Northern Colorado Economic Snapshot - March '12

As is normally characteristic of this time of year, the inventory level of available homes begins to increase. For Northern Colorado and much of the Front Range this may not hold true this year as inventory levels continue to sit at extremely low levels. Sales of single family homes and attached units are up 9% across Northern Colorado for the first two months of this year compared to the first two months of 2011.

After four years of a declining real estate market (2006 to 2009) and the past three years having reached a plateau in sales activity (2009 to 2011), there appears to be a renewed buyer interest in the Northern Colorado real estate market. This can be attributed to a variety of reasons.

• Home Values Have Stabilized: Most geographic areas across the Front Range are experiencing a slight up tick in home values. For Northern Colorado, through February/2011 the average sold price for a single family home was $244,267 and an attached unit was $159,024. Through February/2012 those values were $237,286 for a single family home and $150,455 for an attached unit. (IRES MLS statistics.)
• Home Mortgage Interest Rates: Who would have thought mortgage interest rates would hold at historic lows for as long as they have. The traditional thirty-year fixed rate loan continues to hover around 4%. Adjustable rate mortgages (those dastardly fiends that caused many people to lose their homes) can be had for fewer than 3% with the first five years fixed. Interest only loans (also a bane of the past) are still available, but not as attractive as they once were.
• Real Estate Is A Bottom Up Business: When a real estate market begins to churn in a positive direction it always starts at the bottom. Less expensive properties fuel the fire. This activity creates the opportunity for the domino effect to surface. Low end sellers buy more expensive homes causing a chain of sales to occur. Lack of available inventory can hamper this cycle as sellers wishing to move-up can’t find what they want.
• New Construction: In the movie Field of Dreams, the voice in the cornfield whispers: “Build it and they will come.” That is true of new construction. Activity begets activity. The sound of boom boxes and hammers pounding is like a moth drawn to a light, they attract buyers. Production builders have seen the light with new homes being constructed in pocket areas across Northern Colorado this late winter/early spring.
• Short Sales and Bank Foreclosures: These continue to play an active part of the real estate market as banks and the Federal Government continue to work their way through this process. When this mess is finally put to bed, we would hope the financial institutions and the government have learned their lesson and we won’t find ourselves treading down this path again – ever.
• Unemployment Rate: Jobs fuel the economy. The current unemployment rate for Colorado is running around 7.9%. At the beginning of 2011 it was at 8.9%. When the Northern Colorado real estate market peaked in 2005 the Colorado unemployment rate stood at 5.2%.

There are a lot of positives in the Northern Colorado real estate market as we head into the spring. It continues to be a buyer’s market, especially in higher priced homes, but we are gradually moving toward a more balanced marketplace.