Northern Colorado Economic Snapshot - August '12

As late summer melds into early fall the Northern Colorado real estate market continues to remain strong both in the resale sector and new home construction. For the first time in several years we’re seeing a few new homes being built in the higher price ranges. These are all presales as lenders and builders are still wary of building spec inventory in a price range approaching and exceeding seven digits.

Through July/2012 Northern Colorado single family home sales are UP 12.97% when compared to through July/2011 (3,074 homes vs. 2,721 homes). Attached units are UP 14.38% for the same time periods (628 properties vs. 549 properties). The overall market is UP 13.21%. According to IRES (Northern Colorado MLS) the most active price range for single family homes continues to be entry level properties under $350,000.

Since 2005 when the local market peaked, the Northern Colorado market in 2012 is coming close to mirroring the 2008 market (UP .43% in 2012 for combined single family homes and attached units). This is encouraging after watching the local housing market decline and remain relatively stable from 2009 through 2011. This is historically characteristic of real estate markets. They seem to drop off the edge of a cliff, regain their balance, and then claw their way back to the top. It’s a slow process, fraught with many sleepless nights on the part of buyers and sellers, not to mention Realtors, title people, inspectors, appraisers, builders, etc.

The Absorption Rate for Northern Colorado (the time it takes for the market to fully turn assuming the same rate of sales activity and no new inventory) continues to decline as available inventory remains at a low level and sales expand. The Absorption Rate for Northern Colorado at the end of July/2012 stood at 155 days (5.1 months). This is on the fringe of being a balanced market, where buyers and sellers view themselves on a level playing field.

With this uptick in the Northern Colorado real estate market, where do we go from here?

Unless something dramatic happens in world affairs and the economy takes another shift south, look for the balance of 2012 and into 2013 to remain much the same as they are now. Available properties for sale will continue to remain at historic lows as sales activity swallows-up the inventory at a pace at least equal to new inventory coming into the market. Look for home mortgage rates to continue to vacillate up and down slightly, but remain at a reasonable level. New home production builders see opportunity in the marketplace. As the inventory of platted lots dwindle, dirt work on new home subdivisions will once again be part of the landscape.

The Northern Colorado real estate market has not reached the point of a scarcity mentality where either there is (a) a plethora of listings and few buyers (a buyer’s market) or (b) a limited number of listings and an abundance of buyers (a seller’s market). For the next year, Northern Colorado should experience a balanced real estate market, where well-priced properties in good condition will sell in a reasonable amount of time.

There’s an old saying in real estate: “Price overcomes all objections.” Pricing continues to be one of the dominant elements in the real estate market as resale properties must now compete more with new construction.