Real Estate Information

Job growth is at the root of any economic recovery, and indications are that Northern Colorado is experiencing the long-awaited boost that comes with employment gains, according to regional economist, John W. Green.

In the latest economic assessment that appeared in the Northern Colorado Business Report, Green called attention to hiring at companies like Leprino Foods (Greeley), Vestas Wind Systems (Windsor), and Abound Solar (southwest Weld County), as signs that Northern Colorado is outperforming the national economy. Looking at first five months of the year (January through May), Green said there were "7,587 more employees this year compared to a 2,636 increase during the same period in 2009." He added, "I expect greater employment growth to continue into the fall and the winter slowdown to be much less dramatic than in 2009."

Backing up Green's outlook, both the Fort Collins-Loveland and Greeley areas registrated GMP (gross metropolitan product) that exceeded the pre-recession peaks, according to the quarterly Mountain Monitor report from the Brookings Institution. As of the second quarter of 2010, Fort Collins-Loveland's GMP was 3.1 percent higher than the pre-recession peak, and Greeley's GMP was 1.7 percent higher. By contrast, Denver was still 0.1 percent behind its pre-recession peak.

The Group Inc. Real Estate Insider. Bright spots emerge in Northern Colorado economy. Volume 34, No. 10

While headlines may be casting shadows on the value of home ownership, one of the country's foremost real estate watchers doesn't see cause for alarm. Karl E. Case, the co-creator of the Standard & Poors Case-Shiller housing index, said it's no time to dismiss the American dream.

In a recent op-ed for The New York Times titled "A Dream House After Hall," Case wrote that ownership "makes a lot of sense." The investment values comes in two forms, Case said. First, ownership provides "net imputed rent from owner-occupied housing" which equates to roughly a 6 percent return on investment after maintenance and repair. Furthermore, if the house appreciates in value, gains from selling the house are protected from taxes if the house is a primary residence "and the gain is less than $250,000 for a single filer or $500,000 for a married couple filing jointly."

Deductible mortgage interest, bargains prices in many markets and historic low interest rates are all additional benefits to buying in the current market, Case said. He added, "sooner or later buyers will regain faith, inventories will shrink to reasonable levels, prices will rise and we'll even start building again. The American dream is not dead - it's just taking a well-deserved rest."

The Group Real Estate Insider. Real Estate legend praises the value of home ownership. Volume 34, No. 10. October

As interest rates continue to hover at historic lows - and before they make their inevitable climb - it's important to emphasize both just how much power there is in those rates and how many dollars you can save today.

For instance, if a buyer today takes out a $250,000 mortgage at 4.5 percent interest, they would pay $102,229 in interest over 10 years of payments. By contrast, 6.5 percent interest - still a modest rate by historical standards - on the same $250,000 loan would cost $151,561 in interest over 10 years. It's a difference of nearly $50,000 and 50 percent in increased interest payments.

If you're on the fence about getting into the market, consider interest rate impacts from another perspective. A $200,000 at 5 percent interest requires a monthly payment mortgage of $1,073. If rates were to go up to 6 percent, you could only borrow $180,000 to get the same monthly payment. Put another way, each 1 percent increase in mortgage rates reduces purchasing power by 10 percent.

Interest rates matter. Call me to learn how you can get the most out of your buying power (and how much you can save) while rates are at these historic lows.

The Group Real Estate Insider. Lower interest rates could save almost 50% in interest over ten years. Volume 34, No. 9

With an abundance of housing inventory in most markets and foreclosures common across the country, it seems unfathomable to envision a housing shortage. However, some trends are taking shape that foretell just such a possibility in certain parts of the United States.

According to a recent article reported on MSN Money, economists are pointing at the convergence of two trends - a depressed level of home construction (new home starts in 2009 were one-third of the historical norm of 1.6 million), and the inevitable emergence of a generation that will soon be entering the work force and forming households - that could cause a shortage.

Overbuilt markets such as south Florida, Las Vegas and Phoenix may not be in danger of such a squeeze anytime soon. But the article identifies Western states such as Oregon, New Mexico and Utah, where housing supply and demand is considered to be in balance, as locations that could be under supplied as early as mid-2012.

The Group Real Estate Insider. Believe it or not: Housing shortage could be on the Horizon. September. Volume 34, No. 9

In the looks-can-be-deceiving department, it appears Northern Colorado's new home market is stronger position than it may seem on the surface.

Traditionally, a valuable measure of any new home market is the months of inventory available for sale. For example, if 10 homes have sold over the past year in a certain market segment, and there are 10 homes currently available for purchase, then it follows that there is a 12-month supply of homes on the market. Most experts agree that a six-month supply represents a healthy equilibrium in a local market.

Through extensive research conducted by The Group Inc., we've found a number of "phantom listings" in the Northern Colorado market that have exaggerated new home inventory and artificially increased the months of supply. These "phantom listings" consist of properties that appear on the Multiple Listing Service as being available for sale, when in fact the home is not yet under construction. Because construction is not under way, it could be many months before the home is actually ready for purchase. For example, there are currently 37 new homes in the Fort Collins market listed for sale priced between $200,000 and $250,000. However, only seven of those are under construction and 30 are considered "phantom listings."

It is important for sellers, buyers and lenders to have a true picture of the new home market. Contact me for more details on "phantom listings" and the state of the new home market.

The Group Inc. Real Estate. New home market stronger than it appears: impact of "phantom listings." Volume 34, Number 9. September 2010.

Colorado State University employees and its alumni living across the state earn more than $4.1 billion in household income, according to a recent report titled Created to Serve: Colorado State University's Impact on the State's Economy. According to the study, the collective income represents 3.1 percent of all household income in the state, generates $130.8 million in state income taxes and $50.2 million in annual sales taxes.

Other findings from the study include:

- CSU employees represent 11 percent of household income in Fort Collins.

- CSU generates more than $300 million in annual research spending.

- CSU research results in a 0.2 percent increase in overall productivity of Colorado firms, worth $79.7 million annually.

- Students spend $168 million in Fort Collins each year, which supports 628 jobs.

- CSU employs 6,200 workers and approximately 50,000 CSU alumni are employed in the state.

- Spin-off companies created by CSU research have created 550 jobs in the state.

The Group Inc. Real Estate. Study finds CSU stirs Colorado's economy. Volume 34, No. 6

When a customer spends $100 at a local independent business, 68 of those dollars stay locally. If that same $100 is spent at a non-local business, only $43 stay here, according to the Andersonville Study of Retail Economics.

The Be Local 20/20 Challenge, sponsored by Be Local Northern Colorado, asks residents to pledge to spend $20 per week from their normal household budget at local, independent businesses for the next 20 years.

As of May 21, 2010 634 people had accepted the 20/20 Challenge. The direct dollar amount impact of this is $253,000. With the economic multiplier effect, where a dollar turns over and circulates in the economy four to seven times, these 634 people have at least $1,014,400 dollar impact on our local economy.

To learn more or take the 20/20 Challenge pledge, visit www.belocalnc.org/2020-challenge/

The Group Inc. Real Estate. How 634 = $1 million: Be Local. Volume 34, No. 6.

Single women have become an increasing force in the residential real estate market, representing 21 percent of all home buyers in 2009, according to an assessment by the National Association of Realtors. That compares to just 14 percent of the market as recently as 1995. Some additional statistics about impact of single-women buyers.

- Second largest share of adult households who purchase homes

- One quarter of all first-time home buyers

- 17 percent of all repeat buyers

- 58 percent of single-women buyers were first-time buyers

The Group Inc. Real Estate Insider. Survey finds single women have growing role in housing market. Volume 34, No. 6

Apparently there's no place like home for Colorado high school graduates this year. Colorado State University and the University of Northern Colorado are each reporting large waves of applications from in-state students for next fall's freshman class.

As of May 15, CSU reported 8,548 in-state applications, up 1 percent over last year's total of 8,467. UNC has fielded 6,325 in-state applications. Out-of-state applications at CSU, meanwhile, slipped this year, with 6,390 requests for acceptance, down 6 percent. UNC reported 1,268 out-of-state applications.

Overall, to date CSU has received 14,938 applications, and expects the freshman class to total about 4,500, likely making it the largest incoming class ever. The previous freshman class record was 4,404 in 2008. The 2010 class is also shaping up to be the most ethnically diverse ever, with a 15 percent increase in minorities. UNC has received 7,593 applications, a 7 percent overall increase from 2009. The school expects 3 percent growth for the incoming class over last year's 2,377 freshman class.

The Group Real Estate Insider. In-state applications to CSU on record pace: UNC up 7%. Volume 34, No. 6.

While mortgage rates continue to hover near 5 percent, expect rates to rise in the near future. According to Lawrence Yun, chief economist for the National Association of Realtors, a resurgent U.S. economy combined with growing federal deficit will nudge mortgage rats higher over the coming months. In his latest projections, Yun said 30-year of the year and maybe even 6.5 percent by late 2011.

While such rate increases may seem minimal, each percentage increase can have significant ramifications on purchase power. That's because each 1 percent increase in mortgage rates erodes total buying power by 10 percent. So, if you are in the market for a $300,000 house, and rates increase from 5.0 percent, you'll need to adjust your price point down to $285,000.

The Group Inc. Real Estate. Economist: 30-year mortgages to reach 5.6 percent by end of 2010. Volume 34, No. 6.