Tight inventory keeps driving housing-price gains

We’re still early in the year, but the signs are pointing to another red-hot rise in Northern Colorado housing prices for 2016 — possibly even over and above last year’s double-digit rate of home-price appreciation.

In February, the average sale price was $329,776 across the region, up 8.5 percent over the month last year. But for two of the region’s submarkets, Fort Collins/Wellington/Timnath and Loveland/Berthoud, the rate of increase is approximately twice the regional average.

Last month, average prices in Loveland/Berthoud were up 17.2 percent, and up 16.4 percent in Fort Collins/Wellington/Timnath. Greeley/Evans, which experienced 13.8 percent growth in average prices for all of 2015, saw prices go up 11.2 percent over last February.

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Note that these price hikes are following a year in which four Front Range metro areas were among the top 11 nationally in home price appreciation. Greeley was No. 5, Boulder No. 7, Denver-Aurora No. 8 and Fort Collins-Loveland No. 11. At this rate, the Front Range might rule those rankings again this year.

What’s fanning the flames? Last month, we pointed out how the lack of housing supply was not keeping up with demand. That shortage remains a factor that will force homebuyers to compete for available houses, which in turn increases the likelihood of bidding contests over the limited inventory.

It bears repeating: With demand outstripping supply, prices will continue to stay under pressure. And homebuyers who have been waiting to get in the market are paying a price for their patience.

Here are some additional observations we’d like to share, based on this home price data as well as market statistics that we’re seeing:

• Comparing February results, average prices in both Fort Collins and Loveland increased more than $100,000 from February 2014.

• The average sales price in Estes Park jumped $100,000 from a year ago, to $396,626. It should be noted that one of the 18 sales last month in Estes Park fetched $1.025 million.

• Windsor/Severance actually experienced a slight price decline, from February 2015, but the average is still up nearly $80,000 over February 2014.

• Employment growth is a leading indicator of real estate demand 12-18 months later. From June 2014 to June 2015, Northern Colorado (Larimer and Weld counties) added 10,100 jobs to its labor force — a gain of 4.1 percent. With that information, it’s reasonable to expect that demand will stay strong over the coming 12 months.

Now let’s see how February housing sales reflect on Northern Colorado’s submarkets:

Fort Collins/Wellington/Timnath: Similar to January, sales in February declined from the same last year, once again attributable to shrinking supply. Sales for the month totaled 201, down 6.9 percent. But at the same time, average prices increased 16.4 percent.

Greeley/Evans: Unlike other submarkets where sales totals are up only slightly or even below last year, the number of sales here actually jumped 16.6 percent to 161, with an average price of $234,472, up 11.2 percent.

Loveland/Berthoud: Total sales nudged up by 6.3 percent, but average prices surged by 17.2 percent over last February. The average price last month was $358,508.

Windsor/Severance: Previously the most expensive submarket in the region, average prices slipped by 1.5 percent to $383,237. Total sales for the month, which were down in January by 19.5 percent, ticked up 15.7 percent in February to 59 closings.

Estes Park: Understanding the sample size is smaller, but Estes Park registered an average sales price of $393,626 in February, surpassing Windsor. The average price was up nearly $100,000 over February 2015.

Ault/Eaton/Johnstown/Kersey/La Salle/Mead/Milliken: As a group, Weld County’s outlying communities experienced a 19.7 percent drop in total sales last month. Additionally, the average price slipped to $292,973, down 5.4 percent.

Longmont/Weld County-Boulder County: We’re tracking sales in two parts of Longmont — where it crosses into Weld County, as well as its larger Boulder County territory. While it’s hard to draw conclusions from the small amount of activity on the Weld County side (eight sales with an average sales price of $286, 824) the chart shows that sales totals were down in February in Longmont while prices held steady.

Larry Kendall co-founded associate-owned The Group Inc. Real Estate in 1976 and is creator of Ninja Selling. Contact him at 970-229-0700 or via www.thegroupinc.com.