Lack of housing supply keeps squeezing local market

How is the Northern Colorado real-estate market like a grocery store on a weekend night? If you’ve made that run to the grocer on Sunday night to pick up a few staples to start off the week, you likely know the feeling of staring at shelves that are short on inventory. The store is waiting for the next delivery truck in order to restock.

Local real estate shoppers could use a delivery truck full of properties, because the shelves in the real-estate aisle are about two-thirds empty compared with six years ago at this time. As of August 2010, total active listings of all types (including commercial properties) across the region numbered 9,614. This year, that supply of total active listings has dwindled to 3,166 — a decline of 67 percent.

Narrowing the scope to look at residential real estate over the past two years, we see that supply dropped in July in all but one local submarket. Only the Windsor/Severance area has more housing inventory than two years ago, with a slim increase of 2.3 percent. Overall, inventory was 1,713, down 29.2 percent from July 2014. The consequences of low inventory combined with a strong demand are to be expected; average housing prices are up 10.96 percent across the region since last July, and 25.1 percent over the two-year span.

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When will we see the delivery truck arrive to restock the shelves for local homebuyers? A good indicator will be when state lawmakers modify Colorado’s construction-defects law and make it easier to build some condominiums in this state. That would help both supply and affordability. If you’d like to understand more about this issue, read the Aug. 8 edition of The Wall Street Journal for an article focusing on the restrictive defects law. It reports that construction insurance for builders in Colorado is averaging $15,000 per condo unit — if you can get it at all.

Some additional observations from July’s statistics:

Even while demand remains strong, the number of home sales has declined — again a direct reflection on the lack of supply. Overall closings were down 3.3 percent from July 2015 to July 2016, and down 7.9 percent over two years.

Closings declined in five of the seven submarkets, with only Windsor/Severance and Longmont showing sales growth. The Windsor/Severance gains are being driven largely by a relative boom in new housing construction. Through the first six months of the year, Windsor has issued more building permits for new homes than each of its much larger neighbors — Fort Collins, Greeley and Loveland.

Sales in Windsor for July totaled 112, up 38.2 percent from last July and up 91.3 percent over July 2014. Longmont, the other submarket with a gain in sales, reported 171 closings, two more than July 2015 and 16 more than July 2014.

While average prices for Windsor reached $402,830 in July, that represents only a 6.5 percent increase from the year before — modest when compared to the rest of the region. Among the sub-markets, the biggest year-over-year gain in average prices occurred in the Greeley/Evans area — 18.4 percent — and the collective outlying communities of Ault, Eaton, Johnstown, Kersey, La Salle, Mead and Milliken — 18.2 percent.

Only one submarket, Greeley/Evans, reported an average sales price below $300,000. The average sale in Greeley/Evans was $262,441 in July.

Total sales, while down in individual closings, surpassed the $400 million threshold in dollar volume in July. All sales brought in $419,139,851 in July, compared with $390,976,120 in July 2015.

As we’ve discussed here in a previous column, Wellington is making a significant impact on sales in the Fort Collins area. In July, sales in Wellington totaled 35, or nearly 10 percent of all closings (365) in the Fort Collins area last month.

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.