December 28, 2012

Real Estate: A return of rising prices, home-building

The past year has seen a revival in Northern Colorado’s residential and commercial real estate markets, and 2013 should bring even more good news to the sector.

On the residential front, both home sales and home prices are expected to rise in the coming year, by as much as 3 percent, according to Re/Max Alliance broker Sean Dougherty.

Across the region in 2012, the overarching trend saw a decrease in homes on the market as a result of lower foreclosure rates and increased consumer confidence that inspired home buying.

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Low vacancy rates that drove apartment rents to their highest point in years also contributed to an increase in home buying. In many cases, Northern Colorado residents found that interest rates below 4 percent, coupled with the low vacancy rate, made it cheaper to buy a home than to rent.

The dwindling home inventories that Northern Colorado started to see in 2012 should continue as both vacancy rates and interest rates stay low, Dougherty said.

In addition, as more jobs are created, a growing population will mean more new Northern Coloradans who need a place to live.

As a consequence, the developed-lot shortage that many homebuilders began seeing in 2012 will intensify, requiring larger investment to build homes to fill the growing residential demand.

Without developed lots, homebuilders will have to purchase and develop raw land, which comes at a much higher price than building on an already-developed plat.

“Homebuilders have already bought all available developed lots. The transition from raw land to developed land requires major investment capital, but private equity is available for well-located residential developments,” said Steve Kawulok, head of Sperry Van Ness in Northern Colorado.

And as more companies arrive or expand here, industrial space will become an even hotter commodity in 2013, according to Kawulok.

This past year saw a sharp increase in demand for industrial space, particularly in Weld County, where oil and gas companies, as well as ancillary companies to the energy industry, absorbed a great deal of the county’s existing industrial buildings.

“Emerging home building (and the) construction industry will create additional demand for scarce industrial space,” Kawulok predicted. “Industrial space will be limited and offered at higher prices as a result.”

Outside of oil and gas, the microbrewing and distilling industry will also drive industrial demand, Kawulok said.

Retail also holds some potential in 2013, with the planned redevelopment of the Foothills Mall in Fort Collins and a brand-new Bass Pro Shops being constructed in Loveland’s Centerra.

Some speculative industrial property development can be expected in 2013, Kawulok said, so long as sufficient private capital can be raised, given that traditional lenders aren’t likely to jump in quite yet.

Investment properties will also become more popular, with out-of-state buyers purchasing more properties in Northern Colorado.

Investors are also expected to begin taking a closer look at metropolitan areas outside of large cities in search of higher yields on their capital. Properties with prices between $1 million and $5 million will be especially attractive.

The past year has seen a revival in Northern Colorado’s residential and commercial real estate markets, and 2013 should bring even more good news to the sector.

On the residential front, both home sales and home prices are expected to rise in the coming year, by as much as 3 percent, according to Re/Max Alliance broker Sean Dougherty.

Across the region in 2012, the overarching trend saw a decrease in homes on the market as a result of lower foreclosure rates and increased consumer confidence that inspired home buying.

Low vacancy rates that drove apartment rents to their highest point in years…

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