The ’90s are over.
The days of selling a house in a matter of days are, for the most part, a distant memory. Selling a new house without incentives rarely happens anymore. Gone is the ability to place 500 or more permit-ready lots on the market at the same time and build out the subdivision in a couple of years.
One telling sign: For sale signs, left out in the elements in front of building lots, new construction and especially resale, are beginning to rust out, said Bill English, president of the Greeley Area Board of Realtors.
The real estate market in Northern Colorado, many say, is simply finding equilibrium after the booming 1990s.
Used houses are suffering the most in the current market, English said, because those in the market find they can qualify for a new home with the hefty move-in incentives offered by many builders. Older homes usually need new furnaces, new roofs and new windows. “By the time you spend money to do that, you might as well buy new,” English said.
Windsor has the highest standing inventory of permit-ready lots while Johnstown/Milliken has the slimmest, according to a comprehensive 2005 study of the Northern Colorado market, said Steve Kawulok, managing broker of The Group Inc. in Fort Collins.
The Group study looked at the markets in Fort Collins, Loveland, Greeley, Windsor, Johnstown/Milliken and Wellington.
“The area out of balance was Windsor,” Kawulok said, noting the area has a 33-month supply of permit-ready lots and a 12-month supply of new homes. Windsor had 455 home starts in 2005, but only 320 closings.
A balanced market is a 24-month supply of permit-ready lots, he said, because it takes two years to turn raw land into a permit-ready development.
Kawulok said the study showed 1,255 permit-ready lots in the Windsor area and more than 10,000 additional lots in the planning stages. “Not all paper lots will be developed,” he said, explaining that some developers will hold off bringing lots online to avoid saturation.
Johnstown/Milliken, in comparison, has a seven-month supply of houses, with 635 starts and 660 closings in 2005, and almost a 28-month supply of permit-ready lots.
“Since it typically takes six to eight months to build a house, that’s a fairly healthy supply – a balanced supply,” Kawulok said.
Fort Collins has a nine-month housing inventory, with 1,000 annual closings, and 1,669 permit-ready lots, or a 17-month supply. Loveland tracks close to Fort Collins, with 1,600 permit-ready lots, or a nine-month supply, and 1,000 annual closings.
To the north, Wellington had 213 closings in 2005, with 413 permit-ready lots. The community has about a seven-month supply of new homes.
The study indicated Greeley, with 715 housing starts, has an eight-month supply of inventory and 2,500 permit-ready lots, for a 30-month supply.
Savvy consumers negotiating
Bob Golba, sales manager for Journey Homes, which is building throughout Northern Colorado, said the number of permit-ready lots “is staggering.” But he also sees it as a good thing. “What happens is we will have a shortage of lots, so everyone brings on projects. Then we have a plethora of lots. We’re in a very good market and there is so much availability. It’s like going to Starbucks where you have lots of choices.”
The abundance means developers will be more selective in bringing on new product, he said. Rather than do an entire subdivision in one fell swoop, they will return to introducing it in phases. “Five years ago, you could sell out 500 lots.”
It’s also becoming more critical for developers and builders to have the right product at the right location. Five years ago, he said, mistakes in this area – say, putting an option-heavy house in a moderate subdivision – were made, but many got away with it. “Someone would still come along and buy it.”
Not so today. At least not so easily.
“Consumers are way more educated,” Golba said. And, arm in arm with their real estate agents, they’re ready to negotiate. “They know the market and what’s out there. They’re also not committed to buying in a particular location,” Golba said, noting many customers who look at Journey Homes in one location often end up buying in a different community.
Taking a philosophical tone, Golba said he’s not overly concerned by the high number of permit-ready lots in Northern Colorado, and especially Windsor, comparing it to a good fishing hole. Like fishermen, developers tend to go where the fish are biting. “Thirty-three months, that’s a lot (of lots), but at the same, it’s an area geared for growth because of I-25 and U.S. 34.”
Martin West, a longtime Windsor real estate agent, agreed. Completion of the Medical Center of the Rockies in Loveland, literally across the highway from Windsor’s town boundaries, and the arrival of Intel Corp. on Harmony Road in Fort Collins, just a few minutes from Windsor’s front door, bode well for real estate in the Windsor area, he said.
Builder incentives are making a difference, too. “Ten years ago, builders wouldn’t even have thrown in a garage door opener to get a house sold. Now they’re offering $15,000 in landscaping and upgrades.”
And the market is still good for buyers with mortgage interest rates still near historic lows.
But the boom of the ’90s? Gone, unless a huge employer moves to the region, West said. “I think, compared to the last couple years, the market will gradually pick up.”
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