LOVELAND — Realtor Larry Kendall believes the number of homes sold in Northern Colorado will increase by nearly 9 percent in 2015 provided a short supply of inventory doesn’t hold the market back.
Kendall, a founder and chairman of The Group Inc. based in Loveland, told a crowd of about 600 people Thursday evening that while the demand and low interest rates are in place, a short supply of home listings has the markets in Larimer and Weld counties “a little out of balance.”
Speaking at The Group’s 2015 Real Estate Forecast Expo at the Embassy Suites in Loveland, Kendall predicted that 11,051 homes will be sold this year in Larimer and Weld counties, compared with 10,139 sold in 2014. The forecast is based on the results from polling The Group’s 200 sales associates. Last year, they predicted 10,164 would be sold, which turned out to be 99.7 percent accurate.
The lack of supply will continue in 2015, he said. Part of the problem, he said, is the lack of construction of new condominiums, which he calls the “portal” through which first-time buyers enter the market.
He said normally 30 percent of new construction is made up by building condominiums, but currently, condos are making up only 3 percent of new construction.
Kendall believes reforming the construction-defects law could open the gate for developers to start more condominium projects. A key concern for builders is that Colorado law lets the majority of a homeowners’ association board, rather than a majority of the homeowners, decide whether to sue over construction defects. Builders say the law is difficult for building condominiums because so many homeowners live under one roof, complicating legal action.
“We hope the law will be reformed,” Kendall said.
Because of the shortage, the average price of a condominium in the region increased last year by about $51,000, a 27.4 percent increase, three times that of the average-price increase of $25,000 for a single-family home, an 8.3 percent increase.
He said the shortage is driving the current uptick in apartment development, declaring that apartments in the region “are not overbuilt. … We can absorb 1,300 to 1,500 apartments per year.” Kendall predicts many of the luxury apartment units being built now will be sold as condominiums in seven years after the six-year statute of limitations runs out on the construction-defects law.
Kendall believes demand for apartments is being driven by Millennials, who have been dubbed a “generation of renters” because they don’t want to be tied to one location for too long, and because many potential buyers are still trying to recover from the Great Recession.
Kendall said jobs drive the residential real estate market, and that Larimer and Weld counties’ annual job growth rate of 2.44 percent per year, according to Woods & Poole Economics in Washington D.C., bodes well for the industry in Northern Colorado.
He said the drop in oil prices causing layoffs at oil companies in the region may be a benefit for homebuilders who began experiencing a labor shortage when workers left construction firms for the oil fields. “They may come back to construction,” Kendall mused.
Kendall said while consumer confidence is rising, Realtor confidence, tracked by the National Association of Realtors, is at its lowest point since September of 2013 because the short supply is creating such a competitive market.
“Realtors are exhausted,” he said. “They are having to write five or six contracts on one house before closing a deal.”
The Group also presented the New Neighborhood/Builder exposition that featured Northern Colorado builders and affiliated businesses.
Editor’s note: An earlier version of this story incorrectly stated how many apartment units could be absorbed in the Northern Colorado market.