Long considered to be the first three rules of real estate, “Location, location, location” may need to concede the podium to “Supply, supply, supply.” At least, that seems to be the case in Northern Colorado thus far in 2017.
Housing supply – or more specifically the lack of it – has become the most powerful influence on how local submarkets are performing.
A notable case in point is Estes Park, where the supply of homes available for sale has plummeted by 57 percent between June 30, 2015, and June 30 of this year. As a consequence of this thin supply, home prices are up 38 percent over the past two years, and the number of sales during the second quarter is down more than 19 percent. Similarly, in the Greeley-Evans area, inventory is off by roughly 51 percent. At the same time, prices are up more than 25 percent, and sales are down 21 percent for the quarter.
In normal conditions, a decline in the number of home sales would reflect a struggling economy. But as the rising prices would indicate, demand continues to be strong. The supply is simply not sufficient in places such as Estes Park and Greeley-Evans to satisfy the appetite of homebuyers. By contrast, communities with stable or growing supply are also experiencing an increased number of sales.
With that said, where can homebuyers turn during this “mosh pit market” that seems to bring out multiple offers for almost every home that’s put up for sale?
Here are three suggestions:
• Scout out those markets that have supply. A good place to start is in the Loveland-Berthoud area, which offers the best supply relative to demand. Looking at Berthoud by itself, the inventory of homes has jumped 44.68 percent in the last two years — primarily due to recent new construction. Even more, Berthoud has approved thousands of permit-ready lots that make even more new construction likely in the near future.
• Speaking of new construction, the best way to avoid the competitive “mosh pit” is to focus your attention on new neighborhoods. You get the opportunity to slow down and identify a brand-new home that suits your needs without wrestling 10 other buyers.
• If you can afford it, look at higher-priced homes. In fact, there is an abundance of supply in the upper-end market. With the equity you could gain from the sale of your existing home, combined with the benefits of low interest rates, chances are strong that you can make the move up to your dream home. These conditions make it the best move-up market we’ve seen in many years.
As we weigh these factors –—tight supply and high demand — it’s plain to see that any talk of a real estate “bubble” in Northern Colorado is misguided. Bubbles are usually caused by oversupply — the opposite of what’s occurring in this area right now. And with Colorado experiencing one of the best economies and lowest unemployment rates in the United States, all indications point to continuing demand — and a continuing increase in home prices.
Larry Kendall is co-founder of The Group Inc. Real Estate and is creator of Ninja Selling. Contact him at 970-229-0700 or via www.thegroupinc.com