Despite a year filled with social and economic trials, local real estate held its ground in 2020. Even with tight inventories, home sales surged — and demand isn’t about to stop in 2021. Consequently, the housing industry is literally creating a stir. Dirt is turning and dust is flying as builders hustle to meet the continuing appetite for housing.
Here’s a look back at how we got here:
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After years of robust job growth, we got a jolt. COVID-19 led to double-digit job losses in the spring across Larimer, Weld and Boulder counties. Between June and December, Northern Colorado regained 46% of its jobs. We’re not out of the woods, but our region fared better than most, and much remains to be done to return to pre-pandemic employment levels.
Work-at-home options sustained a significant chunk of the labor force and lured new income to the region as people relocated for quality-of-life reasons. The pandemic has demonstrated to companies and workers that they can be productive from home, and some are choosing to live in one region and work in a totally different region of the country, because they can.
See the cloud? That’s dust kicking up from the homebuilding industry. With few existing homes for sale, builders are trying to make up the difference. And despite obstacles — high lumber tariffs, supply chain disruptions, rising water and land prices — 2020 ranked among the best years ever for builders.
Based on residential resale inventory being so low — 50% lower on average compared to a year ago — new construction is the darling of 2020. We absorbed projects at a rate no one expected. Windsor’s RainDance development is a case in point. Launched in 2016, it began selling homes in 2018 with the goal to build 2,800 units over 10-20 years. Instead, it’s on pace to wrap up in half that time and be completed by 2022. Recent cuts in lumber tariffs will help the industry outlook in 2021. And with multiple housing developments in the works, expect the cloud to hang around.
At the beginning of 2020, the 30-year fixed rate U.S. weekly mortgage averaged 3.64%. A year later, that rate was a full percentage lower, as the Federal Reserve started buying mortgage-backed securities to intentionally keep rates low. The drop in rates translates to a significant boost to housing affordability for many Americans, though we expect rates to inch upward. The mortgage industry has also helped with the economic recovery. For example, if a family can save $200 per month by refinancing, and it spends that money each and every month, that acts an immediate stimulus for the economy.
Housing topped financial news around the country with sales up 10% in some markets. There were plenty of buyers in Northern Colorado, where sales grew about 9%. Inventory plunged by 50% last year, making it difficult to meet the demand in our region. New home construction will begin to provide options this year, but 2022 is when the market will feel the impact.
Northern Colorado and the nation as a whole are producing far fewer new homes than the demand might indicate. The word of the year will be ‘back order.” This year will be a year of catching up. We won’t see a lot of homes delivered, but we will see a lot of projects get started around the region.
The Great Reshuffle
Northern Colorado has always been an amazing place to live. Many Americans began to focus on new priorities; city living lost its luster for some, so they fled the cities and headed to the suburbs. People across the nation began looking to move here for our quality of life.
During 2020, the importance of home also changed, as well as the function. We needed our homes to serve as offices, schools, and places to provide respite from the outside world. Many people modified or restructured their home to create more separation of space, transitioning away from open concept designs. And since our homes were serving so many functions, the popularity of larger homes increased. In fact, the number of homes sold above $1 million skyrocketed 79% in Larimer County and 31% in Weld County between 2019 to 2020.
As real estate is leading the charge out of recession, expect to see more dirt and dust flying.
Brandon Wells is president of The Group Inc. Real Estate, founded in Fort Collins in 1976 with six locations in Northern Colorado