One of the trends taking hold in today’s real estate market is the emergence of Millennials as a major force in home purchases across the United States, especially in the upper-end housing segment.
Bloomberg Businessweek recently called attention to this shift in an article titled “Millennials Are Changing the Luxury Real Estate Market,” noting that while this demographic (born between 1981 and 1996) may have gotten a slow start entering the housing market, they are starting to jump in with both feet — and setting lofty goals for their next house.
Thanks to low interest rates and rising incomes, many of these young adults are in a position to spend big on housing. And with the pandemic influencing people to want more from their homes, these factors are all adding up to high demand for square footage and modern amenities.
All of which begs the question: Are we seeing this same trend take shape in Northern Colorado? Sales statistics would seem to suggest that’s the case.
In 2020, sales of homes priced at $1 million and above increased in all local communities — including a 50% rise in Berthoud, up to 83% growth in Timnath and 109% in Fort Collins — compared to 2019. Sales in the $750,000-$1 million range were also up across the board, most notably at 86% in Fort Collins. So far this year (sales closed through Feb. 20), Windsor is the hot spot for high-end sales over $1 million, already reporting 63% of the sales that were recorded there in 2020.
While we wouldn’t contend that all of these well-heeled buyers are Millennials, this generation does represent the country’s largest slice of the adult population (72.1 million) and needs to be recognized as a heavy hitter among today’s homebuyers.
Meanwhile, as Millennials and others keep looking for luxury homes, they are running into an all-to-common challenge for homebuyers up and down the Front Range — a shortage of choices. Inventory for high-end homes was gobbled up quickly last year and builders are hustling to catch up to the demand. But there is currently a shortage of available lots for building new custom homes.
“It just takes so long to get a project off the ground,” Jay Brannen, president and owner of Brannen Design & Construction in Fort Collins, told me recently. “There’s so much time and risk involved, there aren’t many people out there who want to do it. Unfortunately, you see that across the country.”
One near-term trend that might emerge from the lot shortage is the rise of so-called “scraper” projects, where buyers like the location and decide to overhaul or raze the existing house to build a bigger, high-end home. “That’s going to grab hold here a little bit,” Brannen said. “Especially in Fort Collins, where we’ve kind of reached our growth limits, especially in the southern direction.”
Long-term? Today’s demand will eventually create momentum in the high-end market, as lenders see the value in supporting new developments.
“Money will flow to profit eventually, as risk factors start to make sense.” Brannen predicts. “I think we have a longer runway (period for demand) than people may think. I think rates will continue to stay low for the next 2-3 years. People will start to say that will make sense to develop.”
Brandon Wells is president of The Group Inc. Real Estate, founded in Fort Collins in 1976 with six locations in Northern Colorado.