On January 19, The Group held its Annual Real Estate Forecast virtually. During this streamed event, Group President and CEO Brandon Wells explored the market trends we saw in 2020 and forecasted our predictions for 2021, based on information from reliable sources in the industry and our own decades of experience.
Wells shared statistics specific to the many cities throughout the region, dove into consistent real estate trends across Northern Colorado and the nation, and provided insight for what to expect in the future.
2020 was a surprising year in a lot of ways — including the success and stability of the real estate market in Northern Colorado. Overall, we saw record-low interest rates, low inventory which drove prices higher for sellers, impressive luxury home sales, and a renewed pressure on new construction builders.
Over the years, our forecasts for home sales and average sales price have been between 95 and 99 percent accurate. This year, our predictions fared a bit less accurate (but not by much!), due to the unpredictable nature of a global pandemic and the economic challenges it brought.
At last year’s Annual Forecast, we predicted 10,900 home sales for 2020. The actual number of residential home sales for 2020 was 11,685, which significantly exceeded our expectations. We predicted $424,761 for our average sales price, which ended up being $439,117, again exceeding our predictions.
During the Annual Forecast, Wells detailed the number of home sales and average sales prices for cities in Northern Colorado, including Fort Collins, Loveland, Greeley/Evans, Windsor/Severance, Timnath, Wellington, Berthoud, Johnstown, Longmont, Boulder, and a combination of Ault, Eaton, Kersey, La Salle, Mead and Milliken. To see a statistical breakdown of each of these areas, check out the presentation slides from our Real Estate Forecast.
Among the lessons gained from the pandemic is the importance of home. At no time in modern history has the importance of the place we call home been more pronounced than it is today. Without the lure of movie theaters, restaurants, concerts and health clubs, many Americans are embracing a slower pace of life and learning to love what home has to offer. This is the type of event that could determine how future generations see the value of home ownership.
This new focus on home was an underlying theme that affected the market in unforeseeable ways. Many decided to make changes to their living arrangements to better accommodate their new at-home lifestyle, which included working from home, learning from home, and eating, socializing and working out at home. This translated to many upsizing to larger spaces that include an extra room for hobbies, a home office, a finished basement, a larger yard and more.
Not to mention, the mobility of the workforce allowed many to move to Northern Colorado while staying employed elsewhere. There was a renewed emphasis on quality of life, as many moved from larger coastal cities to the suburbs, seeking the amenities we enjoy here in Colorado, like the outdoors, a slower pace of life, a vibrant small business community, and various family-friendly attractions.
At the beginning of 2020, the 30-year fixed rate U.S. weekly mortgage averaged 3.64 percent. 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 into a boost for many Americans, and created added stimulus through refinancing and increased affordability on new purchases.
Many used the pandemic as an opportunity to refinance, which naturally created a stimulus for the local economy. Homeowners who are now saving $200-300 a month are now able to invest that money into the economy, spending it at restaurants and shops, or putting it towards travel or other expenses.
The supply vs. demand issue has been a constant narrative over the last several years — only increasing during this unique year for the industry. During last year’s forecast, we could not imagine inventory dipping any lower than it already was. However, we saw a shocking 50% drop in inventory since the start of 2020.
Take Fort Collins, for example. At the start of 2019, there were 366 homes for sale, and we ended 2020 with just 175 homes for sale, representing a 52% decrease in inventory. Each city across the Front Range experienced a similar trajectory, which in turn drove up prices and created more competition for buyers.
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Nothing says economic uncertainty quite like a global pandemic. But it seems that uncertainty is no match for the urge to relocate. How do we know? Northern Colorado’s luxury housing market is all the proof we need. Most of those who can afford it — many of whom can work from home — were attracted to the idea of a different lifestyle. And Northern Colorado is where they can find it. In fact, sales of upper-end homes (priced at $1 million or more) in Northern Colorado grew by at least 22 percent in every community in the region last year.
2021 looks to be another incredible year for Northern Colorado real estate and homeowners. The area will see a lot of dirt moving as some major housing developments across the Front Range take shape. The market will continue to be impacted by historically low inventory, which, in turn, will lead to increasing appreciation. Mortgage rates will remain low for the foreseeable future which will continue to keep demand strong as more people choose to call Northern Colorado home. And luxury home sales are expected to remain strong, as many will be motivated to seek more space to match their new at-home lifestyle.
As mentioned, we predict supply will continue to be constrained in 2021 as new construction builders fight to keep up with demand. We predict 12,195 residential home sales for 2021, which reflects 12% growth compared to the previous year. We also predict an average sales price of $461,667 for the region.
Just like in 2020, new construction will continue to be the name of the game for Northern Colorado in 2021.
Despite obstacles due to COVID, including high lumber tariffs, supply chain disruptions, rising water and land prices, and more, 2020 ranked among the best years for builders. With the increasing demand, it has been a challenge to keep up supply, especially with some major delays to production.
During the forecast, Wells said, “Last year, the word of the year was ‘social distancing.’ This year, the word of the year is going to be ‘backorder.’”
Projects slated to take several years to complete have had to shorten their window to meet demand.
Windsor’s RainDance development is an excellent example. It started in 2018 with the goal to build 2,800 units over at least 10 years. However, it’s on pace to wrap up in about half that time. Recent cuts in lumber tariffs will help the industry outlook in 2021. And with multiple housing developments in the works, expect the new construction dust cloud to hang around.
“2021 is going to be a year of dust and dirt for Northern Colorado,” Wells predicted.
Good news for would-be buyers. After a year in which interest rates plunged to historic lows – an average of 2.67% on a 30-year fixed mortgage as of December 31 – we don’t expect much to change in early 2021. National experts are predicting that rates will hover around 3% over the first half of the year, before possibly ticking up slightly in the latter half of the year as the economy recovers and the Fed slows its purchasing of mortgage-backed securities.
Just like the economic downturn between 2007 and 2009 was called “Great Recession,” we call this current moment “The Great Reshuffling.” It’s unknown how deep the economic pain from the pandemic will be felt in our area. Clearly, the job growth of recent years has stalled, but it’s evident that remote workers are moving to places like Northern Colorado for a better quality of life. Even if it doesn’t show up in jobs data, the so-called “Great Reshuffling” should continue to bring newcomers – and their incomes – to the region.