October 2020 NoCo Market Update – 12.8% appreciation in a global pandemic?
I made a quick video for this month’s market update. I wanted to talk candidly about what’s going on with our real estate market because it’s hard to wrap your head around. We had huge appreciation September 2020 vs September 2019, prices in Fort Collins are up almost 13%, prices across Northern Colorado up about 10%. Obviously, very surprising during a global pandemic. This is a complex issue and can’t just be boiled down to low-interest rates. Also, I want to be clear that we do not report these numbers joyfully. We’re acutely aware that these incredible rates of appreciation further exacerbate an already acute housing affordability issue. That being said, we feel it is all the more important than ever to explain what is driving the market so that you can act accordingly.
Northern Coloradoans know the market is hot, but often don’t understand all the factors fueling it. Lots of people are moving to Colorado, everyone knows that, but they may not know that our property taxes are half the national average and 1/4 of what they are in many high tax states. This makes it a great place for people to retire, saving $1,000/month in property tax when you’re on a fixed income is enough to make someone move, we see it time and again.
The quality of our public schools is another big driver, many people are able to avoid private school tuition by moving here. A family with two kids in private schools living in another state will save on average $20,000 by moving to Nothern Colorado and placing their kids in our excellent public school system.
Also, the cost of development is incredibly expensive here due to water rights and long entitlement processes. Also, Larimer County’s policies require developers to turn 50% of their developed area into open space. This makes for smaller lots and more expensive homes. In other markets where the cost to build is lower, the resale market is always competing with new construction. But in our market, new construction doesn’t compete as well with the resale market. When the median price of new construction is $550k and the median lot size for that new home is 4,700sf, a lot of people end up buying an older home in an established neighborhood which continues to put pressure on the resale market.
All that to say, I do not think we are in a bubble. I think this market still has legs and I believe there is significant appreciation ahead of us before any price correction occurs. The demand and lack of inventory is unlike anything I’ve seen in my 18 years of real estate. We overheard a lot of people say during the shutdown, “well, at least with the pandemic the market will drop and housing prices in NoCo will drop” But the opposite occurred. We experiences a 40% drop in our inventory in one year and we already had lower levels of homes for sale than in our market’s history. The combination of low interest rates, our strong job market and a newfound ability to work remotely have driven even more people to Colorado than ever before.
Thank you for reading and as always feel free to drop me a line with questions or comments. Also, if you have suggestions for future topics you’d like me to address in my videos, I’d love to hear from you!