This report prompted a lot of comment, most of it pretty negative, and then it got worse. The following day, the Commerce Department reported that sales of newly constructed homes fell 12.4% in July to a seasonally adjusted annual sales pace of 276,000. This is the slowest pace on records dating back to 1963 and the past three months have been the worst on record for new home sales. To put it in perspective, for twenty five years from 1983 to 2007 there were more than 600,000 new homes sold annually. By 2009 sales had dropped to 375,000 and now we are looking at 276,000, less than half of the market of just three years ago. With new homes not selling builders have stopped building and there were just 210,000 new homes for sale at the end of July, the lowest level in 40 years.

This drop in new home construction is a real drag on the economy. According to the National Association of Home Builders, the construction of each new home creates the equivalent of three jobs for a year and $90,000 in taxes. This means the one year economic loss of 250,000 homes is 750,000 jobs and $225 million in tax revenue plus the loss of perhaps $40 billion in construction spending and the entire ancillary spending new home owners make on furnishings, fixtures, landscaping and a host of other products and services.

Obviously high unemployment, slow job growth and tight credit have kept people from buying homes, even with attractive selling prices, the lowest mortgage rates in decades and historically high housing affordability conditions.

On the good news side, at least for home owners, selling prices are holding steady. Locally, the average selling price for July was up 1.9% from a year ago and the local median price of $214,000 is up 1.9% for the year to date. The national median existing home price for July was up 0.7% from a year ago and the median sales price of a new home was down 4.8% from a year earlier.

Also on August 25, 2010 the Federal Housing Finance Agency released their report on their House Price Index for the second quarter and said that over the past year, seasonally adjusted prices fell 1.6% compared to the second quarter of last year. The good news is that Colorado was ranked #14 on the list with a one year drop of 0.25% and was the best performing state in the Mountain Region. The Fort Collins – Loveland area was ranked at #94 with a price drop of 2.69% and this compares to five years ago when Colorado was ranked #47 and Fort Collins – Loveland near the bottom at #247 out of 253 MSA areas.

To put all this in perspective, annual home sales, because of the healthy activity in the first half of the year are still expected to reach 5 million in 2010. This compares to annual sales that have averaged 4.9 million in the last 20 years and 4.4 million over the past 30 years. Locally, we are in much the same situation. In spite of poor sales in July, sales are still up over 10% for the year and even with the prospect of lower sales in the next few months we should still equal last years sales and average selling price. Our inventory of homes for sale is in good shape and in line with the demand and sellers have for the most part priced their homes properly and presented them in good condition. For any potential home buyer, this would seem to be the perfect time to buy a home and a much better use of your money than wasting it on rent. We invite you to call a real estate professional to at least open a dialogue on the current opportunities.

It normally takes at least one or two months from the time a buyer gets serious about looking for a home until there is a closed sale so showing activity in May / June should be an indicator of closings in July and it was. Showing activity was down 33.7% from the previous year in May and June and closed sales in July were down 30.5%. Wow! We knew that the tax credits which expired with June closings were having a positive impact on sales but we did not realize sales would dry up to this level as soon as it expired. During the ten month run of the tax credits local real estate sales posted a 25.3% increase over the corresponding ten months of the previous year and now to hit the worst July on record (at least in the last twenty years) is pretty discouraging.

It is evident that most everyone who was thinking about buying, particularly the first time home buyer, managed to get it done by the end of June to take advantage of the tax credit and there aren’t many buyers left. And this is in spite of fixed 30-year mortgage rates that are approaching 4% which is about 3% money after the interest deductibility is calculated. The difference between a $200,000 mortgage payment at 4% compared to 6% is $250 per month and compared to 8% is over $500 month. Coupled with the fact that home prices have shown absolutely no appreciation in the last five years, this suggests that homes today are more affordable than they have ever been.

Anyway, there is some good news. We originally reported June sales of 398 homes which was a 14.7% increase over the previous year. There were a number of late sales to increase the total to 415 and an increase of 19.6%. The inventory of continues to decline and based on an average demand of 260 homes per month over the last year, there is a supply of 7.2 months which is pretty close to a balanced market between supply and demand. At least the lower inventory is taking some pressure off selling prices which remain pretty close to last year. The showings in July, while down 16% from last year were actually up 6% from last month. And then there is the sales activity in other areas of the region and we stack up pretty well. The Loveland / Berthoud (south Larimer County) area was down 40% in July and is up 9.6% for the year to date and Greeley / Windsor and Weld County was down 24% in July and has just a 1.2% increase for the year to date. This compares to the Fort Collins (north Larimer County) area, down 30% in July and up 10.4% for the year to date.

As to where we go from here, that is anybody’s guess. We had a good six month run to start the year and sales were up 23.6%. We don’t think anyone thought that was sustainable but if we start double digit decreases for the rest of the year – and heaven forbid this does not mean any more 30% – we will struggle to meet last years sales total, which was the lowest since 1995.

Three things are needed to get this market back on track: attractive home pricing and supply, low mortgage rates and improved consumer confidence. We have two of them in place and now if we could just get the economy back in business we should be ok but, as we are reminded, that is kind of a chicken and egg scenario. Which comes first; an improving economy or improving consumer confidence?

All of this is made a lot easier by the simple fact that we live in one of the best places in America and we are proud to reveal all of the reasons that make it so. Naturally we follow closely the awards, accolades and publicity this area receives and make sure our prospective clients are aware of each and every clipping an announcement. The most recent of these was the July 12, 2010 announcement by CNN / Money magazine that Fort Collins was #6 on the list of ‘Best Places to Live in America. We have had recognition from them before and were tops on the list in 2006 and in second place in 2008. The drop was apparently due to a reduction in state education funding but #6 is certainly an enviable position given that they began with 746 U. S. cities with a population of 50,000 to 300,000. And obviously weather is not one of the factors or Eden Prairie, MN. might not have been selected #1. In reviewing the ratings categories, we missed an ‘A’ grade in housing affordability and only got a ‘C’ grade in the arts / leisure category which seems very surprising given the fact that Fort Collins has their own symphony and opera plus many theater organizations and sports, leisure and recreational opportunities that are unsurpassed. We did pick up an ‘A’ grade in the other three categories; jobs/economy, education and health.

The Money magazine article is only the latest in a long string of national awards recognizing Fort Collins as a wonderful place to live and work. Away back in 1997 Readers Digest selected Fort Collins as one of the best places in the country to raise a family and in 1998 Money magazine in an article entitled ‘Best Places to Live’ ranked Fort Collins ‘Best in the West’. In 1999 the A&E network featured Fort Collins as one of “America’s Ten Most Livable Cities / Cities That Have It All”. The same year USA Today had an article entitled “Fort Collins Reaches the Summit of Retirement Spots and in 2000 Fort Collins was ranked #5 on Money magazine’s list of ‘Best Places to Retire’. In 2002 Forbes magazine ranked Fort Collins as one of the “Top 50 Places to Live in the United States” and more notice came in May 2003 when Fort Collins was selected by AARP as the “#1 Best Place to Reinvent Your Life”. In 2005 Where to Retire magazine said we are the “Top Retirement Spot” and in 2005 the New Retirement publication gave us an “A” rating as an ideal place to retire. Kiplinger’s magazine 2006 one of the Fifty Best Places to Live, Money magazine 2007 said we are the #1 Small City in America and in 2008 Where to Retire said we are one of the top eight “Enriching Towns for Art & Music Lovers”. Forbes in 2008 said Fort Collins was one of the ten ‘Best Educated Cities in America’ and Business Week said we were ‘One of the Best Places to Raise Your Kids’. In 2010 Portfolio.com analyzed business and lifestyle trends in America and selected Fort Collins the #3 midsized metro area for quality of life and one of the 2010 ‘Dozen Distinctive Destinations’ by the National Trust for Historic Preservation.

Other publications have selected the area for its economy:

* Wall Street Journal 2001 – “A Pocket of Prosperity”
* Employment Reviews 2002 – 17th Best Place to Live & Work in America’
* INC magazine – “The Best Place to Start and Grow a Small Business”
* In 2005 an SBA study said Fort Collins led the entire nation in ‘entrepreneurship and innovation’ – the two key drivers of economic health
* Forbes magazine in 2006 ‘ 6th Best Place for Business & Careers’
* Entrepreneur magazine, 2006 ‘A Hot Mid-Sized City for Entrepreneurs’
* Fast Company said in 2007 “Top 30 Fast Cities” due to innovation and creativity of work force
* Forbes magazine, 2008 “3rd Best Place for Business & Career”
* Best Boomer Towns “One of the Top 20 Places to Thrive”
* Next Generation Consulting, 2009 #1 Best Place to Live and Work for Young Professionals”
* #2 Metro Area for Business & Careers” in 2009 and #4 in 2010 as selected by Forbes– Forbes magazine.
* Moody’s Economy / U.S. News & World Report 2009 – one of the ‘best places in the country to purchase residential real estate’.

And, as to be expected, the area has received much recognition for the many recreational opportunities. Some examples:

* Bicycle Friendly Community National Award – League of American Bicyclists 2005
* Men’s Journal 2005 “#4 Best Place to Live in the U.S”
* Outside magazine 2005 “American Dream Town – One of the Best Towns in the U.S”
* Runners World 2005 “One of the Best Running Cities in America”
* #4 College Town ‘With Great Golf” – Business Week 206
* One of America’s Most Walkable Cities – MSN
* Dog Friendly Town – Dog Fancy 2007
* Gold Level Bicycle Friendly – American Bicyclists 2008
* One of the places to “Live and Play Now” National Geographic Adventure 2009
* One of the ‘Greatest Places to Live in the West’ American Cowboy magazine 2010

In addition, we have a ‘Nationally Accredited Senior Center’ the Poudre School System has been named a ‘Blue Ribbon District’ the City of Fort Collins web site was ranked ‘Best of the Web, the Fort Collins Housing Authority has been recognized by HUD as a ‘High Performer, the Poudre Valley Health System won the 2008 Baldridge Award, the only health care organization to win the nations top quality award and most importantly, Fort Collins is home to Colorado State University, a public, four year, nationally accredited comprehensive research university and featuring the top ranked College of Veterinary Medicine.

We should all be proud of this achievement and recognition and it certainly makes our job easier. As Mayor Doug Hutchison has stated; it “recognizes what I’ve known for a long time and what many other people who live here know: Fort Collins is a special place”.

Fort Collins has once again appeared on Money magazine’s list of best places to live but has slipped four places to No. 6.

 The Choice City topped the list in 2006 and then slid to No. 2 in 2008. The drop this year was due in large part, the magazine said, to cuts in local school funding.

“I’m delighted to see this kind of recognition,” said Mayor Doug Hutchinson, who attributed the city’s ranking to strong partnerships among government, nonprofits and the private sector.

The Money ranking of best small cities comes out every two years. Loveland was ranked 33 on the list.

In ranking Fort Collins, Money editors highlighted two things: “bikes and beer,” calling the city a “high-end microbrew mecca” and saluting the 29 miles of in-city bike and pedestrian trails.

However, Fort Collins got dinged by the magazine for cuts at Poudre School District, which, like most of the state’s school districts, is struggling to make ends meet. In Colorado, school districts are legally separate governments and not run by cities.

“This idyllic town – No. 1 in 2006 – would rank even higher but for one thing. (No, it’s not last summer’s Balloon Boy hoax, perpetrated by the local Heene family.) Colorado schools are hurting. After the state sliced public schools budget this year, Fort Collins’s Poudre School District laid off 139 full-time employees.”
The magazine’s summation isn’t exactly correct. PSD officials say they are eliminating 139 positions, but most are coming through attrition and retirement, not layoffs.

Evan Dreyer, a spokesman for Gov. Bill Ritter, said many states are struggling to fund public education as the economy founders. But he said Colorado has worked to protect K-12 education as much as possible and said there are many reasons to celebrate Fort Collins, citing Colorado State University in particular.

“We’re very proud that Colorado communities consistently rank in the Top 10. And don’t forget that CSU is Gov. Ritter’s alma mater,” Dreyer said. “We … like to look beyond just the beer and bikes.”

June was the end date for the tax credit incentives so there was a boost in sales as there was a scramble to get homes that were under contract at the end of April closed by June 30th. Note that the tax credit has now been extended to September 30, 2010 but only for contracts dated prior to the end of April so there will not be much effect on sales over the next three months.

One of the reasons for the improvement in June is that there were finally some more expensive homes sold. In this area, homes priced above $400,000 are generally considered ‘fine home’ properties and account for about 10% of the total market. In June there were 38 homes sold that were priced above $400,000 compared to 18 last year. The volume accounted for 21.6% of total sales for the month compared to just 12% last year. Sales in this category for the year to date are now at 135 homes compared to 111 last year.

New home sales continue to struggle with just 145 sold so far this year, representing 9% of the total market. In the five year period from 2001 to 2005 new home sales averaged 22.5% of total sales but in the 4.5 years since new home sales have been about half of that accounting for just 12% of the total market and are on a pace this year for less than 10%. At some point in time we are going to have to start building more new homes to replace existing homes and to accommodate an expanding market.

The days on the market for home sales closed in June averaged 109 compared to 108 last year but there is a big improvement in the year to date with 110 days this year compared to 118 last year. The inventory of homes for sale dropped slightly to 1,968 and based on the last twelve months of sales, this represents a 7.4 month supply which is close to a balanced market.

The big question mark is showing activity which was down 32.6% in June on top of a 34.8% drop in May. Typically it takes a couple of months from the start of showings to a closed sale so the effect of this will probably show up in July and August closings. Either that or buyers are finding what they are looking for by looking at a lot less properties so time will tell.

The first six months typically represent 50% of the year’s activity so we are on a pace for 3,200 closed sales compared to 2,917 last year which would be a good recovery. However, the 2,917 sales in 2009 were the lowest since 1995 and 3,200 pales in comparison to the average sales of 3,850 in the ten year period from 1998 to 2007.

All in all, a good six months with 1,053 closed sales representing a 14.6% increase over the second quarter last year and the best quarter since the 1,069 in the second quarter of 2008. In addition, June was the first meaningful increase in the average selling price since May last year. We’ll keep our fingers crossed that the significant decline in showing activity does not mean a significant decline in home sales.

In 1979 the median purchase price of a newly constructed single family home was $62,900 and the median income in the U. S. was $16,461. The cost of a new home was then the equivalent of 3.82 years income. Thirty years later, in 2009 the median cost of a new home was $216,700 and the median income was $48,500, so this home cost 4.47 years of income.

However, new homes built today are much larger. In 1979 the average home was 1,650 sq. ft. while today, the average is 2,202 sq. ft. so while the median price has increased 245%, the cost per square foot has increased from $38.12 sq. ft. to $98.41, a much smaller 158% increase. This compares to a 195% increase in median income so on a per square foot basis, homes today cost less as a percentage of income than they did in 1979.

As for amenities, 86% now have central air conditioning installed compared to 66%. 97% have two or more bathrooms compared to 79% and 24% of homes today have three or more baths compared to just 8% in 1979. Homes with four or more bedroom homes have increased from 25% to 38%, in 1979 36% of homes had no garage or a one car garage, today 90% have two or more car garages. Another trend in home design is ceiling height. An estimated 80% of homes in 1979 were built with 8’ or lower ceilings. Today more than half – 58% of homes with are built with 9’ or higher ceilings.

One thing that has gotten smaller is the lot size. In 1979 just 33% of all homes built were two stories and the median lot size was 9,580 sq. ft. This compares to 2009 when just 57% of homes were two or more stories and the lot size shrunk to 8,780 sq. ft.

When mortgage interest rates are factored in, these bigger and better homes are substantially less expensive than those of thirty years ago. Mortgage interest rates had started to increase dramatically in the late 1970s reaching a peak of 16.9% in 1981. The interest on a 30-year fixed rate mortgage in 1979 was 12.9%. With a 20% down payment, that $62,900 home carried a mortgage of $50,320 and a monthly payment of $552.71 or 40% of gross median income. In 2009, the interest rate was 4.93% and the $216,700 home had a mortgage of $173,360 with a monthly payment of $924.83 or 22.9% of income. Granted the 12.9% is historically high and the 4.9% is historically low but no matter how the homes are compared newly constructed homes today are bigger, better built, more energy efficient and have more amenities and represent excellent value.

The home sales that were closed in May were on the market 97 days which is a big improvement over the 118 days last year and the year to date performance has improved from 122 days to 111 days. The inventory of homes for sale actually dropped from 2,120 at the end of April to 2,061 at the end of May. The biggest shock in the May results is in the showing activity which declined 30% from last month and a very worrisome 34.8% from last year. We know a lot of the activity prior to the end of April was buyers rushing to get homes under contract to qualify for the tax credit but this looks like it has come to a screeching halt which could have a serious negative impact on sales over the next few months.

This comes at a time when we have a good inventory of homes for sale– equivalent to a 7.9 month supply and mortgage rates which are almost unbelievably low and in the prime time of the year for buyer activity. Hopefully it is just a dip in the road rather than a fall off the cliff and we will certainly keep our fingers crossed that the momentum that has been built up over the last eight months will continue through the summer selling season (June through August) which accounts for 35% of annual sales.

The National Association of Realtors is a month behind in reporting home sales but the good news is that existing home sales in April were up 22.8% from a year earlier and new home sales were up 47.8%. These gains were widely anticipated but still beat all forecasts. “The upswing in April existing home sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but other factors also are supporting the market,” said Lawrence Yun, NAR chief economist. “For people who were on the sidelines, there’s been a return of buyer confidence with stabilizing home prices, and improving economy and mortgage interest rates that remain historically low”. NAR also reported that the Pending Home Sales Index, based on contracts signed in April, was 22.4% higher that in April 2009.

The median national price of homes sold in April was $173,100, up 4% from a year ago and total housing inventory rose 11.5% to 4.04 million existing homes for sale which represents a 8.4 month supply. Unfortunately, a true recovery in the housing market won’t happen until we see solid gains in employment and income and that appears to be a very slow process. And then there is still the shadow inventory consisting of a back log of homes in the foreclosure process that have not hit the market. LPS Applied Analytics has estimated that banks currently have about 1.1 million foreclosed homes on their inventory and that another 4.8 million mortgages are likely to end in foreclosure. Add to this the results of a recent Zillow survey which found that 7% of all homeowners were “very likely” to try to sell their homes in the next twelve months if the housing market seemed to be improving. If 7% of all homeowners hit the market, that would equal about 5.3 million homes, more than the number of existing homes sold all of last year. The additional inventory is not a “healthy” development, said Lawrence Yen.

All of this will keep the buyer in the driver’s seat and cause further pressure on home prices. The challenge is to find more buyers who are certainly in a great position to take advantage of all these market forces.

Identified as the #1 “place to reinvent your life” by AARP The Magazine , Loveland Colorado, nicknamed “The Sweetheart City,” is a retiree’s paradise. Located 45 minutes from Denver, the small city of just under 60,000 has a small town feel, with large areas of single-family homes enjoying the natural shade of abundant trees. The outlying neighborhoods offer spectacular views of the prairie and the front range of the Rocky Mountains, under vast Colorado skies.

The area has close proximity to the Rocky Mountain National Park, with access to skiing, hiking and fishing that led AARP Magazine to describe it as an “outdoor Eden.” Colorado State University, located in Fort Collins, gives the town a lively, youthful feel, while Lake Loveland, located only a few blocks from the center of the city, offers sandy shores, a tranquil sculpture garden, museums, miles of bike paths, golf courses and a vibrant art scene. Although housing prices are above the national median, they are lower than you would find in the nearby cities of Denver or Boulder, although the cost of living in the area as a whole is expected to increase in the next decade.

Pictured: Downtown Fort Collins, Colorado

Original news clip from CNBC

You may already have some idea of how much your home is worth. Tax assessments, real estate appraisals, asking prices for other homes in your neighborhood and newspaper reports of sales and price trends in your marketplace are all helpful tools in considering the current market value of your home.

The definition of market value is “The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”

Your best approach to setting an offering price for your home is to work with an experienced real estate professional who can offer you a comparative market analysis. A well-prepared comparative market analysis looks at the actual sales trends in your neighborhood and community for similarly featured homes. These reports take into account factors such as listing price, actual sales price and time on the market.  Make sure that each selling price is checked for any buyer incentives which really mean a lower net selling price to the seller. In lots of contracts, particularly in the lower price range, there may be seller allowances for buyer closing costs that can be as much as 3% of the selling price. Most of this information is available from the ‘multi-list’ service but it is important to also check the county records for recent home sales outside the MLS.

One important factor included in a comparable market analysis is the ‘competition’ or other similar homes currently offered for sale. Remember that a buyer will be comparison-shopping. If they like your neighborhood or your style of home or the price range they will be looking at all other homes that are comparable. If your home is priced properly and shows well in competition with the other offerings, yours may be the first to sell. Your real estate professional should be knowledgeable about the other homes on the market and how they compare to yours both in features and in price. It is also informative to take a tour of similar listings with your agent or visit open houses to view the competition

Even armed with all of the information available, determining an exact listing price can be difficult and there is no exact formula. If you price your home too aggressively, you are leaving money on the table. If you list your home at an inflated price, you risk having your home on the market for much longer periods than necessary. Many sellers want to leave some room in the pricing for negotiation but, in fact, serious buyers often overlook an overpriced home and this unrealistic pricing will help to sell other similar homes on the market, taking those potential buyers out of the equation. Pricing your home above market value means you may also miss qualified buyers who what to stick closely to a particular price range. For example, let’s suppose that the true market value of your home is $215,000 and you price it at $230,000. A buyer who is looking to spend $215,000 may conduct their search in the price range of $200,000 to $225,000 and may never even bring your home up for consideration. As a consequence, sellers of ‘over-priced’ homes tend to become desperate, slashing prices dramatically and ending up with the same or even less than if they had simply priced the home fairly in the first place.

Pricing your home shouldn’t be a guessing game. When you decide to sell your home, your real estate professional should be able to assist you in determining a pricing strategy that is right for you. Don’t be one of those sellers who receive a good offer early on in the process and think that they must have priced their home too low. A fairly priced home will usually receive a fair offer. With careful research and a sound approach to the market, achieving a fair asking price should be a reasonable objective. And if that price is the first offer in the first week – be happy! 

With a big assist from the ‘tax credits’, particularly the $8,000 first time home buyer credit, local home sales in April were 22% higher than in March and 23.6% higher than April last year. Homes priced under $250,000 are typically in the price range for the majority of first time home buyers and over 70% of the April closings were in this price range. For the year to date there is a 24.6% increase in the closed sales for homes priced under $250,000. Homes priced above $250,000 are not seeing anywhere near this type of activity with a sales increase is just 6.2% compared to last year.

Selling prices have held up well with the average at $238,706 representing a 2.9% decrease for the year to date. The median price, which reflects the mix of homes sold, is down just 0.5% to $209,000.

 This is a breakdown of the sales and pricing by type of home:

Sales of resale homes, both detached and attached are up 25.3% while sales of   newly constructed homes are down 43.1%. Five years ago, new home construction accounted for around 20% of the total market but by last year had dropped to 10% and is at 7.5% for the first four months of this year.

As evidence of the positive affect that the $8,000 first time home buyer tax credit had on our market we just have to look at sales in the first nine months of last year which were down 14% and compare this to the home sales in the last seven months which are up 22%. The tax credit has now ended although we can expect to see some benefit from closed sales between now and the end of June as the rules called for homes to be under contract by the end of April and the sale to close by the end of June. But we are now in uncharted territory – do we go back to the doldrums of early 2009 with a double digit drop in sales or will activity continue to be robust through the traditional high volume months of May through August? The answer probably lies somewhere in between. For the next few months we are facing a very low level of sales from 2009 which were down 12% from the previous year and 30% from our peak volume years so a sales increase in the range of 10% would not be unreasonable to expect. Compared to last year there are more active listings on the market, the average price is lower and interest rates continue to hover around 5% making the market very attractive for buyers.