Last week we reviewed the local Fort Collins real estate sales over the decade ending with 2010. To complete the 2010 review we thought we should take a look at how our neighbors in Denver and northern Colorado performed so here are the 2010 residential sales ranked by market size:

Metro Denver is certainly the elephant in the room but it is notable that 2010 is the first time since 1999 that their total volume did not break the $10 billion mark. And then there is the ‘Republic of Boulder’ with an average selling price about double any other area. It is interesting that the average selling price increased in all of these areas which should rank Colorado near the top when the national sales reports come out in February.

The Fort Collins area compares pretty well with a modest drop in closed home sales and a modest increase in average selling prices. This is probably about the best we could have expected from a year shadowed by uncertainty. The tax credit certainly helped the first few months but the fragile economy, high unemployment and more difficult mortgage lending took many potential buyers out of the market. A good balance between supply and demand helped hold prices steady.

For the New Year, we expect a slow start because we are up against relatively high sales for the first six months of 2010. At the end of June last year, sales were up 23.6% over the previous year and this year we do not have the benefit of the tax credit to try and keep up with these numbers. We do seem to have an improving economy and a higher level of consumer confidence but the slow growth in employment will serve to hold back on consumers making major financial commitments. The historically low mortgage rates are projected to increase into the 5.5% to 6% range by the end of the year but these low rates are somewhat offset by tougher underwriting standards. Depending on how we get through the first six months, in the summer we should start to see a pick up in sales compared to last year and we fully expect that 2010 will prove to be the bottom and look for a small increase in home sales for the year. We also don’t expect much movement either way in the average selling price. Sellers seem to have accepted the low rate of appreciation and are pricing their homes appropriately. In the price range up to $400,000 there is a very balanced market so prices should be stable and in the higher price ranges, financing is more available, the inventory is down and this market should start to balance out. The one thing that will keep a lid on the selling prices is the fact that there are a number of potential home sellers – including banks with inventory – who have held their homes off the market. As the demand starts to increase so will the supply of homes, serving to cap any increase in selling prices. In summary, we expect total sales in 2011 to be in around 3,000 homes at an average price of $250,000 for a total market of $750M, a 6.1% increase. Now watch that come back to bite us!

If you would like more information, or if you did not get a copy of the January 8^th report, please let us hear from you.

Local real estate sales finished the year on a high note as December closings actually posted an increase from last year, halting a five month string of double digit sales decreases. This was unexpected and took the year to date sales to 2,872 compared to the projected 2,815 so we avoided the twenty year drop and the 2010 sales are now the lowest since the 2,833 reported in 1995. The average selling price also finished strong and the quarterly increases of -2.7, 0.3, 4.9 and 8.5 certainly show a trend to higher prices. The median price for 2010 was $215,000, a 2.4% increase over the $210,000 for 2009

The total sales volume for 2010 is $706.7M which is actually an increase of 0.7% over 2009 and the first increase in year over year volume since the peak of $982M in 2005.

The first graph shows the average selling price for the decade from 2001 to 2010. The decade showed steady growth in the average selling price starting at $208,217 in 2001 and peaking in 2007 at $253,406. It then dropped back for a couple of years, hitting a low of $239,372 in 2009 before recovering to $246,051 in 2010. The ten year increase of 18.2% pales in comparison to the 107% increase in the previous decade (1991 – 2000) but is obviously much more sustainable and more in line with the 31.7% increase of the 1980’s.

The second graph shows the total home sales by year and from the peak of 4,100 in 2004, there has been a steady decline to the current 2,872, a drop of 30%. For the decade we averaged 3,600 sales per annum compared to the previous decade average sales of 3,252 so the market grew 10% on the strength of the first few years but the current level of sales goes back fifteen to twenty years.

A great deal of the drop in sales can be attributed to the precipitous decline in new home construction. In the first two years of the decade there were 2,071 new homes sold in the area. In the last two years there have been 574, a drop of almost 75%. New home sales used to account for 25% of the market and as recently as 2005 were at 20%. The current level is 10% of the total market. We are going to have to start building again to have any hope of increased sales and this market segment has been stuck due to the lack of financing for land development and new home construction. It has been very difficult to obtain funding for speculative construction and even pre-sale builders and buyers are having a tough time getting construction financing.

In next week’s column we will take a look at our market performance compared to other areas and attempt to provide some insight into the prospects for home sales and pricing in 2011.