Homebuilding Boom in Berthoud Slows Price Increases
It was almost exactly 1 year ago when we lost data sharing. Ever since, we’ve been comparing 2016 data that included both IRES and REColorado data to 2017 IRES only data. I’m done with that and I’m not holding my breath for it to come back. Data share or the big merger may happen at some point, but I’m moving on. Until further notice I will pull data for the previous month and then pull the same month the previous year. This will give us the best apples to apples look at what’s going on in our market.
I’m in the final stages of the annual Affordability Study. For that supplemental report I’ve pulled both IRES and REColorado data, combined columns, merged the data sets, de-duped and visually inspected the data. The results showed there aren’t enough REColorado-only users in our area to be concerned with this small piece of missing data. About 8 years ago I researched how many Longmont sales were from MetroList only. This was at the height of the recession and before data sharing. At the time, 12% of Longmont listings didn’t show up in IRES – that was a statistically significant amount, so we went out of our way to include them. Last year only 64 or 5.3% of our listings were not listed in IRES. Interestingly, when combining data from both MLS’s, the average home price drops by $2,443 and increases the number of homes sold under $350k (I’m using that metric in the Affordability Study) by 34. So a side note here is that if you are looking for a less expensive home for your clients, don’t forget to check REColorado.
As far as this month’s data goes, we are still pretty early in the year and there are no real trends that raise concern. At this stage in the year the data set is still so small that small changes can create large percentage changes (check out the Total # Sold-Month for BoCo Plains as an example), so let’s talk more about the numbers next month as the trends will emerge soon enough. I’m just thankful we are up YTD on total sales of single family homes in Longmont. It’s been a while since we’ve seen that in positive territory.
There is one HUGE thing that I’d like to briefly cover. If you take a look at the chart I created, the price increases in the local towns in our region are pretty self-evident. This year Dacono took top honors of having the highest increase in average price at nearly 18%!!! You’ve all heard “drive until you qualify“. This is an excellent example. In fact, this chart is almost perfectly in reverse order of the average price data. If you think people don’t gravitate toward value, you are wrong. And, Boulder may have its second consecutive $1 million plus average price, but it actually declined! Maybe there really is a ceiling when you have affordable housing in nearby communities.
The real oddball in this chart is Berthoud. How can a tiny town like Berthoud have a declining average price amongst all these giant increases? Loveland to the north and Longmont to the south each increased 9%, so how can there be a 14% difference? The time to make your guesses has passed… It’s new construction. More specifically, it’s new construction of moderately priced homes. Berthoud had only 201 sales in 2016. Last year they had a 139.3% gain in homes sold to 481 units…and it lowered the average sales price. Hmmm, do you think that would work in other places? This supply of new homes may not lower prices in all cases, but it would surely help stabilize them because it would relieve the upward pressure of demand. This is basic economics folks, not rocket science.
My prediction from about two years ago is that this is the year that we will finally see some relief from skyrocketing prices. With interest rates finally on an upward march, what would have been higher prices is going to be offset by the increased cost of money. It’s my prediction we will probably only see a 5%-7% increase in prices in 2018. That increase is going to be held back by the fact that it’s going to cost buyers more to borrow. Don’t think this will be a slow-down, prices will just be rising less rapidly, and the rest is business as usual.