Houze the NoCo Real Estate Market in January ’22? Smokin’!
|As far as the closed sales in most areas of Northern Colorado go, 2022 started out very similar to 2021. How were these two years similar? Fewer closed sales in January. Fewer Listings. Fewer days on market and higher prices? Who is benefitting from these conditions? Sellers is the answer, for sure. Agents too, I guess. Having spoken with many sellers and agents, the stress and complications created by these conditions are taking their toll.
Of course, we know sellers benefit from the rise in prices to net more on their sale. Once those sellers sell, they become buyers and are thrust into a position we don’t envy. They now must face all the stressors the market can dish out. Current conditions with rising interest rates, low inventory, fewer days on market and higher prices put them into new and uncomfortable situations. Extremely low inventory begets both buyers and sellers additional problems during negotiations and while under contract with appraisal issues, confusing escalation clauses, crazy inspection resolutions and cancelled contracts. The landscape has changed. It began about two years ago and it’s only getting worse with skyrocketing prices and extremely low inventory.
This month we are going to begin by talking about the graph in the middle of the report. This is one of my favorite graphs ever. I wish it turned out a little sexier, but the information is finally in front of us. It’s is an evaluation of single-family homes sales in Loveland in 2021. I’m guessing this isn’t a huge surprise for those of you who have thought this through, but the results are a bit staggering. The green bars correlate to the left side axis. They show the average square feet of the house sold in that price range. As prices rise, the average size of the house gets bigger. The red line corresponds to the right-side axis. This tells you average price per square foot of the homes sold in that price point. Did you realize that buyers of the least expensive homes in Loveland pay the highest price per square foot? The price/sf drops to its lowest point in the $500k-$550k range, then climbs as prices also climb into the million-dollar range. The number above the green bar indicated the number of closed units in that price range.
The chart clearly shows that the least expensive homes sold in Loveland (under $350,000) average around 1,000 square feet and their buyers paid the highest price per square foot between $260 and $265/sf. This price/sf is even higher than homes sold above $900k and much, much higher (about 25% more) than the $205/sf for an $800k-$900k home. This might tell us that those who can least afford a home are paying the most. It also might indicate that investors chasing cheap investment homes might do better by playing the higher price points in the market because they are overpaying for the less expensive homes. We know that once permits are pulled, taps are in, the hole is dug and architecture is complete, economies of scale take over and it’s less expensive to dig a bigger hole, build a second story and generally expand the size of the house. We also know when an owner has more disposable income, the luxury items added increase the price/sf, so the right half of the chart makes perfect sense. Even with this knowledge I’m shocked at the U-shaped red line in the graph, particularly how high the far-left end is. Maybe, some advice to the proper buyer would be to chase the value between $450k and $600k, rather than overpay in the lower price points.
The Fort Collins market saw significant drops in closings of both single family and attached homes in January 2022 versus January 2021. Both saw nice price gains in the low to mid-teens, but why the drop in sales? Inventory is the answer for both. In today’s market, most closings happen a month to a month and a half after they are listed. In December of 2020 there were 105 new listings that helped to produce the 124 single family closings. There were only 74 listings in December 2021 that produced 86 closings in January of 2022. That means any new listings in a given month should represent about 85% of the following month’s closings. We will see how that tracks throughout the year. A quick look at the decline in days on market in the Fort Collins attached homes was because last January, there were 8 closings at Confluence at 401 Linden that averaged 613 days on market. That number had to fall.
Oh, and fun facts, or not… as of 2/10/22 there are exactly 176 active listings of single-family homes in ALL of Larimer County, 134 in Boulder County, and 274 in Weld. The 44 active listings in Fort Collins indicate 14 days of inventory.
The Greeley market, despite fewer sales made 20%+ gains in average and median prices in both single-family and attached sales. Both segments increased their list to close price ratio nicely. The Greeley attached market was one of just two markets (the other being Berthoud single-family) that had an increase in the number of sales over January 2021. And while it looks as if there was some weakness in the days on market, this was highly influenced by 14 new construction sales that averaged 145 days on market, bringing the overall up 17.4%… nothing to see here. Basically, the same thing is happening to increase the days on market in the Loveland attached market too.
Fewer sales resulting in fewer listings are the norm in the entire region. I now have evidence of this in the Longmont, Boulder, Loveland, Greeley, Fort Collins areas. So, you aren’t alone in dealing with these market conditions. And, in her most recent report, the great, the wonderful, and epically brilliant Megan Aller of First American Title in Denver says listings are on their way. The Denver area is already seeing a slight rise in listings already. This doesn’t usually occur until mid-March or April, but with the mild weather we’ve had this winter and prices climbing, I think some sellers are trying to get ahead of the curve.
There were a quite high number of listings in January in the Windsor, Highland Meadows, Timnath & Severance area. Let’s see how well my public math and predictions work when the February stats come out. There were 171 new listings in that area. Let’s see if we have about 195 closings… Seems kind of high.
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