Despite ongoing inventory challenges, Northern Colorado’s real estate market showed encouraging signs of recovery in the fourth quarter of 2024. Both housing segments experienced notable growth in sales volume, with detached single-family homes leading the charge at a 16% increase, while the condo and townhome market saw a modest but positive 7% uptick compared to Q4 2023.
Market stability was evident in steady price levels across both segments, and although inventory remains below historical norms, the slight increase from last year’s figures suggests a gradually improving supply situation in the region’s predominantly single-family home market.
Historical Context: Inventory levels of homes
On the left side of the chart:
- The solid line on the top of the chart is the number of homes and condos for sale, from 2008 to today.
- Notice the line is very high in 2008, due to LOTS of bank foreclosures.
- Buyers didn’t buy as much during the downturn due to the scary media headlines and job loss.
- As a result inventories were high.
- The dotted line on the bottom shows the number of homes sold each month
- Notice its been trending upwards.
- This was caused by an improving economy and growth in the population.
- Note more homes are sold in the summer than the winter
- Investors buy consistently all year.
- Families with kids in school prefer to move in the summer.
On the right side of the chart:
- Notice that the number of sales is about the same as the number of homes for sale.
- There’s very little inventory and it’s competitive for buyers.
Other observations:
- We didn’t arrive in this low inventory situation overnight. It took almost a decade to burn off all of the excess bank inventory.
What does it mean for the client?
- As long as the inventory is tight
- Buyers will have to compete hard (write great offers) to win a home.
- Sellers will generally have the edge in negotiations
Inventory vs. sales
Inventory hit a new 11-year low in 2021. It increased sharply in early 2022. Inventory is very cyclical with the yearly seasons. We are seeing inventory spike up in 2Q24 to levels not seen since 2012. 4Q had the usual seasonal pullback for the holidays.
Historical context: MOI
Months of Inventory (MOI) is a great metric to track the strength of the market. It is the measure of how long it would take for all the properties on the market to be sold if no more inventory came on the market.
For e.g., if one home is selling per month in a certain neighborhood and there are currently 6 homes on the market, there would be 6 MOI in that neighborhood. (Note that Six MOI = 90 days on market.)
- MOI was high in the mid to late 80’s, reflecting our slow Denver market at that time.
- As the market strengthened going into the 90’s the MOI plummeted. During the 90’s MOI was under 4, a strong seller’s market.
- MOI began increasing in 2001 and leveled off around 2004 at 6-7 (buyer’s market).
- As the market began to strengthen after our downturn in 2007 – 2009 the MOI went down quickly. This indicates there are more buyers than sellers, and housing inventory is not keeping up with housing demand. This is where we are currently in the market.
- We have way more demand for homes than we have supply, so prices are going up.
What does it mean for the client?
- It is critical for your clients to understand the market in order to make correct decisions.
- Low MOI means a strong sellers’ market with all that implies:
- Multiple offers
- Picky sellers
- Buyers need to have their act together with strong contracts and pre-qual letters, etc.
- Sellers: use this to help show your sellers how strong the market is to list.
- Educate them on the difference between a buyer that is pre-approved vs. pre-qualified, and that not all offers are equally strong.
- Buyers: educate serious buyers on how to be a strong buyer.
Inventory has steadily tightened since 2008. It hit bottom in 2021 and has been increasing since then. MOI for NOCO homes on 1/03/25 was 2.1. Denver is at 1.7 MOI as of the same date. Inventory, although not at record lows, is still quite tight.
Current market
Performance of different size homes.
Let’s look more closely at different prices segments of home sales:
- This chart breaks sales down into the sizes of homes: under 1,052 sq. ft. (smallest 10%), 2,800+ SF (biggest 10%) and four buckets in between.
- It looks at the metrics for each size bucket so you can accurately assist your clients much more in making buying and selling decisions.
- Instead of just looking at neighborhood or type of home or price range we can get right down to the size of the home.
- For e.g., if your client is looking to buy a 1,500 sq. ft. home, you’d look at segment 3 1350-1745 sq ft.
- You see there’s only 1.9 MOI, prices have held fairly steady in the past year.
What does it mean for the client?
- It’s critical for a smart buyer or seller to understand everything they can about their market, down to the size range of the property in question.
- This slide helps you provide specific, quantifiable data to your clients based on the size of their home so they can make the right decisions.
- Used in conjunction with other data like neighborhood metrics and local comps, this chart will help your clients make better decisions.
NOCO comparison by size: homes
There is the most inventory in the luxury area of the spectrum. Prices are mostly stable across all areas. Inventory is up slightly compared to the same time last year in all segments.
NOCO comparison by size: condos
A lot of new condos were built, and these properties have been bought up. Marketing times for these properties are similar to what they were just one year ago. Prices were fairly stable except for the entry level and larger luxe units which experienced a pullback/correction.
Market comparison: Detached Single Family
Data Source: IRES, RE Colorado, and Your Castle Analysis
Market comparison: Attached Single Family
Data Source: IRES, RE Colorado, and Your Castle Analysis
Historical context comparisons
Average home prices in Northern Colorado trail a bit behind those of Denver. Average price of condos and townhomes in NOCO have surpassed the price point of Denver units but have since pulled back down in a correction.
Average Greeley home & condo price from 1979-2006 was mostly an upward march: +5.7% per year. In the last recession, prices dropped 18% from 2006 peak, hitting bottom in 2010. Prices have risen ever since. 2023 has seen a slight pullback. Third quarter of 2024 the average was at $424,560. This data from the Federal Reserve and is their estimate for ALL properties (homes + condos). The Federal Reserve releases its new data one quarter behind.
Average Fort Collins home & condo price from 1979-2006 was mostly an upward march: +5.1% per year. In the last recession, prices dropped 5% from 2006 peak, hitting bottom in 2010. Prices have risen ever since with only a slight pullback in 23Q1. Third quarter of 2024 the average was at $450,830. This data from the Federal Reserve and is their estimate for ALL properties (homes + condos). The Federal Reserve releases its new data one quarter behind.
Data Source: FRED Economic Data
Average Boulder home & condo price from 1979-2006 was mostly an upward march: +5.5% per year. In the last recession, prices dropped 5% from 2008 peak, hitting bottom in 2010. Prices have risen ever since, with the smallest dip the last 2 quarters. Third quarter of 2024 the average was at $478,290. This data from the Federal Reserve and is their estimate for ALL properties (homes + condos). The Federal Reserve releases its new data one quarter behind.
Data Source: FRED Economic Data
Boulder homes: Historical context
Data Source: IRES, RE Colorado, and Your Castle Analysis
Fort Collins homes: Historical context
Data Source: IRES, RE Colorado, and Your Castle Analysis
Greeley homes: Historical context
Data Source: IRES, RE Colorado, and Your Castle Analysis
Longmont homes: Historical context
Data Source: IRES, RE Colorado, and Your Castle Analysis
Loveland homes: Historical context
Data Source: IRES, RE Colorado, and Your Castle Analysis
Big 5 City homes: Historical context
Data Source: IRES, RE Colorado, and Your Castle Analysis
Net worth for owners is higher than renters
Homeowners are the 1%’ers!
- Well, it’s not quite that simple .. but what is true is that the vast majority of wealth in America is held by homeowners, not renters.
- The average net worth of a U.S. homeowner in 2019 was $255,000, compared to just $6,300 for the average renter.
- The numbers are shocking, and renters definitely aren’t aware of this, so educate them. Let them know that if they want to build wealth over time owning a home is the tried-and-true formula.
- Investors (landlords) with a few rental properties do even better!
- The more the world changes, the more it stays the same – buying a home is the right thing to do to house one’s family and build long term wealth.
- Or they can just make their landlord happy (and wealthy) forever. Whichever they choose.
What does it mean for the client?
- If you are renting you should STRONGLY consider buying if you want to build wealth. The numbers are clear.
Buying is generally more affordable and less expensive than renting. In addition, research by the Federal Reserve found that home owners accumulate 40x more net worth than renters over their lifetime.
Data Source: Federal Reserve Survey of Consumer Finances 2016-2019
First time buyer
If you buy a home today vs. next year (First Time Buyer). More than $400,000 in wealth creation in 10 years!
*This does not include approximately $93k paid in interest over first 10yrs
Should I buy now?
Denver wealth creation for first-time buyers. The Federal Reserve chart about net worth is interesting, but let’s try to make it a bit more tangible for Denver.
- We’ll consider several typical scenarios – this one is for a first-time buyer
- The top left looks at what that first-time buyer client might face if they buy today.
- The bottom left examines how much more their payment might be in a year if:
- Home prices go up 5%
- Interest rates go up 0.5%
- The payment could go up 11% if you wait for a year (and what will your rent do in the interim?)
- The right side is a chart depicting:
- Top: The home value, with 5% annual appreciation.
- Middle light purple: the mortgage balance, which is paid off over time.
- Lower heavy grey line: the accumulated equity (“wealth creation”) for the client.
What does it mean for the client?
- The first-time buyer’s 5% down payment of $25,000 turns into over $400,000, or +1635%.
- For most buyers, this gain would be tax free!
- You also get to save on rent expense.
- Potentially, you deduct your property taxes and mortgage interest as tax deductions, reducing your tax burden. These benefits are not included here. Talk to your CPA.
- Historically, the stock market (S+P 500) returns around 11% per year before tax or 8% per year after tax.
- If history predicts the future, that $25,000 down payment invested in the stock would worth $54,000 (after tax) in ten years, for a 115% return.
Home builds in the United States
Why is the inventory so low? Denver has experienced strong population growth in the past decade, but almost no additional inventory from new home builders. Builders are limited by high costs for land, water taps, labor, and materials. We don’t anticipate a boom in construction. As a result, inventories could remain low for several years.
Current market conditions by area: homes
Current market conditions by area: condos
