Housing Supply is an Issue that Will Not Improve Any Time Soon and Here’s Why

There are two common concerns about the housing market that one hears from both consumers and real estate professionals alike. First, they question whether or not we are on the brink of another housing bubble, and second, they want to know why there aren’t more homes for sale.

I don’t plan on addressing the concern regarding a housing bubble in this article except to say that we are not currently in “bubble” territory, although affordability does concern me immensely. Today I would like to concentrate on the second question about the lack of homes for sale.

According to the National Association of REALTORS®, there were 1.96 million homes for sale in the United States in May 2017. When adjusted for seasonality, this falls to just below 1.9 million which is essentially the same level we saw back in 2000.

Now consider that the country has added over 21 million new households during that same time period, and you can see why this is so troubling. It is worth noting that many of these new households did move into rental properties, but this still leaves the U.S. with a substantial housing shortfall, which explains why demand for homes is so high.

With the shortage of homes for sale, you would normally expect builders to meet this pent-up demand with new construction housing but, unfortunately, this has not been the case. In fact, new single-family housing starts are running at about 800,000 (annualized), and I believe we need starts to come in at over 1 million to satisfy demand – especially as older Millennials start to create households of their own and begin thinking about buying instead of renting.

We therefore have a quandary. Trust in the housing market has clearly returned, but there are not enough homes to meet the demand of buyers, and when a buyer does find a home, they are met with very stiff competition, which is driving prices increasingly higher.

So why are we in this position and how do we get out of it?

In reality, there is no single reason for the situation we are in today. Rather it is a number of factors that, when combined, suggest to me that the market will not return to equilibrium any time soon.

The first reason for the shortfall is purely demographic. As “Boomers” age, they are not following the trends of previous generations. Many are staying in the workforce far longer than their predecessors, and, as they are postponing retirement, they do not feel compelled to downsize. In fact, almost two-thirds of Boomers plan to age in place and not move even after retirement. Without this anticipated supply of homes from downsizing Boomers, there aren’t enough homes for move-up buyers, which in turn limits the supply of homes for first-time buyers.

Secondly, as a nation we just aren’t moving as often as we used to. When I analyze mobility, it is clear that people no longer have to relocate as frequently to find a job that matches their skill set. There has been a tangible drop in geographic specificity of occupations. Where we used to move to find work, this is no longer as prevalent, which means we are moving with less frequency.

Thirdly, as mentioned earlier, builders aren’t building as many homes as they could. This is essentially due to three factors: land supply/regulation, labor, and materials. The costs related to building a home have risen rapidly since the Great Recession, and this is holding many builders back from building to their potential. Furthermore, in order to justify the additional costs, many of the homes that are being built are larger and more expensive, and this is no help for the first-time buyer who simply can’t afford a new construction price tag.

Fourthly, while the general consensus is that home prices have recovered from the major correction that was seen following the recession, this is actually not the case in some markets. In fact, there are 32 U.S. metro areas where home prices are still more than 15 percent below the pre-recession peak. As equity levels remain low, or non-existent, in these markets, many would-be sellers are waiting until they have sufficient equity in their homes before putting them on the market.

And there is still one more issue that is certain to become a major factor over the next few years: interest rates.

Imagine, if you will, the country a few years from now when interest rates have normalized to levels somewhere around 6 percent. Now consider potential home sellers who are happily locked in at a mortgage rate of about 4 percent who are considering their options. Will they sell and lose the historically low rate that they currently have? Remember that for every 1 percent increase in rates, buyers can afford 10 percent less house. If they don’t HAVE to sell, their thoughts may lead to remodeling rather than moving. I think that this is a very reasonable hypothesis which could lead us to see low inventory levels for a lot longer than many think.

With little assistance from the new home market, I believe we will suffer from low inventory levels until well into 2018.

Our best hope for a more balanced market lies with builders, so hopefully they’ll be allowed to do what they do best – build more homes.


Posted on September 5, 2017 at 8:00 am
Windermere Colorado | Posted in Economics 101 | Tagged , ,

How Homeownership Impacts the U.S. Economy

Windermere’s Chief Economist, Matthew Gardner, explains how a strong, stable housing market is critically important to the overall U.S. economy.


Posted on September 4, 2017 at 8:00 am
Windermere Colorado | Posted in Economics 101 | Tagged , ,

6 Ways to Personalize a White Kitchen

White-on-white kitchens have been a classic look for many years. Why does this trend endure? For starters, white connotes cleanliness, makes small spaces appear larger, and brightens rooms that are naturally dark.

Although many all-white kitchens are just lovely, some can appear a bit stark or cold. To help clients warm up their white, I recommend a variety of strategies, such as mixing metals and adding contrasting paint, fabric or wood. Read on for inspiration for personalizing your white kitchen so that it stands out from the crowd.

White Kitchen 1Allard Ward Architects, original photo on Houzz

1. Warm metal accents. Copper, bronze, brass and polished nickel are just a few of the metals that can warm up an all-white kitchen. The gold sconces above the window and the white pendant lights, with their subtle hint of gold, add warmth and a touch of luxury to this all-white kitchen.

Related: Kitchen Lighting in Copper, Bronze, Brass, and Nickel

White Kitchen 2: GIA Bathroom & Kitchen Renovations, original photo on Houzz

2. Color and metal. Moving beyond metallics alone, a single contrasting color when combined with metals can create drama in a white kitchen. In this photo, a modern white kitchen intermingles black pendants and countertops with gold seating. This combination contributes to the room’s sleek contemporary look.

White Kitchen 3Orchid Newton Ltd, original photo on Houzz

3. Wallpaper. I love wallpaper, especially in kitchens. Wallpaper can introduce color, movement and dimension to a white kitchen. When applied to a lone wall, wallpaper can create a dynamic focal point, as shown in this photo. The bright white cabinets and crisp white walls are softened by the shades of blue in the fish swimming on the side wall. This kitchen’s under-the-sea motif is enhanced by the blue tile on the back wall and the sea urchin-shaped pendant lights.

White Kitchen 4IS Architecture, original photo on Houzz

4. Colorful island. Wood-stained islands often appear in white kitchens because of the richness and contrast they bring. This kitchen shows a creative alternative, pairing a chartreuse island with a chartreuse Roman shade. Together they lend a whimsical, personalized feel. To give your white kitchen a personal touch, consider painting your island your favorite color.

White Kitchen 5Mosaic del Sur, original photo on Houzz

5. Tile rug. Layering in a rug is a great way to introduce color and texture to an all-white kitchen, but some clients worry that a rug could be an added source of dirt as well as a possible tripping hazard.

This clever kitchen resolves both issues with a tile rug instead of a fabric one.

White Kitchen 6Hindley & Co, original photo on Houzz

6. Backsplash. A tile backsplash also can bring color and texture to your white kitchen. But who says a backsplash must be tile? This kitchen has a counter-level window in lieu of a tile splash. The window faces a luscious succulent garden, thus creating a green vista for an otherwise monochromatic kitchen.


Posted on September 3, 2017 at 8:00 am
Windermere Colorado | Posted in Housing Trends | Tagged , , ,

Why Owning a Home is Such a Smart Investment

Home Ownership a Better Investment

After succumbing to the “Great Recession” ten years ago, the stock market has made a comeback. So, does that mean you should forget about buying a new house and invest in stocks instead? The answer to that question, say experts, depends on your investing savvy, your financial discipline, your age, and your current financial situation.

The first question you need to ask yourself is, “Am I disciplined enough to invest in stocks?” According to two professors who recently studied 30 years of personal-finance performance, you need to be someone with exceptional financial discipline if you want to earn real money in the stock market. Or, you could simply buy a house.

When you buy real estate, the down payment and monthly mortgage payments force you to set aside a significant amount of your earnings on a regular basis. It’s automatic. But if you can’t summon the same discipline to invest that same amount of money in the stock market on an equally regular basis, then stocks are probably going to be a losing proposition, according to the professor’s study.

“We find that if people don’t invest all the money, actually about 90% of the time, you’re better off buying real estate,” says Professor Eli Berachaco-author of the study.

Other issues that make stock investing risky

Investing guru James Altucher wrote a column in The Wall St. Journal titled, “8 Reasons You Stink at Trading Stocks.” In it, he argues that most non-professionals don’t have the investing savvy required to be successful in the stock market. Here are a few telling excerpts:

  • “Nine out of 10 people think they are above-average drivers. Nine out of 10 people think they are above-average investors. Both are mathematically impossible.”
  • “Most people sell at the bottom and buy at the top—the opposite of what you want to do as an investor—because they let emotions get in the way of patience and strategy.”
  • “It’s really hard to own stocks. It’s not just picking a stock and watching it go up 1,000%. It’s buying it and sometimes watching it go down 80% before it ends up rising 20% above your purchase price. It’s waiting. It’s patience. Psychology is at least 80% of the game. And knowing when to sell? Even harder.”

Age matters

When you’re young, many financial advisors encourage investing in things like individual stocks. With a long career ahead, you have time to wait for any bad investments to turn around before you may really need the money. But once you’re a little older, with a family, and starting to focus on your financial future, that’s when advisers recommend you buy things like real estate—a conservative investment with a long history of stable, predictable earnings.

The type of loan you choose also makes a difference

If you want to both own a home and invest in stocks, consider a 30-year home loan, which will significantly reduce your monthly payments and leave you with extra money for playing the market. (Just remember the tradeoff: You’ll end up paying thousands of dollars more in interest over the life of the loan.)

If you don’t have a burning desire to play the stock market, choose a 15-year home loan. You’ll pay less interest over the life of the loan, you’ll build equity faster, and, obviously, you’ll be mortgage-free 15 years sooner.

The tax advantages of owning real estate

As a homeowner, you’re entitled to a bevy of tax benefits you don’t get as a stock investor. You can deduct your mortgage interest and property taxes from your annual tax return. Plus, depending on your circumstances, you could also get a deduction or credit for any home-office expenses, moving expenses, capital gains, any “points” used to lower your interest rate, and more.

One caveat: investing in real estate takes time

No matter what some of those reality TV programs show, buying a home should not be viewed as a get-rich-quick scheme. But if you think you’re ready to put down roots for as long as seven years, chances are very good that any home you purchase will appreciate significantly during that time (even if the economy runs into some bumps along the way).

The non-financial benefits

Of course, not all of the benefits of owning a home are financial. For most Americans, their home is a source of tremendous pride, comfort, security and freedom. Most of us also use our homes to showcase our personality, through paint colors, furnishings, landscaping, yard signs, holiday decorations and so much more.

Yes, the stock market is on an upswing currently (depending on the week), but if you want an investment with a long-term track record of consistent returns—plus tax breaks and a variety of personal perks—you may want to buy a home instead.

If you have questions about the buying or selling process, or are looking for an experienced agent in your area, connect with us  here.


Posted on September 2, 2017 at 8:00 am
Windermere Colorado | Posted in For Buyers & Sellers | Tagged , , , ,

Colorado’s Home Price Appreciation Rankings

New Rankings

The new rankings are out from the Federal Housing Finance Authority which ranks all 50 states plus close to 300 individual metropolitan markets for home price appreciation.

We trust this source because they track actual sales of individual homes versus simply looking at average prices. Their home price index is one of the key pieces of research that we follow closely.

There are a few significant items in their latest report (which is hot off the press).

  • Colorado is ranked 2nd for one-year appreciation, 5th for five-year appreciation and 1st for twenty five-year appreciation. Prices across Colorado have increased 324% since the end of 1991.
  • Fort Collins/Loveland is ranked 10th out of all the metro areas for one-year appreciation with a 12.1% increase.
  • Greeley is in at 21st with 10.73% appreciation

In case you are curious, the hottest market in the country is Mount Vernon, Washington with 15.1% yearly appreciation. Atlantic City is ranked last with a 0.8% price decrease.

It’s clearly “good to be us” as we are one of the highest-performing markets over the long-haul.

Check out the FHFA recap video here:

Here is the data straight from FHFA’s report:

U.S. house prices rose 1.6 percent in the second quarter of 2017 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI).   House prices rose 6.6 percent from the second quarter of 2016 to the second quarter of 2017.  FHFA’s seasonally adjusted monthly index for June was up 0.1 percent from May.

The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.  FHFA has produced a video of highlights for this quarter.

Significant Findings

  • Home prices rose in 48 states and the District of Columbia between the second quarter of 2016 and the second quarter of 2017.  The top five states in annual appreciation were:  1) Washington 12.4 percent; 2) Colorado 10.4 percent; 3) Idaho 10.3 percent; 4) Florida 9.4 percent; and 5) Utah 9.2 percent.
  • Among the 100 largest metropolitan areas in the U.S., annual price increases were greatest in the Seattle-Bellevue-Everett, WA (MSAD), where prices increased by 15.7 percent.  Prices were weakest in New Haven-Milford, CT, where they rose by 0.1 percent.
  • Of the nine census divisions, the Pacific division experienced the strongest increase in the second quarter, posting a 2.6 percent quarterly increase and a 8.9 percent increase since the second quarter of last year.  House price appreciation was weakest in the Middle Atlantic division, where prices rose 0.8 percent from the last quarter.

Source: FHFA


Posted on September 1, 2017 at 5:10 pm
Windermere Colorado | Posted in Colorado Real Estate | Tagged , ,

Don’t Stress About Selling… We’ve Got You Covered ☂️

Have you wondered how much 💰equity💰 you have in your home? If so, perhaps you’ve thought about selling. It can be daunting to think about the process and all it takes to get a home ready to sell, but we have you covered ☂️!

Eric Thompson, President of Windermere Real Estate in Colorado, explains how we help you sell your home with ease and confidence in the video below. 👀 Check it out 👀

Want to learn more? Check out our website ➡️ TheCertifiedListing.com.


Posted on August 16, 2017 at 7:43 pm
Windermere Colorado | Posted in For Sellers | Tagged ,

Gardner Report – Market Analysis

Check out the latest Gardner Report below with information and stats on the Northern Colorado Real Estate Market!

You can download the 4-page PDF here: Gardner Report PDF Download

The Gardner Report  | Metro Denver and Northern Colorado Q2 2017

The following analysis of the Metro Denver and Northern Colorado real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact me.

ECONOMIC OVERVIEW


Colorado added 62,000 new jobs over the past 12 months, an increase of 2.4% over this time last year. All of the metropolitan markets included in this report saw annual employment growth, with substantial growth in Boulder (4.7%) and Fort Collins (+4.1%), and more modest growth in Grand Junction (0.3%).

In May, the unemployment rate in the state was 2.3%, matching the prior month and down 3.4% from a year ago. The lowest unemployment rate was in Fort Collins at just 2.0%. The highest rate was in Grand Junction, though it was still a relatively low 3.3%. It is reasonable to expect these markets will see above-average wage growth given the tight labor market.

HOME SALES ACTIVITY


  • There were 17,581 home sales during the first quarter of 2017, a solid annual increase of 3.9% over the first quarter of 2016.
  • Jefferson County saw sales grow at the fastest rate over the past 12 months, with a 9.4% increase. There was also an impressive increase in Douglas County (+6.3%).  More modest sales growth was seen in Denver and Weld Counties.
  • Even with the rise in sales, listing activity is still running at well below historic averages, with the total number of homes for sale in the second quarter 7.6% below a year ago.
  • Sales growth continues to trend higher, but inventory levels remain well below where they need to be to satisfy demand.
Annual Change in Home Sales

HOME PRICES


  • Due to solid demand, home prices continue to rise with average prices up by 8.5% year-over-year to an average across the region of $438,980.
  • Boulder County saw slower appreciation in home values, but the trend is still positive.
  • Appreciation was strongest in Denver and Weld Counties, where prices rose by 12.4% and 10.6% respectively.
  • Economic growth is driving job growth, which is driving housing demand. Given the relative shortage of homes for sale, expect to see home prices continue to appreciate at above-average rates at least through the rest of the year.
Metro Denver and Northern Colorado Heat Map
Annual Change in Home Sale Prices

DAYS ON MARKET


  • The average number of days it took to sell a home dropped by three days when compared to the second quarter of 2016.
  • Homes in all counties contained in this report took less than a month to sell. Adams County stood out as it took an average of only 11 days to sell a home.
  • During the second quarter, it took an average of just 17 days to sell a home. This is down by a substantial 13 days compared to the first quarter of this year.
  • The takeaway here is that demand remains robust as evidenced by the remarkably short amount of time that it is taking to sell a home.
Average Days on Market

CONCLUSIONS


This speedometer reflects the state of the region’s housing market using housing inventory, price gains, home sales, interest rates, and larger economic factors.After the second quarter of 2017, I have moved the needle even farther in favor of sellers. Mortgage rates remain very competitive and, with the specter of lending standards easing a little, demand will remain robust, which will be reflected in rising home values.

ABOUT MATTHEW GARDNER


Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K.

Posted on August 9, 2017 at 5:34 pm
Windermere Colorado | Posted in Colorado Real Estate, Market News | Tagged , ,

Interest Rates Rise… So What?

The Federal Reserve raised their benchmark interest rate 0.25% this week.

So what does this mean for real estate?

Some perspective is in order…

First, mortgage rates are not directly tied to the Fed Funds rate. They are, however, closely tied to the 10-year Treasury.

While the Fed was raising their rates this week, mortgage rates actually dipped lower (although slightly).

Mortgage rates today on a 30-year loan are essentially 4.25%.

The long term average for mortage rates, going all the way back to 1970 is 7.5%

For every 1% rise in rates, there is a corresponding 10% impact to the monthly payment.

Mortgage rates have increased about 0.75% since the election.

Most economists expect rates to increase another 0.5% by year-end.

Click HERE to read a great article that goes a little more into depth about what this means for homeowners.

We are watching mortgage rates closely and will continue to keep our customers updated as to where the experts think they are heading. Contact us directly if you have any questions. (970) 460-3033.


Posted on March 17, 2017 at 3:23 pm
Windermere Colorado | Posted in Finance | Tagged , , , ,

Two Years & Top 3% in Metro Denver Market

Windermere Real Estate, the largest regional brokerage in the Western U.S. is celebrating its second year in the Denver market this month.  After just two years, the Seattle-based company now ranks in the top 3% of all real estate brokerage companies in the metropolitan area.

Exclusively WindermereWhile Windermere has been growing over the last two years, metro Denver homeowners have been benefitting from the robust growth in real estate prices.  According to the latest report from the Federal Housing Finance Authority, Denver ranks 14th out of 258 metropolitan areas for home price appreciation with 10.14% growth over the last 12 months.

This appreciation rate is nearly double the long-term average of 5.8%.  Prices in metro Denver have been appreciating at double-digit rates for the last four years in a row.  The average price of a single-family home now stands at $448,000.  Just two years ago, when Windermere started in Metro Denver, the average price was $371,000.

“For four years now we have had the perfect storm to cause prices to increase at a rate that is nearly double the long-term average.  Metro Denver is one of the fastest growing populations in the country, we have an incredibly healthy economy with high employment, interest rates that are roughly half of the long-term average, and the inventory of homes is at all-time lows,” said Eric Thompson president of Windermere Real Estate in Colorado.

There are only 2,918 single family homes currently for sale in Metro Denver, 7.8% lower than a year ago.  “With tight supply and strong demand, we see expect very strong price appreciation for the foreseeable future,” said Thompson.

About Windermere Colorado:

Since its inception in 1972, Windermere Real Estate has grown to be a network of 300 offices with more than 6,000 agents by focusing on three basic principles: hire the best people, give them the best tools and create thriving communities. Windermere’s growth has allowed them to expand into the Colorado market led by Eric Thompson, President of Windermere Colorado. 

Centennial Office: www.Windermere5280.com

Cherry Creek office: www.wmdre.com


Posted on March 14, 2017 at 3:31 pm
Windermere Colorado | Posted in Denver Real Estate Market, Press Release | Tagged , , ,

Colorado Real Estate Market Update

ECONOMIC OVERVIEW

Annual employment growth in Colorado was measured at a respectable 2.2% in November and will likely finish the year having created around 55,000 new jobs. Within the metropolitan market areas included in this report, we are seeing employment growth at or above the state level and I anticipate that this will continue to be the case in 2017.

Unemployment rates continue to drop, and with rates now below three percent, all of Colorado’s metro areas are at full employment. Because of this robust level of growth—in concert with very low unemployment levels—I anticipate that we will see some fairly substantial income growth as companies look to recruit new talent and keep existing employees happy.

HOME SALE ACTIVITY

  • There were 14,614 home sales during the fourth quarter of 2016—up by a marginal 0.7% from the same period in 2015.
  • Jefferson County saw sales grow at the fastest rate over the past 12 months, with a 5.9% increase. Sales activity fell in three counties, but this was a function of short supply rather than slowing demand.
  • Listing activity continues to remain well below historic averages, with the total number of homes for sale in the fourth quarter 12.8% below that seen a year ago.
  • The key takeaway from this data is that 2017 is shaping up to be one which will still substantially favor home sellers. I do anticipate that we will see some improvement in listing activity, but it is almost a certainty that demand will exceed supply for another year.

 

HOME PRICES

  • Demand continued to exceed supply in the final three months of 2016 and this caused home prices to continue to rise. In the fourth quarter, average prices rose by 9% when compared to the fourth quarter of 2015. The average sales price across the region is now $393,969.
  • In many parts of the region, prices are well above historic highs and continue to trend upward. With double-digit price increases over the past year, the market remains very hot.
  • Annual price growth was strongest in Larimer and Jefferson Counties, where prices rose by 11.8% and 10.9% respectively.
  • While we will likely see some modest softening in home price growth in 2017, we can still expect a very strong market.

 

DAYS ON MARKET

  • The average number of days it took to sell a home dropped by one day when compared to the fourth quarter of 2015.
  • Homes in a majority of the counties took less than a month to sell.
  • In the final quarter of the year, it took an average of just 27 days to sell a home. This is down from the 28 days it took in the fourth quarter of 2015.
  • The Northern Colorado housing market is still firing on all cylinders. The only missing piece is listings, which remain well below the historic average.

 

CONCLUSIONS

This speedometer reflects the state of the region’s housing market using housing inventory, price gains, sales velocities, interest rates, and larger economic factors.

For the fourth quarter of 2016, the needle remains firmly in the seller’s territory. It will be interesting to see if the recent increase in mortgage rates has any effect at all on the housing market. I believe that it will; however, I expect that it will likely cause a slowdown in home price growth rather than any collapse in home prices.

 

Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has over 25 years of professional experience both in the U.S. and U.K.


Posted on February 6, 2017 at 9:24 pm
Windermere Colorado | Posted in Colorado Real Estate, Colorado Real Estate Market Update, Market News | Tagged , , , , , , , , ,