Here’s how the largest Colorado cities rank on the most recent Federal Housing Finance Authority’s quarterly report. They study the appreciation rate in 245 metropolitan areas all over the country.
Boulder 65th 8.76%
Colorado Springs 15th 11.54%
Denver 30th 10.16%
Fort Collins 85th 7.51%
Grand Junction 58th 9.01%
Greeley 45th 9.51%
Interest rates have been trending higher since the fall of 2017, and I fully expect they will continue in that direction – albeit relatively slowly – as we move through the balance of the year and into 2019. So what does this mean for the US housing market?
It might come as a surprise to learn that I really don’t think rising interest rates will have a major impact on the housing market. Here is my reasoning:
1. First Time Home Buyers
As interest rates rise, I expect more buyers to get off the fence and into the market; specifically, first time buyers who, according to Freddie Mac, made up nearly half of new mortgages in the first quarter of this year. First-time buyers are critical to the overall health of the housing market because of the subsequent chain reaction of sales that result so this is actually a positive outcome of rising rates.
2. Easing Credit Standards
Rising interest rates may actually push some lenders to modestly ease credit standards. I know this statement will cause some people to think that easing credit will immediately send us back to the days of sub-prime lending and housing bubbles, but I don’t see this happening. Even a very modest easing of credit will allow for more than one million new home buyers to qualify for a mortgage.
3. Low Unemployment
We stand today in a country with very low unemployment (currently 4.0% and likely to get close to 3.5% by year’s end). Low unemployment rates encourage employers to raise wages to keep existing talent, as well as to recruit new talent. Wage growth can, to a degree, offset increasing interest rates because, as wages rise, buyers can afford higher mortgage payments.
There is a clear relationship between housing supply, home prices, and interest rates. We’re already seeing a shift in inventory levels with more homes coming on the market, and I fully expect this trend to continue for the foreseeable future. This increase in supply is, in part, a result of homeowners looking to cash in on their home’s appreciation before interest rates rise too far. This, on its own, will help ease the growth of home prices and offset rising interest rates. Furthermore, if we start to see more new construction activity at the lower end of the market, this too will help.
National versus Local
Up until this point, I’ve looked at how rising interest rates might impact the housing market on a national level, but as we all know, real estate is local, and different markets react to shifts in different ways. For example, rising interest rates will be felt more in expensive housing markets, such as San Francisco, New York, Los Angeles, and Orange County, but I expect to see less impact in areas like Cleveland, Philadelphia, Pittsburg, and Detroit, where buyers spend a lower percentage of their incomes on housing. The exception to this would be if interest rates continue to rise for a prolonged period; in that case, we might see demand start to taper off, especially in the less expensive housing markets where buyers are more price sensitive.
For more than seven years, home buyers and real estate professionals alike have grown very accustomed to historically low interest rates. We always knew the time would come when they would begin to rise again, but that doesn’t mean the outlook for housing is doom and gloom. On the contrary, I believe rising interest rates will help bring us closer to a more balanced real estate market, something that is sorely needed in many markets across the country.
Stylizing your own home can be a daunting but rewarding challenge. When you own your living space, it’s easy to feel a sense of ownership over every piece of your design. But for renters, the challenge is a bit different. Despite limitations, it’s no less important to one’s well-being for a residence to convey a sense of ownership and self. To make a rental unit feel a bit more like home, we took down a few ways to imbue your abode with your own spirit, without leaving a permanent mark in the space or your wallet.
Storage – Let’s be honest, rentals often lack sufficient storage place, and since custom cabinetry isn’t usually an option for renters, investing in some added storage is key. Add some simple shelves, bookshelves, baskets, or under the bed storage.
Blinds – Vertical blinds may be the ultimate decorating sin. No one likes feeling as if they’re living in a motel room. We suggest you either take them down or hide them under curtains. Just don’t throw them out or you may not get your security deposit back!
Accessorize – Pillows, throws, candles, books, light fixtures… the only way to get a truly genuine space. This is by far the easiest and a MUST.
Wall Art – Those pesky holes might keep you from hanging art or photos on your walls, but when it comes down to it, they’ll only take a few minutes to patch up when it comes time to move out. This doesn’t mean you have to hang an entire art gallery, but hanging one statement piece and placing the rest of the photos on a mantel or shelf should do the trick.
Rugs – Last but not least, rugs: the peanut butter to your rental jelly. If there are scratched hardwood floors or stained carpets, you can cover those up easily with a throw rug. Not only that, a rug is a great investment piece that will add your personal flavor to any space. And they absorb noise and make a room feel comfy.
All of us at Windermere are very excited to kick-off our third season as the Official Real Estate Company of the Seattle Seahawks!
Once again, our #tacklehomelessnesscampaign is front-and-center, with the Windermere Foundation donating $100 for every Seahawks home-game defensive tackle to YouthCare, a Seattle-based non-profit organization that has been providing services and support to homeless youth for more than 40 years. During the past two seasons, the Seahawks have helped us raise $66,800 through our #tacklehomelessness campaign, and this year we are looking forward to raising even more money – and awareness – for this important cause.
Our partnership with the Seahawks and YouthCare fits perfectly with the mission of the Windermere Foundation which is to support low-income and homeless families in the communities where we have offices. Through the #tacklehomelessness campaign, we hope to be able to do even more.
A “scorecard” will be posted after each home game with an update on how much we’ve raised. You can follow our progress throughout the Seahawks season on our Facebook page at Facebook.com/WindermereRealEstateand on Instagram at https://www.instagram.com/windermere/.
Luxury homes sales across the U.S. continue to perform strongly, but I’m noticing some headwinds starting to appear that are worthy of a closer look.
It’s often thought that luxury real estate runs totally independent of the overall market, and while this is true in some respects, there are definitely correlations between high-end housing and the rest of the market.
The first similarity is that the luxury market has suffered from some the same inventory constraints that are almost endemic across all price points in the U.S. But, similar to the overall market, we are starting to see a rise in inventory, which should be good news for real estate agents and luxury home buyers alike.
Impact of rising inventory
This increase in the number of luxury homes for sale has started to have a tapering effect on price growth, which again, is similar to what we’re seeing in the rest of the market. But as real estate professionals, we know full well that all housing is local and some markets are performing far better than others.
For example, luxury markets in Maui, Northern California, Colorado, and Sarasota, Florida, are all experiencing substantial price growth, while there are noticeable slowdowns in many parts of New York and New Jersey. Even Queens and Jersey City, which have continued to benefit from high demand, have seen price growth stall recently, indicating that those markets could be losing some steam.
Why the slowdown?
The slowing of luxury sales in certain areas around the country piqued my interest, so I decided to explore why this is happening. The first thing I noticed is that cities with high property taxes are fairly prevalent on the list of slowing markets; this includes cities like Boston, Austin, New York City, and Chicago. It is likely that the federal tax changes limiting the deductibility of property taxes are the culprit for such slowdowns in these areas.
Something else that has undoubtedly impacted luxury home sales in markets, such as New York City and Seattle, is the significant decline in foreign buyers from countries like China and Canada. According to the National Association of Realtors, the number of purchases by international buyers fell by 21 percent between 2017 and 2018, amounting to a drop of $32 billion – the largest decline on record. Foreign buyers spent $121 billion on 266,754 properties, making up 8 percent of the buyers of existing (previously lived in) homes.
My research tells me that foreign home buyers are pulling back amid political uncertainty in the U.S. Ongoing concerns about a potential trade war, combined with rhetoric against foreigners, have done their part to dampen some of the enthusiasm to invest in U.S. housing. Also playing a role in this slowdown is the Chinese Central Government which has started placing tighter controls on the ability to spend money outside of mainland China. And finally, rising home prices and a strong U.S. dollar are likely two other key factors behind the tumbling interest in luxury real estate from overseas buyers.
So how do I see the luxury market performing in 2019?
Luxury real estate sales in markets like Boston, Clearwater, Austin, and Alexandria, Virginia will continue to slow down for the reasons stated earlier, but in other parts of the country, home buyers will provide the demand needed to keep the market plugging along at a healthy pace.
The changes affecting mortgage interest deductions and property taxes will also continue to impact the luxury market in certain areas, but this will, to a degree, be offset by other tax changes that favor high-income households and increase their disposable income. Something else that will help keep the luxury real estate market afloat in the coming year is jumbo mortgage interest rates which remain remarkably competitive compared to historic standards.
On a whole, high-end real estate sales have been strong over the past few years. While I am predicting somewhat of a slowdown next year given the headwinds discussed earlier, 2019 will be remembered as a year where balance started to return to the luxury housing market.
Mr. 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 Gar
Windermere Real Estate Chief Economist Matthew Gardner explains how restrictive growth policies are affecting housing affordability in many cities.
This well-maintained home at 1112 101st Ave Ct is located in West Greeley in the Promontory neighborhood. With easy access to Loveland, Windsor and Ft. Collins, this is the perfect starter home or income property. This West facing house has new quartz counter tops, subway tile back splash, maple cabinets, and traditional hickory ﬂoors in the kitchen and in the entryway. Contact Lindsey Crisanti for your private showing at 970-420-4498 for more information or click the link below for more details.
It’s true, certain parts of our market are cooling off. We are seeing fewer multiple offers, fewer bidding wars, and fewer inspection concessions.
However, homes that are priced right and in great condition are selling, and in many cases, selling quickly.
As buyers feel the market cool a bit, it may cause them to want to wait. They sometimes feel like it’s a better choice to ‘wait and see what happens.’
The reality is, there is a real cost to waiting given two specific facts.
1. Interest rates will continue to rise
2. Prices will continue to rise
Interest rates are a little more than 0.5% higher than a year ago and experts predict them to be another 0.5% higher by this time next year.
Prices have been appreciating at roughly 10% per year for the last four years. Based on the numbers, we see that appreciation could be 5% per year for the next two years.
So, let’s look at a house priced at $450,000 today. If prices go up “only” 5% for the next 12 months, that home will cost $22,500 more in a year.
And, if rates go up another half percent, the monthly payment will be $206 higher. That’s an 11% increase!
In an environment of rising prices and rising rates, there is a real cost to “wait and see.”
When dissatisfaction with your current home strikes, it can be exciting to launch into a plan for a new addition. A new living room, bedroom, or more can add value to your home while improving your quality of life.
On the other hand, even a modest addition can turn into a major construction project, with architects and contractors to manage, construction workers traipsing through your home, hammers pounding, and sawdust everywhere. And although new additions can be a very good investment, the cost-per-square-foot is typically more than building a new home, and much more than buying a larger existing home.
Define your needs
To determine if an addition makes sense for your particular situation, start by defining exactly what it is you want and need. By focusing on core needs, you won’t get carried away with a wish list that can push the project out of reach financially.
If it’s a matter of needing more space, be specific. For example, instead of just jotting down “more kitchen space,” figure out just how much more space is going to make the difference, e.g., “150 square feet of floor space and six additional feet of counter space.”
If the addition will be for aging parents, consult with their doctors or an age-in-place expert to define exactly what they’ll require for living conditions, both now and over the next five to ten years.
Types of additions
Bump-out addition—“Bumping out” one or more walls to make a first-floor room slightly larger is something most homeowners think about at one time or another. However, when you consider the work required, and the limited amount of space created, it often figures to be one of your most expensive approaches.
First-floor addition—Adding a whole new room (or rooms) to the first floor of your home is one of the most common ways to add a family room, apartment or sunroom. But this approach can also take away yard space.
Dormer addition—For homes with steep rooflines, adding an upper floor dormer may be all that’s needed to transform an awkward space with limited headroom. The cost is affordable and, when done well, a dormer can also improve the curb-appeal of your house.
Second-story addition—For homes without an upper floor, adding a second story can double the size of the house without reducing surrounding yard space.
Garage addition—Building above the garage is ideal for a space that requires more privacy, such as a rentable apartment, a teen’s bedroom, guest bedroom, guest quarters, or a family bonus room.
You’ll need a building permit to construct an addition—which will require professional blueprints. Your local building department will not only want to make sure that the addition adheres to the latest building codes, but also ensure it isn’t too tall for the neighborhood or positioned too close to the property line. Some building departments will also want to ask your neighbors for their input before giving you the go-ahead.
Requirements for a legal apartment
While the idea of having a renter that provides an additional stream of revenue may be enticing, the realities of building and renting a legal add-on apartment can be sobering. Among the things you’ll need to consider:
- Special permitting—Some communities don’t like the idea of “mother-in-law” units and therefore have regulations against it or zone-approval requirements.
- Separate utilities—In many cities, you can’t charge a tenant for heat, electricity, and water unless utilities are separated from the rest of the house (and separately controlled by the tenant).
- ADU Requirements—When building an “accessory dwelling unit” (the formal name for a second dwelling located on a property where a primary residence already exists), building codes often contain special requirements regarding emergency exists, windows, ceiling height, off-street parking spaces, the location of main entrances, the number of bedrooms, and more.
In addition, renters have special rights while landlords have added responsibilities. You’ll need to learn those rights and responsibilities and be prepared to adhere to them.
The cost to construct an addition depends on a wide variety of factors, such as the quality of materials used, the laborers doing the work, the type of addition and its size, the age of your house and its current condition. For ballpark purposes, however, you can figure on spending about $200 per square foot if your home is located in a more expensive real estate area or about $100 per foot in a lower-priced market.
You might be wondering how much of that money your efforts might return if you were to sell the home a couple years later? The answer to that question depends on the aforementioned details, but the average “recoup” rate for a family room addition is typically more than 80 percent.
The bottom line
While you should certainly research the existing-home marketplace before hiring an architect to map out the plans, building an addition onto your current home can be a great way to expand your living quarters, customize your home, and remain in the same neighborhood.
Much of the Western United States is grappling with the same issue this summer – the specter of smoke and fire from some of the largest forest fires in recent memory. For individuals, even the decreased air quality can be a threat, while the destruction that the fires themselves can wreak is devastating. Homeowners living near impacted areas are often left with an impossible choice – pack up what they can and evacuate or remain in a dangerous location and hope for the best. Thankfully, homes needn’t be defenseless against the heat. To help fortify your home against damage stemming from fires, we brought together advice from a few experts.
Opt for Flame-Resistant Walls and Roofing
- It may be obvious but building a home out of non-flammable materials like brick, stucco, metal, or concrete is a key way to prevent a fire from taking hold initially.
- The troublesome spaces tend to be beyond the core of the home. Decks, balconies, and overhangs all commonly include wooden components that can be easy points of egress for embers.
- Replacing or coating these accent points with fireproof materials is a short-term expense that, much like insurance, prevents far greater financial strains in the future.
No Space is Too Small to Protect
- Think that little vent in the attic is too small to be an issue? Think again!
- Even vents built into kitchens and dryers should be considered as potential problem areas. Protecting these can allow continued circulation of air without incurring an excess fire risk.
- Wire screens with 1/8th” to 1/4th” between screen bars are typically enough to keep treacherous embers from sneaking into your home.
Fortify Your Windows
- The most vulnerable spots in most homes are glassy exterior windows. While their views are understandably gorgeous, they can be easy pressure points for fires to overpower.
- If you have the means to replace single-plane glass with wire glass or fireproof safety glass, that’s a worthwhile expense to ensure neither flames themselves nor radiant heat can shatter into your home.
- Beyond simply upgrading the glass, installing retractable fireproof exterior panels is the safest route to fire protection. And don’t forget your skylights!