So how much real estate is sold in Northern Colorado?
As it turns out, a lot!
Last month alone there were 1,099 single family homes that sold in Larimer and Weld Counties
The average price was $429,144 which means the total sales volume for one month was $471,629,129 (almost a half a billion)!
Over the last 12 months, just over $4.5 billion worth of single-family homes have sold.
That’s a lot of real estate!
With interest rates so low, one could argue that money is essentially on sale.
It’s actually half off.
30-year mortgage rates hit 3.75% which is exactly half of their long term average.
Rates have averaged 7.5% over the last 40 years so today buyers are getting half of that rate.
The “sale” on mortgage rates creates a significant savings in monthly payment because of the 1%/10% rule.
For every 1% change in interest rate, the monthly payment will change roughly 10%.
So when rates go up to 4.75%, a buyer’s payment will be 10% higher.
For example, the principal and interest payment on a $400,000 home with a 20% down payment at today’s rates is $1,482.
If rates were 1% higher, the payments jump up to $1,669.
Here are some observations we have about the market right now:
- Inventory is up, price reductions are up, the length of time to sell a home is up
- Seller concessions are more prevalent
- Sellers are more willing to accept contingent offers (especially in higher price ranges)
- If a home doesn’t sell within a week, it often becomes stigmatized by the market and potential buyers assume there must be something wrong with it
- Homes that likely would have sold within hours a year ago, are now sitting on the market
- Condition is super-important as buyers become even more picky
- Pricing a property correctly on day one is paramount
- Sellers who over-price their property are finding themselves chasing the market
An interesting stat which can give some insight to the national market is the Home-ownership Rate.
It simply looks at the percentage of Americans who own their home instead of rent.
The most recent report from the Census Bureau shows the rate at 64.2%.
Most importantly, this number is showing stability after many years of change.
After many years of hovering around 64%, the Home-ownership Rate started increasing in 1996 and reached as high as 69.5% in 2005.
2008 started several years of declining back to the pre-1996 levels of 64%.
So today it’s back to what seems to be “normal” based the long-term average.
If you have driven on I-25 lately you may have noticed that the Front Range is a popular place.
The projections show that it will only get more popular in the future.
Today, 4.8 million people live along the Front Range from Fort Collins down to Pueblo.
In 2030, just 11 short years from now, 5.7 million people will live here. Yes, that’s almost 1 million more than today.
This is all according to the Colorado State Demographers Office.
While this seems like a big increase, keep in mind that this assumes that population growth occurs at a fairly modest 1.7% per year.
It seems that our state will continue to grow and there will continue to be a demand for housing.
Given how active our market is today and has been over the last few years, many people assume that virtually every home with a “For Sale” sign in the front yard is already under contract.
They are surprised to learn that, in most cases, the “For Sale” sign does indeed represent a home that is actively for sale.
For example, today in Fort Collins there are 655 single-family homes on the market. 290 of these are under contract and will be closing soon. 365 of these are still active. So, 56% of the signs in Fort Collins are in front of homes that are still available.
Here are the specific numbers for each of our Northern Colorado markets:
• Fort Collins = 56%
• Loveland = 57%
• Windsor = 58%
• Greeley = 41%
Photo Credit: Rawpixel via Unsplash
Few topics cause more division among economists than the age-old debate of whether you’re better off paying off your mortgage earlier, or investing that money instead. And there’s a good reason why that debate continues; both sides make compelling arguments.
For many people, their mortgage is the largest expense they will ever incur in their lives. So if given the chance, it only makes logical sense you would want to pay it off as quickly as possible. On the other hand, a mortgage is also the cheapest money you will ever borrow, and it’s generally considered good debt. Any extra money you obtain could be definitely be put to good use elsewhere.
The reality is, however, a little less cut and clear. For some homeowners, paying off their mortgage earlier is the right answer. While for others, it would be far more advantageous to invest their money.
Advantages of paying off your mortgage earlier
- You’ll pay less interest: Each time you make a mortgage payment, a portion is dedicated towards interest, and another towards principal (we’ll ignore other costs for now). Interest is calculated monthly by taking your remaining balance, the length of your amortization period, and the interest rate agreed upon with your lending institution.
If you have a $300,000 mortgage, at a 4% fixed rate over 30 years, your monthly payment would be around $1,432.25. By the time you finish paying off your mortgage, you would have paid a total of $515,609, of which $215,609 were interest.
If you wanted to lower the total amount you pay on interest, you don’t need to make a large lump sum to make a difference. If you were to increase your monthly mortgage payment to $1,632.25 (a $200 a month increase), you would be saving $50,298 in interest, and you’ll pay off your mortgage 6 years and 3 months earlier.
Though this is an oversimplified example, it shows how even a small increase in monthly payments makes a big difference in the long run.
- Every additional dollar towards your principal has a guaranteed return on investment: Every additional payment you make towards your mortgage has a direct effect in lowering the amount you pay in interest. In fact, each additional payment is, in fact, an investment. And unlike stocks, bonds, and other investment vehicles, you are guaranteed to have a return on your investment.
- Enforced discipline: It takes real commitment to invest your money wisely each month instead of spending it elsewhere.
Your monthly mortgage payments are a form of enforced discipline since you know you can’t afford to miss them. It’s far easier to set a higher monthly payment towards your mortgage and stick to it than making regular investments on your own.
Besides, once your home is completely paid off, you can dedicate a larger portion of your income towards investments, your children or grandchildren’s education, or simply cut down on your working hours.
Advantages of investing your money
- A greater return on your investment: The biggest reason why you should invest your money instead comes down to a simple, green truth: there’s more money to be made in investments.
Suppose that instead of dedicating an additional $200 towards your monthly mortgage payment, you decide to invest it in a conservative index fund which tracks S&P 500’s index. You start your investment today with $200 and add an additional $200 each month for the next 30 years. By the end of the term, if the index fund had a modest yield of 5% per year, you will have earned $91,739 in interest, and the total value of your investment would be $163,939.
If you think that 5% per year is a little too optimistic, all we have to do is see the S&P 500 performance between December 2002 and December 2012, which averaged an annual yield of 7.10%.
- A greater level of diversification: Real estate has historically been one of the safest vehicles of investment available, but it’s still subject to market forces and changes in government policies. The forces that affect the stock and bonds markets are not always the same that affect real estate, because the former are subject to their issuer’s economic performance, while property values could change due to local events.
By putting your extra money towards investments, you are diversifying your investment portfolio and spreading out your risk. If you are relying exclusively on the value of your home, you are in essence putting all your eggs in one basket.
- Greater liquidity: Homes are a great investment, but it takes time to sell a home even in the best of circumstances. So if you need emergency funds now, it’s a lot easier to sell stocks and bonds than a home.
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A statistic we keep our eye on is the percentage of homes which sell for at least list price.
In a robust, healthy, market with lower inventory, we will frequently see homes selling for their asking price or even higher.
Here are the number of sales that occur for list price or higher in each of our major markets:
• Fort Collins = 60%
• Loveland = 60%
• Greeley = 71%
• Windsor = 56%
There are a couple of things we notice about these numbers. First, well over half of all sales are for at least list price. This means that a buyer needs to be prepared to make a full price offer (or higher) in most cases. This also means that if a seller is priced right and marketed effectively, they should achieve their asking price.
We also notice that these percentages are lower than one year ago. In 2018 these numbers were 5% to 10% higher in each market. This is good news for buyers of course because the bidding wars are not as intense as last year.
We are often asked, “Which is the better buy, a newer or older home?” Our answer: It all depends on your needs and personal preferences. We decided to put together a list of the six biggest differences between newer and older homes:
Surprisingly, one of the biggest factors in choosing a new home isn’t the property itself, but rather the surrounding neighborhood. While new homes occasionally spring up in established communities, most are built in new developments. The settings are quite different, each with their own unique benefits.
Older neighborhoods often feature tree-lined streets; larger property lots; a wide array of architectural styles; easy walking access to mass transportation, restaurants and local shops; and more established relationships among neighbors.
New developments are better known for wider streets and quiet cul-de-sacs; controlled development; fewer above ground utilities; more parks; and often newer public facilities (schools, libraries, pools, etc.). There are typically more children in newer communities, as well.
Consider your daily work commute, too. While not always true, older neighborhoods tend to be closer to major employment centers, mass transportation and multiple car routes (neighborhood arterials, highways and freeways).
Design and layout
If you like Victorian, Craftsman or Cape Cod style homes, it used to be that you would have to buy an older home from the appropriate era. But with new-home builders now offering modern takes on those classic designs, that’s no longer the case. There are even modern log homes available.
Have you given much thought to your floor plans? If you have your heart set on a family room, an entertainment kitchen, a home office and walk-in closets, you’ll likely want to buy a newer home—or plan to do some heavy remodeling of an older home. Unless they’ve already been remodeled, most older homes feature more basic layouts.
If you have a specific home-décor style in mind, you’ll want to take that into consideration, as well. Professional designers say it’s best if the style and era of your furnishings match the style and era of your house. But if you are willing to adapt, then the options are wide open.
Materials and craftsmanship
Homes built before material and labor costs spiked in the late 1950s have a reputation for higher-grade lumber and old-world craftsmanship (hardwood floors, old-growth timber supports, ornate siding, artistic molding, etc.).
However, newer homes have the benefit of modern materials and more advanced building codes (copper or polyurethane plumbing, better insulation, double-pane windows, modern electrical wiring, earthquake/ windstorm supports, etc.).
The condition of a home for sale is always a top consideration for any buyer. However, age is a factor here, as well. For example, if the exterior of a newer home needs repainting, it’s a relatively easy task to determine the cost. But if it’s a home built before the 1970s, you have to also consider the fact that the underlying paint is most likely lead based, and that the wood siding may have rot or other structural issues that need to be addressed before it can be recoated.
On the flip side, the mechanicals in older homes (lights, heating systems, sump pump, etc.) tend to be better built and last longer.
One of the great things about older homes is that they usually come with mature tress and bushes already in place. Buyers of new homes may have to wait years for ornamental trees, fruit trees, roses, ferns, cacti and other long-term vegetation to fill in a yard, create shade, provide privacy, and develop into an inviting outdoor space. However, maybe you’re one of the many homeowners who prefer the wide-open, low-maintenance benefits of a lightly planted yard.
Like it or not, most of us are extremely dependent on our cars for daily transportation. And here again, you’ll find a big difference between newer and older homes. Newer homes almost always feature ample off-street parking: usually a two-care garage and a wide driveway. An older home, depending on just how old it is, may not offer a garage—and if it does, there’s often only enough space for one car. For people who don’t feel comfortable leaving their car on the street, this alone can be a determining factor.
Finalizing your decision
While the differences between older and newer homes are striking, there’s certainly no right or wrong answer. It is a matter of personal taste, and what is available in your desired area. To quickly determine which direction your taste trends, use the information above to make a list of your most desired features, then categorize those according to the type of house in which they’re most likely to be found. The results can often be telling.
If you have questions about newer versus older homes, or are looking for an agent in your area we have professionals that can help you. Contact us here.