The Group: Lack of inventory, sales of luxury homes continue to push up home prices

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A global pandemic failed to slow down increases in average home prices as most Larimer County towns witnessed a dire shortage of available properties while demand continued to grow.

In addition to lack of supply, home prices throughout Weld and Larimer counties were  skewed by sales of high-end luxury homes, said Brandon Wells, president and CEO of The Group Real Estate. 

In The Group’s annual real estate forecast, presented virtually, Wells recapped an unprecedented year that saw lower interest rates, shifts in where and how people want to live and work and growing demand for larger and more expensive homes. 

Combined, the average sales price for all of Northern Colorado was $439,117 at the end of last year. The Group predicted it would end this year at right around $462,000. 

Timnath had the most expensive home prices, topping an average $600,000 for the first time and making it the most expensive place in Larimer County to buy a home outside of Estes Park.

Fort Collins’ sales prices shot up close to $468,738, an 8.7% increase from 2019. In 2017, Fort Collins’ home prices were on the verge of eclipsing $400,000. Three years later, they are nearing $500,000.   

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The primary driver, Wells said, was the number of homes that sold for more than $1 million.

“Fort Collins, Timnath, Berthoud and Longmont all saw double, basically 2x increases, in the number of million-dollar properties,” Wells said, attributing it to a decrease in interest rates and “people looking for and desiring more out of the place they call home.”

Wellington remained the most affordable community in Larimer County with average prices at $382,603, up 7.4%. That’s still well above the average $300,000 seen just a few years ago. 

A road runs through the 100-acre Windsor Villages at Ptarmigan, one of two developments that will bring homes and commercial retail near the Interstate 25 and Colorado Highway 392 interchange in Windsor, Colo. on Saturday, Dec. 19, 2020.

The town of about 10,000 is not a market known for high-end properties, but it’s seen the impact of pricing in other areas and lack of supply, which led to price escalation in the marketplace, Wells said. 

Going into this year, Wellington had just 36 homes on the market, down from 71 this same time last year. 

Across the region, home prices continue to rise even as the COVID-19 pandemic changed the way homes were marketed and sold. Open houses were canceled, home tours went virtual, closings took place outside and documents were signed on the hoods of cars. 

It didn’t slow down the number of homes sold, which surpassed 2019. Last year, 11,685 homes were sold throughout Northern Colorado, up from 10,900 in 2020. The Group predicts 12,195 homes will be sold this year, 510 more than last year, as people moved to the region for jobs, or brought their jobs with them. If the pandemic showed us anything, it was how portable many of our jobs could be. 

With the ability to work from just about anywhere, many people who were able “chose quality of life,” Wells said. 

For so many years, the trend was away from McMansions in favor of smaller homes, and open floor plans. The pandemic changed that, too, he said.

Buying trends are now turning toward more space separation. 

People are needing offices and places they could turn into gyms; places where they could educate their kids and have more yard space for recreation. 

“At the onset of the pandemic we were using our kitchen tables to try to educate our children,” Wells said. “We quickly learned that wasn’t the best learning environment.”   

Some people are fleeing the city after the amenities they sought like nightlife, restaurants and things they considered important to their quality of life “came a screeching halt,” Wells said. 

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Inventory, cost challenges 

Inventory will be one of the big housing stories this year as the ongoing lack of supply grows more critical. “We sat here a year ago and talked about how low and dire the inventory situation was,” he said. No one foresaw another 50% drop. 

Areas like Severance and Windsor that had new inventory saw increased demand. “It’s no longer drive ’til you qualify, it’s drive to where you can find a home because the inventory is so dire.”

Lack of inventory is leading to what Wells calls “a year of dust and dirt” for Northern Colorado as several new developments work their way through municipal planning departments. 

Northern Colorado won’t see as much product delivered to the marketplace but will see dirt flying at many developments across the region, he said. 

Developments that opened in the past few years, like Martin Lind’s RainDance in Windsor, are building out more quickly than expected. 

Related:Windsor subdivision RainDance sees rapid growth with more expected in 2021

New construction will be challenged, he said, by rising construction costs caused partially by COVID-19-related shutdowns and restrictions on plants that produce lumber, windows, etc., and water, one of the largest challenges in Northern Colorado.

Much of the region’s water comes from the Colorado Big Thompson project that begins at Lake Granby and is pumped to Horsetooth and Carter reservoirs. 

The average cost of one share of CB-T water has gone from $7,000 in 2009 to $65,000 this year. “The cost continues to skyrocket because availability continues to go lower.” 

Crew members work to construct a home at RainDance, Martin Lind's 2,800-unit subdivision, in Windsor, Colo. on Tuesday, Jan. 5, 2021.

2020 home prices

Average home price in 2020 / percent increase from 2019

Fort Collins: $468,738 / +8.7%

Loveland: $425,643 / +4%

Greeley/Evans: $321,195 / +6.1

Windsor/Severance: $444,829 / +5.6%

Timnath: $600,269 / +5.0%

Wellington: $382,603 / +7.4%

Berthoud: $491,645 / +6.0%

Johnstown: $417,648 / +1.7%

Pat Ferrier is a senior reporter covering business, health care and growth issues in Northern Colorado. Contact her at patferrier@coloradoan.com. Please support her work and that of other Coloradoan journalists by purchasing a subscription today.