The Insider - Ocotober 2010

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Economic indicators

Rialto Bridge project

Bright spots emerging in NoCo economy

Vol. 34, No. 10 October 2010

The Best of Both WorldsA dynamic exists in our market today that we have never seen during The Group’s 34 years in Northern Colorado. The research tells us that this is the perfect time for those who own a single family home in a lower price range, and wish to move up to a larger, nicer home.

Six months of housing inventory is considered balanced by the National Association of Realtors economist. More than six months is considered a “Buyer’s Market” and less than six months is considered a “Seller’s Market.”

The data below from the second quarter of 2010 shows that a Seller’s Market exists on the mid to low end and a Buyer’s Market exists on the high end. For example, an owner of a $300,000 home in Fort Collins can sell their home in a Seller’s Market and purchase a $450,000 home in a Buyer’s Market.

This is a time when move-up buyers can really take advantage of a unique dynamic in our market.

Call me if you’d like to learn how you can have the best of both worlds and play in both markets.

DYNAMIC REAL ESTATE MARKET - DATA FROM 2Q 2010

Price Houses Salesper Houses Monthsof TypeofCity Range Sold Month forSale Inventory Market

FortCollins Under $320,000 666 222 933 4.2 Sellers Over $320,000 166 55 642 11.6 Buyers

Greeley Under $220,000 504 165 704 4.2 Sellers Over $220,000 123 41 388 9.5 Buyers

Loveland Under $320,000 339 113 586 5.2 Sellers Over $320,000 83 28 380 13.7 Buyers

Windsor Under $420,000 107 36 191 5.3 Sellers Over $420,000 28 9 91 10.1 Buyers *S

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A PublicAtion of the GrouP, inc.

Matt ThompsonBroker Associate/Partner

5401 Stone Creek CirCle

loveland, Co 80538(970) 443-9910

Matt ThompsonBroker Associate/Partner

Real estate legend praises the value of home ownership

While headlines may be casting shadows on the value of home ownership, one of the country’s foremost real estate watchers doesn’t see cause for alarm. Karl E. Case, the co-creator of the Standard & Poors Case-Shiller housing index, said it’s no time to dismiss the American dream.

In a recent op-ed for The New York Times titled “A Dream House After All,” Case wrote that home ownership “makes a lot of sense.” The investment value comes in two forms, Case said. First, ownership provides “net imputed rent from owner-occupied housing,” which equates to roughly a 6 percent return on investment after maintenance and repair. Furthermore, if the house appreciates in value, gains from selling the house are protected from taxes if the house is a primary residence “and the gain is less than $250,000 for a single filer or $500,000 for a married couple filing jointly.”

Deductible mortgage interest, bargain prices in many markets and historic low interest rates are all additional benefits to buying in the current market, Case said. He added, “sooner or later buyers will regain faith, inventories will shrink to reasonable levels, prices will rise and we’ll even start building again. The American dream is not dead – it’s just taking a well-deserved rest.”

Bright spots emerge in Northern Colorado economy

Job growth is at the root of any economic recovery, and indications are that Northern Colorado is experiencing the long-awaited boost that comes with employment gains, according to regional economist John W. Green.

In his latest economic assessment that appeared in the Northern Colorado Business Report, Green called attention to hiring at companies like Leprino Foods (Greeley), Vestas Wind Systems (Windsor), and Abound Solar (southwest Weld County), as signs that Northern Colorado is outperforming the national economy. Looking at first five months of the year (January through May), Green said there were “7,587 more employees this year compared to a 2,636 increase during the same period in 2009.” He added, “I expect greater employment growth to continue into the fall and the winter slowdown to be much less dramatic than in 2009.”

Backing up Green’s outlook, both the Fort Collins-Loveland and Greeley areas registered GMP (gross metropolitan product) that exceeded the pre-recession peaks, according to the quarterly Mountain Monitor report from the Brookings Institution. As of the second quarter of 2010, Fort Collins-Loveland’s GMP was 3.1 percent higher than the pre-recession peak, and Greeley’s GMP was 1.7 percent higher. By contrast, Denver was still 0.1 percent behind its pre-recession peak.

20,000 reasons why it’s okay you missed the tax credit deadline

Don’t be sad if you didn’t get to take advantage of the $8,000 first-time homebuyer or the $6,500 existing-homeowner tax credits.

If you purchased a $250,000 home on April 30th of this year, the day the tax credit expired, your monthly payment would have been $1,058 based on the interest at that time of 4.875%. At today’s rates of 4.25%, you could purchase a $270,000 home—worth $20,000 more—for $1,062 per month (both examples assume a 20% down payment).

The purchasing power of today’s interest rates have exceeded the benefit of the Homebuyer Tax Credit.

Rare set of conditions make for prime real estate investment opportunity

This may be a harmonic convergence for real estate investors. Multiple factors have coincided to make the current market ideal for anyone looking to expand their investment holdings. Most notably, those factors are:

• Low interest rates: Nationally, rates for 30-year conventional home loans averaged 4.52 percent as of September 15.

• Lower prices: In most markets, average home prices are below pre-recession peaks. Nationally, prices are down an average of 18.3 percent from the second quarter of 2007.

• Rising rents: Vacancies are falling, which is allowing owners to raise rents in Northern Colorado. According to the latest Colorado Division of Housing report, average rents in Loveland have climbed 7.6 percent over the past year. The higher rents coincide with a vacancy rate that’s down to 4.1 percent, compared to 7 percent at the same time last year. Similarly, Fort Collins rents increased 7 percent while vacancies plunged to 6.8 percent from 9.9 percent last year.

Contact me if you’d like to learn more about today’s inviting real estate investment market.

Real estate-based funds are winning on Wall Street

Morningstar Inc. reports that real estate was the top-performing category among U.S. stock funds through August. Real estate-based mutual funds and exchange-traded funds brought a 13.7 percent total return, compared to a 4.6 percent loss for the S&P 500 stock index over the same period. Similarly, real estate beat all other categories for the 12-month period ending in August.

Rialto Bridge project planned for downtown Loveland

A $4 million redevelopment project in downtown Loveland is expected to raise the profile of the 200 block of East Fourth Street. Called Rialto Bridge, the three-story, 20,000-square-foot development is being marketed for restaurant and office users. Additionally, part of the building will be used to augment the Rialto Theater next door. Rialto Bridge will include a community reception room, and a green room and production space for the theater, according to the Colorado Real Estate Journal.

The project is a joint effort of the city of Loveland and private developer Troy Peterson.

Christo proposal puts Colorado in spotlight

In his long-running effort to drape 42 miles of the Arkansas River in fabric, the artist Christo continues to confront a river of doubt from locals in southern Colorado. In an article titled “Christo vs. Colorado,” the Wall Street Journal summed that Christo and his late wife Jeanne-Claude have spent $7 million and conducted “at least 150 public lectures” over 18 years to try and win public approval. The fate of the project may finally be determined in the coming months. The submission deadline for public comments was September 14, and the Bureau of Land Management expects to make a decision next spring.

Real estate by the numbers

• $675,000 – Price for which the former Windsor branch of New Frontier Bank sold to two private and local investors. The FDIC had listed the former bank building, 1130 Main Street for $925,000

• 26,348 – Colorado State University’s enrollment for the fall semester of 2010. The total represents an all-time high, and a 3.7 percent gain over last year. CSU’s freshman class set a record of 4,472, up from 4,404 in 2008. The enrollment that includes more Colorado residents than any other state university

• 395 – The ranking for Fort Collins-based company Otter Box on Inc. magazine’s list of the 500 fastest-growing companies in the United States.

• $2 million – The amount of money donated by the Bohemian Foundation to help fund the new Fort Collins Discovery Museum. Construction crews broke ground on the 43,000-square-foot facility in September.

• 3.3-megawatt – Amount by which the Colorado State University solar plant at the Foothills Campus will be expanded during the next four months, creating what will be one of the largest solar plants at a U.S. university. The total 5.3-megawatt facility will generate a total of 8.5 million kilowatt hours of clean electricity annually.

• $3.5 million – The total amount of funding that two Larimer County projects received from the federal Recovery Act, or stimulus, according to the White House report “100 Recovery Act Projects Changing America.” The funding included $3 million for the recently completed I-25-Crossroads Boulevard intersection in Loveland, and $500,000 for Larimer County’s Crossroads Safehouse program.

• 14 acres – Amount of acreage approved by the Greeley Planning Commission for Leprino Foods to build its own renewable wastewater treatment facility on the former Meyer Feedlot. The plant will include an anaerobic digestion system, a process used as a renewable energy source, to process the waste from the cheese factory it has under construction in east Greeley.

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Matt ThompsonBroker Associate/Partner

5401 Stone Creek CirCle

loveland, Co 80538(970) 443-9910

Matt ThompsonBroker Associate/Partner