2007 Real Estate and Economic Predictions

Colorado Rejoins Top 10 Fastest Growing StatesThe Census Bureau Report placed Colorado as the eighth-fastest growing state in the United States surpassing last year’s ranking at 11^th.  The report also showed that for the first time since 2002, more residents moved to Colorado from other states than from other countries. While the census report did not breakdown where the growth occurred within Colorado, the western slope counties such as Delta, Chaffee, Pitkin and Montrose have seen an increase of retirees from the baby boomer generation. Other counties with significant growth are Larimer, Weld and El Paso counties. If the population increases as its expected to, this year will be the biggest increase in population since 2001.

Job Growth Predicted to Slow Slightly Job growth is predicted to slow slightly according to a recent University of Colorado Leed Business School Report. Colorado’s economy will slow this year but not enough to prevent job hunters from moving to the state in much higher numbers according to the report.  Colorado job growth is predicted to fall 2.3 percent from 2006 to 1.9 percent this year, but this is still faster than the 1.5 percent rate of job growth expected nationally.

Residential: Continued Buyers Market/Crackdown on LendingA continued buyers market will be the theme for 2007 with a renewed focus on legislation to curb the corrupt lending practices and adjustable mortgage crisis. By the end of 2006, in the Denver Real Estate market, our inventory of homes for sale was up 16% from the prior year. The surplus of inventory could be blamed on the typical challenges homeowners face such as job transfers, job losses, divorces, health problems or relocations, but the surplus of homes this year is probably more closely tied to the record number of foreclosures 2006 experienced. These foreclosures may be due to consumers flocking to risky loans, over building, fraud and inflated appraisals. This problem is sure to spark new legislation in the lending sector. What does this mean for 2007? We will continue to see a surplus of listings. Buyers have the best opportunity to purchase homes at a better price than we have seen in years. Banks are accepting more short sales or short pays in lieu of foreclosures so there are tons of opportunities to purchase these pre-foreclosure homes. Homes in most areas are still seeing appreciation, however location, location, location has never been more important!

Commercial Investors Are Flocking to DenverThis past year marked a record year for commercial real estate with more than $5 billion commercial sales in the Denver Metro Area, a 64.5 percent increase from 2005. According to a study released by Fredrick Ross Co., Denver has now moved beyond the recovery mode of the past five years and into a significant commercial real estate growth stage. Tenants are leasing space in downtown Denver at a record pace and vacancy rates have dropped from 16.1 percent in 2005 to 12.8 percent in 2006. The report also emphasized that the dramatic increase in commercial sales activity is being seen nationwide and is a sign of a healthy economy with unfailing investor confidence in real estate as a desirable asset.Overall, the prospects for 2007 look promising and very exciting. It is not hard for me to see why Colorado is one of the fastest growing states in the nation. For more information on Denver Area Real Estate or to search all Denver Area Properties, Fix Ups or Bank Owned Properties please visit   www.coloradosells.com 

by Courtney Nelson, Broker Associate Keller Williams Realty

Helping Diffuse the Crash Theory

Real Estate Under the Media MicroscopeRecently the media has immersed itself in the status, forecasts and opinions of our current real estate market. If you haven’t seen any of these headlines “The Housing Tipping Point,’ ‘Housing Bubble Bursts,’ ‘House Values Plummet,’ you are in the minority. Hopefully, this information will explain some of these claims and emphasize that our market is in a transition and not crashing!

Crash or Soft Landing? According to Economy.com, a report titled “Housing at the Tipping Point- The Outlook for the US Residential Real Estate Market,” the nation’s housing market will slip like it hasn’t slipped since the Great Depression, with home price declines in 2007 approaching 20% in some areas where “crash” could replace “soft landing.” Another prediction from a Pennsylvania based firm says nationwide the median sales price for an existing home will decline in 2007 by only 3.6%, however that would be the first full year decline in home prices since the 1930’s. The highest probability of price declines is in metro areas throughout California and New York and both coasts overall. Markets that have been seeing double-digit home price increases in the last decade are the most vulnerable to the depreciation. In general, markets like ours here in the Denver Metro Area and for most of the mid – west and interior part of the country our markets are typically steady markets with more consistent cyclical changes. We rarely see double-digit appreciation or depreciation or dramatic shifts. The Denver Metro Area has been shifting to a buyers market for almost 5 years now, the larger cities and especially coastal metropolitan areas are finally catching up.

The Good News What is shifting? According to Realty Times Consumers and commercial developers are fleeing to the cities where redeveloped downtowns, apartments and more affordable smaller homes are coming into vogue. People are seeking simpler less complicated lifestyles with less of a commute. Builders are shifting to building multi family communities and trying to create urban cores where people can shop, play, dine and recreate within walking distance from their home. These urban communities are no longer just attracting the young single working class, but families, retirees, luxury upper end buyers and lower income. The cooling market is cooling spending jets. The pace of consumer spending will also slow as the housing market recedes from its recent highs, according to the preliminary findings of a study conducted by Lusk Center economists. While single-family markets are cooling, apartment markets and condo conversions are heating up. Apartment rents increased 7 to 8 percent in 2005, the first big jump in more than a half-decade.  

Local GrowthDenver’s core business downtown area has nearly tripled its population in the last 20 years. Slowly, Denver is rehabbing and developing communities that are drawing many types of homeowners to seek out downtown urban living. Some of these communities include:Union Station: Redevelopment of Denver’s train and bus station will be a $1 billion dollar project complete with retail, luxury apartments and commercial development.Gates Rubber Factory: The site of one of Denver’s most famous factories will soon be developed into a vibrant mixed use community, situated close to light rail.City Park South:  City Park South is most know for its proximity to the Museum and Zoo and is seeing a rebirth of new development and rehabbing of older homes. Please call me with any questions at 720-210-7377!  Or for more information please visit www.realtytimes.com or www.denverpost.com

By Courtney Nelson, Broker Associate with Keller Williams Realty

 For more information visit www.coloradosells.com

Keep a Close Eye on the Boomers!

Second Home BOOM!Despite the cooling real estate market, the second home market is booming and the baby boomers are fueling the surge. Since 2000 there has been a nearly 70 percent jump in the amount of second home closings.  According to Realty Times, “The breakout second home market is cushioning the housing market against a hard landing as the second home sector’s sales pace surges far ahead of both new and resale homes. These second homes are for a wide range of use, vacation, retirement or investment. “The boomers have higher amounts of investable assets than we have seen before. They typically have real estate, as 37 percent of their total assets,” according to Realty Times.

Tax Relief Some people have speculated that the second home market boom is directly related to the tax law changes that occurred with the Tax Relief Act of 1997.  In 1997 Congress revamped the federal homes sales capital gains tax rules, eliminating the long standing incentive for home sellers to “roll over” profits on the sales of their primary homes into larger and costlier replacement houses. Under the old rules according to Realty Times, as long as you kept buying more expensive replacement homes, you could defer capital gains taxation on your profits indefinitely. Under the revised code, married, joint-filing home sellers can keep up to $500,000. of sales gains, tax-free, and only pay taxes on profits above that limit. Single-filing taxpayers can keep the first $250,000. of their gains, tax free. Congress may not have intended this result, but the fact remains: Suddenly, “Homeowners did not have to buy expensive houses to avoid capital gains tax. Instead, buying a smaller less expensive primary residence and a second home with the tax-free gains made second-home buying more financially attractive than ever before.”

Boomers Jump on The Band Wagon With CautionFor those of you who are in the Baby Boomer category and do not own a second home or investment property, the opportunity to invest your money in real estate  can be a great investment. With a buyers market looming throughout the country, now more than ever, buyers can get a “deal”, and as long as your goal is to hold the real estate or invest in resort areas you are bound to reap the benefits.  For those of you who are seasoned real estate investors or just own a second home or investment property, make sure you investigate fully the option of a 1031 Exchange. There are huge benefits in opting to do a 1031 Exchange if you are ready to sell your vacation or investment properties and you can defer your capital gains taxes. Deferring your taxes enables you to use the equity you may have gained in the home to invest in additional properties.  When investing, the fundamentals still apply and diversification remains the cardinal rule. Buyers have to beware that if the real estate market begins to crack that you are not caught with all your money in real estate.

What Does This Mean For The Rest of Us?For the non-boomers, we have to be conscious of this growing boomer population and where they are putting their money. When buying a home, features such as main floor masters, ranch homes and low maintenance yards are increasingly being requested.  Buying homes in resort areas or tourist areas where appreciation is higher would be a wise decision, if possible. For those of us who know of baby boomers who have lots of equity to invest, encourage them to do so and you may have a new vacation home to visit! Please call me with any questions at 720-210-7377!  Or for more information please visit www.realtytimes.com

 By Courtney Nelson Broker Associate Keller Williams Reatly

Visit www.coloradosells.com for more information or call 720-210-7377