Real Estate 2006

Trends For 2006

1. Oversupply. There is an oversupply of resale homes, apartments, and office space for rent. These areas will be a "buyer’s market." There is also a potential oversupply of residential lots. A rule of thumb for a "balanced market" is 1.44 new dwelling units for every new job. A tracking of employment growth indicates we are oversupplying residential dwelling units & lots by 2,000/year.

2. Good Market. Very Competitive. The buyers and tenants will be there in 2006 – but they will be picky, expecting quality, value, design and "wow!" They have a lot from which to choose. Sellers, builders, and landlords who bring their "A" game will do well. Those who bring less will complain that it is a "bad market".

3. Design Power. Buyers are demanding more design in their housing. Builders and sellers who provide the "wow!" will do very well. If in doubt, provide more, not less. Here are some of the design "turn-ons" and turn-offs".

Turn-ons. Houses backing to open space, views, water; outdoor rooms and outdoor fireplaces; colors (anything but white); hardwood or tile floors on most of the main level (except bedrooms and possibly dining rooms): main-floor master bedrooms; 9-10 foot ceilings (even in basements); natural materials (stone, wood); "killer-kitchens" – custom cabinets (42" or better), islands, granite, full-tile backsplash; stainless-steel appliances.

Turn-offs. Dated, overpriced homes; clutter; un-staged homes; white walls; oak; brass; vinyl; choppy floor plans that don’t flow; dated southwestern designs and colors; 8-foot ceilings; 4-inch tiles; half of anything – ½ brick up the front, ½ wide porches you can’t use, ½ the lighting you need, single tile backsplash versus full backsplash, etc.

4. Interest Rates and "Cap Rates". Traditionally, capitalization rates used by investors to value investment property have tracked with interest rates. The low interest rates and shortage of quality investment properties have dramatically lowered cap rates over the past several years – as investors "bid down" the cap rates. With gradually rising interest rates, look for cap rates to start rising again – affecting the valuation formulas for commercial and investment real estate. Be careful if you have adjustable rate loans that are tied to a short term rate index (such as prime).

5. Apartment Rents. It appears rents have finally bottomed out. Vacancy rates will continue to gradually decline as buildings fill up. Rents will start slowly rising by year end.

6. Advice for:

1.  
   1. 􀂃 Sellers. You are competing with builders as well as other sellers. Make your home look as new as possible (put it in "show" condition) and price it right.
   2. 􀂃 Buyers. Every 1% rise in interest rates equals 10% less home you can buy for the same payment. This may be your last year to buy at historically low rates.
   3. 􀂃 Builders. Raise the level of your game on design and customer service. Know your market and watch your supply.
   4. 􀂃 Developers. Create "residential resorts" versus "subdivisions." Commercial developers: create a sense of identity and place.
   5. 􀂃 Investors. Watch your "cap rates."

7. Hot Markets. Timnath – "receiving area" for Fort Collins! Within a few years, it will be recognized as one of the fastest growing places in the country- easy to do with a current population of only 200. Hot markets will continue in Wellington, Windsor, Water Valley, Centerra. "25/34", and watch for the amazing amount of residential growth southeast of I-25 and U.S. Hwy. 34 in 2006.

8. Flashback. Fifteen years ago we made the following predictions:

1.  
   1. 1. Northern Colorado would become a "region" with people living in one community but often working, shopping, and entertaining in another.
   2. 2. I-25 would be perceived as "Main Street" and would become the most used "local street" for commuting and commerce.
   3. 3. The epicenter of economic activity for the region would move to the intersection of I-25 and U.S. Hwy. 34 (where the U.S. trade routes cross).

9. Vision 2020. Here is our crystal ball for the next fifteen years.

1.  
   1. 1. The hottest growth corridors will be (1) I-25 from Wellington to Berthoud (with most residential growth occurring within 2 miles either side of I-25); (2) U.S. Hwy 34 from Loveland to Greeley; (3) Harmony Road from Fort Collins to Eaton; (4) U.S. Hwy 85 from Denver to Ault.
   2. 2. The combined population of Larimer and Weld counties will reach 720,000, an increase of 225,159 from the 494,841 total at the end of 2005.

10. Enjoy 2006 – "Another Year in Paradise!"

 

The Group, Inc. – 2006 Forecast

IRS Rule Changes

IR-2006-74, May 4, 2006

WASHINGTON — Organizations that provide seller-funded down-payment assistance to home buyers do not qualify as tax-exempt charities, the Internal Revenue Service said in a ruling released today.

Down-payment-assistance programs provide cash assistance to homebuyers who cannot afford to make the minimum down payment or pay the closing costs involved in obtaining a mortgage. Such programs can qualify as tax-exempt charitable and educational organizations under Internal Revenue Code section 501(c)(3) when properly structured and operated.  In Revenue Ruling 2006-27, released today, the IRS provides a detailed discussion of the guidelines – including two examples that meet – and one that fails to meet – the tests for exemption. 

The ruling makes it clear that seller-funded programs are not charities because they do not meet the requirements of section 501(c)(3).  Increasingly, the IRS has found that organizations claiming to be charities are being used to funnel down-payment assistance from sellers to buyers through self-serving, circular-financing arrangements. In a typical scheme, there is a direct correlation between the amount of the down-payment assistance provided to the buyer and the payment received from the seller. Moreover, the seller pays the organization only if the sale closes, and the organization usually charges an additional fee for its services.

A March 2005 report entitled, “An Examination of Downpayment Gift Programs Administered By Non-Profit Organizations,” commissioned by the U.S. Department of Housing and Urban Development (HUD), found that seller-funded down-payment assistance has led to underwriting problems and resulted in an increase in the effective cost of homeownership.  A report from November 2005 entitled, “Mortgage Financing:  Additional Action Needed to Manage Risks of FHA-Insured Loans with Down Payment Assistance,” conducted by the U.S. Government Accountability Office (GAO) found similar results.

“The IRS is increasingly concerned with organizations that are taking advantage of homebuyers who need assistance for a down payment to realize the American dream of homeownership,” said IRS Commissioner Mark W. Everson.  “So-called charities that manipulate the system do more than mislead honest homebuyers and ultimately jack up the cost of the home.  They also damage the image of honest, legitimate charities.”

The IRS is examining 185 organizations that operate down-payment-assistance programs.  A particular organization’s tax-exempt status can be verified using the on-line database at irs.gov (click on “Charities & Non-Profits” and then click on “Search for Charities”).  In addition, the agency has denied applications for tax exemption from over 20 organizations that seek to provide this service and is considering applications from a number of other down-payment assistance organizations. 

Revenue Ruling 2006-27 will be published in Internal Revenue Bulletin 2006-21, dated May 22, 2006.

 

Northern Colorado’s population to grow 45% in the next 15 years

Larimer and Weld counties will be one of the fastest-growing regions in the state over

the next 15 years, according to Colorado state demographer Jim Wescott. He projects the

population in Northern Colorado will increase by more than 225,000 by 2020 – a 45%

increase compared with 2005’s estimated 494,841 residents.

However, out-of-state transplants aren’t totally responsible for the growth. Instead,

Coloradans’ reproduction rate can take credit as the biggest contributor to the increase. In

2006, 56% of the state’s population growth is projected to be the difference between births

and deaths, with net in-migration accounting for 44% of the increase.

A look at our neighbors Price

Boulder benchmark makes Fort Collins and Greeley housing look affordable

The same house built by the same builder, Wheeler Construction, in Boulder, Fort Collins and Greeley in the

late 1950s and early 1960s is the perfect illustration of the cost of living in the three different communities. The

ranch-style house, covering 1,100 square feet with a one-car garage and full basement, sold for $136,000 last year

in Greeley, while the same home sold for $200,000 in Fort Collins and $361,000 in Boulder.

“Main on Main” Whats happening

Witness the historical development along I-25 from U.S. 34 to Crossroads Blvd.

The 8-square mile area around I-25 and U.S. 34 is the largest area of construction in the state of Colorado at the

present time. With more than 2-million square feet of commercial construction underway or recently completed,

we are witnessing history being made. Here’s a summary of some of the projects:

Centerra – 3,000+ acres northeast and northwest of I-25 and U.S. 34 in Loveland

• Medical Center of the Rockies – 570,000 square feet, completion scheduled for early 2007

• Medical office building – 84,000 square feet, groundbreaking March 2006

• Promenade Shops at Centerra – 670,000 square feet, opened in October 2005

• Heska Corp. – 60,000 square feet, completed July 2005

• Motorplex at Centerra – Co’s BMW, 37,000 square feet, opened October 2005; Davidson Chevrolet

Subaru of Loveland, Ferrero I-25 Dodge Jeep Chrysler and King Buick Pontiac GMC, all breaking ground

by April

• Residence Inn – 72,000 square feet with 103 suites, to open this summer

• The Marketplace at Centerra – 240,000-square-foot phase 2; stores opening this spring, summer include

JoAnn Fabrics, Old Navy, Ross, Marshalls, Panera Bread, Chick-Fil-A and Good Times

• Flex office building – 32,000 square feet, completed, Five Rivers Cattle Co. moved in in February

• Rangeview Two – 45,000-square-foot office building, completion this month

• First National Bank – 14,250 square feet at U.S. 34 and Boyd Lake Avenue, summer completion

• Kroll Factual Data – 32,000 square feet, opened May 2005, company’s 3rd building at Centerra

2534 – 540 acres at the southeast corner of I-25 and U.S. 34 in Johnstown

• Hartford Land developing 151 residential lots, with homes ranging from $350,000 to $1 million-plus

• The Plaza at 2534 – 550,000 square feet of retail, including Ethan Allen, 20,000 square feet; Home State

Bank, 7,000 square feet; other retailers, restaurant to break ground in spring and open early 2007

• Everitt Commercial Partners building – 44,000 square feet, 4 stories, occupants include Bank of Colorado,

LBN Insurance, Burns Marketing; open by Jan. 2007

• Office building covering about 75,000 square feet south of The Plaza

• 46,000-square-foot Club Colorado and 13,000-square-foot day spa and physical therapy

• North Colorado Rehabilitation Hospital – 50,000 square feet, opened in the summer of 2005

Eagle Crossing – Northeast corner of Crossroads Boulevard and I-25

• The Loveland side will cover approximately 60 acres and consist primarily of retail, with 3 parcels under

contract

• The Windsor side will cover about 120 acres for both retail and office; awaiting town approval

Crossroads Business Park – Southeast corner of Crossroads and I-25

• 57 acres sold in 1 year, including Home State Bank’s purchase of about 3 acres

Embassy Suites – 19 acres on southwest corner of The Ranch

• John Q. Hammons Inc. has plans for 8- to 9-story, 250- to 275-room hotel and 80,000-square-foot

convention center across from Budweiser Events Center; city of Loveland awaiting application

Thunder Mountain Harley-Davidson property – 20 acres on northwest corner of Crossroads and I-25

• Hooters – 5,000 square feet, should open in mid-March

• Clear Channel regional headquarters – 15,000 square feet, should open in early April

Thompson River Ranch – 650 acres east of I-25 and about ½ mile north of Colorado 402

• Approved for 1,650 single-family homes and 18 acres of commercial, 100 multifamily units

How to use this page

This blog is set up to look at the Northern Colorado Real Estate Market from a large Macro scale down to a particular neighborhood or even house.

How to use this page

This blog is set up to look at the Northern Colorado Real Estate Market from a large Macro scale down to a particular neighborhood or even house.

Welcome!

Welcome to the Group Real Estate blog on the Northern Colorado Real Estate Market.

This blog is the Source of information on what's really going on in the Northern Colorado Real Estate Market, and this blogg is designed to serve all people in the Northern Colorado Real Estate Market.

Here you will find: Home Buyers and Sellers, Real Estate Brokers, Investors, Lenders, Bankers, Architects, Title Companies, and anyone else interested in Real Estate in the Northern Colorado Real Estate Market.

Please feel free to contribute as you see fit in any way that will benefit the Northern Colorado Real Estate Market!

Thank you for being apart of this Blog!

Best Regards,

Jonathan Irvin
Partner/ Broker Associate
The Group, Inc Real Estate
970-690-1400
jirvin@thegroupinc.com