Demand for Affordable Housing in the Rocky Mountain Region
Why is it becoming increasingly more difficult for prospective homeowners to find affordable housing? What exactly is “affordable” housing? It is defined as costing one-third or less of household income. A perfect storm of contributing factors is causing rapid increases in home prices across the country, leaving affordable home ownership out of reach for many. Despite these challenges, Fort + Hom is committed to being part of the solution and making the dream of home ownership a reality in the Rocky Mountain region
Impact of the Pandemic
The pandemic has changed the landscape of real estate. Homes became not just houses, but also schools and offices. Quarantine forced families to spend more time at home than ever before. Many households found they needed more space and wanted more amenities, such as outdoor entertaining areas. Demand for home ownership has skyrocketed and the inventory of home simply can’t keep up. This, of course, means higher prices for homes. In addition, increased demand for building materials, coupled with lower supplies of lumber due to the wildfires led to rapidly rising material costs. Higher costs exacerbated the supply-demand imbalance, driving home prices even higher.
Another huge consequence of the pandemic is the shift to teleworking. Many employees, particularly at tech companies, are no longer tied to living in a specific city. Facebook, Twitter, Stripe, and others have implemented permanent remote work policies for many employees. Families living in high-cost cities like San Francisco, Chicago, and New York, are gravitating towards lower-cost locations. The result – rapidly increasing home prices in locations attracting transplants, such as western mountain cities. Re-locating tech workers with higher salaries can afford to bid up home prices, leaving many trying to buy homes frustrated and unable to compete.
Colorado Housing Prices Soaring
The impact on Colorado housing prices has been tremendous. In the midst of the pandemic, the average price of a single-family home in Denver reached $600,000 for the first time. And prices continue to climb with the average price reaching over $623,000 in April of 2021. The Denver “real estate marketing is in a frenzy” according to Metro Real Estate Market Trends Reports.
Realtors are encouraging buyers to make decisions and bid quickly as houses are selling in just a few days. One agent described it this way, “Inventory in this market is like a bathtub with an open drain.” Increasing prices are pushing more and more detached houses out of the classic $300-499K market. With hyperactive buyer demand, realtors are often pushing prospective buyers to homes above their price
And it’s not just Denver
In Colorado Springs, appreciation has been high across all zip codes, ranging from 31% to 91% over the last five years. Just how “hot” are the real estate markets in Colorado? RedFin’s Compete Score rates a city on a scale from 0 – 100 on competitiveness. A score over 70 indicates that many or most homes received multiple offers, often with waived contingencies.
Colorado Springs: 90 Redfin Compete Scale, 24% yearly increase in median sale price
Denver: 86 Redfin Compete Score, 17% year yearly increase in median sale price
Fort Collins: 76 Redfin Compete Score, 26% yearly increase in median sale price
4.8 million millennials are turning 30 in 2021 and may enter homebuying market. Interest rates continue to remain low. Demand for housing will continue to remain high. However, higher construction costs, shortage of labor, and limited new lot space will limit the construction of new homes. New home sales are still higher than before the pandemic, but uncertainty around lumber prices and materials are creating challenges. Builders are beginning to pause on new construction despite the high demand, creating yet another strain on affordable housing.
Renovation More Cost Effective than New Home Construction
As lumber prices remain high, it’s clear that renovating an existing home in disrepair is a more cost-effective solution to increasing inventory than new home construction. While starting to decline, lumber commodities were still trading 3.5 times higher in May than the same time period last year.
Fort + Hom’s mission to revitalize homes in need and create quality, affordable homes in desirable neighborhoods is more relevant than ever. Market trends all point to the demand for attainable homes and the efficiencies of renovation over new construction, particularly in the Rocky Mountain region.
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