I continue to receive many questions about the local housing market — how the year has been and what I expect to happen next year. Given the different reports, it can be confusing trying to decipher what’s happening.
On a national basis, the housing market has improved with just a few exceptions. Sales transactions are up, median prices are increasing, foreclosures are trending down, new home construction is increasing, rental vacancies are decreasing and interest rates remain at record lows.
On a statewide basis, Colorado is experiencing much the same, but the overall numbers are heavily influenced by what’s happening on the Front Range. It’s often reported that overall, Colorado is seeing more positive housing activity than many other states with decreasing foreclosures and robust new home building activity.
On a local level, there are some similarities and some differences to the national market. Similarly, inventories of homes for sale have fallen to record lows. While our population has continued to grow, there’s been little new home building activity. Moreover, many people have taken their homes off the market because their mortgages exceed the present value of their homes. In our local market, the housing inventory is down 22 percent from a year ago and 45 percent from two years ago.
Sales transactions are up across the nation, the state and our local market as well. Year to date through October, residential home sales are up 13 percent over a year ago and 34 percent from two years ago. Much of the activity reflects great opportunities for buyers, including investors.
The median price is a standard by which home prices are compared all around the country. It’s the mid-point of sales price activity — half of sales are over that mid-point and half are under for a given period of time. Our local median sales price is $165,000 year to date, which is up
3 percent from the same period a year ago. In recent years I’ve seen the median sales price as high as $224,000 and as low as $148,000. What a swing. Median price is influenced by increasing demand and diminishing inventory, especially in the lower price levels.
New home construction is up measurably locally, as it is around Colorado and the United States. Residential construction permits are up 3 percent year to date, and we expect to see more than 400 new homes built this year. Still, this number is significantly down from the more than 1,000 new homes constructed annually in years past. This increase is influenced by the two primary factors of diminished available inventory and bargain basement lot prices for homebuilders.
Locally, rental vacancies are trending similar to regional and national activity. For the third quarter, the average apartment vacancy rate in Grand Junction fell to 3.8 percent, down from 7.7 percent just a year ago. Again, this trend is due to the scarcity of new multi-family construction and the fact some families must rent after losing their homes to foreclosure.
The one area in which the local real estate market differs from the state and national markets relates to foreclosure activity. Generally speaking, there are fewer foreclosures in the state and nationally compared to a year ago. There are exceptions, of course, and our area is one of them.
I was encouraged when I saw fewer foreclosures in 2011 than 2010 and expected the trend downward to continue in 2012. Well, I was wrong. Year to date through October, our local foreclosures rate is up for all property types. Foreclosure filings are up 20 percent, while foreclosure sales are tracking about even. Sales activity always lags behind filings, but will most probably follow the filings trend by year end. That will still be down from a high point of 2010, when we had 1,372 filings and 836 sales. By comparison, there were 312 filings and 103 sales in 2006.
The reason Mesa County is seeing increases in foreclosures is that we headed into this last recession later than other communities. I believe our economy was still being influenced by energy activity. Foreclosures will remain an influence in our market through next year, but I think we’ll see more investor activity as a result.
I hope this fairly summarizes our real estate market this year and answers some questions as to where we might be headed in 2013. I will share more details of the 2013 forecast in my next column.
Meanwhile, in the spirit of Thanksgiving, I’d like to encourage the support of local philanthropic organizations.
I recently had the privilege of attending a luncheon at Catholic Outreach, an organization of eight staff members and more than 500 volunteers who serve the needs of hundreds of individuals and families everyday. The needs of the disadvantaged are many in our community, and I value such organizations as Catholic Outreach, Homeward Bound, The House (for homeless teens), Mesa Developmental Services, Hilltop and the many other community resources for their efforts.