Buying a New Construction Home Archives

Commercial And Residential Real Estate Continues To Ride The Tailwinds

Both the residential and commercial markets in Northern Colorado are robust according to industry experts, despite the headwinds of higher interest rates, a potential recession and changes in how Americans work.

Residential
The residential market experienced upheaval in the past several years with growth during the pandemic followed by a dip starting in 2022 as interest rates ticked up.

Longmont and Johnstown were among the communities topping the charts for sales over the past couple of years. Median prices are rising but not at the previous rate of growth.

The Northern Colorado population continues to grow. By 2050, the Weld County population is forecast to reach 610,000 people and the estimate for Larimer County is 495,000 people. That means more homes will be needed.

Key points:
• Inventories will remain low, but the number of potential buyers has declined because of interest rates. Homeowners with mortgage rates below current market rates are reluctant to move.
• Builders are not keeping up with demand, even though newly built homes are selling a bit slower compared to 2021 and 2022.
• Home appreciation is expected to be flat or see a slight increase.
• Inflation will taper off.
• If a recession happens, it will be a slowdown instead of a full-fledged recession.
• The market is normalizing compared to recent years that were epitomized by “rushes”. Since 2020, 75% of the people who bought houses express “buyers remorse” which could result in increased sales activity as people attempt to correct their situations.

Commercial
In comparison, the commercial market in Northern Colorado remains better than most.

Short-term interest rates, which jumped from 3% to 7.5% in a short period of time, affected construction loans and likely caused some projects to be delayed. As rates begin to level off, they will remain manageable at about 5%.

Compared to the prior year, retail commercial properties have recovered fairly well with supply and demand in balance. Fort Collins retail has completely recovered from the pandemic, and Greeley has almost recovered. Overall along the Front Range, construction of new retail is low.

The office market is the segment in most distress since the pandemic forced many office workers to move home. Nationwide, the return-to-office rate has been about 50%.

Since Northern Colorado doesn’t have as many large corporate offices as found in Denver, its vacancy rates have been lower.

Larimer office vacancies are at 5.7% and Weld’s vacancy rates are at 7.6%, compared with 15.4% in Denver.

The bright spot in commercial real estate, like last year, has been industrial and warehouse uses. Industrial rental rates are growing 4% in Weld County and 6% in Larimer, and everything that’s been built is being absorbed.

By comparison, and taking Amazon distribution center in Loveland out of the equation, industrial is seeing five times more demand than office and retail.

Call me to discuss your future ideas about buying and selling!

Source: bizwest.com

Home Construction Hiccups

Prices for lumber have surged more than 200% since June, 2020, adding an estimated $36,000 to the price of an average new single-family home, according to the National Association of Home Builders.

The rising and volatile costs of lumber continue to hamper the new-home and remodeling markets. Lumber prices nearly doubled over a four-month period in 2020 and have continued to reach new highs. The price and availability of building materials have been cited as one of the top challenges that homebuilders face at a time when
the real estate industry is calling for more housing inventory to meet surging buyer demand.

Forty-seven percent of builders said they were “including price escalation clauses in their sales contracts” to help protect themselves from ongoing price increases in the lumber market, according to recent builder and housing surveys.

Builders are pre-ordering lumber to help avoid cost increases, and 22% are obtaining price guarantees from suppliers. But those price guarantees don’t often stretch past two months.

The sky-high prices may soon back off: Lumber futures have posted slightly weaker numbers as of early June.

Even as prices edge down slightly, they will still be well above historic averages, even as much as twice the average compared to the past 20 years.

Believing that a decrease in lumber pricing is inevitable as higher prices tame demand, some builders are recommending a delayed start of home building projects until fourth quarter, 2021, or first quarter, 2022.

How is the Northern Colorado New Home Market Affected?

Dana Spanjer with Spanjer Homes indicated that uncertainty surrounding COVID and recent price increases have delayed spec home construction for as much as a year. Material escalation clauses are included in their contracts for clients building custom homes.

Alexa with Landmark Homes reported one listing being released at a time for contract in each of their seven Northern Colorado communities and sale prices are subject
to material pricing. Build time is 8-10 months after the initial 1-2 month process of obtaining permits.

Jim Hauan, REALTOR representative for Sage Homes, shared that lot reservations are converted to contracts after completion of the foundation so the home can be priced with current lumber costs in mind. Turn around time from contract to close is 11 months.

Give me a call to talk about opportunities for working with a local builder for your next home!

Source: magazine.realtor

How Do I Buy a New Construction Home?

As the northern Colorado housing market continues to offer limited opportunities, some buyers are turning to new construction.

Where do you start?

Before visiting model homes, your first step is to meet with a lender to determine the purchase price and loan amount for which you qualify. While many builders offer allowances for closing costs or design upgrades in exchange for working with their preferred lenders, the choice of lenders is yours.

Time to shop!

It’s fun to visit model homes! Focus on new home neighborhoods that fit your approved price range and preferred location. When you visit a model home, you will be talking with a sales associate that represents the builder. Some builders require that you be accompanied by your agent to assist you in the purchase process .

Model homes are built to WOW! Upgrades add to the cost of the home so you’ll want to know what materials and fixtures are standard.

Neighborhood details vary. How large are the lots and is fencing allowed? Is there a Homeowner’s Association? What are the amenities such as walking trails or parks? What are the neighborhood schools? Are future developments planned for the surrounding area?

Who is your builder?

Learn about the builder’s qualifications. Talk to current homeowners about their experience and search online for reviews and news articles.

Write a contract!

The builder’s sales rep will complete the contract with you, which is different from the contract used for the sale of an existing home. If applicable, you will also discuss the time frame for listing and selling your present home.

Construction begins!

Your new home may take a few months to complete, if it’s already under construction, or 6-8 months for a home that is not yet started. You will have opportunities to visit your new home while it’s built.

The finish line!

The last few weeks before closing are a busy time! Your lender will update and finalize your loan approval and determine the amount of cash you need for closing. An independent inspection of your home might be done. Before closing, you will walk through the home with the builder to review the operating systems, the home warranty, and check for any minor items that need attention.

Moving day!

Finally, closing documents are signed, and you have the keys to your new home! If your dream home is a custom build, that’s yet another process.

Source: Redfin, Dana Spanjer with Spanjer Homes

Ready to explore the idea of buying or building a new home? Give our office a call at 970-221-5995 or go to our website!

6 Tips To Buying A New Construction Home

Buying a new construction home is a bit different than purchasing a resale home — one that’s been previously owned by someone else. You’ll need to be familiar with a few tricks of the trade, along with understanding a bit about how the process works.

1. Use your own Broker/Agent.

ALWAYS use your own RE/MAX Advanced Broker/Agent; doing so will help ensure that you get what you want. Understand that the sales reps you meet at new construction communities are likely representatives of the Seller — the builder, corporate owners, developers, whomever — they are there to present their product, answer your questions … and do the best job for the Seller.

2. Don’t expect price reductions.

Yes, it does happen. But overall, remember that builders have established a set of prices that they feel best make their product (the houses) marketable with an expected profit margin. Furthermore, lowering the price on a house drops the comparable value of other houses in the community, thus bringing the entire suite of houses down in price.

3. Look instead for builder concessions in the form of additional upgrades.

Rather than price reductions, you may be able to gain a few upgrades from the builder at no cost, or for less money. Perhaps the builder would be willing to include a fence, landscaping, upgraded carpeting, or appliances as part of your purchase without charging you extra.

4. Builder incentives in the form of interest rates, etc., may not be coming from the builder.

Lots of new communities boast incentive programs that cite things like “3.75% financing for 30 years” or “Zero Closing Costs.” What’s important to know is that the builder may not be the one actually paying those closing costs, or reducing the interest rates. Typically, those types of incentives are coming from the builder’s preferred lender who is counting on a sufficient number of loan transactions in order to recoup the cost of the incentives.

5. Expect to use the builder contract or addendum.

In almost every case, new construction homes require the use of a builder’s contract or at least a lengthy addendum in addition to the typical purchase forms used by a Broker/Agent. Generally builder forms include language specific to the terms of the building process and can be many pages long, full of tightly packed terms. While much of the language is common sense, be sure to read the contract thoroughly yourself (as will your Broker/Agent) and then consult with a qualified real estate attorney if you have questions or concerns. Agents, even those sales reps for the seller, aren’t allowed to (and shouldn’t) attempt to advise you or interpret what those custom forms really say.

6. Builder warranties vary.

Not all builder warranties are the same. Some builders warrant their work from top to bottom for several years, some only for one. Many builders will offer a warranty of up to about 10 years for structural-type issues, with other warranty time frames for things like plumbing leaks. In addition, you’ll find that your new home will likely
have individual warranties for appliances, roofs, windows, etc. Be sure to carefully review the warranty offered by the builder of your desired home before signing the final contract for your new home purchase.

Looking For More Information?

Take a look at our Pinterest Board – House Hunting Tips
https://www.pinterest.com/remaxadvanced/house-hunting-tips/

Or check out some other links:

http://www.hgtv.com/design/real-estate/how-to-buy-in-new-construction

https://www.redfin.com/blog/2014/08/10_tips_for_buying_new_construction.html#.VdO3hflVhHw