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.
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.
• 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.
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.
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