STYLE Media and Design

Style invited a variety of local experts to give their expectations for 2010’s real estate market. Foreclosures and short sales are expected to continue, property values will remain stagnant, and new construction is largely non-existent. New jobs are thought to be the needed catalyst for our real estate market to make a true rebound.

Though this year may be one characterized by a largely wait-and-see attitude, opportunities do exist for new buyers, existing homeowners and investors. Our experts, both educators analyzing the trends and brokers on the front lines, advise readers where to find the silver lining for 2010.

Cris de la Torre, Professor of Finance at Universit of Northern Colorado

FROM OUR EXPERTS

The formula is simple: “When the people of America start feeling more confident about the state of the country again, that is when the real estate market will start to turn around,” says Cris de la Torre, Professor of Finance at University of Northern Colorado.

But it is difficult to predict how soon that will happen because it all depends on the people of America having jobs, continues de la Torre. “It is also hard to predict what will happen in the near future because we have been in an unprecedented market for the last couple of years, so we are not sure how quickly we will recover.”

Real estate is no longer the ‘can’t lose’ investment that Northern Colorado enjoyed for so many years, according to de la Torre. “People are now waiting longer to buy homes when they move into the area through relocation, marriage or other life changing events.”

A bright note: this makes the rental market a great investment in Northern Colorado and it is a prime time to purchase investment properties. “For so many years experts in the area told residents that it was always more financially beneficial to buy than rent, but that is not always true today when it is harder to get any kind of loan.”

Even though Northern Colorado is no longer enjoying an increase in property values every year, as we have in the past, real estate is still a great investment because the market will come back and values will go up, continues de la Torre.

“In Northern Colorado we are far better off than most of the nation in our property values and rate of unemployment.” De la Torre says the national average of unemployment is around 10 percent. The average for Northern Colorado is only 7.8 percent. Real estate values are always directly tied to unemployment statistics.

With the stock market the way it is, de la Torre advises making real estate investment just part of your overall financial portfolio. “In these times it is best to diversify your investment funds and not have them all in one basket,” he says. “Real estate is still a good investment in Northern Colorado.”

He says Northern Colorado remains a desirable place for companies to relocate because there are so many skilled and educated people that make valuable employees for these companies.

Primary jobs is the factor that will turn the real estate market around, says de la Torre, but the key to investing in real estate even in a slower market is to find an expert Realtor who knows the area, the market and the stimulus and tax credits available.

Information courtesy of Rick Ness, Keller Williams Realty

Dr. Steven Laposa, Director of Colorado State University’s Everitt Real Estate Center, says many factors in the real estate market, especially the commercial market, will continue to keep it sluggish in 2010 and beyond. “Because the population growth and migration of people has slowed and the employment rate is down, naturally the real estate market will remain slower.”

He believes this trend, when mixed with the economic downturn, will continue throughout 2010. “The real estate industry should be more concerned about taking care of the properties that exist and make certain that they are financially healthy before worrying about building new developments.”

He says business owners have started to realize this and are using the real estate that has already been developed more efficiently. Cities are also doing more redevelopment in areas that have been stagnant or empty. Finally, “people are realizing they can live with less,” he says. “We don’t need a Linens ‘n Things, plus a Bed, Bath and Beyond, or a Circuit City along with a Best Buy.”

In addition, people are also starting to spend less, save more and are trying harder to get out, and stay out, of debt. “People have stopped refinancing to get equity out of their homes so there is less expendable income in most families,” he says.

“There have been 4,200 job losses in the Fort Collins and Loveland areas from December 2007 through August 2009, there are fewer leasing and sales transactions which lowers the overall demand for real estate, so plans for hiring or expanding operations are lower.” These factors will continue to contribute to a slow real estate market on a local level.

Rick Ness, Managing Broker of Keller Williams Realty

IN THE TRENCHES

Despite employment concerns, Rick Kness, managing broker of Keller Williams Realty, still believes this is a great time for people in Northern Colorado to better their financial situations through real estate. “People that have a job, some cash and equity in a home can benefit greatly in this market climate.”

This is the perfect time for people to move up into larger homes or move into more desirable or more expensive neighborhoods. “The mid to upper priced homes are more available than the lower priced homes right now,” he says, “so those who want to move up have many more available choices.”

People may lose a bit on paper because of the decreased value of their current homes, but will more than make up for it in the long run with a better financial situation as the mid to high end property they purchase eventually goes up in value, he says. “If you have a professional Realtor that has stayed educated and informed during the market fluctuation, there is money to be made.”

He also believes the market will recover when primary jobs start growing in the area. “Northern Colorado has several advantages that will help the primary job market. We have a great quality of life and have been one of the top 10 cities to live and retire for many years.”

He says one key to getting businesses to relocate to the area is the speed with which local governments approve permits. “I think cities are starting to understand that they don’t have to give away the farm to get businesses to relocate here, they just need to be timely with the review processes.”

Kness predicts the foreclosure rate will begin to decrease in 2010, especially in Weld County, with Larimer County close behind. He believes short sales will increase a bit. “Most banks would rather sell a home for what is owed on the property than have another foreclosure to deal with, and sellers can avoid a foreclosure on their credit history [with a short sale].”

Good deals in the lower end housing market may have hit their peak prices, says Kness, because these properties are becoming scarcer. “At this point there is more demand than supply, so those values will soon start appreciating again.”

“It is a lot more work to be a Realtor in a market like this,” he says. “Realtors must be very knowledgeable, not only about the market and availability of homes, but must also keep up on the tax credits and other government stimulus incentives. I tell my agents that they should be neither cheerleaders nor doomsayers. They need to just tell the clients the truth so they can make the best decisions possible.”

Eric Thompson, President of The Group Inc.

Eric Thompson, President of The Group Inc. Real Estate, predicts that the first half of 2010 will be active and driven by the homebuyer tax credit that was recently extended and expanded. “The tax credit is just that, a credit, not just a tax deduction,” he says. “There will be many people in the first half of the year that will be taking advantage of this program before it expires in April.”

The credit was expanded to include not only first time homebuyers, but also current homeowners. The income restriction is for households making less than $225,000 per year, meaning buyers and sellers can benefit in all home price ranges. “If you pair this incentive with the lowest interest rates we will probably see for some time, it is a great time to invest or re-invest in real estate, which should keep the market fairly active in this area.”

Thompson says The Group has changed their marketing approach by being more aggressive and creative for their sellers in finding buyers and helping the buyers understand the tax credits and incentives.

Chris Hardy, managing broker for Coldwell Banker, predicts there will still be many foreclosures in 2010 as banks begin actively working to clear their books of bad debt. “Last year at this time many banks had a moratorium on filing foreclosures and took a ‘wait-and-see’ position with the new administration as to what sort of institutional incentives would be offered to do loan modifications and work-outs with troubled home owners,” Hardy says.

The wait appears to be over. “We already began to see an increase in foreclosure filings at the end of 2009, and it is likely to continue through 2010 and into 2011.”

He says the downside is this may flood the market with aggressively priced homes and suppress property values.

However, this would be a boon to investors, first time homebuyers and existing homebuyers looking to trade-up. They will have many opportunities to purchase bank-owned (aka REO) homes at what could be considered below-market values. Hardy agrees with other experts that the real estate market revolves around jobs. “Without more primary jobs in the Northern Colorado area, we will not see much of an increase in the market in 2010.”

Real estate values are not totally dependent on the state of the economy, adds Hardy. The market value of homes is also spurred by life-changing events that are happening everyday, no matter what the economy is doing. “There will always be young couples getting married and needing homes, or having more children and needing bigger living spaces, or job changes or family changes that require relocation.” This reality helps keep the real estate market from getting stagnant.

Another positive? Northern Colorado is not dependent on any one large company, corporation or industry to keep the economy stable. “We are not like Detroit where a huge percentage of the population was employed by the car manufacturers. We have many companies, large and small, as well as our agricultural industry, that keep the economy strong.”

Chris Hardy, Managing Broker of Coldwell Banker

Hardy says there has never been a huge boom or bust cycle in Northern Colorado because of the diversity of these employment opportunities. “We need to see a steady growth of more medium to small businesses relocating to the area to provide primary jobs.”

The abundance of available commercial space that was developed and, with the onset of the recession, remains empty is still available to new businesses. “If we can fill up these empty commercial spaces everything will start to pick up because primary jobs create secondary and support jobs,” he says. “Everything is tied together in our economy and it all revolves around jobs. In real estate we used to say the determining factor for property value was location, location, location. Now it is jobs, jobs, jobs.”

Renewable energy technology, still in its infancy, has put Northern Colorado in a great position to attract necessary new jobs, he says, as many companies work to partner with Colorado State University and others to expand this sector.

Hardy also encourages real estate investment. “It is a perfect time to invest in rental properties instead of keeping all your money in the stock market. If people start doing that, rental homes will be provided for those who need homes and another income source will be there for the investor.”

He believes the Northern Colorado market will turn around in the next three to five years. “I believe this is a great time to buy and sell or upgrade with the help of a professional Realtor to assist buyers to make wise investments in this unique market climate.”

While our experts agree that Northern Colorado needs jobs before we will see the real estate market show substantial increase in value, there are some advantages in the current market. If you are considering a real estate investment, an upgrade in the size of your home, a first-time purchase, or even if you are a new business looking for an existing structure to fit to your business needs, take advantage of an experienced local real estate expert to help you get the best deals available in 2010.