a monthly publication of

REAL ESTATE INSIDER

AFTER A YEAR OF GROWTH IN THE HOUSING MARKET, LOOK FOR MORE IN 2016Not only did we see Northern Colorado’s housing market boom throughout 2015, indications tell us that these upward trends will likely continue for years to come. Over the past four decades, average home price appreciation has settled around 5 percent annually. But in 2015, our region blew those numbers out of the water, with double-digit price gains in all but one of the local sub-markets (in Windsor/Severance the increase was nearly 9 percent). Fort Collins/Loveland and Greeley are #9 and #10 respectively in the top 30 markets in the US for appreciation.We see these upward trends continuing into 2016. At The Group Inc., we’re forecasting an average price increase of 7.7 percent for Fort Collins/Timnath. Our estimates for Loveland/Berthoud and Greeley/Evans are similar, at 6.8 percent and 7.55 percent, respectively.The combined influences of rising prices and stagnant wages alone could start to squeeze affordability. But other factors come into play as well. Interest rates are expected to increase in 2016, which places a particular burden on first-time buyers.While nobody knows exactly how much rates will increase, expert predictions have us climbing to the range of 5 percent to 5.5 percent. While that remains low by historical standards, every increase of 1 percent in interest rates cuts purchase power by 10 percent. Coupled with a lack of condominiums in the area — Colorado has some unusual provisions that prevent much in the way of multi-family construction — many people are simply priced out. Expect to see more buyers adopting the philosophy of “drive ’til you qualify.” That means we’ll see more active home sales in the region’s outlying communities, such as Wellington, Berthoud, Severance, Johnstown, because the home prices there are less. We expect Wellington will be especially popular thanks to its

proximity to Fort Collins (the region’s priciest town) and access to Poudre School District.

2015 HIGHLIGHTSINVESTORS – With high appreciation and rising rents, this was another great year to own investment property in northern Colorado and owners saw the value of their portfolios increase. Those wanting to enter this market, however, found it difficult to find properties to purchase, as a ready supply of homes in good condition under $300,000 became a thing of the past.BUILDERS – There was renewed activity in new construction with many national builders in our market. The new inventory was welcomed by buyers who enjoyed more choices, a variety of design, and upgraded features that have become standard in most new homes. 2016 will prove to be very competitive for builders, especially those building in the $400,000 range and up.JOB GROWTH – Approximately 12-18 months following increases in job growth, the local housing market is impacted. Northern Colorado cities have been experiencing steady employment and population growth in the past few years and Greeley and Fort Collins-Loveland are among the top 30 markets for home appreciation over the past 12 months. Employment continues to be the leading indicator of rising housing demand and the latest figures hint at more to come. APPRECIATION – Average prices in Fort Collins and Loveland moved well beyond the $300,000 threshold. Building prices increased with labor, land, and materials costs. The cost of water also caused new home prices to increase.

2015 IN A NUTSHELL

Average Price Up 12% to $305,133Residential Sales Up 1% to 10,229Inventory Below 6 Months in All MarketsNew Home Starts Up 22%

Sales Activity by Market Residential Building Permits Vacancy Rates

2016 Trends 2016 Advice Commercial Market Update

2016 Forecast 2015 Forecast Accuracy Residential Transactions

February 2016Vol. 40, No. 1

Homes are

more affordable

now than

they were

10 years ago.

SALES ACTIVITY BY MARKET

RESIDENTIAL BUILDING PERMITS

VACANCY RATES

FORT COLLINS/WELLINGTON/TIMNATH Year # of Homes Sold % Change Dollar Value % Change Average Sales Price % Change 2010 2,783 -5% $696,823,184 -2% $250,386 +5% 2011 2,736 -2% $693,885,165 0% $253,613 +1% 2012 3,374 +23% $879,448,133 +27% $260,654 +3% 2013 3,878 +15% $1,082,392,812 +23% $279,111 +7% 2014 3,816 -2% $1,146,193,050 +6% $300,365 +8% 2015 3,721 -2% $1,264,256,756 +10% $339,763 +13%

GREELEY/EVANS Year # of Homes Sold % Change Dollar Value % Change Average Sales Price % Change 2010 1,532 -8% $218,002,039 -6% $142,299 +2% 2011 1,465 -4% $208,237,058 -4% $142,141 0% 2012 1,493 +2% $241,807,019 +16% $161,960 +14% 2013 1,944 +30% $344,461,436 +42% $177,192 +9% 2014 2,280 +17% $461,049,659 +34% $202,215 +14% 2015 2,450 +7% $550,163,302 +19% $224,556 +11%WINDSOR/SEVERANCE Year # of Homes Sold % Change Dollar Value % Change Average Sales Price % Change 2010 501 +1% $150,282,988 +6% $299,966 +5% 2011 557 +11% $161,958,496 +8% $290,769 -3% 2012 728 +31% $218,991,979 +35% $300,813 +3% 2013 819 +13% $260,621,098 +19% $318,219 +6% 2014 787 -4% $273,390,928 +5% $347,384 +9% 2015 824 +5% $311,164,717 +14% $377,627 +9%

LOVELAND/BERTHOUD Year # of Homes Sold % Change Dollar Value % Change Average Sales Price % Change 2010 1,363 +2% $315,371,969 +5% $231,381 +2% 2011 1,381 +1% $322,535,668 +2% $233,552 +1% 2012 1,681 +22% $412,216,976 +28% $245,221 +5% 2013 2,002 +19% $517,210,506 +25% $258,347 +5% 2014 1,977 -1% $556,336,704 +8% $281,405 +9% 2015 2,100 +6% $665,133,740 +20% $316,730 +13%

AULT/EATON/JOHNSTOWN/KERSEY/MILLIKEN/MEAD/LASALLE Year # of Homes Sold % Change Dollar Value % Change Average Sales Price % Change 2010 535 +1% $104,919,874 +5% $196,112 +4% 2011 698 +30% $134,601,026 +28% $192,838 -2% 2012 896 +28% $187,164,073 +39% $208,888 +8% 2013 1,053 +18% $245,284,496 +31% $232,939 +12% 2014 1,279 +21% $334,731,851 +36% $261,714 +12% 2015 1,134 -11% $330,482,439 -1% $291,431 +11%The number of “homes sold” is defined as “purchased dwelling units” and includes both new and resale single-family homes, town homes, condominiums, and patio homes. Change in average sales price is not the same as appreciation/depreciation.Source: MLS

Fort Collins Area Loveland Area Greeley Area Dec ’14 Dec ’15 Dec ’14 Dec ’15 Dec ’14 Dec ’15Industrial 3% 4% 12% 11% 7% 3%Retail 3% 4% 4% 4% 6% 5%Office 5% 3% 9% 6% 5% 4%

Single-Family Multi-Family Units 2013 2014 2015 2013 2014 2015Fort Collins 555 565 509 552 527 49 Greeley/Evans 155 292 449 275 521 290 Loveland 233 361 465 109 208 225 Windsor 356 241 265 52 14 13

COMMERCIAL MARKET UPDATE

2015 brought a mix of outcomes across Northern Colorado’s three commercial market sectors – retail, office, and industrial. Slowing margins in the local oil and gas industry has made office tenants cautious even though there is a lack of quality office space available. A growing housing supply stimulated the need for retail space and retail vacancy rates declined as rental rates increased. Although industrial market vacancies increased, would-be tenants can’t find enough large spaces to meet current need.

2016 TRENDSAFFORDABILITY – Increased prices, stagnant wages and rising interest rates will have a negative effect on affordability. Northern Colorado is still relatively affordable compared to other parts of the country taking into account our relatively lower prices, the still low interest rates, our low property taxes (CO ranks 39th in the country) and a median household income that is above the national median in all of our communities. GOOD MARKET – STILL COMPETITIVE – The Northern Colorado market remains very active, but buyers and sellers need to be realistic about the process. New regulations have complicated the loan process but full-time, knowledgeable Realtors and Lenders can make the process easier and increase the likelihood of a successful transaction. Make sure you have the best people on your team.DESIGN – Large showers, high end finishes, contemporary, ranch style, open plans, quality, outdoor living, energy efficient, grey or neutral colors – these are features today’s buyers are looking for. INTEREST RATES – It is predicted interest rates could increase to the 5 to 5.5 percent range. Although these are low compared to past history, increases cut buying power. Buyers would fare better by getting into the market before we see increases.FIRST TIME BUYERS – Properties under $300,000 are flying off the shelf, but there are opportunities for first time buyers to get into a home if they are patient, prepared, pre-approved by a reputable lender, decisive, realistic about their wants and needs, and the offer they will make. MOVE-UP MARKET (Guaranteed Sales Plan) – The over $400,000 market isn’t moving as fast as the lower prices, and this presents an opportunity for homeowners wishing to move up. Homeowners who are nervous about how fast their current home will sell can take advantage of The Group’s Guaranteed Sales Plan. We have helped hundreds of homeowners move up with this program. Ask your Group Realtor if this can work for you. RENTAL MARKET – What has been favorable for investors has been more of a challenge for those looking to rent. Low vacancy and increasing rents have caused some people to move into the outlying communities and in some cases they made the decision to purchase rather than rent. Several apartment projects are in the works which will help ease this situation.

2016 ADVICEFOR SELLERS – Even though there is greater competition in today’s market, buyers are still looking for clean, updated, properly priced homes in move-in condition. Anything less could cause you to leave money on the table. Be ready for a fast move in the lower price ranges. Anytime is a good time to sell.

FOR BUYERS – Be knowledgeable about the Northern Colorado market and its different housing options. Get the right people on your team, know what you want, be ready to act quickly, do your homework, and make a realistic offer.

FOR INVESTORS – Understand how investing in real estate can increase your wealth. Attend The Group’s ‘Wake-Up Money’ seminar to educate yourself. Work with a Realtor who can guide you through the process. Be patient, prepared, and decisive.

FOR BUILDERS – The landscape is competitive and could be tricky. With building occurring in the $450,000-$600,000 range, there is opportunity for the move-up buyer. Builders can find more ready buyers by working closely with the Realtor community. The Group’s Guaranteed Sales Plan can help buyers make that step to a new home.

Attend The Group’s

‘Wake-Up Money’

seminar to educate

yourself. Work with a

Realtor® who can

guide you through

the process.

Be patient, prepared,

and decisive.

Group Mortgage and The Group Guaranteed Title were formed to make the home-buying process easier and more convenient for our customers. Loan officers in every Group office are dedicated to making your home-financing experience both beneficial and gratifying. A comprehensive line of lending products is available to assist you when purchasing or refinancing a home.

Homeowners who are nervous about how fast their current home will sell can take advantage of The Group’s Guaranteed Sales Plan. We have helped hundreds of homeowners move up with this program. Ask your Group Realtor® if this can work for you.

GROUPMortgage, LLC

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GROUPMortgage, LLCCorporate NMLS 1170166 Office Phone 970.419.2374

Regulated by the Division of Real Estate

Horsetooth Office (970) 223-0700 375 E. Horsetooth Road, Fort Collins, CO 80525 PRSRT STD

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FORT COLLINS, COPERMIT NO. 304

Harmony Office (970) 229-0700

RETURN SERVICE REQUESTEDwww.thegroupinc.com

Mulberry Office (970) 221-0700

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THE SOURCE Fort Collins (970) 493-0700

Loveland Office (970) 663-0700

2016 FORECAST

2015 FORECAST ACCURACY Our prediction for residential transactions in the Northern Colorado real estate market in 2015 was 92.5% accurate. We forecasted 11,051 sales and 10,229 sales actually occurred in 2015. The demand was there for 11,051 homes; unfortunately, the supply was not.

2016 will be another positive year in the northern Colorado real estate market. Our growing population and robust job growth continue to drive the housing market. Prices, transactions, and new home starts will all continue their upward trend. The fundamentals of our region continue to make Northern Colorado a smart place to own real estate. Here are our predictions for 2016:

% Loveland/ % Greeley/ % Windsor/ % % Prediction Change Berthoud Change Evans Change Severence Change ChangeNumber of home sales 3,795 +2.0% 2,142 +2.0% 2,499 +2.0% 840 +2.0% 1,156 +2.0%Averagesalesprice $366,000 +7.7% $338,000 +6.8% $241,000 +7.5% $402,000 +6.5% $313,000 +7.5%

Ault/Eaton/Mead Johnstown/Kersey

Milliken/LaSalle

Fort Collins/Wellington/

Timnath

2016 Residential Sales Forecast

10,139 10,229

6,8378,172

Source: MLS. Numbers are for residential and attached sales only.

9,696

2015 RESIDENTIAL TRANSACTIONS - NORTHERN COLORADO REAL ESTATE MARKET

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