U.S. Housing Market Conditions, First Quarter 2003: National Data

Fort Collins-Loveland, Colorado
Strong in-migration, stimulated by sustained employment gains, resulted in significant population growth throughout the 1990s in the Fort Collins-Loveland, Colorado metropolitan area. However, the area has registered a significant slowdown in population and employment growth in recent years. Population is expected to continue to grow during this decade but at a lower rate than previously. In-migration has slowed due to the recent decrease in employment opportunities. Unemployment reached an all-time high of 5.2 percent in 2002. Cutbacks in manufacturing, construction, and services-related industries prompted the rise in unemployment in 2002. The unemployment rate rose to 5.5 percent in February 2003.

Colorado State University (CSU) is the largest employer in the metropolitan area with approximately 7,300 employees. Following years of moderate increases, enrollment increased dramatically in the past 2 years. The fall 2002 enrollment of 24,735 was the largest ever and an 8.5-percent increase over fall 1999 enrollment. CSU houses approximately 5,500 students, and fraternities and sororities house another 2,000. It is estimated that approximately 2,400 students commute from outside the metropolitan area. Of the remaining 14,500 students, more than 95 percent are housed in the local rental market.

In the metropolitan area building permits were issued for 21,038 single-family and 6,240 multifamily units from 1995 through 2002. Fort Collins issued approximately 8,500 single-family permits and Loveland issued approximately 5,000. The balance of the single-family permits were issued by either Larimer County or surrounding municipalities.

Approximately 40 percent of multifamily activity during the period was intended for owners with the balance for renters. Close to 95 percent of the multifamily owner units were condominiums or townhomes located in Fort Collins.

Building activity peaked in 2001 when permits were issued for approximately 3,850 units and declined to 3,400 units in 2002. Rentals accounted for 80 percent of the multifamily permit activity in 2001. In contrast more than 90 percent of the multifamily permit activity in 2002 was for owner condominiums. At present there are approximately 340 rental units under construction in projects located in Loveland and Estes Park.

The metropolitan rental market was tight through most of the past decade but has softened since the beginning of 2000. The Colorado Division of Housing reports a vacancy rate of 3.4 percent for the first quarter of 2000. As of the first quarter of 2003 the rate had increased to 16.1 percent. Contributing to the increasing vacancies are the decline of renter demand due to decreased employment opportunities and out-migration of families to other areas for employment. Two large market-rate projects totaling 440 units entered the market in late 2002, contributing to the vacancies. In addition, numerous renters have taken advantage of the low interest rates and have become homeowners, further dampening rental demand. In addition to the major market-rate developments completed recently, approximately 800 general occupancy rental units and 180 units for the elderly have been built with financing from low-income housing tax credits (LIHTCs) since January 2000. The overall apartment vacancy rate is expected to level off as these new units are absorbed, but the market will still have a persistent surplus. Many market-rate developments and some affordable LIHTC rental developments are offering rent concessions. Depending on the terms of the lease, they may include 1 or more months’ free rent, reduced rents, no application fees, lowered deposits, free garage parking, free washer/dryers, and no credit checks. “Look and lease” specials are also being offered.

The metropolitan area has three major sales markets: Fort Collins/Wellington, Loveland/Berthoud, and Estes Park. The Group, Inc., reports that the number of homes sold has tended to increase each year since 1995. Homes sold in Fort Collins/Wellington historically commanded higher prices than those sold in Loveland/Berthoud, but that gap has disappeared. In 2002 the average sales price for homes sold in Loveland/Berthoud, $218,034, exceeded the average sales price for homes sold in Fort Collins/Wellington, $217,314. In Estes Park the Estes Park Board of REALTORS^® reported the average sales price for a single-family home in 2002 was $288,375, up 4 percent from 2001. The average sales price for townhomes and condominiums was $227,289 in 2002 compared with $225,428 in 2001.

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