The Wells Group annual real estate forecast for 2017 contained many well-known woes of La Plata County’s housing industry as well as a few surprises reflecting on last year’s housing climate.
Residential units, for example, fell short of the predicted 5 percent increase for 2016. The real estate agency attributed that to regulations that inhibit lot development.
“There was not a lot of robust growth in rural residential land development,” said The Wells Group broker/owner John Wells.
Residential construction, in general, was soft in 2016. There were 27 single-family residential building permits pulled in Durango in the first eight months of 2016, a 37 percent decrease from the same time period in 2015.
Though demand remains high, rental rates did not increase to the degree real estate agents predicted, Wells said.
Alternative housing solutions, and policy that enables such construction, remains stagnant in La Plata County.
“We thought last year that tiny homes might be the hot spot,” Wells said. “And you see them around, but they’re not a substantial number of homes. And if you have one, then the question is, where are you going to put it?”
Wells also pointed out that the construction defects law continues to deter condominium development, and that the city’s fair-share ordinance, which requires developers to build a portion of their units affordable or else pay an in-lieu fee.
“We would all like to see workforce housing,” Wells said. “I think (the lack of) it is the biggest threat. We’re not sure how many homes and living units are delivered that are actually fair-share price product.
“We still suffer from the construction defect issues. This is a statewide issue, and quite honestly, an impact to our affordability.”
Between 2001 and 2008, multi-family building permits comprised about 29 percent of the total, with an average of about 155 units per year. But from 2015 to 2016, those permits accounted for 18 percent of the total, or about 40 units per year.
All of these factors contribute to an obvious and growing problem: Durango’s housing stock cannot accommodate the number of people who want to live here.
“The question is, do we want to allow density or not?” said Bob Allen, real estate appraiser with Allen & Associates Appraisal Group.
New, multi-unit projects are on the horizon.
Late last year, Durango City Council approved a plan for 194 apartment units at Escalante Drive near Wal-Mart. A smaller project underway at the corner of Florida Road and North College Drive is expected to be complete this fall and will add 20 units to the rental inventory.
Another 50 rental units for Florida Road are under the city’s review.
In the buyer’s market, activity at Three Springs is expected to continue to thrive in 2017.
Patrick Morrissey, senior vice president for the Southern Ute Growth Fund Real Estate Group, said they’ll break ground this summer on a 70-unit apartment complex. The existing Confluence apartments reached capacity last year, he said.
“We expect 50 new home starts and also another restaurant going in,” Morrissey said. “Additional infrastructure for future housing will continue to move forward. We’ve got pretty good growth out here.”
Migrants from elsewhere in Colorado are the top feeders to La Plata County, followed by Texas, New Mexico, Arizona, California, Florida, Oklahoma, Illinois, New Jersey and Pennsylvania.
In recent years, newcomers from Texas have outnumbered California migrants.
In the mid-1990s, extreme earthquakes and fires brought a large influx of migrants from California, Allen said. But Texas buyers have outpaced California buyers in the past three years.
“The number of baby boomers migrating here from the Front Range is growing exponentially,” said Wells. “They’re selling their homes for the appreciation while looking for a lifestyle change.”
The year ahead in real estate revolves around a significant statistic that has challenged the local housing climate for years: From 2000 to 2010, the county’s housing unit growth and household growth both increased at a rate of about 2 percent per year.
But from 2010 to 2015, housing unit growth grew only by about 0.87 percent per year, while household growth maintained its pace of a 2 percent increase per year.
“We have inventory challenges for homes under $500,000 and lots under $100,000,” Wells said. “And we continue to see a median increase in the price of homes.”
Real estate agents predict an increase in home sales in 2017 in Forest Lakes, a community about eight miles north of Bayfield, as well as in Bayfield, because of their relative affordability compared to Durango.
In-town residential real estate in Bayfield, however, has been an increasingly hot commodity, and the median price of those homes is expected to rise this year.
On the upside, Wells said the federal government’s promotion of the National Park Service’s 100-year anniversary brought a welcome boost to regional tourism, including visitations to Mesa Verde National Park.
Lodging occupancy is also strong, including at hotel alternatives such as VRBO and Airbnb. Two new hotels underway will also add beds to Durango.
A number of factors could or will influence the market in the next couple years, including higher lumber costs; changes in the county and city comprehensive plans; the county’s building code and land-use policy, both of which are under revision; and possible impact fees and use taxes, which could raise building costs.
Wells also anticipates “the Amazon effect” to change the fabric of the commercial hub of downtown Durango in the years to come.
“I think we will see less and less retail-type commercial property uses as online shopping continues,” he said. “As a result, the dynamics of our downtown might change. More commonly requested uses now are marijuana retail and restaurants and bars.”