Prospective homebuyers, now is your moment. Prices are low and so are interest rates.
“This is the best since 1971 for home affordability,” said Don Ricedorff, a real estate broker at The Wells Group. “Interest rates are between 3 and 4 percent.”
While this is driving up sales activity to heights not seen since the crash in 2008, there still are weak spots in the market, particularly in the upper-end home segment.
Ricedorff, active in Durango’s real estate market since 1993, said he has seen business bounce back since the market bottomed out in 2009, when only 532 homes sold.
“At the end of 2011, 718 properties were sold,” Ricedorff said. “We’ve come back significantly.”
Ricedorff believes that the real estate market is beginning to improve with the growing influence of the “millennial” generation, also known as “Generation Y.”
Generation Y is between the ages of 18 and 35. Currently, it makes up 34 percent of the workforce. It is projected that in five years, millennials will make up 65 percent of the U.S. workforce, according to 2010 U.S. Census.
“They will all need a primary home to live in,” Ricedorff said. “This is the best time to lock in a low rate and a low cost of living. Rents are likely to increase.”
The factor holding millennials and many others back is unemployment. While Colorado’s unemployment rate declined to 7.9 percent in December, it still is painfully high for some when compared with the 5 percent range it hovered around before the recession. Many millennials also have the added burden of being saddled with debt from college, the cost of which has risen sharply in recent years.
Nationwide, this has contributed to a tendency to rent rather than buy.
“We are more of a renter nation than we have been for a while,” Christopher J. Mayer, a professor of real estate at Columbia University, said in a Feb. 24 New York Times article.
That means one group is sitting especially pretty in the current real estate market: landlords.
In fact, the demand for rental properties has brought investors back to the table, and in January, The Wells Group hosted an “Investing Symposium.” About 80 interested investors attended.
“It has only been in the last few months that we have seen the small investor interest resurge in the real estate market,” Ricedorff said.
Larry Allen, an investor who focuses on residential properties, namely duplexes and single-family homes in Durango, rents them out to worthy tenants.
“It’s a higher return on investment than most opportunities available right now,” Allen said.
The margin is low, but Allen still considers owning and renting a good investment, and the consistent rental income stream is a monthly return on his investment.
“The best thing is having equity built by someone else,” Allen said.
Still, investing in real estate yields no high returns quickly.
“It is not a short-term investment,” Allen said. “You need to hold onto it for a while to make it a worthwhile investment.”
Gene Fisher, president of Gene Fisher Custom Homes, has been building and developing in Durango since 1978, including the Skyridge subdivision, which was developed in 1999.
Fisher experienced “an almost instantaneous reaction” to the national housing meltdown in 2008-2009.
“In the 33 years I’ve been doing this, we’ve never just had it stop,” Fisher said. “This has not been a recession – it has been a depression in the building industry.”
Fortunately, Fisher has noticed the market coming back.
“Currently, there is a growing demand for building because there’s not a lot of availability in town,” Fisher said. “There’s more construction going on right now than there has been in three or four years.”
The trend is toward smaller, more-efficient homes, Fisher said.
“We’ve seen a significant shift from large homes to smaller homes,” he said. “I think what’s happening in the market place is people are willing to buy a smaller, high-quality home that is custom built rather than an outdated larger home available on the market.”
Local banks are also faring well.
Bank of the San Juans has seen only two occupied single-family homes “get into trouble” since 2010, said Art Chase, president of the bank.
“We didn’t participate in the insanity of the subprime lending. We also made sure people had adequate investment on their homes,” Chase said.
Though signs are good the real estate market here is recovering, many argue that Durango faces a more-difficult decision: to grow or not to grow.
“Durango is at a crossroads that will demand city officials to make plans to grow responsibly or decide not to grow,” Fisher said.
The result of not growing responsibly, Fisher said, will be an increase in housing costs, including renting and owning.
“There is only one way to limit growth – by making it very expensive to live here,” Fisher said.
“My philosophy is if we continue to limit responsible growth, we’ll have a cute physical town in 10 to 20 years, but it will change because young people with families will not be able to live here,” Fisher said. “We won’t have the makeup of people you have now – the diverse community makes Durango special.”
Despite the optimism many feel about the direction of the market, the fallout from the crash is far from over, and foreclosure rates remain high.
La Plata County Treasurer Ed Murray said 74 home foreclosures were filed in 2007 – the year before the market crashed. By 2011, that number had more than tripled to 268, which still was an improvement over 2010, when there were 324 foreclosures filed.
That doesn’t include people who are underwater on their homes, meaning they owe more than it is worth, or who are struggling to hold on to homes they no longer can afford.
Kurt Trautmann, deli manager at Durango Natural Foods, is among those on the edge of losing their homes. He succumbed to a predatory loan in 2006 and has tried to refinance to no avail. He’s facing possible foreclosure on his family’s home at West Second Avenue and 32nd Street.
Trautmann has a home loan serviced by Bank of America and owned by a “securitized loan trust.”
“The only person that I could ever speak to was in India,” Trautmann said.
Trautmann said he has attempted several times to renegotiate the terms of his 30-year mortgage and has been told that his paperwork was lost or expired.
“There is no due process for foreclosure,” Trautmann said. “I’m just fighting for my home.”
From where he’s sitting, the fact that several new custom homes recently have gone up in his neighborhood isn’t much consolation.