Not surprisingly, there’s a scarcity of lots in northern Colorado and housing prices are climbing even higher. Affordability Index is decreasing (not a good thing) and rents are increasing.
I sat in the Embassy Suites in Loveland, CO this past December, listening to a panel of men tell me what I already know. There are few lots, prices have increased by double percentages and we have very low inventory of houses on the market which means that buyers will be traveling east until they can afford their first homes, sometimes even a move-up home. That’s not always a good thing even with the low prices of a tank of gas. After much research, I found some interesting facts:
- Some lenders are looking into “location efficient” mortgages based on easy access to amenities and commute time.
- Default rates are higher in far-flung exurbs while appreciation rates are lower
- Americans are changing their minds and moving back to cities; millennials show a strong preference for the urban lifestyle.
- Local governments initially support the construction of infrastructure but the low-density, sprawling communities cannot shoulder the ongoing costs of maintenance and the taxes inevitably go up for that area or services are cut back.
Fannie Mae experimented with the “location efficient” mortgages just before the housing crash. The idea has resurfaced and some financial institutions are working on a proposal to create “energy star” type of rating systems based on transportation costs.
According to Scott Schaffer, a Minnesota writer on transportation and housing issues, failing to incorporate commuting costs into underwriting of home loans is a “glaring flaw” in quantifying the ability of a borrow to repay the loan. He quotes statistics from AAA that states an extra ten miles would cost nearly $91,000 over the life of a 30 year loan.
But the magic word is “qualify.” In northern Colorado, it means buying in Greeley while working in Fort Collins—a 30 mile commute. Or buying In Johnstown while working in Denver—a 44 mile commute. Or families would have to decide that they would prefer smaller homes and lots to a longer commute. And until we come to our senses and invest heavily in public transportation, those are our choices.