Boulder

The 2008 real estate market followed a similar pattern to the past few years with sales activity across the area experiencing a continuing decline.  In 2005, there were 4,725 single-family homes sold in the Boulder Valley area; in 2006 (4,389); in 2007 (4,076); and in 2008 (3,393).  Since 2005, that’s a reduction of nearly 28.19% in the number of sales over that past four year period. 

For real estate markets to sustain themselves in a positive direction, they need to churn.  They need to have a consistent influx of buyers and an on-going flow of available inventory.  When that happens, home values remain relatively constant or increase at a reasonable rate.  When the real estate market gets skewed; i.e., too many buyers, but not enough available inventory or too much available inventory, but not enough buyers, two things can happen – home values increase noticeably (demand exceeds supply) or home values decrease noticeably (supply exceeds demand).    

Over the course of the past three years (January/2006 to December/2008) the Boulder Valley real estate market has seen the average sales price of a single-family home go from $440,236 (2006) to $446,742 (2007) to $431,339 (2008); an overall decrease of approximately 3.45%.  Which means?  The local real estate market has been relatively flat during the past thirty-six (36) months in terms of home values.  Considering what has happened negatively to other real estate markets across the country, the Boulder Valley real estate market has held its values during this economic downturn.

The questions then becomes, How did this happen?  It’s back to the supply and demand overview above noted.  Demand decreased 28% in the past four years; supply decreased nearly 23% in the past four years.  If supply hadn’t decreased, and demand remained the same, what would have happened to Boulder Valley real estate home values?  Although this is possibly conjecture, it is based on other areas of the country where demand decreased noticeably, but supply continued to increase in which case home values experienced dramatic decreases. 

The Boulder Valley real estate market has remained relatively stable over the past three years in terms of home values simply because available inventory has also adjusted downward.  For a variety of reasons, people chose to either take their homes off the market or not put them on the market.  Builders stopped building spec homes they couldn’t sell.  Potential buyers became renters, resulting in homes for sale being withdrawn from the market.  People decided to “settle-in” for the time being to see what would happen in the marketplace. 

Below is an overview of sales activity for the past two years for single family homes in the various Boulder Valley areas, courtesy of IRES – the Northern Colorado Multiple Listing Service.   

                        2007       2008           %                 2007                  2008                 %

     Area           Solds      Solds      Change     Average Price   Average Price   Change

Boulder           939         747         -20.45%          $662,320         $655,378          -1.05%      

Superior           169         120         -28.99%          $411,125         $437,818          +6.49%     

Louisville        248         203         -18.15%          $392,014         $391,306          -0.18%

Lafayette         315         252         -20.00%          $404,360         $355,934          -11.98%

Longmont       1118       1018       -08.94%          $279,404         $252,400          -09.66%

Sub. Plains      571         443         -22.42%          $587,845         $526,399          -10.45%

Sub. Mtns.       309         262         -15.21%          $456,849         $435,110          -4.76%

Broomfield      407         348         -14.50%          $380,019         $396,371          +4.30%

                        ===        ===        ======          =======         ======           ======

   Totals …      4076       3393       -16.76%         $446,742         $431,339          -03.45%                                                                              

November 2008 MARKET UPDATE

BOULDER CO REAL ESTATE

       The 2008 real estate market can most aptly be characterized as one of dynamic change.  The future will be noticeably different than the past.  In the past, home owners relied on real estate to build net worth over time through appreciation.  In the future, real estate will be viewed as a means for creating equity through debt reduction i.e. paying off the mortgage(s).  Double digit annual increases in home values won’t be a part of the economic equation for a number of years (if ever again).

      Once the housing market digs itself out of this bank foreclosure/short sale scenario it currently wallows in, real estate buyers will still take a cautious look at what they are purchasing.  The days of multiple offers, driven by lower mortgage interest rates, will be few and far between.  Price, location and condition will continue to be strong considerations for buyers.  Value will be the major component of the “new” housing market. 

      People’s behavior patterns change once they are faced with a sense of scarcity.  A few years ago when Colorado experienced a drought, people learned to live with watering their lawns less.  They became more conservative.  As gas prices escalated earlier this year, people began to drive less.  Despite the lower gas prices today, people still drive less.

      The same mental concept will exist in the mind of future home buyers.  They will take a serious look at where they are now and ask themselves if they need a larger home, newer home, etc.  Reducing personal debt will be a major focus of the economy over the next few years as people wrestle with the uncertainty of the job market and their depleted retirement accounts.

      But, even in the darkest times there is light.  There is opportunity.  It simply takes an open mind and the willingness to explore.  Here are some thoughts.

·         In today’s real estate market, cash is king.  Don’t have to sell your home to buy a home?  You are in a strong negotiating position.  Contracts conditional on the buyer needing to sell their home to buy your home are of little value in most situations.  Unless you own a tepee in the far reaches of an almost inaccessible mountain valley and the only possible buyer you will ever get needs to sell their igloo in Alaska before they can buy your tepee.  Then you “might” want to consider a conditional contract.

·         The rental market in the Boulder Valley was strong this past summer and fall.  Why?  Because there was a plethora of people who couldn’t qualify to buy a home, but could afford the payments for a rental.  So?  Look at real estate from an investment perspective.  Remember, build wealth through debt reduction.

·         Real estate markets ebb and flow.  It’s the nature of the beast.  If home values were always increasing, it’s a no brainer - Buy!  Buy!  Buy!  If real estate markets were always down, we’d all be tenants.  That’s assuming there were actual landlords.

·         This too shall pass.  Time changes all things.  It’s just a matter of time before the good days will be the good days again.  They will be different, though.  If history teaches us one thing, it’s how to avoid the mistakes of the past.  Today, the government is our perceived savior.  Funding billions of dollars into an economy that needs to right itself.  How long that will take is anyone’s guess, but there will inevitably be change.   

            Here we are again, spring is getting ready to, well, spring.  It seems to happen every year about this time.  The days get a little longer.  People crawl-out from wherever they have been hibernating for the past five or six months.  Birds begin to sing.  Plants, trees and flowers commence to flourish.  And, oh yeah, the real estate market starts to show signs of increased activity.  It’s a great time to be alive.

            The good old “bell curve” concept of real estate begins to take shape; i.e., more listings, more buyers, more showings and more sales.  The good old “bell curve” hasn’t been kind to real estate the past couple of years.  As the national economy has suffered, the ripple effect has impacted real estate activity across the country.  One of the most noticeable impacts on the real estate market is the lack of a “domino effect”. 

            The “domino effect” occurs when there are several real estate transactions in place that all need to close, so none of the domino’s fall.  As an example, Seller No. 1 needs to sell their condo to buy a starter home; Seller No. 2 of the starter home needs to sell their home to buy a larger home; the Seller No. 3 of the larger home needs to sell their home to buy a retirement home in Florida.  For all of this to happen, none of the transactions (dominos) can fail. 

            The major problem with today’s real estate market, be it here in the Boulder Valley or across the country, is that, in this example, if Seller #1 can’t get their condo sold.  As such, none of the other transactions is going to take place.  It’s like running a cross country race in quick sand.  It takes a lot of effort and there isn’t much progress.  For the real estate market to return to a balanced level, where there are approximately a similar number of buyers and sellers, there needs to be a reasonably active “domino effect” in place.  If not, then a multitude of sellers are attempting to attract a limited number of buyers.     

            Below is a simple breakdown of sales activity from IRES (the Northern Colorado MLS) for the first quarter of the past two years for single family homes.  

                                                 2007 Sales                  2008 Sales

                                                 1^st Quarter                 1^st Quarter    

                        Area                Single Family             Single Family             % Change

              Boulder                         173                              152                              -12.13%

              Superior                        29                                19                                -34.48%       

              Louisville                      44                                39                                -11.36%

              Lafayette                      80                                47                                -41.25%

              Longmont                     218                              210                              -3.66%

              Suburban Plains            92                                97                                +5.43%

              Suburban Mountains    46                                42                                -8.69%

                                                   ===                             ===                             ======

              Total                             682                              606                              -11.14%

Note:  A comparison of the end of the first quarter of 2006 and the end of the first quarter of 2008 shows a 22.40% reduction in the number of single family homes sold for the areas noted above.  (2006:  781 / 2008:  606)

February 2008 MARKET UPDATE

BOULDER CO REAL ESTATE

       Real estate markets are often characterized as being one-dimensional; i.e., they are up, down or flat.  But, there are always pocket areas within the real estate market that are behaving differently than the market as a whole.  As an example, in the automobile industry, with the recent increase in gas prices, overall car sales may be down, but fuel-efficient or hybrid cars may be selling at a positive pace. 

      The same is true for real estate.  Homes in certain price ranges or geographic locations may be experiencing a difficult time selling, but other price ranges and locales may be doing very well.  The point is that a blanket statement should not be made about the real estate market at any single moment that relates to all aspects of the market.  Generally though, it can be stated that the market is up, down or flat collectively as a whole, based on historical data relating to current activity.

      In the past, and to some degree today, the three words that portray real estate most were Location! Location! Location!  Those are words based on emotional appeal.  They aren’t necessarily facts.  The two most important words in real estate today are Absorption Rate!  The dictionary defines absorption as to “take in and make part of an existent whole”.  In real estate terms it could be defined as “taking in homes for sale and making them part of the inventory of sold properties”.  The word rate then represents the amount of time at which absorption occurs.

      If one were to analyze specific neighborhoods, communities or geographic areas, the Absorption Rate could be determined for both today and the past.  By going through his process, it could be established if the real estate market in those areas is up, down or flat.  The same can be said on a larger scale when looking at the entire real estate market.

      Therefore, below is a brief overview of residential real estate listings and sales over the course of the past few years from Boulder to Ft. Collins, and the close-in mountain communities to the eastern plains.  All information is from IRES, the Northern Colorado Multiple Listing Service.

                                                   New Listings                                Sales                 Absorption

         Year      New Listings          % Change           Sales            % Change                Rate •          

         1998          15757                 -------                  12913              -------               14.64 Months

         1999          17705                 +12.3%               13038              +0.97%            16.30 Months

         2000          18738                 +5.83%               13529              +3.76%            16.62 Months

         2001          22366                 +19.3%               13868              +2.50%            19.35 Months

         2002          24177                 +8.09%               13930              +0.44%            20.83 Months

         2003          25204                 +4.24%               14304              +2.68%            21.14 Months

         2004          26429                 +4.86%               15404              +7.69%            20.59 Months

         2005          27390                 +3.63%               15578              +1.12%            21.10 Months

         2006          28001                 +2.23%               14382              -7.68%             23.36 Months    

         2007          25890                 -7.54%                13746              -4.42%             22.60 Months

·         Absorption Rate:  Assuming sales activity would remain the same, and no new listings were to come into the market, this is the number of months it would take to “absorb”; i.e., sell the entire inventory of new listings for each year.

January 2008 MARKET UPDATE

BOULDER CO REAL ESTATE

            Real estate markets are somewhat reflective of life: good times, not so good times…and everything else in between.  If you were to characterize today’s real estate markets, as always, you would have to view it from different perspectives.  The first perspective is on a national level.  Admittedly, certain geographic areas of this country have seen better times.  Saddled with over building and double digit appreciation for years, those areas are now faced with the reality of the “not so good times”.

            If you were to look at the Colorado housing market, you would discover pocket areas around the state that are holding their own and other areas that have lost their grip.  The Boulder Valley real estate market has been holding its own for the past year.

            Here are some observations about the Northern Colorado housing market for 2007 relative to 2006 courtesy of IRES (Northern Colorado MLS).

·         The “Average Sold Price” of a residential property in 2007 was up just under one (1) percent compared to 2006 ($311,196 vs. $308,487).

·         The “Average Median Sold Price” of a residential property in 2007 was nearly the same as 2006 ($242,097 vs. $242,000).

·         In 2007, there were 7.6% fewer new residential listings on the market than in 2006.

·         In 2007, there were 4.5% fewer sold residential properties than in 2006.

            The Federal Reserve’s recent attempts to “stave off” the possibility of a recession has been viewed as either a positive move for getting consumers back into borrowing to help “jump-start” the economy or, too little too late.  The wheels of commerce take a long time to get up to speed once they have experienced a diminishing pace. 

As we enter the spring housing market, most noticeably the busiest time of the year, we still need to determine what impact lower home mortgage rates, available inventory of homes for sale and stable home prices will have on the market.  Characteristically, in the Boulder Valley housing market, sixty (60) percent of the residential properties sell and close between March and August.   

            Home mortgage interest rates have remained relatively stable for the past two years.  The traditional thirty-year fixed rate loan has vacillated between 5.5% and 6.75% during that time period.  With the reduction in the Federal Fund’s Rate, home mortgages have settled around 5.75%. 

            Here’s a question for prospective home buyers:  Is now a good time to consider purchasing real estate?  Some thoughts:

·         Mortgage interest rates continue to be available at reasonable levels (6.125%). 

·         Home values have stabilized.

·         Moderate levels of inventory exist within the market.

·         Strong rental market, if you are an investor.

December 2007 MARKET UPDATE

BOULDER CO REAL ESTATE

         One of the national media’s focal points in 2007, as it relates to real estate, was that home values across the country were plummeting.  There is some truth to that for specific geographic areas.  California and Florida, in particular, have suffered double digit depreciation after several years of double digit appreciation.

Thus far this decade, the Boulder Valley real estate market has experienced sensible increases in home values.  This can be attributed to a variety of reasons; i.e., a manageable number of resales and new homes available; affordable home prices as compared to the coasts; and a relatively stable business/employment base.

When the availability of inventory far exceeds demand, the real estate market is upside down.  In such a market, home values decline as sellers (resale and new construction) attempt to attract the few buyers in the marketplace.  Buyers know the market is upside down, so they come from a much stronger position of negotiation.  This upside down market has been plaguing the real estate market across the country for the past two years; fueled by a myriad of bank foreclosures, and HUD properties.

In the past, available financing could make or break the real estate market.  In the 1980’s, when mortgage interest rates were at double digit levels, the real estate market nearly shut-down.   That’s not evident today.  Mortgage interest rates have remained reasonably stable for the past two years, ranging from 5.75% to 6.75% for a fixed rate thirty year loan.   At this time for first time buyers, FHA is at 5.50% with zero points for a fixed rate thirty year loan. As such, a home buyer’s sense of urgency to buy is not based on mortgage interest rates.

Below is an overview of sales activity for the past two years for single family homes in the various Boulder Valley areas, courtesy of IRES – the Northern Colorado Multiple Listing Service.   

                        2006       2007           %                 2006                  2007                 %

     Area           Solds      Solds      Change     Average Price   Average Price   Change

Boulder            990         934         -5.65%        $638,642            $662,853          +3.79%     

Superior           204         168         -17.64%      $426,384            $410,180          -3.80%     

Louisville          272         247         -9.19%        $361,828            $392,463          +8.46%

Lafayette          329         313         -4.86%        $395,061            $405,901          +2.74%

Longmont         1227       1110       -9.53%        $289,902            $279,617          -3.54%

Sub. Plains       612         570         -6.86%        $558,992            $588,480          +5.27%

Sub. Mtns.       353         309         -12.46%      $415,801            $456,865          +9.87%

In the chart, you will note that the Average Price has moved up or down in single digits.  No great fluctuations.  What is affecting our real estate market is the lack of buyers, which impacts the number of sales. 

For 2007, overall single family home sales for the communities/areas noted above were down 8.42% over 2006.  The sales in 2006 were down 7.66% over 2005.  Collectively, over 15% fewer single family homes sold in the Boulder Valley market area in 2007 versus 2005. Inventory levels of listings have also declined, with 7.7% fewer new listings on the market in 2007 versus 2006.   

November 2007 MARKET UPDATE

BOULDER CO REAL ESTATE

            If you were to characterize 2007, as it relates to real estate, you would probably think of words like bank foreclosure, sub-prime loans, and falling home values.  That’s a pretty accurate description if you were looking at it from the perspective of the national real estate market.  Things haven’t been that rosy across the country this year. 

            Nearly every day there have been negative media comments about the poor real estate market. But, there are always two sides to a coin.  The glass can be half-full rather than half-empty.  You can look for the good things in life and people, and real estate, if you just take the time to look.

            The first thing to look at is this.  We live in the Boulder Valley… in Colorado.  It’s not South Dakota or Missouri or Arkansas (no offense intended to those areas).  If there is a heaven, as it was suggested in the movie; Field of Dreams, it may be Colorado and not Iowa.  Colorado has a certain mystique about it.  It’s about the Rocky Mountains, pristine lakes, cowboys, snow, skiing,  and the wide-open range. 

            When it comes to real estate, Colorado and the Boulder Valley are areas that conjure up words like quality of life, blue skies, clean air, friendly people, and a great place to call home.  What doesn’t get mentioned often these days, as it relates to our area, are words like reasonable home appreciation, manageable foreclosure rates, sensible levels of available homes for sale, and practical amounts of new construction. 

            Maybe you are still in disbelief! Maybe the media painted a picture of the real estate market that is so bleak that there’s no end to the tunnel.  Well, let’s look at some facts as they relate to the total Northern Colorado real estate market, compliments of IRES (MLS).  Below are statistics through November for the past three years for single family homes.

                                                                                                                          % Change

                                                   2005                2006                2007             2005 to 2007

New Listings                         26,240               26,922             24,578                   -6.33%

Sold Listings                         15,653               13,441             12,912                   -17.51%

Average Sales Price             $297,000           $308,487         $311,996               +5.05%

Median Sales Price              $237,000           $242,000         $243,500               +2.74%

Some thoughts about the local real estate market:

·        There are not rampant for sale signs wedged in yards throughout neighborhoods.  Actually, there are noticeably fewer homes for sale today than two years ago.

·        Overall home sales are down.  The absorption rate (the time it takes the market to fully turn, which is a supply and demand relationship) was about 7 ½ months in 2005.  Thus far in 2007, the absorption rate is just under 10 months. 

·        Average Sales Price and Median Sales Price have increased slightly over the past two years.  This indicates a fairly stagnant market, but with home values holding their own.

·        Home mortgage interest rates have fluctuated between 5.75% and 6.75% over the course of the past two years… affordable when compared to double digit rates in the past.

·        For homes to sell in a timely manner, they still need to be in good shape, show well, be priced right, and be marketed globally via the Internet.

·        Also, the rental market has improved, making now a great time to invest in real estate.   

October 2007 MARKET UPDATE

BOULDER CO REAL ESTATE

            There’s a concept in real estate called the “domino effect”.  The domino effect is one method of measuring the degree of activity in the real estate market.  If the market is slow, the domino effect isn’t very noticeable.  If the market is active, the domino effect can have a visible impact on the number of sales.

            So, what is the “domino effect”?  Very simply, it’s the number of transactions in a sequence that have to occur for all or any of the dominos not to fall.  As an example, if I need to sell my home before I can buy your home, two things have to happen:  1)  I need to get my home sold and 2) I need to buy your home.  This is the most basic example of the domino effect; just two transactions have to transpire.

            In an active real estate market, the chain of dominos can be much longer.  As an example, I need to sell my condo to buy your starter home so you can buy a larger home, so that seller of your larger home can buy a retirement home in Arizona.  In this chain, four transactions have to happen in order for the domino chain to stay intact.  These four different transactions need to funnel their way through buyer loan approvals, property inspections, appraisals, title/document review, and successful closings.  If one of these transactions fails, the possibility exists that they all will fail.

            In today’s real estate market, the “domino effect” is rarely evident.  Most real estate buyers today are in either of the two following scenarios:  1)  They have sold their house and they are in the market to purchase a replacement home.  As such, depending on their personal situation, their motivation may be high or they may be taking a “wait and see” attitude about the market and have decided to rent.  Either way, they are in a stronger purchasing position since they have nothing to sell.  or 2)  They have a home to sell and want to buy a replacement home, but they don’t as yet have a buyer for their home. 

            If you are a home seller in today’s market, what options do you have available to you to create, even on a minimum level, the domino effect?  Here are some thoughts.

1.      Perceived Value.  Even in a slow real estate market, there are buyers looking to buy.  From the perspective of perceived value, how does your home compare to similarly priced homes not just in your neighborhood, but in the general geographic area of your home.  Buyers today are much more mobile today than they were ten or fifteen years ago.  Today’s buyer may look at homes in our area from Denver to Fort Collins and Evergreen to Estes Park before they make an informed decision.

2.      Price Overcomes All Objections.  In many home purchases, price often becomes the defining factor in whether or not a sale happens.  The old adage about location, location and location being the three motivating factors for a buyer to buy, still holds some truth.  But, ultimately, price will become the dominant element that determines if a successful closing occurs or not.

3.      Buyer Incentives. To compete effectively against new home builders and competitively priced resale homes, resale home owners need to ask themselves the following question:  “What can I offer a prospective home buyer that would cause them to buy my home over the competition?”