Boulder

      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?”

            What defines the market place as it relates to the domino effect?  One word:  demand.  As demand increases, the domino effect expands.  Only time will tell to what degree the domino effect becomes a significant force in our local marketplace.