2020 was a chaotic rollercoaster for the Boulder Valley real estate market. Luckily, home values weathered the storm better than anyone could have hoped, and we are now primed for potentially the most real estate sales volume we have ever seen.
Buyer Demand. Our company has tracked buyer demand on a daily basis for many years, and it is higher than it has ever been for this time of year. This demand is especially strong for single-family homes. It appears that the trend of buyers desiring larger living spaces and more land will continue into 2021, as the pandemic lingers on and the work from home movement has finally crossed the chasm into mainstream acceptance. This latter work from home development is particularly salient for Boulder Valley, where our 300-plus days of sunshine per year and world-class quality of life are attracting those who can now work from anywhere. At each of our weekly sales meetings this year (attended by more than 100 of the best agents anywhere), we hear story after story of multiple offers on listings, prices getting bid up by tens of thousands of dollars, and buyers who are getting frustrated with all of the stiff competition. It seems that the pool of eager buyers is very deep this year.
Interest Rates. Adding fuel to the buyer demand fire is the fact that interest rates are forecast to stay at once-in-a-lifetime low rates for the foreseeable future. Our most veteran agents tell stories of helping people buy homes in the 1980s with mortgage rates above 18% — that is like financing a home purchase with a credit card. Now, buyers can expect to obtain loan rates at-or-below 3%, which is as close to free money (when average inflation is considered) as we are likely to ever see in America.
So, what could possibly derail this buyer juggernaut? Well, here are a couple of the most likely possibilities.
Lack of Inventory. In 2020, despite high buyer demand, many would-be sellers opted to stay put in their current homes. It is part of the human condition to become more conservative in the face of uncertainty, and COVID-19 presented humanity with one of the biggest uncertainties of the past 100 years. Thus, it is not surprising that we finished 2020 with only 313 single-family homes for sale in all of Boulder County, down 37% compared to the end of 2019 (498 homes). For added context, consider that at the end of 2002, we had more than 1,800 homes on the market.
It remains an open question as to whether sellers will get the message that 2021 will be an excellent time to sell a home — and an even bigger question regarding whether sellers will act on this message. If the answer to both questions is “yes,” then we really could have the highest dollar volume of home sales ever in Boulder Valley this year. This is a big “if,” however, because of…
COVID-19. At the time of this writing, more than 25 million Americans have contracted COVID-19 and more than 400,000 of them have died. This has — and will — greatly affect home sales in ways predictable and unforeseeable. Thankfully, there are multiple effective vaccines currently being distributed and administered. There remain, however, several unknowns on this front: Will too many people refuse to get vaccinated and thus thwart herd immunity? How quickly will enough of the population be vaccinated to provide such herd immunity and restore more certainty for people’s decisions? Will the current vaccines be efficacious against new (and perhaps more virulent) strains of the virus that are emerging?
A lot of things vis-à-vis COVID-19 will have to break in our favor this year to give enough sellers the confidence to move ahead with their home sale decisions, which is the only way we will even come close to meeting the apparently insatiable buyer demand. If we are lucky, this could be a year for the record books (in a good way).
Regardless of how things go with our fight against COVID-19, 2021 promises to be an excellent time to sell a home if you’re considering doing so… and a very challenging time to be a buyer.
May we all be lucky in 2021.
Jay Kalinski is the owner of ReMax of Boulder and ReMax Elevate.
The year 2019 was another very good year for residential real estate in the Boulder Valley, but unlike the previous five-plus years, it was marked by slowing appreciation, slightly rising inventory (finally), and longer average time on the market.
In Boulder County, median and average sales prices of single-family homes increased by a very modest 1 percent, while attached dwelling (condos and townhomes) appreciation was essentially flat. In the city of Boulder, the average single-family home sales price increased a modest 2.6 percent to an immodest $1,246,250, while attached dwellings increased 2.4 percent to $538,360.
Single-family listing inventory in Boulder County reached a peak of 1,058 homes and attached dwellings topped out at 370 units on the market, both reaching their peak in June, and both above the peak inventory of the last several years. To put this in perspective, however, the inventory of single-family homes in 2006 (just before the Great Recession) reached a peak of 2,763, more than two-and-one-half times the peak of 2019. That is, we still have far less inventory available than we used to.
The average number of days homes stayed on the market before closing reached 61 days, an increase over last year by 5.2 percent for single-family homes and 15.1 percent for attached units. The average months of inventory (the time it would take for all existing homes to sell if no additional homes came on the market) rose to 1.8 months, an increase of 6 percent for single-family homes and 28.6 percent for attached units. By traditional standards, this would still qualify as a seller’s market (when months’ of inventory is in the 5-6 percent range, it is considered a balanced market, and we are still a long way from that). Charts on top show a snapshot of the Boulder County 10 vital statistics we track to gauge the market.
So, what is going on? Why do the months’ of inventory indicate that we’re in a strong seller’s market when many of the other metrics are pointing toward a more balanced market? And what can this tell us about 2020?
Explaining the months of inventory question
There appear to be a couple of key factors keeping our months of inventory much lower than historically. First, the nation as a whole — and Boulder County especially — have been building far fewer new homes that we were building pre-Great Recession. This graph from census.gov illustrates the situation well:
In Boulder County, we are getting close to full buildout under our current zoning and land use regulations, meaning that unless they are amended, we will run out of available lots on which to build new housing. (In practicality, this means that neighboring counties will become our bedroom communities, as Boulder still has the lion’s share of jobs in our area and people will be forced to commute farther and farther.)
Thus, with people continuing to move into the area at a strong pace while building is lagging behind, demand will structurally continue to outpace supply.
Second, people are staying in their homes longer than they used to. In 2010, homeowners nationwide stayed in their homes an average of eight years before selling. By 2019, that figure had increased to 13 years. With people selling less frequently, inventory goes down and, with strong demand like we have in Boulder, months of inventory stays low, too.
In Boulder, this issue is exacerbated by the fact that a lot of our homeowners are older (the National Association of Realtors reports that homeowners 73 years and older stay in their homes for an average of 17 years) and many of these Boulderites want to continue to age in place. Moreover, the Boulder Valley does not have a lot of options for the elderly looking to downsize and stay in their current community.
Accordingly, housing turnover is lower than it used to be, and this trend is likely to be even stronger in Boulder, further suppressing inventory.
For 2020, it appears that our available housing inventory will continue to be reined in by the structural impediments of inability to build sufficient new housing and current homeowners staying in place. That will put upward pressure on prices. Continued migration into our area fueled by our (currently) robust economy will keep demand high and put additional upward pressure on prices. Additionally, our return to very low interest rates will allow more potential buyers to qualify for our expensive property than would have otherwise been the case.
On the other side of the equation, home prices have risen so high (especially in the city of Boulder) that, even with low interest rates, the pool of buyers able to buy in our area will be relatively small. Moreover, the political uncertainty of election years can cause people to take fewer risks (such as buying a home). The fact that this promises to be an especially colorful election cycle will likely be a drag on demand as we get closer to November.
Based on the foregoing, if I had to make a prediction, I would suspect that the first part of the year will have very strong activity, with prices rising and multiple offer situations being not uncommon. Then, I suspect that the market may cool as we get closer to the election, which may be an especially good time to buy for those with intestinal fortitude.
Originally posted by Jay Kalinski
If you are like a lot of people, your eyes may start to glaze over at the mere mention of “Opportunity Zones,” but stick with me as there is a fascinating story of apparent desperation, questionable motives, and possibly deceitful tactics in order to stem any growth in Boulder.
What are Opportunity Zones anyway?
Opportunity Zones were created by the 2017 federal tax reform package, the Tax Cuts and Jobs Act, as a way to incentivize investors to improve and revitalize communities across the country that have languished while the rest of the US enjoyed a terrific boom. Specifically, an Opportunity Zone is a census tract that Congress designated as eligible (read struggling) to receive private capital investments through “Opportunity Funds,” which allow investors to receive a deferral, reduction, or possibly even elimination of federal capital gains taxes, depending on how long they keep their money invested in a qualifying property and how much they improve it.
This is where the story gets interesting. Gov. Hickenlooper, seemingly with support from Boulder at the time, designated a Boulder census tract that runs from 28th to 55th Streets and from Iris to Arapahoe Avenue as an Opportunity Zone. While virtually every other municipality welcomed these designations as an opportunity to revitalize their struggling communities, the Boulder City Council placed a moratorium on its Opportunity Zone, blocking investment. And did I mention that this is a limited time offer?
If you are new to the area or have not been following local politics closely (and who could blame you?), it might seem surprising that Boulder would block such investments. However, as discussed in a previous column, a majority of the Boulder City Council appears to be beholden to Boulder’s CAVE people (Citizens Against Virtually Everything) who do not want growth of any kind. It seems they want things to be like it was “back then,” an apparently bygone era with fewer people, fewer businesses, etc. When viewed through this lens, their actions, though by definition counter productive, make sense.
And now for the master stroke of the CAVE people: make it look to the public like they are lifting the moratorium, when they are actually downzoning large parts of the city. Under the guise of lifting the Opportunity Zone moratorium and updating “use table standards,” the city will effectively downzone thousands of properties (not just in the Opportunity Zone), limiting office uses to 25 percent of floor area in the BR, BMS, and TB business zones, and limiting small office uses in residential zones. This will make any existing building in an affected business zone with more than 25 percent office space a “non-conforming use,” meaning that changes or expansions to this use would require city approval through a non-conforming use review. And what do you think the chances of getting approved would be?
This proposal by the city council runs counter to its stated positions on the environment, not to mention its own Boulder Valley Comprehensive Plan policies supporting creation of 15-minute walkable neighborhoods and other policies favoring mixed-use planning, smart growth, and pedestrian uses.
If you are so inclined, you can share your opinion with the city council at firstname.lastname@example.org, or if you are really motivated, you can attend the council’s public hearing at 6 p.m. on Sept. 3 at 1777 Broadway.
Originally posted by Jay Kalinski is broker/owner of Re/Max of Boulder.
A well-functioning market consists of two sides: suppliers who offer a particular good for sale and consumers who purchase those goods. In the Boulder Valley residential real estate market since 2012, there have been more consumers looking to buy homes than there were sellers offering homes for sale, which has led to a long appreciation period for homes. Now, however, it appears that the number of buyers is dropping as is their willingness to pay ever-increasing prices.
Spotting the trend
First, how do we know that there are fewer buyers in the market? The most direct measure of buyer activity that my company tracks (courtesy of Broker Associate Mike Malec) is the number of showings per available listing. From examining the data, it is fairly easy to see that this year’s showing activity is markedly below the recent boom years, but is still above the levels present during the recession.
Second, to further substantiate this decline in buyer activity, we can look at more indirect measures, such as average sales prices, available inventory of homes on the market, and average time a home will be on the market before sale. Each of these markers indicates a decline in buyer activity. Through May of this year, the average price of a single-family home in Boulder has fallen 0.6 percent, while the average attached unit has fallen 4 percent, compared to the same timeframe last year. This indicates that there are fewer buyers competing for available homes to the point where home appreciation rates have stalled. At the same time, the amount of homes available on the market has increased nearly 20 percent for single-family homes and almost 50 percent for attached ones, while the average time on the market for single family homes has gone up 5 percent and nearly 20 percent for attached ones. These statistics indicate that those buyers in the market are becoming choosier and are able to take their time making decisions.
Based on the above discussion, it seems that there are fewer buyers in the market and that those who are in the market are more cautious, but why?
It does not appear that our local economic conditions explain the drop in buyer activity. According to the State Demographer’s office, people are continuing to move into Boulder and Broomfield counties, albeit at a slower rate than previous years (though the city of Boulder has seen its population declining in the last two years). And local unemployment levels continue to be historically low.
Economic conditions at the national level are softening, to the point where the Fed is discussing interest rate cuts, so these conditions may play some role. But, interest rates are actually about half a percent lower than they were at this time last year, which would appear to weaken that argument.
Could it be the weather?
Another possible explanation I’ve heard is that our unusually cold and snow winter could have suppressed buyer demand as people were less willing to trudge through the snow to go see houses. While this is plausible, all else being equal, we would have expected to see that pent up demand being released as the weather improves, but we just have not seen that play out in the data yet.
Whatever the cause of the decline in buyer activity may be, local real estate legend Larry Kendall of the Group Inc. Real Estate in Fort Collins always says that buyers are the smartest people in the market, so they may be acting as the proverbial canary in a coal mine, meaning that they could be a leading indicator that our market is shifting from a seller’s market to either a balanced or buyer’s market. If you are a seller, be wary of pricing above the market in these shifting conditions.
Originally posted by Jay Kalinski is broker/owner of Re/Max of Boulder.
LOUISVILLE — Jay Kalinski, owner of Re/Max of Boulder, is opening a new real estate agency in Louisville under the Re/Max Elevate banner.
The Re/Max Elevate office, set to celebrate a grand opening May 1, is at 724 Main St.
Kalinski said agents had been clamoring for an office in eastern Boulder County because many live in that area and many have clients looking for homes in places such as Louisville, Lafayette, Firestone and Frederick.
“Over time, more and more of our agents have been working outside of the city of Boulder and outside of Boulder County,” Kalinski said,
And while the company considered opening the office in other nearby towns, “Louisville seemed to be a consensus choice,” he said.
The Re/Max Elevate office, technically a separate franchise from Re/Max of Boulder Inc., will launch with 15 agents. A handful are transferring from the Boulder offices, but most are newly recruited agents.
Kalinski said the office may be able to support as many 20 or 25 agents. For comparison, Re/Max of Boulder has about 115 agents.
Kalinski said the Louisville office will likely not be the last new location for his team.
“We’re in growth mode and looking to expand,” he said.
The decision on where to target for the company’s next office will — like the Louisville decision — be driven by input from agents and clients, he said.
Originally posted by Lucas High
Home sales for Boulder-area real estate got off to a slow start in 2019 despite fairly mild January weather, resulting in decreased sales compared with a year ago.
Single-family homes posted 184 sales, a decrease of 20.3 percent compared with 231 homes sold in the same month last year. Sales of condominiums and townhomes dropped 23.0 percent for the same period with 71 units sold vs. 92.
“The market saw a pretty significant slowdown that started mid-November and continued through January,” says Ken Hotard, senior vice president of public affairs for the Boulder Area Realtor® Association. “The fundamentals are still solid—inventory improved and interest rates aren’t going up quickly,” he says, noting that interest rates are historically low and affordable at around five percent or below for a 30-year fixed mortgage.
Month-over-month single-family home sales dropped 39 percent in January with 184 homes sold compared to 302 in December. Townhome/condo sales were a bit stronger, nearly matching December sales with a .013 percent decrease – 71 units sold vs. 72.
Inventory jumped 15.7 percent for single-family homes with 722 homes for sale in January compared with 624 in December. Attached dwellings showed even greater improvement, rising 18.1 percent—241 units vs. 204.
Hotard explains that for now the statistics represent a series of events. “Once we get enough data, we’ll start to see trends,” he says.
“There seems to be uncertainty in the market and buyers are thinking I can stay where I am and look for a better opportunity in the future,” says Hotard. “It’s a story that’s repeating itself in a number of markets across the country.”
Yet Boulder-area prices continue to rise or hold steady, job growth and the employment rate remain strong, and Boulder County is still a desirable place to live.
“Our strong fundamentals should attract buyers as we move through February.”
Originally posted by Tom Kalinski Founder RE/MAX of Boulder on Tuesday, March 14th, 2019.