In 2020, hopes were high for a much brighter 2021. But from the continuing impacts of COVID to the devastating loss of 10 of our cherished community members in a horrific act of senseless violence, 2021 has offered little respite from the trials and tribulations of 2020. And yet our resilient community will continue to endure and overcome. People still need a place to live, and owning one’s home continues to play an integral part in the fulfillment of the American Dream. What follows is an overview of our current market conditions, followed by frank advice to buyers looking to buy a home this year, speaking from experience in the trenches, in hopes that it will help you own your piece of the ever-more-elusive American Dream.
The current landscape
If you are in the market to buy a home, you have likely come to realize that inventory is extremely scarce and the competition is simply brutal at almost all price ranges. On the supply side, our stock of available homes for sale in the Boulder Valley is the lowest it has been since tracking began. At the time of this writing, only 400 single-family homes were for sale in all of Boulder County — and of those only 148 (or 37%) were not already under contract (for a population of about 330,000 people!).
On the other side of the equation, the demand is far surpassing the supply of available homes. There are numerous reasons for this, but some of the most prominent are (1) that rates are still near historic lows (often below the traditional rate of inflation) so more people can afford more home than ever before; (2) a far larger percentage of the population is able to work remotely, with people no longer needing to live near their office, and what better place to live than Boulder?; and (3) people are expecting to spend more time at home, and the Boulder Valley offers larger homes with more land than many more urban areas.
The result of this severe mismatch between supply and demand has resulted in many properties receiving multiple offers. In fact, we are routinely seeing well-priced, desirable homes selling 10-to-20% (or more) above their asking prices. Surprisingly, we are observing this phenomenon not just in the “affordable” sub-$500,000 market, but also for homes priced well into the millions of dollars. As one might imagine, this is presenting an enormous challenge for would-be buyers who are dealing with the serious fatigue of writing strong, often above-asking offers on home after home only to lose out to someone willing to pay even more. This is also creating a challenge for appraisers who are asked to justify homes selling for tens (or hundreds) of thousands of dollars above previous sales.
If you are a buyer in this situation, it might be tempting to hit the pause button and wait for prices to fall before resuming your search. In some parts of the country, that could very well be sound advice. In the Boulder Valley, however, I would caution you against giving into that temptation if you are serious about owning a home here. Why? Because unlike other parts of the country, prices are unlikely to “come back down,” but rather are likely to continue to appreciate into the foreseeable future. Why? Many, many reasons. First, the Boulder Valley continues to enjoy one of the highest qualities of life anywhere in the world and people continue to want to live here. Second, we have far more jobs — in more diverse industries — than other comparably-sized cities, which continue to draw people to our area. Third, Boulder County is edging ever closer to build-out, the point at which no more homes will be able to be built here (absent regulatory changes). The inability to build more homes makes the ones already here all the more valuable. Truthfully, there are many more reasons, but the foregoing are sufficient to likely ensure continued appreciation of our housing stock.
As a prospective buyer, then, what are you to do? Don’t give up. Here are a couple of things you can do. First, you can adjust your price search, starting on lower-priced homes knowing that they will be bid higher. You may not get every feature you want, but you will be a homeowner enjoying appreciation and equity-building. Second, you can look for ways to sweeten your offer. There are many ways to do this, such as waiving certain contract rights, increasing your earnest money or down payment, or finding a way to make an all-cash offer (if you don’t have a rich uncle, there are loan companies, including some innovative startups, that specialize in this). The best way to navigate this is to work with a qualified Realtor who can advise you on your particular situation. Good luck!
Oh, and if you are a homeowner reading this and considering selling, this is definitely the year to do it!
Jay Kalinski is the owner of ReMax of Boulder and ReMax Elevate.
It is evident that the world was woefully unprepared for a pandemic like COVID-19, and local real estate was no exception. COVID-19 wrought fright, confusion, and uncertainty on buyers, sellers, real estate agents, and legislators, as everyone tried to discern how best to navigate the crisis unfolding before them. Many contracts to buy and sell real estate that were then in-process fell through or were renegotiated, and the legal fallout from that may stretch on for years.
And yet, life marches forward, and people continue to need to move and buy/sell real estate, so all of the players have learned to adapt in order to help people move on with life. Some of these adaptations will likely become enduring features of the new normal, while others may fade with time. The following is a brief look at some of the most prominent trends to emerge from this pandemic and whether they are likely to last.
- Marketing.Before COVID-19, a small minority of properties were marketed using 3D technology, relying instead on photos and, perhaps, static floor plans. Now, however, virtually every buyer expects (and sellers demand) an immersive 3D tour of a listed property. Pre-pandemic, buyers would likely visit many homes in-person before deciding on which home to make an offer. Now, buyers are almost certain to “tour” a number of homes virtually and then select the one (or few) that they actually want to see in person. We are even seeing this trend emerge in commercial real estate, as being able to tour a property virtually can save companies time and money in assessing whether a potential commercial space will fit their needs.
This 3D marketing trend will almost certainly continue for the duration of the pandemic, but it is less clear if it will continue after or slowly fade back to “normal” as people begin to feel safer again.
- Remote transactions.Before this pandemic, a large portion of a real estate transaction could be accomplished electronically, with agency agreements, purchase contracts and property-related disclosures all commonly being signed electronically. However, when it came time to close the transaction, the parties still had to physically attend a closing and physically sign documents in front of a notary public. This was the case for two primary reasons. First, Colorado’s previous attempts to pass remote notarization legislation, which would have removed the requirement of physical presence and allowed parties to sign documents via the internet, never made it through the legislature. And second, many lending institutions continue to require physical “wet” signatures and in-person notaries to minimize the potential for fraud. To solve the first problem, Gov. Polis signed an executive order allowing remote notarization. However, as we soon learned, even with remote notarization now allowed, lending institutions (inexcusably, in my view) persisted in requiring in-person physical signatures. Thus, we experienced the phenomenon of “curbside closings,” wherein the parties would drive to the title company and sit in their cars while a notary in a mask and gloves would hand them the document, watch them sign, and then notarize their documents. Having witnessed such “curbside closings,” which are clunky and awkward, I can predict that buyers and sellers will demand that the government and lending institutions allow fully remote closings in the future. Once in place, I believe this trend will be here to stay because it is vastly more convenient for people.
- Shifting consumer preferences.With most employees (those fortunate enough to keep their jobs) being forced to work remotely, many people and companies have discovered that, not only do they like working from home, they can actually be more productive. As a consequence, an emerging trend we are seeing is that buyers are looking for homes with an office (or workspace) more than before. And they also seem to be favoring rural (i.e., private space) over dense and urban. This may also portend a coming shift in the commercial office market, as companies realize that they can get by with much less space than before. This trend is likely to continue as more people become accustomed to being productive from home; however, the strength and reach of this trend will be limited by the fact that some jobs can be done only in person and more space at home costs more money, so not everyone will be able to realize this desire.
These are just a few of the trends emerging from the COVID-19 pandemic, and it is likely that others will develop as things continue to unfold. It will behoove buyers, sellers, and landlords to track these trends carefully to best position themselves for the future.
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.