Kalinski: Boulder Valley real estate – Rear and forward view

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.

So what?

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

Posted on February 5, 2020 at 3:00 pm
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Kalinski: How buying and selling a home will change in the Roaring 20s

As we enter a new decade, the massive wave of technological advancements fueled by entrepreneurial tech companies has reshaped consumers’ expectations.  Companies such as  Uber and Amazon have both dramatically shortened the time that people expect to wait for gratification and raised consumers’ expectations with regard to the ease and smoothness of the experience.  That is, consumers now expect to press a button and have whatever it is that they want delivered to them in a matter of a couple days (Amazon shipments), hours, or even minutes (Uber rides); moreover, they want to be able to track their shipment’s progress through a simple, pleasing interface on their phones.

While consumers now expect smooth, pleasant and near instant gratification in most aspects of their lives, the real estate home sale process still typically takes 30 to 45 days and — due to its complexity, legal ramifications, and the fact that it is an ongoing negotiation between multiple parties — it is usually neither frictionless nor “fun.”  This growing friction between consumers’ expectations and the longer duration and complexity of completing a real estate transaction has made the industry ripe for innovation.  What follows are the likely developments that will make real estate transactions faster and easier over the coming decade.

1.  The home search-to-closing customer journey.  The days of agents-as-gatekeepers of real estate listings are gone.  These days, most buyers start their search online and look at up to hundreds of homes to educate themselves.  When they get serious, though, about 90 percent of buyers (and sellers) choose to use an agent to help them with the home buying/selling process. 

Why is that?  It’s because Realtors realized that they needed to change their value proposition to buyers and sellers in order to stay relevant and, well, valuable.  One of the challenges for buyers and sellers is that, with the exponential growth of information available on the internet, the amount of “noise” has grown exponentially as well, but the valuable information (the “signal”) has become harder to find.  Today’s Realtors have things that are in short supply online: hyperlocal and market knowledge, a network of trusted vendors and professionals, expert negotiation skills, a refined process to make the home buying/selling experience less painful, etc.  These skilled Realtors who have adapted to consumers’ shifting expectations provide their clients with better technology, a smoother process, and expert advice.  Those agents who fail to adapt will eventually exit the business.

Other innovators, such as so-called iBuyers, will make you an offer, often within a day, to buy your home for cash quickly.  This convenience, however, comes at a cost, as many iBuyers will likely cost you two-to-five times more out-of-your-pocket than using a Realtor would.

2.  The loan experience.  Typically, the longest (and perhaps most annoying) part of a real estate transaction is the loan process.  Many lenders can take 30 days or more to complete their due diligence, including their assessment of your loan-worthiness and an appraisal of the home, before approving a home purchase loan.  Anyone who has been through this process knows how frustrating and slow it can be.

Fortunately, at least for many people, this process may get a lot shorter and easier.  Lenders are using artificial intelligence (AI) to conduct automated appraisals on properties and help with assessing buyer’s applications.  For “in the box” situations, with well-qualified “W2 employees” buying homes that the AI algorithms can value with a high degree of confidence, the underwriting process can be dramatically shortened without the need for a physical appraisal.  This is already a reality — last fall, we represented buyer clients whose lender did not require an appraisal on the home they were buying and gave them very fast loan approval.

3.  The title and closing process.  Almost everything can seemingly be accomplished these days online from the comfort of your home.  However, at least in Colorado, you still need to physically go to the title company and hand-sign a stack of documents in front of its notary public (how barbaric, right?).  Well, this isn’t actually the title company’s fault, as many lenders — and state law — still require physical notarization of certain documents.

The good news is that this may change in 2020, if the Colorado legislature passes a bill similar to Senate Bill 18-109, which would allow optional remote notarization of documents.  If such a bill were to become law, then notarizations could be done using audio-video recording of the document signing (kind of like signing over Skype or FaceTime, but with more layers of security).  Thus, you would be able to close on the purchase/sale of your home from anywhere in the world, so long as you have a good internet connection.

Conclusion.  The players in the real estate industry have (finally) recognized that consumers’ expectations and demands have shifted and are innovating quickly to make the home buying and selling process faster, easier, and more enjoyable (or, at least, less painful).  Within the next few years, many people will be able to buy/sell a home in half the time or less than it takes on average today, and with a lot less disruption to their lives.

Originally posted by Jay Kalinski is broker/owner of Re/Max of Boulder.

Posted on January 15, 2020 at 5:00 pm
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Where have all the buyers gone?

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? 

Economic Conditions?

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.

The takeaway

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.

Posted on July 2, 2019 at 3:00 pm
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Boulder-Area Home Sales Warm As Spring Approaches

February’s Boulder-area home sales shook off January’s real estate chill with a rise in sales all around. But even with the significant jump for the month, sales for the year still lag compared with last year, which could be good news for those ready to buy a home in this competitive market.

Single-family home sales for Boulder rose 26.1 percent in February – 232 homes sold compared with 184 last month. In condominium/townhomes, 78 units sold in February, a 9.8 percent improvement compared with January’s 71 units sold.

“It was good to see the February rebound in sales for both single-family and attached dwellings. But year-over-year, sales are behind in both. We’re definitely getting a slower start to the year,” says Ken Hotard, senior vice president of public affairs for the Boulder Area Realtor® Association.

Year-over-year, single-family home sales dropped 14.8 percent through February 2019 with 426 Boulder-area homes sold vs. 500 the previous year. Condo/townhomes slid 20.8 percent over the same period with 152 units sold vs. 192.

Inventory is virtually unchanged going up .013 percent for single-family homes with 723 homes for sales in February compared to 722 in January. Condos and townhomes saw a 5.4 percent increase in inventory over the same period with 254 units compared to 241.

“The cause of the slowdown is unclear,” says Hotard. “Interest rates aren’t rising. It seems that demand, which has been strong for several years, has eased a bit.”

This can be good news for buyers who are looking for an opening to jump in the Boulder County market. With inventory holding steady and demand easing, the buying environment may be somewhat less competitive than it has been for the past several years.

“What we need is more middle-income housing in Boulder County, that is, housing priced at $600,000 and below,” Hotard notes. “Areas like Erie, Longmont, and Lyons offer homes that are in that sweet spot of affordability, but we could use new housing in that price range.”

 

Originally posted by Tom Kalinski Founder RE/MAX of Boulder on Wednesday, March 27th, 2019.

 

Posted on April 3, 2019 at 3:00 pm
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January Home Sales Chill, Fundamentals Solid

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.

Posted on March 14, 2019 at 7:00 pm
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3 trends that could ruin your home sale plans this summer

Sellers in the Front Range housing market enjoyed a blistering spring season.  Everything seemed to be breaking in favor of sellers — brisk appreciation, multiple offers, favorable terms, and generally quick sales.  However, several trends are emerging that could derail (or at least diminish) a seller’s summer home sale plans.  Here are three of the biggest trends likely to affect our summer market:

1. Rising Interest Rates. For the past several years, economists have been predicting that interest rates will rise from their historic lows (in the 3.5 percent range for a 30-year conventional fixed mortgage).  It turns out that  the eggheads finally got it right. Compared to this time two years ago, interest rates are at least a percent higher — and with the Fed raising their Funds Rate again at their last meeting (and with more raises on the horizon), it seems that even higher rates are coming. It seems now is an appropriate time to refer back to my article discussing the 1 percent Equals 10 Percent Rule, which is a rule of thumb that for each 1 percent increase in mortgage rates, your buying power decreases about 10 percent.  When you consider this with the fact that average home prices in Boulder County have risen about 21 percent in the past two years, it means that the same buyers from two years ago can now afford 31 percent less than they could have back then. 

If you’re thinking, “but I’m a seller, it doesn’t affect me.”  Think of it in these terms: that pool of buyers who would have bought your 2,000 square-foot, three-bedroom house two years ago? They can now only afford a 1,380 square-foot, two-bedroom condo.  That is, the pool of buyers for your home is significantly smaller today.

2. The market hates uncertainty.  To say this has been the least conventional presidency of the modern era is an understatement.  Setting aside the human side of the geopolitical uncertainty caused by the Trump administration (alienating the G7, backing out of the UN Human Rights Council, separating families at the border, etc.), the president has decided to wage trade wars on multiple fronts. And while these acts might be appeasing his base, they are starting to have a negative effect on the economy.  As of mid-June, the stock market has given back all of the gains it made in 2018, due in large part to the trade wars started with China and other countries.  Speaking of China, its investments in the United States have dropped 92 percent this year, and less foreign cash means less money to invest in the housing market.

The effect of this is straightforward — when people feel uncertain and less wealthy (i.e., watching their  world turn topsy-turvy and stock portfolios drop), they are less willing to take risks and make changes. And while home ownership might be the best investment you’ll make, it still represents a risk, especially if you’re a first time home buyer. Thus, the uncertainties in the economy will produce fewer buyers than a steadily rising market.

3. What the frac? The fracking industry in Colorado has flourished since a Colorado Supreme Court ruling in 2016 held that state laws trumped local bans and regulations limiting fracking.  In Weld County alone, there are approximately 23,000 fracking wells, and fights are currently raging over applications to drill near highly populated parts of Boulder and Broomfield counties.  Wells are being placed within 1,000 feet of schools, and this encroaching boom has generated growing health and safety related concerns, from a Colorado School of Public Health study reporting that living near fracking wells may increase the risk of cancer, to a home in Firestone that literally exploded from a leaky underground pipeline.

As the concerns grow, so will buyers’ reservations about buying homes near fracking, which could slow demand in these areas.  Longmont took the extraordinary step of paying two oil and gas companies $3 million to leave town and prevent future drilling.  To be sure, there are competing property rights at issue, but if compromises are not reached that make people feel safe, then homeowners could see their home values fall.

In sum, our market has been red hot this spring, but there are issues on the horizon that could dampen summer sales prospects.  Some of these are likely beyond our direct control, but I encourage you to make your voice heard where you feel you can make a difference.  Your home’s equity (and your conscience) will thank you.

 

Jay Kalinski is broker/owner of Re/Max of Boulder.

Originally posted by BizWest on Wednesday, June 1st, 2018. Original found here.

Posted on June 28, 2018 at 5:15 pm
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Spring Home Sales Continue to Surge

Spring selling season in Boulder County continues to soar with April’s residential sales keeping pace with last month’s rocketing sales as well as outperforming April last year.

“Demand remains strong and inventory tight, keeping upward pressure on pricing,” says Ken Hotard, senior vice president of public affairs for Boulder Area Realtor® Association.

The 345 single-family homes that sold in April 2018 topped March’s rising sales by one unit or .3 percent; and the 126 condominiums and townhomes sold in April represented an additional 4 sold or 3.3 percent over last month.

Year-over-year Boulder-area single-family home sales climbed 5.4 percent through April 2018 – 1,198 homes sold vs. 1,137 – and condo/townhomes sales increased 5.9 percent with 447 units sold compared to 422.

Inventory also grew, which has proven to be a key factor in maintaining sales.

“While inventory showed solid increases in both single-family and condo/townhomes, we could use three-to-four times that amount to meet demand,” says Hotard.

Countywide single-family inventory increased 18.2 percent in April over March with 770 homes for sale vs. 651. Condo/townhome inventory improved 16.4 percent over the same period – 163 units vs. 140.

Hotard says evidence shows prices may have not yet reached a peak. “This is the first time I recall median prices over $1 million. It’s clear that with the city of Boulder built out on single-family housing stock, it’s putting pressure on prices.”

He notes that many dynamics shape the market. “Clearly affordability is a big issue – it influences who can live here, whether purchasing or renting. As more people can’t afford to live here, it’s a big loss because we are losing high quality people and the marketplace is becoming more exclusionary.”

Noting that buyers are coming from many places including California, Chicago, Texas and Nebraska, Hotard says people look to Colorado because of the entrepreneurial spirit and low unemployment.

Hotard summarizes, “As Boulder is to Colorado, Colorado is to the rest of the country.”

 

Originally posted here by Tom Kalinski Founder RE/MAX of Boulder on Tuesday, May 29th, 2018 at 11:56am.

Posted on May 30, 2018 at 9:48 pm
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Boulder County Home Sales Spring Ahead

March home sales signaled a robust and active home buying season ahead for Boulder County.

“The Boulder-area market rocketed forward in March with strong sales that improved significantly,” says Ken Hotard, senior vice president of public affairs for the Boulder Area Realtor® Association.

Following modest positive movement in February, housing surged forward in March, according to March sales statistics. Boulder Valley buyers showed up strong, undeterred by a market pattern of low inventory and rising prices. This pattern has characterized the countywide housing market for several years running.

Single-family home sales in the Boulder-area jumped 43.3 percent in March compared to February 2018 – 344 units sold vs. 240. Condominium and townhome sales also rose, marking 28.4 percent growth month-over-month with 122 units sold vs. 95.

Year-to-date, single-family home sales increased 8.7 percent through March 2018, with 829 Boulder-area homes sold vs. 763. Sales of condominiums and townhomes increased 1.6 percent year-to-date with 312 units sold compared to 307 for the same period in 2017.

Inventory also improved, though modestly. The number of single-family homes for sale grew by 10 percent – 651 units compared to 592 – while townhome and condo inventory grew 5.3 percent – 140 units vs. 133 – month-over-month.

“The inventory level is about a two-month supply of single-family homes and a one-month supply of condominiums and townhomes. A healthy market is thought of as a five- to six-month inventory supply,” says Hotard.

Nationally 40 percent of housing sales occur during March, April, May and June.

Hotard says the consistent buying activity we see in our housing market speaks volumes for the desirability of the area and health of the market.

“It’s a strong, positive market for sellers. We need a significant amount of new product in the market to meet the demand, particularly the demand for housing suited for young people and a broad demographic of ages and incomes.”

Originally posted here by Tom Kalinski Founder RE/MAX of Boulder on Tuesday, April 24th, 2018 at 11:31am.
Posted on April 26, 2018 at 6:52 pm
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