Winter is coming, and impact on real estate uncertain

Winter is coming and, much like the Game of Thrones series, no one can predict exactly what will happen with the Boulder Valley real estate market, but you can be sure that there are going to be some crazy plot twists — and we can hope that the forces of good will win out in the end.  So, rather than make bold predictions, this article will look back at the first three quarters of 2020 and identify a couple of trends that are likely to affect Boulder Valley real estate into 2021.

Looking Back at 2020

2020 has been a rollercoaster of a year in real estate.  The second quarter of the year was by far the most volatile, with a large dip due to the initial COVID-19 surge and accompanying lockdown, and then a burgeoning resurgence as the situation improved.  By the close of the third quarter, you could look at some of our statistics and think that we have had a pretty typical, even robust, year in real estate.

Trend 1: Growing buyer preference for detached homes

While the foregoing statistics indicate an overall strong market, other statistics point toward the first trend we are observing, the change in buyer sentiment in favor of single-family homes over attached dwellings.

As you can see, the inventory of single-family homes available for sale has dropped significantly (to the lowest amount on record) while the percentage of these homes already under contract has gone up tremendously, indicating a very strong demand for these homes.  On the other hand, the number of available attached units has actually increased over last year and the percent under contract has only risen modestly.  The most compelling explanation for this phenomenon is that, due largely to COVID-19, buyers (and their families) are anticipating working and schooling from home for many months to come and are, therefore, seeking larger homes with at least some separation from their neighbors.  I would anticipate this trend to continue well into 2021.

Trend 2: COVID-19 impacts

It appears that COVID-19 will continue to significantly impact people’s lives — and the economy — for months (possibly years) to come.  We discussed its ability to affect buyer preferences above, but COVID-19 may likely have a more direct effect on the real estate market in several ways.  First, if COVID-19 cases continue trending upward and cause local or state officials to issue another full lockdown (i.e., a stay at home order), it could freeze the market again and have devastating consequences that could take even longer to bounce back from than last time. Second, as COVID-19 continues to be a drag on the economy, the more would-be buyers will lose their jobs and with them the ability to purchase homes.  Thus, the longer COVID-19 persists, the more it is likely to erode buyer demand, even with mortgage rates at historic lows.

What can we do?

Looking at the numbers and likely trends, it appears that there are a couple of things we can do to improve the situation going forward.  First, it is imperative to drive the COVID-19 numbers back down, which means practicing social distancing, wearing masks, etc.  Second, if you own a single-family home and are considering selling, this winter will be an unusually favorable time to sell, given the strong demand and paucity of inventory.  If, on the other hand, you own an attached home, you might consider holding off on selling until conditions are more favorable (if you are able to do so).  Finally, if you are a buyer, you should carefully evaluate your financial situation before deciding whether to move forward.  If you decide to do so, expect stiff competition for single-family homes but also know that you could find some potential deals if you are looking to buy a condo or townhome.

Keep in mind that owning a home Boulder Valley has been one of the best investments you could make over the past 30 years and that trend is likely to continue after COVID-19 is just a terrible memory.  Take care of yourselves and each other and we will make it through this better than before.

Originally published by Jay Kalinski, 2020 chair of the Boulder Area Realtor Association and owner of ReMax of Boulder and ReMax Elevate.

Posted on November 4, 2020 at 3:00 pm
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Boulder Valley Real Estate: The rise of virtual in real estate after COVID-19

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.

The real estate industry has been notoriously slow to modernize its practices, but one surprising benefit of the pandemic is that it appears to have pushed the industry into the 21st century.

  1. 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.

  1. 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.
  2. 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.

Posted on June 16, 2020 at 7:00 pm
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Real estate in the time of COVID-19

At the start of the year, I read an article about the 10 biggest threats to the global economy in 2020, written by a prestigious international organization.  “Global pandemic” did not make the list, which goes to show how generally lousy we humans are at accurately predicting the future.  As such, any predictions that I (or anyone else) could give you about how this pandemic will unfold, in terms of its impact on the local real estate market, would likely fare no better than random chance.  Similarly, with the situation evolving so rapidly, any advice or best practices I could offer today may become obsolete in short order.

So, rather than peddle advice and predictions, let’s pause and take stock.

Nationally:

Back in 2008, the financial crisis was sparked in the real estate sector and led to a crisis that nearly collapsed the banking system.  We see from history that recessions that begin in the housing sector tend to be worse and last longer than recessions ignited by other factors.  Today, the recession we are likely heading into has a very different background — our economy and housing market were far stronger and more resilient, thanks in part to the measures put in place after that recession (tighter lending restrictions, more stringent liquidity requirements for banks, etc.).  In fact, we were enjoying the longest economic expansion since WWII.

According to National Association of Realtors chief economist Dr. Lawrence Yun, “Conditions today are very different than the last boom/bust cycle.  In 2004, we had a huge oversupply of new homes.  In 2019, we still had a huge undersupply of new homes.  In fact, we haven’t been building enough new homes to keep up with demand in over a decade.  During the last downturn, there was the subprime factor and the variable interest rate.  Now there are fewer variable rate mortgages and virtually no sub-prime mortgages.”

Colorado and Boulder County outperform the nation:

Colorado is well-positioned as a top economy nationally.  Real GDP growth in Colorado ranked seventh in the nation year-over-year, and the state’s five-year average ranks fifth, according to economist Rich Wobbekind with CU-Boulder’s Leeds School of Business.  Wobbekind says that Boulder County’s economy has been outgrowing the state economy, and is uniquely able to weather a recession.  Boulder County’s economic vitality is fueled by a highly educated workforce and diverse ecosystem of industries including government research facilities, aerospace, biotechnology, cleantech, and information technology — industries that endure in the long term.

Boulder ranks number one in the nation for home value stability and growth for the fifth consecutive year, according to SmartAsset. As discussed in our recently published real estate report, based on our extensive data and market analysis, we have had a healthy housing market through 2019.  Even through the grim days of the Great Recession, home prices in Boulder County declined only by 5 percent and recovered quickly post-recession. If you held onto your home for at least six years, there is no period when you would have lost money on your investment here.

Summing up:

While past performance is no guarantee of future results, the real estate market in our area has a history of weathering recent recessions better than other places and recovering more quickly after the storm has passed.  Given everything that is going on, I still believe that owning property in Boulder Valley is and will continue to be an excellent investment.

Be well and do what you can to flatten the curve.  Stay home.

Posted on April 1, 2020 at 3:00 pm
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