The end may be here (but don’t panic)

At this time last year, our market was experiencing all-time highs for average home prices and all-time lows for housing inventory.  Many of the market indicators we track were pointing to continued strong demand and price appreciation, especially with the continued influx of people into Boulder and Broomfield counties.  And yet, with home price appreciation outstripping wage gains for the better part of a decade, in the back of everyone’s minds was the question: “How long can this go on?”  We may now be starting to get our answer.

The big picture

In 2018 last summer, the Federal Housing Finance Agency measured the average appreciation nationally at 6.89 percent which slowed this year to 5.05 percent.  Then, FHFA ranked Colorado as having the fourth-highest one-year appreciation in the country, at 10.63 percent.  Boulder County ranked 68th among metropolitan areas in the country with 8.25 percent appreciation.  This year, Colorado has dropped to 28th, with 4.78 percent appreciation, while Boulder fell to number 91 with 6.14 percent appreciation  So, Colorado and Boulder County are cooling compared to the rest of the country, but, as a bright spot, Boulder County’s appreciation since 1991 still leads the entire nation at 417.28 percent.

There are 10 statistics we track to gauge the state of the residential real estate market, and studying the movement of these indicators can give you a good sense of the direction of the market.  For most of this decade, those indicators have generally pointed toward a rising market, marked by tight inventory, brisk appreciation, quick sales, and low months of inventory (the time it would take to sell all existing homes if no new homes entered the market).  At the close of the second quarter of 2019, we are seeing a strong shift for both the single-family homes and attached dwellings (see charts).

As you can see, nearly every indicator we track is pointing to a softening, shifting market, aside from interest rates.  And while Months of Inventory still indicates a seller’s market, the trajectory is moving toward a balanced market (between five and seven months of inventory).

And now for the good news

If you are an aspiring buyer in Boulder County, your timing is excellent: inventory is up, so you have more homes to choose from; prices are flat or falling, so you may be able to get a (relative) bargain; and interest rates have dropped once again, so you can get more house for the money.

If you are a homeowner or thinking of selling, the news is not all bad: you’ve rode an impressive wave of appreciation for the better part of a decade; and even when Boulder’s market stalls, it typically does not lose much value (even in the great recession, home prices only dropped about 5 percent).

Remember, don’t panic.  Boulder is still the best place in the country to invest in real estate.

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

Posted on August 1, 2019 at 1:00 pm
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What it’s like to be a first-time homebuyer in 2018

“Ever since we moved out here, we’ve been keeping an eye on the market,” Gibson says. “We see new houses go on the market, but that for-sale sign goes down and a for-rent sign takes its place, and so we’re competing with people that have the ability to buy multiple homes just to rent them out.”

The Gibsons live just north of Boulder in the town of Longmont, Colo. The Boulder area is one of the toughest markets for first-time buyers — and the epicenter of a growing housing affordability crisis.

“The country as a whole has been generally appreciating since coming out of the recession in 2011, 2012. Boulder has definitely led the way in a lot of ways,” says RE/MAX of Boulder’s Jay Kalinski, who is also the chair-elect of the Boulder Area Realtor Association. “Since 1991, we’ve appreciated more than anywhere else in the country — I think for over 400% appreciation since then. Our average single-family house in the city of Boulder now is around $1.2 million.” (The average price of a new home in the U.S. is $377,200, as of September, according to the Census.)

Yahoo Finance visited Boulder for HuffPost’s Listen to America town hall series installment on housing affordability and to talk to residents and local officials about the issues facing potential buyers in a market that serves as a snapshot of what’s happening across the country.

When you look at the affordability index, we’re getting less and less affordable as a community,” Kalinski says. “We’re becoming more akin to something like an Aspen or a Silicon Valley, where our home prices just are not going to support people who are making an average or even a good income.”

Watch the full HuffPost Listen to America town hall for To Develop Or Preserve: A Conversation About Affordable Housing In Boulder, CO.

Boulder City Council member Jill Adler Grano, who spoke at the Listen To America town hall, has been concerned with buyers getting priced out of the Boulder market for some time. “Unless you have money from another source or a lot of money saved up — a trust fund something like that — it’s very difficult to save for that down payment,” she says.

But there are steps the city is taking to address the issue. “As a city, we’re working on a pretty aggressive affordable housing program, so we have a goal of having 10% of our housing stock be permanently affordable,” she says. “At first that was all just for people making below area median income, but now we’ve realized that middle class is actually above area median income, so we’ve added another 5% goal for those making even above area median income but still being priced out of our city.”

But that path to homeownership has its own drawbacks, Kalinski says. “On the bright side, it means you can have a home in Boulder, you can live here at a reduced rate,” he says. “The downside is you don’t get the benefits of homeownership. Your growth is capped at 3% a year, and when the rest of the city is growing it’s a 10% to 15%, you’re giving up all of that upside.”

If income-sensitive housing isn’t an option, there are other routes cash-strapped buyers can take, including a trend Kalinski calls “driving until you qualify” that’s popular in the Boulder area. “First-time home buyers can either look a little further out or they can talk to their friends and family about trying to get a bigger down payment together to get into a market-rate home,” Kalinski says.

As for the Gibsons, they’re pressing ahead and trying to maintain a positive outlook. “I walk my dog around a lot and look at for-sale signs, look at ads, just trying to get an idea of what the market is,” Gibson says. “And hope that our hopes aren’t dashed when we get into a bidding war with about 10 other couples that are also trying to buy the same home.”

Follow Ned Ehrbar on Twitter.

Originally posted here on Yahoo Finance.

Posted on November 7, 2018 at 11:34 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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Boulder-area market holding steady, proving strong demand eclipses low inventory

It’s beginning to look a lot like this year’s Boulder County real estate sales performance will outperform last year’s robust close. Year-over-year sales data for 2017 shows slight improvements compared to 2016, even with inventory at persistently low levels.

“It just proves that demand is strong and consistent,” says Ken Hotard, senior vice president of public affairs for the Boulder Area Realtor® Association.

Single-family home sales in the Boulder area improved 2.1 percent year-to-date through November 2017 compared to the prior year – 4,224 homes sold vs. 4,138.

And the sale of 1,377 condominiums and townhomes through November represented a 5.5 percent gain compared to the prior year’s 1,305 units sold.

“We saw year-over-year sales improvements, but the pull-back in November compared to October was more than average,” says Hotard.

He’s referring to the 7.9 percent drop in single-family home sales in November compared to October — 359 vs.  390 homes sold. Attached dwellings sold decreased 2.4 percent month-over-month with 123 units sold vs. 126.

Since the weather was excellent for house hunting, the pullback is likely indicative of more than the typical seasonal slowdown.

“Inventory is probably the culprit in the November pullback this year, which resulted in not only fewer sales, but also a softening of prices,” he says. When it comes to low inventory, there is “no end is in sight for the foreseeable future.”

Hotard believes price-softening is confined to higher end homes where inventories are larger and homes take twice as many days on the market before selling. “Lower priced homes are not affected,” he adds.

While buyer demand is strong, low inventory can’t supply that demand. November’s inventory is telling: Single-family homes for sale in the Boulder-area dropped 22.8 percent in November compared to October with 777 homes for sale vs. 1,006. Condos and townhomes felt the pinch slightly harder with a 24.7 percent drop for the month of November – 146 units vs. 194.

Mortgage interest deductions may diminish in importance as a result of the doubling of the standard deduction as part of recent tax reform legislation. The National Association of Realtors predicts only a small percent of homeowners will take advantage of the mortgage interest deduction in years to come because of that change.

 

*Photo courtesy of Edwin Andrade on Unsplash.com

Originally posted here by Tom Kalinski Founder RE/MAX of Boulder on Friday, January 5th, 2018 at 10:15am.

Posted on January 16, 2018 at 5:38 pm
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