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
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.
Boulder County home sales declined for December, but overall 2018 sales held somewhat steady with a slight decrease.
“December was not a fabulous month for home sales, particularly for attached dwellings,” says Ken Hotard, senior vice president of public affairs for the Boulder Area Realtor® Association.
Sales of condominiums and townhomes in the Boulder-area dropped 42.9 percent in December compared to November – 72 units sold vs. 126. For the year, attached dwelling sales improved .02 percent with 1,525 units sold vs. 1,522.
Single-family home sales dropped 2.6 percent with 302 sales vs. 310 for December compared to November. Year-over-year, single-family home sales dropped 2.3 percent – 4,533 sales vs. 4,640.
Hotard points out the total decline for all Boulder County dwellings sold for the year – attached and single-family – was only 1.8 percent. That compares to a 3.1 percent national decline reported by the National Association of Realtors.
“Our Boulder County market continues to perform well. Job growth is good, demand is strong, and the area is desirable,” says Hotard, adding that inventory is an ongoing challenge.
Inventory of single-family homes dropped 24 percent in December compared to November—declining to 624 units from 821, while multi-family unit inventory decreased 22.4 percent—204 units versus 63—over the same period.
So where do we go from here?
Hotard says many reports indicate the U.S. is entering a home sales slump, but he expects the Boulder County markets to continue to buck the national trend.
“It’s possible well see a year-over-year decline similar to this year, but I don’t expect it to be more significant, if our markets decline at all,” he says.
In Hotard’s assessment, strong fundamentals in Boulder County are not waning: Employers continue to bring new jobs and prices are holding or improving.
But inventory continues to take a hit. “We need to see inventory numbers improve as we head into March, April, May and June,” Hotard adds.
“It’s going to be ‘steady as she goes’ in 2019, as long as we don’t have any major national or international events.”
Originally posted by Tom Kalinski Founder RE/MAX of Boulder on Monday, February 11th, 2019 at 1:34pm.
A tale of two markets emerged in November, as Boulder County’s single-family home sales skidded to a stop, while townhomes and condos took a significant leap forward.
Single-family home sales in the Boulder-area markets dropped 14.4 percent in November compared to October —310 vs. 362 homes—while condominium and townhome sales rose 14.5 percent—126 units vs. 110.
Yet when data for 2018’s first 11 months is considered, the two markets tracked closely together, and both appear to be slowing, according to Ken Hotard, senior vice president of public affairs for the Boulder Area Realtor® Association.
“This is the first month single-family home sales fell below last year, and condos and townhomes are only slightly ahead,” Hotard explains.
Year-to-date through November, sales of single-family homes decreased 1.4 percent compared to the prior year with 4,205 homes sold vs. 4,266. Attached home sales over the same period improved 3.3 percent – 1,445 vs. 1,399 units sold.
Inventory decreased in both housing categories, though more significantly for single-family homes, which dropped 13.1 percent in November compared to October with 821 vs. 945 Boulder County homes for sale. Condo/townhome inventory fell 6.1 percent in November compared to the previous month with 263 units for sale vs. 280.
“My guess is the growth of the townhome/condo market is due to a larger inventory and more affordable pricing,” says Hotard. “Interest rates are making people jumpy, but the reality is that mortgage rates are still historically low. The more complete view is the inventory and pricing dynamics of the Boulder-area markets.”
He notes that single-family home sales could recover in December, but it’s not likely.
“We have the ongoing headwinds of low inventory and rising prices. When we look back, we’ll see 2018 as market slowdown for housing in our market areas,” Hotard predicts.
Despite the slow-down in housing, Colorado’s economy continues to show strength, wage growth is increasing, and gross domestic product is up, according to recent news reports.
“What the Boulder-area needs is more housing that is desirable and more affordable for people,” adds Hotard.
If there is one constant in Boulder Valley, it’s a strong real estate market. October’s sales statistics show 2018 is on track to finish strong. This is despite that month-to-month, those statistics sometimes show significant fluctuation.
Take September and October 2018. When compared to October, September’s data is like Colorado weather: If you don’t like the statistics one month, wait a month, they are likely to change.
September’s single-family sales dropped 20 percent, then recovered to gain 8.7 percent in October with 362 homes sold vs. September’s 333. Despite the short-term fluctuation, year-to-date sales are holding steady through October, reaching just one unit short of the same volume as last year – 3,880 vs. 3,881.
“It’s hard to characterize our market here in Boulder County. Given all of the factors, it can be difficult to decipher trends as opposed to an event,” says Ken Hotard, senior vice president of public affairs for the Boulder Area Realtor® Association.
“While the swings add volatility to the market, the market exhibits good health with strong demand, and prices and sales holding steady,” he says, adding that a strong economy and job growth continue to be drivers.
Condo/townhomes in Boulder County saw a month-over-month sales decrease of 5.2 percent, with 110 units sold in October compared to 116 in September. Year-to-date attached dwelling sales rose 4 percent through October – 1,317 vs. 1,266.
October’s inventory for attached dwellings also increased 7.3 percent over September with 280 units available in October compared to 261 the prior month. Single-family home inventory declined 10 percent, with 945 homes available for sale in October compared to 1,050 in September 2018.
Hotard projects November and December sales will be “anybody’s guess depending on the weather. But all things being equal, I don’t expect much change through the end of the year.”
The next big change he expects will be in early 2019. “I think we’ll see a big increase in inventory and sales in February and March. I think people will look at taking the gains we have seen in this market, providing inventory and set the market up for pretty strong increases in the big home selling months.”