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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.
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.
Home Sales Slow in December, Show Slight Decline for Year End
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.
Be mindful of warning signs in housing market
2018 was another strong year for residential real estate in Colorado in general and Boulder Valley in particular, but what’s in store for 2019?
First, a look back at 2018. Nationally, Colorado jumped from 10th to fifth among all states for one-year appreciation, with a 9.16 percent increase in home values. Boulder County improved from 57th in 2017 to 41st in 2018, with over 9.5 percent price appreciation. Below are the 10 “Vital Statistics” for Boulder Valley we track to gauge the health of the real estate market from year to year.
As you can see, most of the indicators point toward an appreciating market, though increasing interest rates and a drop in the percentage of homes under contract indicate potential signs of weakness emerging.
In the city of Boulder, the average price of a single-family home topped $1,215,000, which was up 11 percent from 2017. However, Boulder also saw almost 50 fewer home sales than last year, which highlights our continued shortage of inventory. The most affordable city in Boulder County continues to be Longmont, but even there, the average price of a single-family home is now over $460,000 and may reach $500,000 if its appreciation trend continues.
One statistic that gets very little attention is that we often see home prices dip slightly in the second half of the year as compared to the first. As the chart below shows, we generally see appreciation through June or July, and then values trail off slightly. What this chart means is that, if you’re a seller your best bet is to sell in the spring, and if you’re a buyer, try to buy in the fall when home prices are stagnant or dropping.
2018 was quite strong — will 2019 be similar?
Locally, conditions in our area generally support continued appreciation in residential real estate. The total number of active listings available is still less than half of what it was before the Great Recession, which is likely to keep home prices growing, especially as our economy remains strong (very low unemployment) and we continue to see net migration into our area.
There are, however, several trends that could derail continued growth in our market. First, interest rates are almost a full point higher than they were in 2017, and I’ve discussed before how a one point increase in interest rates can reduce purchasing power by 10 percent. The Fed had indicated its intent to continue to raise rates in 2019, however, the news from the Fed’s most recent meeting in January suggested that they may hold off until at least June.
Second, the potential for a recession in the next year or two could begin dragging on home sales. One indicator is that the yield curve (which compares rates for short-term vs. long-term Treasury notes) has been getting flatter. When the yield curve inverts (that’s when rates for 10-year notes dip below rates for 2-year notes), it is very often followed by a recession.
Finally, local no-growth and anti-growth policies, regulations, and mindsets are making it increasingly difficult to add inventory to our region. The dearth of homes to sell could negatively impact our market — and it is the only factor here that we as citizens have a measure of control over.
2019 has the potential to be another great year for residential real estate in Boulder Valley, but we need to be mindful of the potential derailers mentioned above.
Originally posted on BizWest. Jay Kalinski is broker/owner of Re/Max of Boulder.
Exterior Renovations Deliver Best ROI
A beautiful new kitchen is often the renovation homeowners dream of. But if getting a high return on investment (ROI) is at the top of your checklist, you may want to consider doing exterior work instead.
Seven out of the ten highest payback projects are exterior renovations, according to Remodeling Magazine Cost vs. Value Report 2018. Except for a minor kitchen remodel, work done on the exterior of the house generated higher returns than did interior renovations.
Here are the five renovations that give the highest return, according to Remodeling Magazine.
Garage door replacement
A new garage door can give your home instant curb appeal. Expect to spend about $3,500 to install a new 16×7-foot windowed garage door with lifetime warranty and new heavy-duty galvanized steel tracks. Average ROI is 98.3 percent nationwide and 96.7 percent in the mountain region.
Remodeling Magazine’s mountain region includes Colorado, New Mexico, Idaho, Nevada, Utah, Arizona, Wyoming and Montana.
Manufactured stone veneer
Stone is a popular siding, particularly in Colorado. Adding stone to your home’s exterior gives it character and gives high payback when you sell. At a cost of $8,221, ROI in the mountain region is 93.8 percent and 97.1 percent nationwide.
Wood deck addition
Speaking of trends, inviting outdoor living areas are hot, so wood deck additions add desirability to your home. Estimated cost is $10,950. Average payback in the mountains is higher than across the nation—84 percent compared to 82.
Minor kitchen remodel
At last, we can talk about redoing the kitchen. Expect to spend $21,198 to replace some of the components in your kitchen such as fronts of existing cabinet boxes and drawers, new hardware, new energy-efficient cooktop/oven range combination and refrigerator, laminate counter tops, and flooring. Average mountain region payback is just under 84 percent, and 81 percent nationwide.
Siding replacement
A $15,072 investment to replace old warped or cracked siding with new can help sell your home. You will get around 65 percent of that back here in Colorado and almost 77 percent nationwide.
Here are the top ten renovations with the highest payback.
For the full report, visit http://www.remodeling.hw.net/cost-vs-value/2018/key-trends-in-the-2018-cost-vs-value-report
Originally posted here by Tom Kalinski Founder RE/MAX of Boulder on Wednesday, November 7th, 2018 at 2:02pm.