Home ownership has been part of the American Dream since the founding of our republic. It confers economic benefits, a sense of safety and security, and can be a source of pride. Sadly, for as long as this part of the American Dream has existed, it has not been equally available to everyone. As you will see, as much progress as has been made in 200+ years, our work is far from done to ensure that the dream — and reality — of owning a home is truly and equally open to all Americans.
Property protection officially began in the United States with the passage of the Fifth Amendment in 1789, but virtually anyone who was not a white man did not receive this right. After the Civil War, the 14th Amendment declared all people born in the U.S. were citizens and the Civil Rights Act of 1866 stated that all citizens had the same rights to real property as white men. This should have been the end of the story, but a series of court decisions, immigration laws and racially discriminatory zoning laws ensured that property rights continued to be denied to minorities and women.
Woefully and to its shame, in the late 1800s and into the 1900s, the National Association of Real Estate Boards (the precursor to the National Association of Realtors) encouraged racial discrimination and segregation. In fact, its Code of Ethics even mandated that its members work to racially segregate communities.
In 1917, the Supreme Court declared racial zoning ordinances to be unconstitutional, so private restrictive covenants were then used to prohibit the sale of homes to minorities. The Federal Housing Administration, created in 1934, used “redlining” in this period to identify African American areas as high risk by shading them in red and steering whites away from such areas, and real estate agents used discriminatory practices like steering and blockbusting (see the resource links below for more information).
In 1948, the Supreme Court struck down racially restrictive private covenants, though they lingered in practice, even if unenforceable. In a small bright spot, Colorado was the first state in the nation to pass a fair housing law in 1959, helping pave the way for nationwide fair housing legislation.
As many know, the Civil Rights Act was passed in 1964, but less well known is that legislators could not agree on fair housing legislation and NAR actively opposed passage of the Fair Housing Act. It was not until 1968, in the wake of the Kerner Commission Report (studying the causes of race riots) and the assassination of Martin Luther King Jr., that the Fair Housing Act was passed to prohibit discrimination based on race, color, religion or national origin.
By 1975, NAR had finally turned the corner, adopting an agreement with the Department of Housing and Urban Development to promote fair housing, educate its members about their obligations under the Fair Housing Act, and recommend fair housing procedures for its members to follow.
Today, the Realtor Code of Ethics requires Realtors to provide equal services regardless of race, color, religion, sex, handicap, familial status and national origin in accordance with the Fair Housing Act, as amended. The code even goes beyond the act by covering sexual orientation and gender identity.
Despite the progress that has been slowly and painfully won, much work remains to be done to ensure truly equal opportunity in home ownership and property rights. In terms of numbers, the homeownership rate for white households in 2017 was 72.3%, but only 46.2% for Hispanic households and 41.6% for African American households (this is about the same rate of home ownership for African Americans as when the Fair Housing Act was passed in 1968).
The truth is, there are many things that need to change to realize this dream. Locally, it is time to revisit zoning and occupancy laws (see, e.g., www.bedroomsareforpeople.com), and more broadly, groups like the Fair Housing Alliance have put together concrete steps toward a solution (https://nationalfairhousing.org/wp-content/uploads/2019/12/Fair-Housing-Solutions-Overcoming-Real-Estate-Sales-Discrimination-2.pdf).
It is incumbent on all of us — especially elected officials, real estate professionals and the mortgage industry — to continue to do better to make fair housing not just the law of the land, but also the reality.
Originally posted by Jay Kalinski is the 2020 chair of the Boulder Area Realtor Association and owner of Re/Max of Boulder and Re/Max Elevate.
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.
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 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.
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.
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
By Jay Kalinski —
That’s right, based on the latest available data from the Federal Reserve Survey of Consumer Finances, the average net worth of a homeowner is $231,000, a whopping 44 times greater than the average renter’s $5,200 net worth. What makes the situation more dire is the fact that the gap is widening. From 2013 to 2016, the average net worth of homeowners increased 15 percent while the average net worth of renters decreased by 5 percent. The situation for renters is bad and getting worse.
More than any other factor I could identify, homeownership best explains the gap between the haves and have nots. People seem to understand this fact, as a Gallup poll showed that Americans chose real estate as the best long-term investment for the fourth year in a row. So, why aren’t more renters buying homes?
It could be that renters do not want to own homes. Anecdotally, we hear stories about how Millennials prefer to rent to give them a more flexible lifestyle, but the research tells a different story. In fact, Millennials represent the largest share of homebuyers today and only 7 percent of respondents to an NAR survey said that they did not want the responsibility of owning. More generally, 82 percent of renters expressed a desire in the fourth quarter of 2017 to be homeowners and about the same percentage said that homeownership is part of the American Dream.
What is driving this desire for renters to become owners? According to a recent survey, the main reasons renters would want to buy a home are: a change in lifestyle such as getting married, starting a family or retiring; an improved financial situation; and a desire to settle down in one location.
Renters seem to know that owning a home is a great investment, and they overwhelmingly express a desire to do so, and yet something is preventing many of them:
Based on a recent NAR survey, it appears that ability (perceived or actual) is the biggest obstacle to homeownership. In fact, 66 percent of renters reported that it would be somewhat or very difficult to save for a downpayment on a home. Only 16 percent said that it would not be difficult at all. Of those who said saving for a downpayment was difficult, 49 percent identified student loans, 42 percent cited credit card debt, and 37 percent cited car loans.
The above, however, only focuses on one aspect of home affordability. Another side is home price appreciation. That is, if homes were more affordable, it would be easier to save for a downpayment. Unfortunately for local renters, Boulder County has appreciated more since 1991 than any other area in the country — more than 380 percent! The average single family Boulder County home topped $708,000 in February 2018, which is almost 20 percent higher than two years ago.
In addition, interest rates are on the rise in 2018, and we’ve already covered how a 1 percent increase in interest rates can reduce your purchasing power by 10 percent.
There are two takeaways from this. First, for renters, you may be familiar with the adage “The best time to buy a home was 30 years ago. The second best time is now.” That is true now more than ever. If you have been considering making the jump to homeownership, now is the time. At this point, each day delayed likely equals less home for the money.
Second, for local government officials, if you truly support the idea of affordable (market rate) workforce housing, you have the power to encourage it. Without you, the affordability situation will only continue to deteriorate.
Jay Kalinski is broker/owner of Re/Max of Boulder.
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