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.
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.
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