Kalinski: Boulder Valley real estate – Rear and forward view

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.

So what?

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

Posted on February 5, 2020 at 3:00 pm
Jay Kalinski | Category: Articles, BizWest | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Kalinski: How buying and selling a home will change in the Roaring 20s

As we enter a new decade, the massive wave of technological advancements fueled by entrepreneurial tech companies has reshaped consumers’ expectations.  Companies such as  Uber and Amazon have both dramatically shortened the time that people expect to wait for gratification and raised consumers’ expectations with regard to the ease and smoothness of the experience.  That is, consumers now expect to press a button and have whatever it is that they want delivered to them in a matter of a couple days (Amazon shipments), hours, or even minutes (Uber rides); moreover, they want to be able to track their shipment’s progress through a simple, pleasing interface on their phones.

While consumers now expect smooth, pleasant and near instant gratification in most aspects of their lives, the real estate home sale process still typically takes 30 to 45 days and — due to its complexity, legal ramifications, and the fact that it is an ongoing negotiation between multiple parties — it is usually neither frictionless nor “fun.”  This growing friction between consumers’ expectations and the longer duration and complexity of completing a real estate transaction has made the industry ripe for innovation.  What follows are the likely developments that will make real estate transactions faster and easier over the coming decade.

1.  The home search-to-closing customer journey.  The days of agents-as-gatekeepers of real estate listings are gone.  These days, most buyers start their search online and look at up to hundreds of homes to educate themselves.  When they get serious, though, about 90 percent of buyers (and sellers) choose to use an agent to help them with the home buying/selling process. 

Why is that?  It’s because Realtors realized that they needed to change their value proposition to buyers and sellers in order to stay relevant and, well, valuable.  One of the challenges for buyers and sellers is that, with the exponential growth of information available on the internet, the amount of “noise” has grown exponentially as well, but the valuable information (the “signal”) has become harder to find.  Today’s Realtors have things that are in short supply online: hyperlocal and market knowledge, a network of trusted vendors and professionals, expert negotiation skills, a refined process to make the home buying/selling experience less painful, etc.  These skilled Realtors who have adapted to consumers’ shifting expectations provide their clients with better technology, a smoother process, and expert advice.  Those agents who fail to adapt will eventually exit the business.

Other innovators, such as so-called iBuyers, will make you an offer, often within a day, to buy your home for cash quickly.  This convenience, however, comes at a cost, as many iBuyers will likely cost you two-to-five times more out-of-your-pocket than using a Realtor would.

2.  The loan experience.  Typically, the longest (and perhaps most annoying) part of a real estate transaction is the loan process.  Many lenders can take 30 days or more to complete their due diligence, including their assessment of your loan-worthiness and an appraisal of the home, before approving a home purchase loan.  Anyone who has been through this process knows how frustrating and slow it can be.

Fortunately, at least for many people, this process may get a lot shorter and easier.  Lenders are using artificial intelligence (AI) to conduct automated appraisals on properties and help with assessing buyer’s applications.  For “in the box” situations, with well-qualified “W2 employees” buying homes that the AI algorithms can value with a high degree of confidence, the underwriting process can be dramatically shortened without the need for a physical appraisal.  This is already a reality — last fall, we represented buyer clients whose lender did not require an appraisal on the home they were buying and gave them very fast loan approval.

3.  The title and closing process.  Almost everything can seemingly be accomplished these days online from the comfort of your home.  However, at least in Colorado, you still need to physically go to the title company and hand-sign a stack of documents in front of its notary public (how barbaric, right?).  Well, this isn’t actually the title company’s fault, as many lenders — and state law — still require physical notarization of certain documents.

The good news is that this may change in 2020, if the Colorado legislature passes a bill similar to Senate Bill 18-109, which would allow optional remote notarization of documents.  If such a bill were to become law, then notarizations could be done using audio-video recording of the document signing (kind of like signing over Skype or FaceTime, but with more layers of security).  Thus, you would be able to close on the purchase/sale of your home from anywhere in the world, so long as you have a good internet connection.

Conclusion.  The players in the real estate industry have (finally) recognized that consumers’ expectations and demands have shifted and are innovating quickly to make the home buying and selling process faster, easier, and more enjoyable (or, at least, less painful).  Within the next few years, many people will be able to buy/sell a home in half the time or less than it takes on average today, and with a lot less disruption to their lives.

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

Posted on January 15, 2020 at 5:00 pm
Jay Kalinski | Category: BizWest | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,