In 2020, hopes were high for a much brighter 2021. But from the continuing impacts of COVID to the devastating loss of 10 of our cherished community members in a horrific act of senseless violence, 2021 has offered little respite from the trials and tribulations of 2020. And yet our resilient community will continue to endure and overcome. People still need a place to live, and owning one’s home continues to play an integral part in the fulfillment of the American Dream. What follows is an overview of our current market conditions, followed by frank advice to buyers looking to buy a home this year, speaking from experience in the trenches, in hopes that it will help you own your piece of the ever-more-elusive American Dream.
The current landscape
If you are in the market to buy a home, you have likely come to realize that inventory is extremely scarce and the competition is simply brutal at almost all price ranges. On the supply side, our stock of available homes for sale in the Boulder Valley is the lowest it has been since tracking began. At the time of this writing, only 400 single-family homes were for sale in all of Boulder County — and of those only 148 (or 37%) were not already under contract (for a population of about 330,000 people!).
On the other side of the equation, the demand is far surpassing the supply of available homes. There are numerous reasons for this, but some of the most prominent are (1) that rates are still near historic lows (often below the traditional rate of inflation) so more people can afford more home than ever before; (2) a far larger percentage of the population is able to work remotely, with people no longer needing to live near their office, and what better place to live than Boulder?; and (3) people are expecting to spend more time at home, and the Boulder Valley offers larger homes with more land than many more urban areas.
The result of this severe mismatch between supply and demand has resulted in many properties receiving multiple offers. In fact, we are routinely seeing well-priced, desirable homes selling 10-to-20% (or more) above their asking prices. Surprisingly, we are observing this phenomenon not just in the “affordable” sub-$500,000 market, but also for homes priced well into the millions of dollars. As one might imagine, this is presenting an enormous challenge for would-be buyers who are dealing with the serious fatigue of writing strong, often above-asking offers on home after home only to lose out to someone willing to pay even more. This is also creating a challenge for appraisers who are asked to justify homes selling for tens (or hundreds) of thousands of dollars above previous sales.
If you are a buyer in this situation, it might be tempting to hit the pause button and wait for prices to fall before resuming your search. In some parts of the country, that could very well be sound advice. In the Boulder Valley, however, I would caution you against giving into that temptation if you are serious about owning a home here. Why? Because unlike other parts of the country, prices are unlikely to “come back down,” but rather are likely to continue to appreciate into the foreseeable future. Why? Many, many reasons. First, the Boulder Valley continues to enjoy one of the highest qualities of life anywhere in the world and people continue to want to live here. Second, we have far more jobs — in more diverse industries — than other comparably-sized cities, which continue to draw people to our area. Third, Boulder County is edging ever closer to build-out, the point at which no more homes will be able to be built here (absent regulatory changes). The inability to build more homes makes the ones already here all the more valuable. Truthfully, there are many more reasons, but the foregoing are sufficient to likely ensure continued appreciation of our housing stock.
As a prospective buyer, then, what are you to do? Don’t give up. Here are a couple of things you can do. First, you can adjust your price search, starting on lower-priced homes knowing that they will be bid higher. You may not get every feature you want, but you will be a homeowner enjoying appreciation and equity-building. Second, you can look for ways to sweeten your offer. There are many ways to do this, such as waiving certain contract rights, increasing your earnest money or down payment, or finding a way to make an all-cash offer (if you don’t have a rich uncle, there are loan companies, including some innovative startups, that specialize in this). The best way to navigate this is to work with a qualified Realtor who can advise you on your particular situation. Good luck!
Oh, and if you are a homeowner reading this and considering selling, this is definitely the year to do it!
Jay Kalinski is the owner of ReMax of Boulder and ReMax Elevate.
2020 was a chaotic rollercoaster for the Boulder Valley real estate market. Luckily, home values weathered the storm better than anyone could have hoped, and we are now primed for potentially the most real estate sales volume we have ever seen.
Buyer Demand. Our company has tracked buyer demand on a daily basis for many years, and it is higher than it has ever been for this time of year. This demand is especially strong for single-family homes. It appears that the trend of buyers desiring larger living spaces and more land will continue into 2021, as the pandemic lingers on and the work from home movement has finally crossed the chasm into mainstream acceptance. This latter work from home development is particularly salient for Boulder Valley, where our 300-plus days of sunshine per year and world-class quality of life are attracting those who can now work from anywhere. At each of our weekly sales meetings this year (attended by more than 100 of the best agents anywhere), we hear story after story of multiple offers on listings, prices getting bid up by tens of thousands of dollars, and buyers who are getting frustrated with all of the stiff competition. It seems that the pool of eager buyers is very deep this year.
Interest Rates. Adding fuel to the buyer demand fire is the fact that interest rates are forecast to stay at once-in-a-lifetime low rates for the foreseeable future. Our most veteran agents tell stories of helping people buy homes in the 1980s with mortgage rates above 18% — that is like financing a home purchase with a credit card. Now, buyers can expect to obtain loan rates at-or-below 3%, which is as close to free money (when average inflation is considered) as we are likely to ever see in America.
So, what could possibly derail this buyer juggernaut? Well, here are a couple of the most likely possibilities.
Lack of Inventory. In 2020, despite high buyer demand, many would-be sellers opted to stay put in their current homes. It is part of the human condition to become more conservative in the face of uncertainty, and COVID-19 presented humanity with one of the biggest uncertainties of the past 100 years. Thus, it is not surprising that we finished 2020 with only 313 single-family homes for sale in all of Boulder County, down 37% compared to the end of 2019 (498 homes). For added context, consider that at the end of 2002, we had more than 1,800 homes on the market.
It remains an open question as to whether sellers will get the message that 2021 will be an excellent time to sell a home — and an even bigger question regarding whether sellers will act on this message. If the answer to both questions is “yes,” then we really could have the highest dollar volume of home sales ever in Boulder Valley this year. This is a big “if,” however, because of…
COVID-19. At the time of this writing, more than 25 million Americans have contracted COVID-19 and more than 400,000 of them have died. This has — and will — greatly affect home sales in ways predictable and unforeseeable. Thankfully, there are multiple effective vaccines currently being distributed and administered. There remain, however, several unknowns on this front: Will too many people refuse to get vaccinated and thus thwart herd immunity? How quickly will enough of the population be vaccinated to provide such herd immunity and restore more certainty for people’s decisions? Will the current vaccines be efficacious against new (and perhaps more virulent) strains of the virus that are emerging?
A lot of things vis-à-vis COVID-19 will have to break in our favor this year to give enough sellers the confidence to move ahead with their home sale decisions, which is the only way we will even come close to meeting the apparently insatiable buyer demand. If we are lucky, this could be a year for the record books (in a good way).
Regardless of how things go with our fight against COVID-19, 2021 promises to be an excellent time to sell a home if you’re considering doing so… and a very challenging time to be a buyer.
May we all be lucky in 2021.
Jay Kalinski is the owner of ReMax of Boulder and ReMax Elevate.
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.
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.
Sellers in the Front Range housing market enjoyed a blistering spring season. Everything seemed to be breaking in favor of sellers — brisk appreciation, multiple offers, favorable terms, and generally quick sales. However, several trends are emerging that could derail (or at least diminish) a seller’s summer home sale plans. Here are three of the biggest trends likely to affect our summer market:
1. Rising Interest Rates. For the past several years, economists have been predicting that interest rates will rise from their historic lows (in the 3.5 percent range for a 30-year conventional fixed mortgage). It turns out that the eggheads finally got it right. Compared to this time two years ago, interest rates are at least a percent higher — and with the Fed raising their Funds Rate again at their last meeting (and with more raises on the horizon), it seems that even higher rates are coming. It seems now is an appropriate time to refer back to my article discussing the 1 percent Equals 10 Percent Rule, which is a rule of thumb that for each 1 percent increase in mortgage rates, your buying power decreases about 10 percent. When you consider this with the fact that average home prices in Boulder County have risen about 21 percent in the past two years, it means that the same buyers from two years ago can now afford 31 percent less than they could have back then.
If you’re thinking, “but I’m a seller, it doesn’t affect me.” Think of it in these terms: that pool of buyers who would have bought your 2,000 square-foot, three-bedroom house two years ago? They can now only afford a 1,380 square-foot, two-bedroom condo. That is, the pool of buyers for your home is significantly smaller today.
2. The market hates uncertainty. To say this has been the least conventional presidency of the modern era is an understatement. Setting aside the human side of the geopolitical uncertainty caused by the Trump administration (alienating the G7, backing out of the UN Human Rights Council, separating families at the border, etc.), the president has decided to wage trade wars on multiple fronts. And while these acts might be appeasing his base, they are starting to have a negative effect on the economy. As of mid-June, the stock market has given back all of the gains it made in 2018, due in large part to the trade wars started with China and other countries. Speaking of China, its investments in the United States have dropped 92 percent this year, and less foreign cash means less money to invest in the housing market.
The effect of this is straightforward — when people feel uncertain and less wealthy (i.e., watching their world turn topsy-turvy and stock portfolios drop), they are less willing to take risks and make changes. And while home ownership might be the best investment you’ll make, it still represents a risk, especially if you’re a first time home buyer. Thus, the uncertainties in the economy will produce fewer buyers than a steadily rising market.
3. What the frac? The fracking industry in Colorado has flourished since a Colorado Supreme Court ruling in 2016 held that state laws trumped local bans and regulations limiting fracking. In Weld County alone, there are approximately 23,000 fracking wells, and fights are currently raging over applications to drill near highly populated parts of Boulder and Broomfield counties. Wells are being placed within 1,000 feet of schools, and this encroaching boom has generated growing health and safety related concerns, from a Colorado School of Public Health study reporting that living near fracking wells may increase the risk of cancer, to a home in Firestone that literally exploded from a leaky underground pipeline.
As the concerns grow, so will buyers’ reservations about buying homes near fracking, which could slow demand in these areas. Longmont took the extraordinary step of paying two oil and gas companies $3 million to leave town and prevent future drilling. To be sure, there are competing property rights at issue, but if compromises are not reached that make people feel safe, then homeowners could see their home values fall.
In sum, our market has been red hot this spring, but there are issues on the horizon that could dampen summer sales prospects. Some of these are likely beyond our direct control, but I encourage you to make your voice heard where you feel you can make a difference. Your home’s equity (and your conscience) will thank you.
Jay Kalinski is broker/owner of Re/Max of Boulder.