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.
Spring selling season in Boulder County continues to soar with April’s residential sales keeping pace with last month’s rocketing sales as well as outperforming April last year.
“Demand remains strong and inventory tight, keeping upward pressure on pricing,” says Ken Hotard, senior vice president of public affairs for Boulder Area Realtor® Association.
The 345 single-family homes that sold in April 2018 topped March’s rising sales by one unit or .3 percent; and the 126 condominiums and townhomes sold in April represented an additional 4 sold or 3.3 percent over last month.
Year-over-year Boulder-area single-family home sales climbed 5.4 percent through April 2018 – 1,198 homes sold vs. 1,137 – and condo/townhomes sales increased 5.9 percent with 447 units sold compared to 422.
Inventory also grew, which has proven to be a key factor in maintaining sales.
“While inventory showed solid increases in both single-family and condo/townhomes, we could use three-to-four times that amount to meet demand,” says Hotard.
Countywide single-family inventory increased 18.2 percent in April over March with 770 homes for sale vs. 651. Condo/townhome inventory improved 16.4 percent over the same period – 163 units vs. 140.
Hotard says evidence shows prices may have not yet reached a peak. “This is the first time I recall median prices over $1 million. It’s clear that with the city of Boulder built out on single-family housing stock, it’s putting pressure on prices.”
He notes that many dynamics shape the market. “Clearly affordability is a big issue – it influences who can live here, whether purchasing or renting. As more people can’t afford to live here, it’s a big loss because we are losing high quality people and the marketplace is becoming more exclusionary.”
Noting that buyers are coming from many places including California, Chicago, Texas and Nebraska, Hotard says people look to Colorado because of the entrepreneurial spirit and low unemployment.
Hotard summarizes, “As Boulder is to Colorado, Colorado is to the rest of the country.”
As home values continue to rise in Colorado, it’s clear that home sellers are benefitting, with four state metro’s making the top 15 of 24/7 Wall St.’s list of cities where people made the most money on home sales.
Boulder ranked No. 8 on the list with Denver, Fort Collins, and Greeley coming in seventh, eleventh and fifteenth, respectively.
According to 24/7 Wall St., Boulder’s average home price gain since last purchase is 56.4 percent or $176,750, compared with Denver’s slightly higher 56.6 percent which translates to $133,700; Fort Collins’ gain of 54.6 percent or $121,850 and Greeley’s 52.6 percent or $107,748.
Top-ranked California metro San Jose-Sunnyvale-Santa Clara had an average home price gain of 77 percent or$415,500.
Metro areas like Denver, Nashville, and Austin are “historically steady-Eddie appreciation markets in middle America that have transformed into boomtowns during this particular up economic cycle,” Senior Vice President of Attom Data Solutions Daren Blomquist tells 24/7 Wall St.
The top five and half of the top 20 metro areas with largest home sales gain are West Coast markets, which Blomquist notes were “the last to get hit by the housing crisis and the first to recover.”
Here’s a look at the full data on Colorado cities, as reported by 24/7 Wall St.:
No. 7 – Denver-Aurora-Lakewood
Average home price gain since last purchase: +56.6% (+$133,700)
Average home sale (2017): $453,012
Best historical time to sell: 2017 (+56.6% price chg. since last purchase)
Worst historical time to sell: 2011 (-3.6% price chg. since last purchase)
Average outstanding home loan: $316,904
Median household income: $71,926
No. 8 – Boulder
Average home price gain since last purchase: +56.4% (+$176,750)
Average home sale (2017): $645,424
Best historical time to sell: 2000 (+72.6% price chg. since last purchase)
Worst historical time to sell: 2003 (-0.4% price chg. since last purchase)
Average outstanding home loan: $377,262
Median household income: $74,615
No. 11 – Fort Collins
Average home price gain since last purchase: +54.6% (+$121,850)
Average home sale (2017): $530,051
Best historical time to sell: 2017 (+54.6% price chg. since last purchase)
Worst historical time to sell: 2010 (4.9% price chg. since last purchase)
Average outstanding home loan: $281,579
Median household income: $66,469
No. 15 – Greeley
Average home price gain since last purchase: +52.6% (+$107,748)
Average home sale (2017): $327,100
Best historical time to sell: 2000 (+239.7% price chg. since last purchase)
Worst historical time to sell: 2011 (-6.0% price chg. since last purchase)
Average outstanding home loan: $334,061
Median household income: $63,400
To identify the cities where people make the most on home sales, 24/7 Wall St. reviewed home price gains in metropolitan statistical areas of 200,000 people or more provided by Attom Data Solutions. The real estate data clearing house considered the 150 large MSAs with at least 18 years of home sales and price data. Attom determined for each year the median sales price of all single family homes and condos that sold that year and subtracted it from the median sales price of those same properties the last time they sold. To calculate the percentage gain, the median dollar gain was calculated as a percent of the previous median purchase price.
For the full report visit https://247wallst.com/special-report/2018/03/02/cities-where-people-make-the-most-on-home-sales