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.
It is evident that the world was woefully unprepared for a pandemic like COVID-19, and local real estate was no exception. COVID-19 wrought fright, confusion, and uncertainty on buyers, sellers, real estate agents, and legislators, as everyone tried to discern how best to navigate the crisis unfolding before them. Many contracts to buy and sell real estate that were then in-process fell through or were renegotiated, and the legal fallout from that may stretch on for years.
And yet, life marches forward, and people continue to need to move and buy/sell real estate, so all of the players have learned to adapt in order to help people move on with life. Some of these adaptations will likely become enduring features of the new normal, while others may fade with time. The following is a brief look at some of the most prominent trends to emerge from this pandemic and whether they are likely to last.
- Marketing.Before COVID-19, a small minority of properties were marketed using 3D technology, relying instead on photos and, perhaps, static floor plans. Now, however, virtually every buyer expects (and sellers demand) an immersive 3D tour of a listed property. Pre-pandemic, buyers would likely visit many homes in-person before deciding on which home to make an offer. Now, buyers are almost certain to “tour” a number of homes virtually and then select the one (or few) that they actually want to see in person. We are even seeing this trend emerge in commercial real estate, as being able to tour a property virtually can save companies time and money in assessing whether a potential commercial space will fit their needs.
This 3D marketing trend will almost certainly continue for the duration of the pandemic, but it is less clear if it will continue after or slowly fade back to “normal” as people begin to feel safer again.
- Remote transactions.Before this pandemic, a large portion of a real estate transaction could be accomplished electronically, with agency agreements, purchase contracts and property-related disclosures all commonly being signed electronically. However, when it came time to close the transaction, the parties still had to physically attend a closing and physically sign documents in front of a notary public. This was the case for two primary reasons. First, Colorado’s previous attempts to pass remote notarization legislation, which would have removed the requirement of physical presence and allowed parties to sign documents via the internet, never made it through the legislature. And second, many lending institutions continue to require physical “wet” signatures and in-person notaries to minimize the potential for fraud. To solve the first problem, Gov. Polis signed an executive order allowing remote notarization. However, as we soon learned, even with remote notarization now allowed, lending institutions (inexcusably, in my view) persisted in requiring in-person physical signatures. Thus, we experienced the phenomenon of “curbside closings,” wherein the parties would drive to the title company and sit in their cars while a notary in a mask and gloves would hand them the document, watch them sign, and then notarize their documents. Having witnessed such “curbside closings,” which are clunky and awkward, I can predict that buyers and sellers will demand that the government and lending institutions allow fully remote closings in the future. Once in place, I believe this trend will be here to stay because it is vastly more convenient for people.
- Shifting consumer preferences.With most employees (those fortunate enough to keep their jobs) being forced to work remotely, many people and companies have discovered that, not only do they like working from home, they can actually be more productive. As a consequence, an emerging trend we are seeing is that buyers are looking for homes with an office (or workspace) more than before. And they also seem to be favoring rural (i.e., private space) over dense and urban. This may also portend a coming shift in the commercial office market, as companies realize that they can get by with much less space than before. This trend is likely to continue as more people become accustomed to being productive from home; however, the strength and reach of this trend will be limited by the fact that some jobs can be done only in person and more space at home costs more money, so not everyone will be able to realize this desire.
These are just a few of the trends emerging from the COVID-19 pandemic, and it is likely that others will develop as things continue to unfold. It will behoove buyers, sellers, and landlords to track these trends carefully to best position themselves for the future.
Originally posted by Jay Kalinski is broker/owner of Re/Max of Boulder.
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
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