Winter is coming, and impact on real estate uncertain

Winter is coming and, much like the Game of Thrones series, no one can predict exactly what will happen with the Boulder Valley real estate market, but you can be sure that there are going to be some crazy plot twists — and we can hope that the forces of good will win out in the end.  So, rather than make bold predictions, this article will look back at the first three quarters of 2020 and identify a couple of trends that are likely to affect Boulder Valley real estate into 2021.

Looking Back at 2020

2020 has been a rollercoaster of a year in real estate.  The second quarter of the year was by far the most volatile, with a large dip due to the initial COVID-19 surge and accompanying lockdown, and then a burgeoning resurgence as the situation improved.  By the close of the third quarter, you could look at some of our statistics and think that we have had a pretty typical, even robust, year in real estate.

Trend 1: Growing buyer preference for detached homes

While the foregoing statistics indicate an overall strong market, other statistics point toward the first trend we are observing, the change in buyer sentiment in favor of single-family homes over attached dwellings.

As you can see, the inventory of single-family homes available for sale has dropped significantly (to the lowest amount on record) while the percentage of these homes already under contract has gone up tremendously, indicating a very strong demand for these homes.  On the other hand, the number of available attached units has actually increased over last year and the percent under contract has only risen modestly.  The most compelling explanation for this phenomenon is that, due largely to COVID-19, buyers (and their families) are anticipating working and schooling from home for many months to come and are, therefore, seeking larger homes with at least some separation from their neighbors.  I would anticipate this trend to continue well into 2021.

Trend 2: COVID-19 impacts

It appears that COVID-19 will continue to significantly impact people’s lives — and the economy — for months (possibly years) to come.  We discussed its ability to affect buyer preferences above, but COVID-19 may likely have a more direct effect on the real estate market in several ways.  First, if COVID-19 cases continue trending upward and cause local or state officials to issue another full lockdown (i.e., a stay at home order), it could freeze the market again and have devastating consequences that could take even longer to bounce back from than last time. Second, as COVID-19 continues to be a drag on the economy, the more would-be buyers will lose their jobs and with them the ability to purchase homes.  Thus, the longer COVID-19 persists, the more it is likely to erode buyer demand, even with mortgage rates at historic lows.

What can we do?

Looking at the numbers and likely trends, it appears that there are a couple of things we can do to improve the situation going forward.  First, it is imperative to drive the COVID-19 numbers back down, which means practicing social distancing, wearing masks, etc.  Second, if you own a single-family home and are considering selling, this winter will be an unusually favorable time to sell, given the strong demand and paucity of inventory.  If, on the other hand, you own an attached home, you might consider holding off on selling until conditions are more favorable (if you are able to do so).  Finally, if you are a buyer, you should carefully evaluate your financial situation before deciding whether to move forward.  If you decide to do so, expect stiff competition for single-family homes but also know that you could find some potential deals if you are looking to buy a condo or townhome.

Keep in mind that owning a home Boulder Valley has been one of the best investments you could make over the past 30 years and that trend is likely to continue after COVID-19 is just a terrible memory.  Take care of yourselves and each other and we will make it through this better than before.

Originally published by Jay Kalinski, 2020 chair of the Boulder Area Realtor Association and owner of ReMax of Boulder and ReMax Elevate.

Posted on November 4, 2020 at 3:00 pm
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Where have all the buyers gone?

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? 

Economic Conditions?

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.

The takeaway

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.

Posted on July 2, 2019 at 3:00 pm
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4 Key Home Buying Trends to Watch in 2019

As we look ahead to coming trends in 2019 real estate, home buyers and sellers nationwide will face changes in the marketplace, according to the economic research team at realtor.com. From housing inventory to generational shifts, here are four top trends to look for in 2019.

1. Inventory will grow, especially for luxury homes

Inventory has been tight nationwide, hitting its lowest level in recorded history in the winter of 2017, says realtor.com. Supply finally began catching up with demand in 2018. That inventory growth will continue in 2019, but at rate of less than 7 percent. While sellers will have more competition, it will still be a good market.

“More inventory for sellers means it’s not going to be as easy as it has been in past years—it means they will have to think about the competition,” says Danielle Hale, realtor.com chief economist.

“It’s still going to be a very good market for sellers, but if they’ve had their expectations set by listening to stories of how quickly their neighbor’s home sold in 2017 or in 2018, they may have to adjust their expectations,” she adds.

In markets with strong economies and high-paying jobs, most of the expected inventory growth will come from listings of luxury homes.

2. Affording a home will be challenging

Interest rates and home prices are expected to continue to increase. Hale says homebuyers will continue to feel a “pinch” from affordability, as costs will still be a pain point. She predicts mortgage rates will reach around 5.5 percent by the end of 2019, which translates into the typical mortgage payment increasing by about 8 percent. Incomes are growing about 3 percent on average. These factors are hardest on first-time home buyers, who tend to borrow most heavily.

3. Millennials will dominate

Millennials are now the biggest generation of home buyers. Some are first-time home buyers, while others are moving up from starter homes. The millennial group accounts for 45 percent of mortgages compared with baby boomers and Gen Xers at 17 and 37 percent respectively, reports realtor.com. And many millennials still have student debt, which adds to the challenge of affording a home.

4. The new tax law’s effect is still unknown

For many tax filers, the effect of the new tax law won’t be known until their April tax filing results in a bigger tax bill or a bigger refund.

Renters are likely to have lower tax bills, but the new increased standard deduction reduces the appeal of the homeowner’s mortgage-interest deduction. The new tax law may dissuade people from taking out large mortgages which will affect higher cost homes. Add these factors to the challenge of affording a home and homeownership for some may be harder to achieve or less appealing.

The net effect of the coming 2019 trends is that even with these challenges, sellers are in a good position and homeowners will continue to enjoy positive financial gains from their home.

For more information, read the full report at https://www.realtor.com/news/trends/real-estate-trends-expect-2019/

 

Originally posted here by Tom Kalinski Founder RE/MAX of Boulder on Thursday, January 10th, 2019 at 10:05am.

Posted on January 10, 2019 at 11:51 pm
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7 Fall Fix-Ups to Prep Your Home for Winter

Cooler temperatures and mountain snow are reminders that it’s time to prepare your home for winter. Here are steps to take to get ready for falling leaves and freezing temperatures, as recommended by House Beautiful.

1. Prepare your gutters

Clean and well-functioning gutters are a must for winter. Now is the time to clear gutters of leaves and debris and replace damaged sections.

2. Ensure against drafts

Windows are a major source of heat loss in the home. One simple solution is to eliminate drafts with weather stripping. To check for drafts, close the door or window on a strip of paper, and then slide the paper. If it slides easily, it’s time to replace your weather stripping.

3. Disconnect outdoor faucets

Take action sooner rather than later to avoid frozen and bursting pipes in your home. Drain and disconnect your hoses from outdoor faucets before the first freeze.

4. Protect outdoor furniture

Outdoor furniture lasts longer and looks better if it is protected from winter snow and freezing temperatures. Either store the furniture inside for the winter or cover it with a waterproof furniture cover.

5. Repair driveway and sidewalk cracks 

When water freezes in small cracks, the small cracks become big cracks. It’s easy to prevent by filling those small cracks with concrete crack sealer. Your drive and walkways will look much better over the years – and will be safer – if you take this preventive step.

6. Fertilize your lawn

As your grass prepares for winter, it needs to be fertilized to prevent stress and damage through cold temperatures. When days shorten, turf grass shifts food reserves from leaves to roots. Fertilizing grass in the fall feeds the roots and paves the way for a healthy green lawn when spring comes.

7. Check your snow blower

Go ahead and dig your snow blower out of the garage now. Check the oil, tires, and shear pins and crank it up now, before the snow flies. That way, you’ll be ready for that first snowy morning.

For more helpful tips, read the full article at https://www.housebeautiful.com/lifestyle/cleaning-tips/a22652916/fall-home-maintenance-checklist/

 

Originally posted here by Tom Kalinski Founder RE/MAX of Boulder on Friday, October 19th, 2018 at 8:45am.

Posted on October 24, 2018 at 4:29 pm
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