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by Osman Parvez
Today, one of my buyers sent me an email. Let's call him "George."
George wrote:
I disagree with your diagnosis of 'over-heated demand.' We have here under-heated supply - over 10yr lows? Longer? I still say the market would be more 'average' if supply met the demand along the usual mean. I think you are not graphing this all out yet because you know I'm right...
George, this blog post is for you. It's a special, by request, analysis of market conditions in Boulder. Let's look at the data.
Boulder Real Estate Market Update for April 18, 2012 
This first chart shows monthly inventory levels in the City of Boulder for traditional, detached single-family houses. The red line represents this year, 2012. The blue line is last year, 2011. The grey shaded area is the long-term average based on data from 2004 to 2010.
As you can see from the chart, George is right. Inventory is tracking well below average. There are currently 388 homes on market. This year started off with inventory
15% below average during January and the gap increased to
18% below average with the most recent preliminary data for April. Note: roughly the same statistics apply when comparing this year with last year's market as there was no appreciable difference between the long-term average and 2011's inventory pattern in the first quarter.
Let's look at sales volume.
Volume looked fairly typical in January and February, but then 65 houses sold in March, an
increase of 63% from the year before. As of this writing, 29 homes have already sold this month and 150 houses are under contract (or pending). This suggests that closings this April will far exceed last year.
Oh, but despite the current spike of activity, sales volume is completely in-line with the long term average. How can that be?
The answer is that the long-term average includes data from some very strong years. For example, there were 633 houses sold last year (2011) in Boulder. That means 2011 was down approximately 39% from the peak of 1,031 houses sold during 2004 and down nearly 26% from the average 2000 to 2010.
Put another way, if sales continue at the current "average" pace, we'll have over 850 closings this year which amounts to an increase about 36% over last year. Pulling out my crystal ball, it looks like sales volume this year will easily exceed last year, but I have a hard time believing a 36% increase for the year.
So much for averages. Let's drill down a bit, and take a closer look at the entry level in Boulder.
This chart compares sold houses at the entry level in Boulder for the 1st quarter over the past two years. The grey bars represent 1Q/2011, the blue represents 1Q/2012. I've charted two price ranges; $350,000 to $450,000 and $451,000 to $550,000.
Last year, 20 houses sold during the first quarter at both price ranges. This year, sales volume spiked upward for the lower price range, which registered 34 sales. Meanwhile, the higher range dropped to 14 sales.
Year over year, the net increase is just 8 houses. But these two price segments are behaving very different from each other.
This chart (green bars, above) shows the difference on a percentage basis. The lower level tranche ($350K to $450K) spiked upward 70% while the higher level tranche ($451K to $550K) actually dropped 30%.
This distinction is also reflected by analyzing inventory under contract. Take a look at the following pie charts.
This first pie-chart shows inventory under contract at the lower price range ($350K to $450K). At this range, 66% of the properties on the MLS already have a buyer.
At the lower price-tranche, it looks more like 50/50. Not great, when it comes to selection, but better.
Conclusions - The Race is OnThis analysis confirms our recent market experience and the anecdotal evidence from other realtors. This Spring, the most desirable houses at the entry level in Boulder are flying under contract, sometimes within hours of hitting the MLS. Thus, we are advising our clients with strategies that reflect current market conditions.
For buyers, chief among strategy changes is to see the available inventory as soon as possible. Or as a former boss liked to write in ALL CAPS in his emails, TRIPLE ASAP!! When a house at the entry level in Boulder hits the MLS, we dropped everything and try to schedule a showing immediately. I'm effectively "on call" for this and if I'm traveling, I'll established a backup Realtor who is covering my business.
As I told a recent client, it really doesn't matter if you are in your pajamas and getting ready for bed. A house just hit the MLS and it's vacant. Get in the car and meet me at the property, we need to see it immediately.
If my buyers have the flexibility to see houses priced above $450,000 - it might be worth taking a look. It is possible sellers with houses that are not getting much attention would consider a steeper negotiated discount.
On the flip side, if I had a seller who was on the cusp of $450,000 - I would strongly advise them to price it below that threshold and hold firm on negotiation.
What About GeorgeSo is my client George right? The answer is yes and no.
Yes, right now there is record low inventory in Boulder, but the relative increase in sales volume (demand) is eclipsing that record low inventory (supply). Sales volume is up 63% across the broad market and even higher at the entry level, about ~70% in the lower price tranche compared with a year ago. This is
despite the low inventory.
Buyers are finally getting off the fence - at all price levels. Spurred by a recovering economy, expensive rental market, and record low mortgage rates - buyers are rightfully getting back in the market. Sellers meanwhile haven't been getting the message. I'll put it in bold.
If you are thinking about selling your house, don't wait. The market is in great shape NOW. Call me at 303.746.6896.
I will grant George one very valid point. This year's sales volume pattern is in-line with the long term average. But as I mentioned before, the long-term average includes peak volume years such as 2004, when over 1,000 houses sold (38% more than last year). You would think inventory would also be about 38% higher for that peak year, but it's not. In April 2004, inventory stood at 469 houses (21% higher than current inventory)
Negotiation Leverage ShiftsEven within the entry level tranche, there are important distinctions which effect negotiation. 5 bedroom properties tend to appeal the most to investors because rents have risen to ~$800 per bedroom near CU.. Some houses at the entry level have updates or have been more extensively remodeled. Some are on busier streets or have monstrous neighbors with looming (orange) walls.
All of these factors, and more, impact the demand for a house and the leverage a buyer has in the negotiation. If you're serious about buying, it's worth taking the time to get a serious Realtor who is familiar with the active inventory and helping you track sales. As we advise our buyers, tracking the market is the only way a confusing market landscape will come into 20/20 focus.
Blogging is how I inform the public about what's happening in the market, but my first priority is ALWAYS my clients. From entry level homes to historic estates, if you're looking for houses in Boulder, I'd love to help you learn more about market conditions and negotiate the best possible deal. Call me. 303.746.6896.
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Note: Our goal is to provide exceptional service to our clients. The ideas and strategies in this blog post are the opinion of the writer at the time of publication. Silver Fern Homes recommends careful and complete due diligence before buying or selling real estate or other investments. Consult with your professional advisers before making financial decisions. This article is not intended as legal, tax, or investment advice. Silver Fern Homes will not be held liable for investment choices derived from this article.
by Dallice Tylee
Look, I'm a quantitative, research and analysis driven type of guy. Over the years, I've learned that analyzing the value of historical homes requires quantitative evaluation on qualitative characteristics.
