Tuesday, February 8, 2011

Boulder County February 2011 Economic Snapshot

Economic Snapshot

A look at the current real estate market; provided by RE/MAX ALLIANCE


Before a declining real estate market can recover it must reach a plateau. It must halt its negative momentum and begin the arduous process of turning itself around. This can often take an inordinate amount of time, because it is contingent on a number of factors. There needs to exist favorable mortgage interest rates, motivated and somewhat plentiful buyers, reasonably priced properties and acceptable levels of available inventory. There must be a timely transition from a buyer’s market to a more balanced buyer/seller market.

The Boulder Valley real estate market has struggled for the past five years as the national economy drifted into a chaotic state. For Boulder County, overall sales activity for single family and attached units dropped 42% during this five-year period; an average of 8.40% per year. A buyer’s market prevailed.

The Chinese calendar for 2010 was known as the “year of the tiger”; for Boulder County 2010 may be remembered as the “year of the plateau”. Real estate sales last year for Boulder County were comparable to 2009; less than a one percent difference.

2011, the “year of the rabbit” in the Chinese calendar, has gotten off to a quick start. Boulder County single family and attached unit sales for January/2011 are UP nearly 19% over January/2010. That’s without any government assisted first-time homebuyer program being available. Hopefully, this isn’t a tortoise and the hare tale, where the hare takes a nap midway through the course its running or the real estate market slumps in the second half of the year.

Here are some things to digest as we venture down this precarious real estate path the rest of 2011.

1. Mortgage Interest Rates: Back in the late 1980’s and early 1990’s, home buyers would have literally killed to get a thirty-year fixed rate loan for 4.75%. It would have felt like they were stealing money from the banks. They would have been lined-up for blocks; drooling on themselves. In today’s economic climate 4.75% doesn’t generate the same level of enthusiasm. It’s nice, but it doesn’t get home buyers salivating. Mortgage interest rates have risen slightly over the course of the past few months. If the housing market rights itself, look for interest rates to continue this pattern.

2. Available Inventory: That black cloud perched on the horizon is composed of bank foreclosures, short sales and HUD properties. It’s unclear how many of those little devils are out there. They keep popping their heads-up. In the past couple of years many of them have been purchased by savvy investors, first-time homebuyers or, on a more limited basis, buyers looking to take advantage of a price sensitive marketplace and make a move-up. Lack of inventory creates motivation in the mind of buyers. Unfortunately, high inventory levels of available properties have been the norm the past few years. BUT, that may be changing. New residential listing inventory for the Northern Colorado real estate market for January/2011 is down 20% compared to January/2010. Is there a pattern developing here i.e. more sales and fewer listings?

3. Residential Home Values: Finally, for a plateau to exist there needs to be stabilization in market values. For Northern Colorado, the median priced residential property sold in January/2011 for $225,000; for January/2010 that number was $212,000; for January/2005, the year when Northern Colorado sales activity peaked, it was $227,000.

Market data statistics are from IRES the Northern Colorado MLS.