Friday, June 10, 2011
A look at the current real estate market; provided by RE/MAX ALLIANCE
In some obscure way, a healthy real estate market mirrors life; it seeks balance. It trends toward a market where there are a practical number of homes for sale, an adequate number of home buyers, reasonable mortgage interest rates, and an acceptable level of appreciation in home values. When all of these elements are in alignment, tranquility exists. When they aren’t? Then some degree of confusion and uncertainty prevails.
The Boulder Valley real estate market has not experienced a “balanced housing environment” for the past few years. Inventory levels of available properties have declined as many homeowners have decided to either stay where they are and not sell their home or they have rented their home and moved on; themselves often renting somewhere else. Homebuyers have become less visible these days. Through May/2011, Boulder County single family home sales are down 18% and attached unit sales are down 34% when compared to the same time frame for 2010. The overall market is down 23%.
In today’s real estate market, there are certain considerations at play. (1) Buyers are bargain hunters. They want the maximum return on the dollars they are investing in a home. They don’t want to lose money. They believe in the old adage, “Buy low, sell high.”, but they aren’t always confident what low is or what high might be. (2) Price overcomes all objections. There’s a price where everything will sell, even if the seller needs to bring funds to closing. That’s one of the issues facing the housing industry today; it’s an upside down world. Many homes are worth less than what is owed on them. The solutions to that dilemma are to stay the course and hope housing values improve, let the bank have the property or belly-up to the bar at closing with cash in hand, if you’re the seller. (3) He/She who has the gold makes the rules. Mortgage companies and banks are the pathway to the great American dream; home ownership. Unfortunately, that pathway is strewn with stringent governmental and banking regulations, conservative underwriters and appraisers, and difficult qualifying requirements. Mortgage rates have continued to hover in the 4.5% to 5.0% range for the traditional thirty-year fixed rate loan. (4) Seller’s are unrealistic regarding pricing. Real estate markets are like sifting sand; they change quickly. New neighborhood sales reflect on neighborhood values. What sold down the street three or six months ago may not be an accurate representation of what a seller’s home may be worth today. (5) Consumer awareness is at an all-time high. Home buyers have immediate access to a plethora of housing information on the Internet. Some of it isn’t always accurate, but it’s there. More consumers today begin their search for a home, car, appliances, etc. on-line than ever before. They do their homework. When they show-up to purchase, they are educated about the nature of the marketplace.
On the bright side, homes are continuing to sell. Median home values for the Northern Colorado housing market have remained relatively stable for the past few years, only off seven (7) percent when compared to 2005 [slightly over one (1) percent per year on average]. Much better than what has happened in some of the bell weather states where double digit depreciation has been the norm.