Boulder Valley Economic Snapshot - March '11

Spring hasn’t quite sprung as the last remnants of winter continue to meander across the Boulder Valley. This time of year is a time of change and uncertainty when it comes to the weather and the local real estate market. Spring and early summer are characteristically the busiest times of year for home sellers and buyers. The real estate market generally starts its pattern of increased listings and emerging sales as the weather improves. The market begins to de-hibernate.

This year should be similar to past years as home sales tend to peak in June and July; and then begin to drift lower during the balance of the year. The question becomes: Is there anything different this year than the past few years in the local real estate market?

For Boulder County, sales activity through February/2011 is comparable to sales activity through February/2010. But, last year the The Worker, Homeownership and Business Assistance Act of 2009 was still in place for the first part of the year. Sales in the March/2010 through June/2010 timeframe were up noticeably (+36% for single family homes; +32% for attached units) over the same time period for 2009. For 2011, expect sales numbers to be lower than 2010 for those months since there is no government funded buyer incentive program available this year.

Mortgage interest rates have trended-up slightly over the past few months; now residing around five (5) percent for the traditional fixed rate thirty-year mortgage. Lenders are willing to lend, but they require borrowers to provide a horde of financial information. The old days of having a warm body and firm handshake was all you needed to get a loan are … the old days. He who has the gold makes the rules is the new path to acquiring the lender’s money.

Entry level single family homes, those priced from $100,000 to $400,000, will continue to be the most active part of the market. In 2010 they were 57% of the total sales for Boulder County. Thus far in 2011 they are 58% of the single family market. Homes priced from $1,000,000 and up were 5% of the single family market in 2010; they are the same so far this year. The Absorption Rate for homes priced $1,000,000 and up in 2010 was approximately 25 months. The overall market ended 2010 with an Absorption Rate of 6.3 months.

There are pockets of new construction occurring throughout the Boulder Valley. Louisville is doing some in-fill projects. Lafayette is showing some renewed interest in a couple of their existing new home subdivisions. There is sporadic building in some of the other areas, but overall there is no rampant new construction going on like there was six to eight years ago.

This spring look for the Boulder Valley real estate market to continue to be a buyer’s market. Home sellers will need to be knowledgeable of current market conditions, as it relates to home values, as the inventory level of available properties begins to rise. Pricing will be one of the key elements a home seller must make. Pricing a property above current market values and saying bring me an offer and I’ll negotiate is a waste of everyone’s time.

Unlike gas prices, where the price for a gallon of gas increases while you’re pumping it, mortgage interest rates move gradually up and down. Economic forecasts are for rates to remain around their current levels for the rest of the year. Interest only and adjustable rate mortgages have become less popular as fixed rate loans have become more reasonable.