Market Update

Through its first three quarters, 2007 has been a turbulent year. The real estate market has had its ups and downs as well. As you probably recall, we started out the year with a bunch of snow, colossal amounts actually, that chilled the early year sales and delayed the beginning of our selling season. After we thawed out and convinced our out-of-town buyers that we don’t usually get that much snow, the market chugged along at a pretty good clip during the second quarter. A few sellers were even lucky enough to sell their homes for over full price, a rare occurrence in today’s market! During the third quarter irrational exuberance in the mortgage industry came to an end. Mortgage companies were going out of business and borrowers who were not financially ready to buy a home were told that they “no longer qualify”. The era of easy money has come to a close and buyers need both income and a down payment in order to purchase a home. Go figure. The shake up in the mortgage industry has and will continue to affect the overall real estate market but I believe that this reality check will help us in the long run. It is not sustainable to have homeowners in homes they cannot afford. In the short term we will continue to see many foreclosures in some markets and fewer qualified buyers.

If you have been paying attention at all to the media you have heard this before. The thing about real estate is that it is NOT a national story. Real estate is a local phenomenon, neighborhood by neighborhood. The news headlines that proclaim “Real Estate Bust”, “Real Estate Bubble Bursting” etc. do not apply to us. Our real estate cycle seems to be on a bit of a different schedule than the majority of the county. We had our boom early, ending in 2001 or so. When the boom ended our bubble burst with a fizzle not a boom. We have been slowly leaking air over the past five years or so. Some areas in our market area have felt the discomfort that foreclosures and negative appreciation bring to an area. People do not plan nor feel comfortable with owing more than they can sell their homes for. Other areas in our market area have performed pretty darn well over the past five years. Our market is slower now, most sellers will tell you that they hoped for better results, but we have many things going for us in our area. We have a healthy local economy with low unemployment, good income and a population that is growing. People continue to move to the Front Range of Colorado and those people need housing. It is our belief that there is pent up demand waiting for good news on the real estate front. Most people are not required to move at any certain time. To most people an upward move is a luxury caused by a change in family or circumstances. Most of these people can wait a year or two or more if they don’t feel like it will be easy. Once we start getting a bit of good news about the real estate market the pent up demand will release and we will start to see some real strength.

As I mentioned briefly earlier, on a comparative basis with the rest of the country we are doing well. The latest report from the government Office of Housing Enterprise Oversight has the Boulder/Longmont area ranked 185th out of 287 areas with an annual appreciation rate of 2.25%. As of a year ago we had an annual appreciation rate of 3.55% which ranked us 218th. We are not improving but the other areas in the county are getting worse. So how are we doing? Here are a few details. Our sales through the first three quarters are down roughly 9% from last year. The median price for a single family home in Boulder County is $374,000 and $550,000 in the City of Boulder. On average it takes 76 days to get an offer. During July, each listing in our office averaged about 9 showings during the month. During September it was a little under 5 showings per house. None of the sales statistics include houses that don’t sell and there are many that don’t sell. Now is not the time to be an unrealistic seller. When there are dozens of homes to look at in your price range, buyers don’t care how much you owe or how much money you put into the basement. All they know is that they are not interested at the price you are asking. This brings up a couple of other interesting tidbits about our market. First let’s talk about the sales price to list price ratio. This ratio gives us the average negotiation off of the last list price. In our strong markets of the past, this ratio was around 98% or a 2% negotiation. Right now the average is around 97% or 3% negotiation. What gives, it takes almost three times longer to sell a house right now but the amount of negotiation is largely unchanged. What this says to me is that buyers are unwilling to deal with unrealistic sellers. If the house is overpriced they move on and find another one that has the entire package, price, location and condition. The second interesting market fact is more anecdotal and goes hand and hand with the first one. Buyers are seeing more homes before they purchase a home. There is no real sense of urgency on the part of buyers and they are making sure they turn every stone before they make their decision. As we finish the year, sellers will need to make sure they are well positioned in the market and buyers will need to realize that the market is not as bad as you’ve heard.

So, how can I help? I care about my clients and do everything we can to help them accomplish their goals. I sometimes become property managers, finding short term tenants for vacant homes, I stage homes to make them attractive and inviting and do extensive marketing to reach prospective buyers. I am honest and thorough in advising our clients about current market conditions. Please call if I can be of help to you or your friends and family. I appreciate the opportunity to be of service.

 

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