I had the honor of participating in an article for the Boulder County Business Report. The article reports on the current market conditions from the perspective of Ken Hotard of the Boulder Area Realtor Association, Carolyn Hoyt of McStain Neighborhoods, (a local home builder) and myself. The article by Monique Cole is below.
Homes sales slow; somewhat stable
By Monique Cole
December 12, 2008 —
The mortgage crisis, falling stock values and declining market confidence have created a perfect storm in home sales nationwide.
Local experts said Boulder Valley’s market is stable compared to the rest of the country, however, and they don’t expect the situation to get much worse in 2009.
“We are certainly not feeling the pain of Michigan, Chicago and many parts of California,” said Ken Hotard, senior vice president of public affairs for the Boulder Area Realtors Association.
When asked where he sees the region’s home sales market headed in 2009, he said there will be “very little change but maybe some softening.”
Hotard pointed to single-digit changes year-to-year in median sales prices as proof that the local markets are relatively stable. He said the national regions that are being hit the hardest right now are those that saw enormous spikes in sales prices during the past four years. “That never happened here,” he said.
Still, sales volume is slowing throughout the Boulder Valley due in part to economic uncertainty and a tightening in the credit markets.
“People are just like deer in the headlights, just frozen because of the uncertainty,” Hotard said. “How soon that can change is anybody’s guess.”
National experts have named the Denver metro area as one of the first areas that will come out of the current market slide, according to Neil Kearney, a Realtor and owner of Kearney Realty Co.
“As soon as we start seeing some good news in the media we will start seeing a turnaround. I can’t predict when this will happen,” he said. “Right now it seems like people are hunkering down.”
Home sales volume has slowed in the third quarter in the greater Boulder area by about 13 percent, compared with last year.
“This continues a downward trend that began in 2006,” Kearney said. “I see a lot of pent-up demand – people who have wanted to move but have decided to delay a move until the ‘market gets better.'”
Normally lower demand will drive prices down, but supply has also declined to help stabilize prices in 2008.
“Median prices have been mostly flat, increasing in some areas and decreasing in others,” Kearney said. “Inventory is down roughly 17 percent when compared with last year. The lack of inventory has allowed prices to remain stable.”
Superior’s market has been stable, Kearney said, because it is mostly built-out, so there is little competition with new construction. Commuting convenience and reasonable prices have helped it compete with Boulder. Mountain sales have been weak for the past five years, with longer times on the market and more inventory, according to Kearney. Longmont’s high rate of foreclosures and large inventory continue to affect prices there.
According to MLS statistics, compared with last year median sales prices for the third quarter dropped in Boulder, Lafayette and Longmont by 5.1 percent, 14.1 percent and 11 percent, respectively. Meanwhile median prices climbed significantly in Broomfield, Erie and Superior by 11.9 percent, 6.1 percent, and 15.2 percent, respectively. As of October, the highest median price is $573,000 in Boulder, and the lowest median price in the Boulder Valley is $225,000 in Longmont, according to Information Real Estate Services.
The low end in all local markets continues to move, Kearney said. “Boulder’s high end is seeing softening while the prices below $600,000 in the city are still selling fairly well.
“It is no coincidence that the years with the most sales were the same years that credit was easy. This tightening in credit has been affecting us for a year or so,” Kearney said. “Much of the upper end of our market is not affected by the credit crunch.”
However, the high end has been hit by recent panics on Wall Street. “Much of Boulder is wealth based, not income based. This has allowed the Boulder area to have a larger than normal high-end market,” Kearney said. “As the stock market has dropped this year the wealth-based buyer has felt … well, less wealthy. This has slowed high-end sales.”
In the housing crisis, perhaps no one has been harder hit than builders. McStain Neighborhoods recently said it would lay off more employees and shut down its Louisville headquarters, switching to “virtual offices” based in model homes or the residences of remaining staff.
“The extroverts will be in the model homes and the introverts will be working in their homes, and everyone’s happy,” said Caroline Hoyt, co-owner of McStain. Financial pressures have also forced McStain to layoff about 80 percent of its staff during the past two years.
McStain has shelved its West Grange project at Nelson Road and 75th Avenue in Longmont – at least for now. “There just isn’t enough market to spend millions and millions to develop the property,” Hoyt said.
Construction will continue at Indian Peaks South in Lafayette. “Sales are tracking along OK. We’re building half as much as we wanted to, but that beats a quarter.” Hoyt said she does not foresee any price reductions in 2009 but said they might be more flexible on the cost of upgrades.
New housing starts have decreased dramatically in the Denver metro area, Hoyt said, quoting Metrostudy statistics. In the third quarter of 2008, there were 5,671 new housing starts compared with about 10,500 in 2007 and 18,000 in 2006.
“It’s as negative as I’ve ever seen it, and we’ve been in business for 45 years,” Hoyt said.
McStain survived the recession of the ’80s, which put many other builders out of business. Hoyt hopes her company can survive this one, too.
“We plan to muddle along here. It’s not going to be easy, but there you go.”