An article titled “Sales Cut in Half” by John Aguilar appeared above the fold in today’s Boulder Daily Camera. It referenced the recent sales statistics of single family homes in the City of Boulder. The article has announced to the general public what I have been seeing for a few months, activity is down. This does not mean that the sky is falling or that we are following Detroit, Phoenix and Las Vegas into a real estate armageddon. What it means, is that we have been hit, like everyone, by a perfect storm that is not conducive for Boulder’s particular market.
Home sales depend upon buyers who are in a position to buy. This means they have a stable job, money for a down payment, good credit and verifiable reserves. During the past decade a buyer could fudge on 2 or 3 of these and still get away with it. This leinancy was a very strong grease to the wheels of the market. Now you need all four factors to buy a home. This has taken many people out of the market.
Boulder is a high priced area and many of the houses are only attainable by getting a large mortgage on the house. If a buyer doesn’t have a substantial down payment a jumbo mortgage must be obtained. Right now conventional interest rates are in the 4’s but jumbo loans are much higher. Higher jumbo rates combined with a decline in the stock market, increased unemployment and low consumer confidence has made demand for homes in the upper ranges lower than normal. Unfortunately, this lower demand comes at a time when we have an oversupply of homes over $1 million. This market is the one that is hurting right now in Boulder. Market below $500,000 is actually quite healthy.
All of this bad news has happened when our sales are traditionally low. As spring progresses and as the economy turns around sales will increase. Boulder has very few foreclosures and a very resilient set of sellers. Our market is not in a position to go down quickly. Last April there were 65 home sales in Boulder, so far this month there have been just 6 so far. However there are 65 homes currently under contract in the city. Not all will close this month, but clearly we will close more than the 35 that closed in March. I will be watching closely but not looking at each segment in the market is not getting the entire story.