Grand Escalante National Monument is a place in Southern Utah where all of the different layers of rock are exposed for all of those brave enough to go have a look.  I for one love an adventure, and take any chance I can get to spend some time in that beautiful region.  Since I cannot take the trip right now I thought I would do a little back country adventuring into the layers of Boulder real estate.Desert Mesa at Sunset – March 2004

As I mentioned last week, the market for real estate priced below $500,000 in Boulder is actually quite healthy.  It is the market over $1 million that is feeling the burn right about now.  In order to throw a bit more light on the differences between the price ranges, I thought a comparison of under contract percentage and absorbtion rate would help clear up any question on where the strength in the market is right now.

The following statistics were taken from the IRES MLS system and reflect houses that use Boulder as a mailing city.

Under Contract Ratio:

U/C %
< $500,000 23%
$500,001 – $1,000,000 15%
$1,000,001 – $1,500,000 7%
> $1,500,000 5%

 

Absorption Rate (Inventory):  using the sales rate over the past 6 months

Inventory
< $500,000 11 months
$500,001 – $1,000,000 21 months
$1,000,001 – $1,500,000 31 months
> $1,500,000 68 months

 

Let’s first look at the under contract ratio.  This simply shows the activity in the market right now.  It compares the number of properties on the market with the number of those properties that have a contract on them.  According to Fannie Mae 15% is the lower end of a normal market.  This means that all homes in Boulder below $1 million are part of a normal market.  Sales are down and the number of homes on the market are down so this year’s normal market is not so robust as past years normal markets.  Right now there are too few buyers for the homes listed above $1 million.  Fewer than 7% of the homes in that range are under contract.  Competition is feirce and if a seller is smart they need to price their home very well in order to get it sold.

The absorption rate has been rising over the past few months.  This is in direct correlation to fewer sales.  I usually use a 12 month average but today I thought it was more accurate to use the past six months of sales data to illustrate the point.  Given the monthly sales rate over the past six months it would take 11 months to sell all of the homes in the strongest price range and 68 months (5.5 years) to sell all of the homes currently on the market listed over $1.5 million.  As the spring sales begin to kick in these number will fall but they are still very high.  Another indication that we are over supplied in the upper end of our market.  If you are curious the absorption rate using 12 month sales data, the numbers are lower but the idea is the same.  Here are the conservative numbers:

6.2 months; 11.5 months; 21.9 months; and 51.5 months (same categories and order as above.

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