In 2017 Boulder Real Estate Negotiation Tipped Toward Buyers

In 2017 Boulder Real Estate Negotiation Tipped Toward Buyers

In 2017 in Boulder County, the average negotiation off of list price for all sales was 1.3%.  In 2016 it was .36%.  However, when you look at it more closely both over time and across price ranges there are some good market insights.  The chart below shows the sales in each of the last four quarters separated into three categories; those that sold for below the list price (blue), those that sold for exactly list price (orange), and those that sold for above list price (grey). As an example, let’s look at the second quarter of 2016 which is the second group from the left.  During that quarter Boulder County was ranked #1 in the nation for appreciation by  During the quarter, 30% of the sales went for less than the asking price, 20% went for exactly the list price and 50% of the sales sold for a price in excess of the asking price.  This past quarter 56% sold for less than list price, 23% went for exactly asking price and 21% went for above the list price. The overall take away is that buyers have gained some traction in negotiations.  There are two trend lines that intersect.  The upward trending blue line represents the trend of properties selling below the asking price.  The downward trending grey line shows the trend for homes selling at a premium. 

With the information above we can conclude that the overall market is trending away from a strong sellers market.  But in real estate broad generalities are not always accurate.  When we look at individual price ranges we find that the lower range is still very strong and in the luxury ranges the market has shifted more strongly toward the buyer.  During 2017 the average sales price to list price ratio was 98.7%. In other words, on average buyers were able to negotiate 1.3% off of the list price.  However, when we break this down by price range we find that during 2017:

  • Homes that sold for $500,000 or less sold for .9% above list price.
  • Homes that sold between $500,000 and $1,000,000 sold for .4% above list price.
  • Homes that sold between $1,000,000 and $2,000,000 sold for 2.75% below list price.
  • Homes that sold for prices above $2,000,000 sold for 4.17% below list price.

The bottom line is that if you are buying a house in the entry level of any of the Boulder County communities you won’t have much wiggle room on price.  If you are in the market for a home in the luxury range you will have much more room for negotiation.  Don’t be fooled by averages.

The Real Estate Cycle – Where Are We Now?

The Real Estate Cycle – Where Are We Now?

The Real Estate Cycle

The Real Estate Cycle

Approximately 2500 years ago Heraclitus of Ephesus said “The only thing that is constant is change”.  In the moment we sometimes forget that forces larger than we can see are slowly moving culture, markets and people.  Everything we see is changing, however the rate of change makes a difference. We notice more readily the melting of an ice cream cone than the erosion of a mountain.  It’s normal to only take note of what we can readily see.  However, there is wisdom in taking a longer view.

Real estate is cyclical.  There are many factors involved, but the peaks and valleys of the real estate demand and value have been shown to have a relatively consistent cycle of approximately 18 years.  Economist Homer Hoyt made a detailed study of the Chicago real estate market and the broader United States real estate market and found that it has run its course in a steady 18 year rhythm since 1800.  There have been exceptions that have disrupted the normal cycle such as The Great Depression, World War II and the post war boom but on average, the business cycle and the real estate cycle have been very consistent including the 18 year cycle than ended in 2008.  

The infographic above shows the four phases of the real estate cycle.  Here is more information on each of the stages of the cycle.  Most studies present Recovery as the first phase of the cycle, but since the last recession was so memorable I think it makes a good starting point.


Think back to what was in the news in 2008 – 2011: Foreclosures, unemployment, short sales, mortgage reform, lowering interest rates, 40% drop in real estate sales, stock market losing value, declining home prices (Boulder was one of the few markets to hold most of its value), consumers reducing spending, rental vacancies, lower rents, incentives to buy and lease, etc. etc.  The situation was shocking, many of the US real estate markets had just climbed to all time highs, buyers were using easy credit to buy multiple homes thinking that the easy money would continue indefinitely.  And it did, until all of a sudden it crashed. Fortunes were lost. Especially for those who couldn’t hold on for the recovery.  This was the low point in the economy and the real estate market.  The signs to look for when recession is on the horizon are; interest rates are raised to slow an over heated economy, increased inventory of unsold homes, higher rental vacancies, new construction shows with more unsold inventory and higher interest rates (although some developers who are late to the party always get caught), mortgage delinquencies increase which leads to more foreclosures.  During the recession it is a buyers market.  Those with the wherewithal should purchase real estate at a discount.


This is the bounce off the low point.  During this phase the inevitable march of population slowly increases the demand for real estate and other goods. Accumulated inventory gets absorbed, vacant rental units get rented, adult children slowly move out of their parents basements, the Fed lowers interest rates to stimulate demand. With favorable interest rates businesses expand.  They hire more employees, make capital investment.  During this phase, prices stabilize, excess inventory gets purchased and there is virtually no new construction (developers are licking their wounds), in the aftermath of the recession, banks are very careful about lending.


Recovery turns to expansion when most of the available inventory has been absorbed by individuals of businesses.  Rental occupancy rates are higher than average, new construction finishes are at a low and stalled projects finish out, built up foreclosure inventory is all but gone.  Once the expansion is recognized developers scramble to fill the new demand by planning new projects. However, developing property takes 2-3 years from start to finish so this isn’t instantaneous, there is a lag. With very little new construction the demand for re-sale homes is very strong.  This results in rising prices and in some markets the supply demand discrepancy results in multiple offer situations that further exacerbate price increases.  In times of unusually low inventory during this phase (before the new construction projects which have been in development are complete) prices tend to reflect an anticipation of where the market is headed rather than the current market price.  This is a sellers market.  As the expansion phase matures buyers and renters have increased choices but continue to find new places to live.  Positive pressure on prices slows. The real estate market falls into a phase of balanced activity. As long as the broad economic forces are stable, this phase can last quite some time. People have jobs, they start families, they buy cars, the buy houses, they buy refrigerators.  Companies are making profits, they continue to invest in infrastructure.

Hyper Supply

The delineation between market expansion and hyper supply is marked by an increase in unsold inventory and and increase in rental vacancy.  The projects which were started late in the expansion phase continue to come available but to an increasingly tepid response.  Growth in prices is decelerating.  If developers recognize the turn in the market and stop building, the coming recession can be softened considerably.  In this phase, housing, rental units and office space become over built.  As interest rates rise we are then led into another recession.

Where  Are We Now?

First let’s eliminate where we know we are not.  We are not in recession, nor are we in recovery.  Over the last ten years, the Boulder area real estate market has come through the recession phase and then quickly moved through the recovery phase.  I say quickly because we were fortunate not to have a big back log of foreclosure homes that needed to be sold.  Since mid 2012 we have been in the expansion phase.  Throughout the Denver Metro Area we have seen unprecedented construction of rental apartments.  We have seen a steady stream of new residents drawn to our area by a good economy and a great lifestyle. We have seen compounding double-digit real estate appreciation that rivals the top markets in the nation.  Early this summer, the temperature of the expansion seemed to have been turned down a few notches and we are now seeing a slowing in price appreciation and a bit less demand.  However, our inventory is still very low and the overall economy is still doing well.  We seem to be at the beginning of a cycle of increasing interest rates but a 30 year mortgage is still at around 4%.  To me it seems like we are still in the expansion phase, but if each phase was a day we would be definitely in the afternoon.  Here are the next signs we need to look for which would indicate a shift toward the hyper supply phase: 1) increased vacancy rates on rental properties 2) Meaningful increase in interest rates 3) Increased inventory of resale homes for sale 4) New home builders offering incentives and price reductions.  

If we are to believe that the real estate cycle runs in an 18 year cycle, we would expect our next major recession in 2024.  If you would like to discuss a personal strategy as it pertains to the real estate cycle I invite you to contact me.  Neil Kearney, Kearney Realty Co.  303-818-4055

Fireworks from 405 Hapgood

Fireworks from 405 Hapgood

The conventional place to watch the fireworks in Boulder is from Folsom Stadium.  But this year I watched them from the roof of my listing at 405 Hapgood.  405 Hapgood is located on the lower slopes of Flagstaff Mountain and has 180 degree views of Boulder.  The house is a great candidate for a remodel or a scrape and rebuild but what a place to host a fireworks party from your rooftop deck!  Here is a video that shows the finale from the 2017 Boulder Fireworks Show.

Boulder Neighborhood Guide 2017

Boulder Neighborhood Guide 2017

Boulder Neighborhood Guide

I realized a few years ago that people coming from out of town were having a hard time characterizing the different neighborhoods within Boulder.  In response I created the Boulder Neighborhood Guide. In this report I have split Boulder into eleven different areas and present the lifestyle highlights, schools, shopping districts, local recreation and real estate statistics for each area. If you’re interested in learning more about the different neighborhoods within the City of Boulder this is your guide.

Click this link to view and download the report.  Boulder Neighborhood Guide 2017

It is recognized that Boulder is a great place to live but the neighborhoods in Boulder are a bit hard to peg. Boulder was developed over time in a piece-meal fashion. The result is that many of the neighborhoods are only a few hundred homes in size. It is common to have two adjacent neighborhoods developed at different times and with completely different price ranges. While this report is not comprehensive, it will give the reader valuable information from which to start understanding the real estate market in Boulder. I will highlight the major neighborhoods in each area.

If you are visting Boulder you may be interested in where to stay, where to eat, things to do and how to get around.  You may also be interested in walking some of Boulder’s neighborhoods.  I have created a few self-directed walking tours in Boulder that may be fun if you are visiting town.  To access all of that information go my “Visiting Boulder Page

Vancouver Adopts a 15% Foreign Buyer Tax – Is Boulder Next?

Vancouver Adopts a 15% Foreign Buyer Tax – Is Boulder Next?

Vancouver British Columbia

Vancouver British Columbia

How Involved Should Government Be In Real Estate Transactions?

What just happened in Vancouver

In mid July the British Colombia provincial government convened a special session and passed a 15% transfer tax for real estate transactions in the greater Vancouver area involving foreign buyers. The tax went into effect on August 2nd.  The average price of a home in Vancouver is over $1 million so the tax inserted mid stream into the transaction was in most cases over $100,000.  There was no grandfather clause and many transactions that were in process didn’t close.  The ripple effect has been severe and sudden.

Let’s back up and discuss why the government felt the need to implement this new “out of the blue” tax in such a short time frame.  Over the past year real estate prices have increased by over 30%. Much of this appreciation is due to foreign buyers paying cash for real estate as a safe harbor for money instead of their national banks.  Most of the foreign buyers in the Vancouver area are Chinese.  I talked with a local and he said that he lives in a nice neighborhood and there are quite a few homes that are owned by Chinese citizens and are sitting vacant.  The yards are being maintained but nobody is moving in.  The local government officials were seeing their citizens being priced out of the market and homes sitting vacant. In their mind something had to be done.  And they did it.

Vancouver B.C. Skyline

Vancouver B.C. Skyline

Since the new transfer tax went into effect on August 2nd, the market in the Vancouver area has come to an abrupt halt.  Many transactions that were in process were cancelled and many buyers and sellers, both foreign and local, have taken a wait and see approach.  It has been reported that many Chinese buyers have moved on to other Canadian cities such as Toronto.  For better or worse the strategy seems to have worked.

What does this have to do with Boulder?

So what does this have to do with Boulder?  There is no transfer tax in the City and County of Boulder but there are a number of statutes  and fees that have a similar effect.  Connecting real estate to government programs can be an enticing and slippery slope.  Here are a few of the programs that affect real estate and are already in place in Boulder.

  • Permit Fees – Getting a building permit in the Boulder area (both City and County) takes time, persistence and a deep pocket book.  The goal of the local government seems noble – to require that new building or major remodeling be done in a safe, energy efficient manner that is consistent with the area in which the house sits. However, the process has become onerous to the extent that it’s difficult for a homeowner to navigate the process without professional help.  The high fees are really taxes that fund programs that the local government has deemed is best for all but should only be paid for by those who want to exercise their right to improve their property.
  • Inclusionary Zoning –  From the City of Boulder website “Inclusionary Housing (IH) requires that new residential development contribute at least 20% of the total units as permanently affordable housing.  Options for meeting this requirement include providing the permanently affordable units on-site, dedicating off-site newly constructed or existing units as permanently affordable, dedicating vacant land for affordable unit development or making a cash contribution to the Affordable Housing Fund, in lieu providing affordable units (Cash-in-lieu). Regardless of size, all annexed parcels with residential unit development potential are subject to the requirements of IH.” So, while I agree that we need to promote affordable housing in our community, this regulation forces developers to make their profit on 80% of their project. Making the market rate housing that they sell more expensive.
  • Green Points – From the City of Boulder website – “The Green Building and Green Points Program encourages the use of
    British Columbia Float Plane Dock

    British Columbia Float Plane Dock

    sustainable remodeling and building methods and technologies to conserve energy, water and other natural resources. The Green Points Program applies to all new residential construction, and additions and remodels larger than 500 square feet.  The purpose of the Green Points Program is to:

    • help homeowners find the products and designs for building “green;”
    • encourage Boulder homeowners to include cost-effective and sustainable remodeling and building methods that conserve fossil fuels, water and other natural resources;
    • promote the recycling of construction materials and reduce solid waste; and
    • promote better indoor air quality.”

    In order to comply with the Green Points program homeowners and builders end up adding features to their homes that they didn’t necessarily want. More than once I have heard of people adding an electric car charging station to their home when they don’t have an electric car – just because they needed more “Green Points”.

  • Smart Regs – Half of the housing stock in Boulder is made up of rentals. These rentals tend to not be improved upon as much as single family homes and tend to be held for longer periods of time by investors. Therefore, the measures included in the first three bullet points rarely came into play. So, a set of prescribed, required upgrades were designated for all rental properties in the city with a due date of December 31, 2018.  Again from The City’s website “The SmartRegs ordinances update the City of Boulder Housing Code, Rental Licensing Code, and provide new baseline energy efficiency requirements for existing rental housing in Boulder. Improving energy efficiency in existing rental housing enhances tenant comfort and supports the community’s energy goals and climate commitment.”
  • Septic Smart – This one is fairly straight forward. The county wants to maintain the quality of the water throughout the county and many of the septic systems are very old. So in order to mandate inspections they required that septic systems pass inspections and pay a small fee prior to property transfer.  Not a big deal but another precedent of looking to real estate transactions to solve other problems.
Vancouver from a Kayak

Vancouver from a Kayak

The City and County governments have many plans on how to make our area a model community and it will clearly take money in order to make many of these plans come to reality.  I’m afraid that Boulder may move past voter approved sales taxes for open space, and permit and use fees for builders to a more wide spread and lucrative real estate transfer tax.  Colorado mountain communities such as Aspen and Vail charge a transfer tax and now it happened in Vancouver in just two weeks without a popular vote – Special session. During the summer when the government officials were supposed to be on vacation.  Food for thought…


Note: I took the included photos on a trip to Vancouver last year. It was gorgeous!  To enlarge the photo just click on the photo and then hit the “back” button on your browser to come back to the story.

Has the market softened or is everyone on vacation?

Has the market softened or is everyone on vacation?

What a difference a few months make.  Back in April every new listing was inundated with buyers. Open houses were flash mobs and multiple offers were the norm.  Since Memorial Day it seems to be a different market and I’m trying to figure out if the fundamentals have changed or if everyone is just away on vacation.

First of all, this is not an unusual trend. The common perception is that summer is “the” time for real estate sales.  That might be true in other places, but in Boulder County spring is king.  Every year the market slows down for the summer.  Most years it’s in June, last year it was in late July and this year it appears (in hindsight) that it was late May.

Let’s be clear, the market conditions in Boulder County are still good, transactions are still happening, buyers are still out looking, new listings are coming on the market and deals are closings are still happening but it seems that the pressure in the market has waned.  Especially in the high end of each towns market.

In this article I will present a number of different measures that measure market activity.  Cutting to the chase it isn’t clear cut.  Let’s begin by looking at sales. This first chart shows the number of closed transactions in Boulder County each month over the past five years.  The orange line shows sales in 2016 and it’s clear that we are not keeping up with last year’s torrid pace.  Through the first half of the year sales are down 10% from 2015.Total salesInventory is low compared to past years and this has definitely been a cause for the lower activity.  When buyers don’t have many houses to see the chances that they find one to buy goes down.  This next chart shows the flow of new listings to the Boulder County market (all price ranges and types) on a weekly basis.  It appears that new listings peaked back at the end of May and if we follow the trend will be decreasing for the rest of the year.

New listings

Unfortunately, showings started falling just as more new listings were coming to the market.  More listings and fewer showings means that buyers didn’t have the sense of frenzy as they did back in April.  The graph below shows the gross showings by month in Boulder Louisville and Lafayette as set by Centralized Showing Service.  They don’t handle every showing in town but they have a very significant number and the sample is large enough to call it representative.

ShowingsSo far everything makes sense.  This is where it gets a bit fuzzy.  I track the number houses that go under contract each week in Boulder County.  From the graph below it appears that sales are still brisk.  This shows equal or more contracts even while there were fewer showings.  Obviously there are still buyers out there and finally with less competition they can jump on a property and get their offer accepted.  It’s been all too common these past few years for buyers to look around a quite a few houses, find the right one, get beat out in a multiple offer situation and then be forced to start anew.  Wash, rinse, repeat!  This cycle pumps up showings.  In the old days, a new listing comes on the market, buyer sees the listing, buyer likes the listing and then buyer buys the listing.  Maybe we are getting back to that.  Refreshing!

under contract

Before I started checking any of these statistics I felt the market slowing. Fewer listings for my buyers to see, not so many people at open houses and houses staying on the market a bit longer (what’s longer than immediately?).  In an extreme sellers market sellers sometimes get greedy and when they don’t get their price in the first week to ten days they come back to reality a bit.  So it would make sense that there would be more price reductions.  Looking at the graph below we can see that the answer to that query is technically yes, but it doesn’t support the hypothesis that the market has changed.

price reductionsGiven the information below it seems that the market has slowed but it seems more like a vacation than something more permanent.  If you need to sell your house this summer you may need to lower the price.  If we are patient, we will most likely feel the pressure rise when the buyers are back in town.

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