Locally, we began to see improvement in the local real estate market in September 2009.  A direct result of the Homebuyer Tax Credit which was initially scheduled to expire at the end of November but has since been extended and expanded. 

What was designed to be a stimulus for first time homebuyers now includes homebuyers who have lived in their current home for at least five of the past eight years.   First time buyers who place a contract on a home on or before April 30th and close on that home on or before July 1st are eligible for federal tax credits in the amount of $8,000.  Move up buyers have the same deadlines but the tax credit amount is $6,500.

Sales during the fourth quarter of 2009 were up 17% in Boulder County  compared to 2008.  During the entire year sales were down just under 15%. 

So far in 2010 the early year activity has been strong.  Buyers and sellers, who traditionally wait for spring have been spurred on to a winter start by the tax credit and low interest rates.  Showings in our office are up considerably and contracts on homes have picked up dramatically in February. 

We all know that interest rates are a very important piece of the home buying process.  A one percent rise in interest rates can make a huge difference in the affordability of a house.  During this difficult economic crisis we have been lucky to have had interest rates in the 5% range.  This will not last forever.  In fact, the Federal Government has kept down interest rates by buying mortgage backed securities.  The money for this program is nearly out.  By the end of March, many experts expect rates to begin to rise.  If you have been considering a purchase or a refinance, now is the time!  The attached chart shows mortgage interest rates since 1972.  Right now is the bottom.

While our market has not been stellar over the past few years, it is good to keep the relative strength in our market in perspective.  The national media focus have been on the markets that have been the hardest hit.  Our local market has been much more stable.  It would be a much different scenario locally if home values would have dropped significantly.  As it stands, we are down just a few percentage points over the past few years and relatively few homeowners who put down a 10-20% down payment are “upside down” in their mortgage.  See the chart below to see the strength in our local market over the past three years.  Boulder County continues to be a good place to invest and own real estate. 

The slideshow above highlights the monthly statistics and market trends for residential real estate in Boulder County.  Slides include: total sales, median price, under contract percentage and weekly activity.  For best viewing choose the full screen option near the bottom of the first slide.

Here is what I think is going on.  We are busy setting the foundation for a surge that will correspond with the expiration of the homebuyer tax credit.  We are already seeing its effects but as the deadline draws near buyers will stop shopping and start buying.  This should happen by the end of March.  If you don't recall the basics of the tax credit see my previous post on that subject.  Even if you have already filed your 2009 taxes you can do an amended return and see that money this year!

Here is a chart showing the activity in the local market on a weekly basis. You will notice that there was a surge in closings this past week.  This is fairly normal at the end of each month.

In conjunction with Boulder's 150th year celebration, the Boulder History Museum is hosting a series of lectures by some of Boulder's most influential citizens.  There are only a few dates left and the lineup sounds very interesting. 

Tues., March 9 · Tom Cech
Nobel Laureate in Chemistry, Distinguished Professor and Director of the Colorado Initiative in Molecular Biotechnology.

Wed., April 7 · Nick and Helen Forster
Musicians, songwriters, actors and hosts of etown, a nationally acclaimed live radio program based in Boulder.

Tues., May 4 · Frank Shorter
Olympic champion, sports commentator and a driving force in the distance running boom that started in the U.S.

All programs are held at the historic Chautauqua Auditorium.  Click here for ticket information.

Nationally the overall appreciation during 2009 was -1.21%.  Colorado ranked 2nd in the U.S with a 3.07% increase.  The top MSA over the past year was Terre Haute, Indiana whose one year return was 3.11%.  The largest depreciation was seen in Bend, Oregon at -20.55%, closely followed by Las Vegas, NV at -19.30%.

The chart below shows the home appreciation in Boulder compared to that of the United States as a whole. 

For more graphs including four year accumulated appreciation of selected markets and how Boulder has ranked nationally since 2006, click here.  For a list of the top and bottom 20 areas for home appreciation and a full list of all 50 states ranked by 1 year home appreciation, click here. 

While the market hasn't been great over the past two years, imagine if the rates were not within a whisker of the all-time record lows.  These rates will not last forever.  Now is the time to take advantage.  

The chart below shows monthly 30 year fixed interest rates since January of 1972.  Source of the raw data was Freddie Mac. 

During 2002 and 2003 One Boulder Plaza changed the landscape of downtown Boulder by inventing a new category in the local real estate market.  That first successful project merged the Downtown Boulder location and luxury finishes.  The result was a paradigm shift to what a buyer would pay for a square foot of residential living space.  As sales mounted and a new buyers were attracted to the area other developers became encouraged and decided to continue the concept.  Soon new projects were built and early on the local and national real estate market (as well as the financing) were robust enough to provide buyers for the newest and best projects.  Competition has been tough with buyers preferring to choose their finishes and buy “new” rather than pay a similar price for a resale.

Since 2007 the combination of difficult credit conditions, an economic slump, stock market losses and out of state real estate losses have hit the local luxury market severely.  Here is a graph showing all properties sold in Boulder County over $1,000,000 which were listed in the MLS since 1997. 

As you can see the number of sales has dropped significantly since the peak year of 2007.  However, sales in this category are not dead.  During 2009, 78 condo properties sold in Boulder area above $500,000.  Sixteen of those sales were over $1,000,000.  The average price per square foot for properties in the downtown area under $900,000 was $503 and $697 for properties over $1,000,000.

I think going forward the strength of this market going forward depends upon outside forces such as; the strength of the housing market in general both locally and nationally, the ability of the luxury market to withstand a high inventory position while not losing too much value and the availability credit for buyers. 

Market Data

Since January 1, 2009 there have been 16 sales of condo units in Boulder Colorado over $1,000,000.  To view a detailed spreadsheet showing all of the sales, the price per square foot of each unit and the sold date, click here.  I welcome you to delve into the details but here are the details.  The sales ranged from $1,000,000 to $5,317,000 for Jared Polis's custom built penthouse unit at the Walnut.  The average price per finished square foot for the entire bunch was $697.  This is about $100 higher than it would be if we threw out the sales over $2 million.  

Currently, there are 25 condos listed in Boulder over $1 million.  This number understates the true market a bit because there are some properties listed for sale that are not in the MLS.  Most notablyThe Arete has just five properties listed for sale while I think the true number available is close to double that. 

After posting gains in the number of sales during October, November and December, sales during January were again down, although ever so slightly.  This means that the number of sales in January 2010 were at the lowest levels for any month that can be searched using IRES’s historical online data.  Not quite the classical definition of recovery.

Statistics are by nature backward looking and sometimes the past is too negative for an optimistic person like me.  So, before I move on, and talk about the present, I’d like to give an ever so brief report on the major trends in the local real estate market.  Through January, sales continue to struggle and prices are trending downward (although slightly) for the first time in decades.

Now to what I am seeing happening right now in the market.  Just after the New Year, buyers started breaking hibernation early and decided that looking at houses would be a good thing to do.  Since January showings have been robust and starting late January buyers started making offers. Right now 15% of the 2,600 residential listings in Boulder County are under contract.  398 units, not too bad.

Last year we had a late start to our selling market.  Not much happened during the first quarter.  This year, because of the tax credit, the opposite is true.  I expect the number of sales for the next few months to exceed 2009.  We are off to a quick start, but the lingering question on my mind is how strong the market will be after April 30^th.  With the scheduled expiration of the tax credit possibly coinciding with the end of the Fed buying of mortgage back securities (see interest rates - rising); we will have a stern test as to the strength of our short lived recovery.  I will keep you posted.

 The Gallup-Healthways Well-Being Index score measures for each city an average of six sub-indexes, which individually examine life evaluation, emotional health, work environment, physical health, healthy behaviors, and access to basic necessities. The overall composite score and each of the six sub-indexes' scores are calculated on a scale from 0 to 100, where 100 represents fully realized well-being.

While it lists Boulder as the winner, the actual area is the Boulder Metropolitan Statistical Area which includes all of Boulder County.  With a composite score of 72.5 Boulder out paced all areas regardless of size.  The study was extensive and included a sample of 353,000 adults nationwide. 

The overall result calls attention to what we already know.  The quality of life in the Boulder area is outstanding and the people who live here tend to be happy, employed, healthy and relatively affluent. 

Here are the definitions of the areas that were examined during the poll. 

The Life Evaluation Index is based on the Cantril Self-Anchoring Striving Scale, which asks people to evaluate their present and future lives on a scale with steps numbered from 0 to 10, where 0 is the worst possible life and 10 is the best possible life. Those who rate today a "7" or higher and the future an "8" or higher are considered to be "thriving." Those who rate today and the future a "4" or lower on the scale are considered to be "suffering." The overall Life Evaluation Index score is calculated as the percentage of thriving Americans minus the percentage of struggling Americans.

The Emotional Health Index measures daily smiling or laughter, learning or doing something interesting, being treated with respect, enjoyment, happiness, worry, sadness, anger, stress, and diagnosis of depression.

The Work Environment Index measures job satisfaction, ability to use one's strengths at work, supervisor's treatment (more like a boss or a partner), and the formation of a trusting work environment.

The Physical Health Index is determined by sick days in the past month, disease burden, health problems that get in the way of normal activities, obesity, feeling well-rested, daily energy, daily colds, daily flu, and daily headaches.

The Healthy Behavior Index includes four items: smoking, eating healthy, weekly consumption of fruits and vegetables, and weekly exercise frequency.

The Basic Access Indexis determined by access to clean water, medicine, a safe place to exercise, and affordable fruits and vegetables; enough money for food, shelter, healthcare; having health insurance, having a doctor, having visited a dentist recently; satisfaction with the community, the community getting better as a place to live, and feeling safe walking alone at night.

 Not only is this a feel good story for our citizens it gives companies very real data why they should bring their employees to our area.  We have always had a large contingent of people who choose to live in Boulder because of the "outdoor" lifestyle or previous rankings in publications such as Outside Magazine and Money Magazine.  What it turns into is a big self-fulfilling prophecy which attracts the people who perpetuate the lifestyle.  Not a bad cycle to be in.

For a full list of the ranked cities in the poll, click here.

The real estate market is off to a quick start this year.  I see three major reasons why we are seeing increased activity.  The first is the extended tax credit.  The second is low interest rates.  The next reason is less quantifiable but just as valid.  I see the third cause of the improved market so far this winter as an overall improved confidence.  Many people have been slogging along over the past 18 months, listening to bad news, cutting their spending and hoping it doesn't affect them too much.  Just like a farmer's tentative first steps out of the cellar after the tornado, most people pick up a few sticks and are glad the tornado hit the next town.  It's time to start living again.  

Showings are very strong and contracts are just starting to react.  You will see that total sales in Boulder County were just about the same as they were last January.  Not great, the feel going forward is totally different.  Last January the phones were silent and people were in shock.  This year contracts are up and we are ready for an early spring. 

It feels like we have a lot of “mass” behind the early sales.  Most of the early activity is still in the lower price ranges.  However, there are currently 16 homes under contract which are listed above $1,000,000 in Boulder County.  Let me know if you questions.  But for now I need to get back to work. 

The slideshow is best when viewed in "full screen".  Just hit the second button in on the top right corner.