Right now the broad trends in the Boulder area real estate market are:
Sales at a consistent although not spectacular rate. (Down roughly 5% from last year)
Inventory decreasing (normal for this time of year)
Prices are fairly stable but with a nudge toward the negative.
Buyers market with the average negotiation in Boulder County over the last 12 months at 4.17% off of last list price.
Today, I am going to break the market down into smaller silo’s so that you can get a better idea of the market across the different price ranges. Tomorrow, I will do the same thing but instead of using prices I will use areas. Here it goes.
Under Contract Percentage:
This is simply the number of homes currently under contract divided by the number of homes on the market. The higher the number the stronger the market. Not surprisingly, the lower price ranges have quite a bit more activity than the higher price ranges. Usually, there is more stratification between the $750,000 range and the homes listed above $1,500,000 but right now that is not the case. There are currently 18 homes under contract that are listed above $1,000,000 in Boulder County.
$0 – $250k 20%
$250k – $500k 20%
$500k – $750k 14%
$750k – $1MM 7%
$1MM – 1.5MM 7%
>$1.5MM 7%
Absorption Rate:
Absorption rate compares the number of homes that sell during an average month (I use 12 months) to the number of homes currently on the market. For example if on average 10 homes sell per month and there are 120 homes on the market, the absorption rate would be 12 months. Another way of saying it would be, that it would take 1 year to sell all of the current inventory. A low number shows quick turnover and a strong market. During the late fall and winter when many would-be sellers remove their homes from the market the absorption rates are unusually low. Even so, by this measure in would take 31 months to clear all of the homes on the market in Boulder County that are listed above $1.5 million.
$0 – $250k 5.3 months
$250k – $500k 6.2 months
$500k – $750k 8.6 months
$750k – $1MM 13.6 months
$1MM – 1.5MM 15.4 months
>$1.5MM 31 months
Average Negotiation Off Of List Price:
It is very interesting to see how much negotiation is going on between buyers and sellers. A good rule of thumb over all of the years I have been selling homes in the Boulder area has been 3% off of list price. For the last year, the average has jumped to 4.17% over all price ranges and areas in Boulder County. From the figures below you can see that properties under $500,000 are still in the historical 3% range. Where we are seeing more negotiation is in the upper price ranges. You can relate the motivation of the seller to the previous table (absorption rate) and see that many sellers are valuing the opportunity to sell and are willing to stray off of their list price to get it done.
There are many tactical ideas about real estate negotiation but in my opinion not enough is said about the emotional relationship between a buyer, a seller and an agent. Buyers and sellers don’t often meet in person. This can be a very good thing in many ways because the agents take the direct confrontation out of the process. But the downside of this lack of interaction is that buyers and sellers don’t get a chance to make a personal connection. They don’t get a chance to like each other. Their first interaction is the offer for purchase and this can be a very explosive introduction. “Hello Mr. Seller, nice to meet you. You don’t know me but I like your house but I think you are stupid to ask that much. I only think your house is worth $xxx. Oh, and by the way I want to keep your refrigerator, your window coverings and your grandma’s chandelier.” This usually doesn’t inspire an invitation to dinner.
Stephen Covey’s idea of an emotional bank account in “The 7 Habits of Highly Effective People” can be easily translated to the parties in a real estate transaction. Watch the video to see what a buyer, seller and agent can do to make friends with the other sides of the transaction. In doing so, negotiations will go much more smoothly and buyers and sellers won’t mind sitting together at the closing table (this by the way is getting less common).
Advice for Home Buyers:
Don’t make an unreasonably low offer.
Don’t ask for personal items which have been excluded from the sale.
Don’t be unreasonable and uncaring toward the seller.
Do write a personal letter so that the sellers can get to know you as a person (family).
Do compliment them on their home.
The goal is for the seller to want you to live in their home.
Advice for Home Sellers:
Have the house in tip top showing condition.
Fill out all disclosures accurately and thoroughly. Don’t try to gloss over the details. Giving more detail will earn the Buyers trust and respect.
Respond to offers quickly.
Keep the communication lines open.
Advice for Realtors:
Treat the other Realtor with respect, courtesy and go in with a win-win attitude.
Remember that you are not the one who is buying or selling. So don’t make decisions for your client. Lay out the options and let them decide.
In order to sell a house in today’s real estate market a house must make a compelling case to the market. Some things like neighborhood and location within the neighborhood you can’t control. But set those aside and you are left with two key variables that are controllable and important to the sale.
What I’d like to talk about today is being competitive in the market. The main variables a seller has control over is the price they ask for their home and condition and/or upgrades of the home. I have represented these two variables on an axis below so that I show you what I’m thinking. Basically, if your home is in great condition (and I mean exceptional) you can ask a high price compared to similar homes on the market. If your home is in poor shape you have to ask a lower price. This is not rocket science but it gets trickier when a house is somewhere between the extremes. It is in okay condition and has a middle of the road price. Looking at the chart below you can see the line running at 45 degrees. Think of this as the success line. Every house that fits above the line (price vs. condition) will most likely end up in a successful sale. Every home below the line will wallow until the price or the condition changes enough to get it above the line.
Right now the market is fairly slow. There are fewer buyers out there. This means that competition for sellers is tough. In order to be compelling to the small pool of buyers they have to bring a more compelling product to the market. This means that the line has shifted, sellers have to either improve their home to sell it for the same price or reduce their price to make it work.
Knowing where you are is the tricky part. I help my clients by giving good feedback and keeping them abreast of the market as it changes. The information you used to list your house is no longer valid. Get it priced right and have your house show the best it can. If you can’t afford to make improvements up front, lower your price. It’s simple economics.
For many years our average negotiation off of list price has averaged between 2 and 3 percent. Lately, buyers are pushing those ranges. Sellers are seeing many low offers and many times those negotiations do not come to fruition. Buyers are looking for a deal, and who can blame them. Here is a list of average negotiation percentages off of list price for Boulder County across multiple price ranges:
You have probably seen the attached picture before – is it a picture of a young women or an old women? The answer is it depends on how you are looking at it. How you perceive it.
One definition of reality is: “all of your experiences that determine how things appear to you”. I agree with this on many levels – I believe you make your own reality and what you know and believe as well as your past experiences effect what is “real” for you. A slum dweller in India has a much different reality than a socialite living in Beverly Hills.
The key word in the definition above is experiences. I submit that this definition is not as true as it once was. Don’t worry, I will tie in to real estate in a moment.
In the past (B.C. through the 19th century), reality was based on what one actually experienced. All inputs to opinion were very localized. For example, when there was a famine, chances were that you were hungry. Perceived reality equaled actual reality. There were no outside forces to sway your perception.
During the last century, technology in all of its forms have provided us a wider set of inputs. I guess this is called globalization. We have access to and know more about more subjects. Where we used to just be concerned with our local experience, we now are fed data on an ever-broadening spectrum of subjects. Google (verb) whatever subject you can imagine and have instant access to other’s research and opinion’s. It is no longer our own experiences that form our perceived reality it is the experiences and knowledge of others.
My point is that our perceived reality may not always equal our actual reality due to the influence of non-localized information. I run into people all the time who can’t believe the sorry state of our real estate market. The problem is that they have no actual experience with the market, their perceptions are based on outside information. When people come in from out-of-town, (or locals who have not been paying attention to the trends) they assume that values have dropped at least 20%. When in fact they have remained relatively stable over the past 5 years. They come from that paradigm when they submit very low offers. It is easy for sellers to realize that these low ball offers do not fit with the market.
Right now, the media has plenty of negative news to report. There is blood in the water and the sharks are in a frenzy. Foreclosure’s in CA, value loss in Michigan, empty buildings in Florida, etc. Bad news all around, a fact. The problem is that people take that news and equate that news to all other areas. The message is that the market is bad, the conclusion is that the market is bad everywhere.
I get asked all the time what a reasonable offer would be. My answer depends upon many factors but hard data also helps bring a good perspective to the negotiations. Over the last year in Boulder County, real estate transactions have had the following average negotiation percentages in each price range:
$0 – $250k 3.15% (1,307)
$250 – $500k 2.95% (1,550)
$500 – $750k 3.99% (498)
$750 – $1 MM 5.24% (141)
$1 – 1.25MM 8.2% (58)
$1.25 – $1.5MM 8.35% (35)
$1.5 – $2MM 9.9% (22)
>$2MM 8.65% (23)
Numbers in parenthesis represent the number of sales in that price range.
Perception does not always equal reality. While the market in Boulder County is not stellar, it is much better than what you would think by listening to the news. Prices are holding, properties are selling and foreclosures are not a big part of our market. We are very lucky and I’m spreading the word! When you are ready to buy or sell give me a call. I’m here to help. Neil 303-818-4055
The end of January is when the real estate market in Boulder Colorado just starts to get moving. New listings are coming on the market full of hope. But what if you have been on the market for awhile? Here are a few tips to make sure you haven’t lost your showing edge.
Here is the typical scenario; During the first few weeks it is common to have many showings because there is a pool of buyers waiting for new listings. Once the initial few weeks have passed that the showings slow considerably and only new buyers to the market set up showings. So what if your house was not priced correctly or did not otherwise compare well with the competition and remains on the market without offers or interest. I have recently shown homes that have been listed for close to a year. What if you own one of these homes and need to get the house sold. Here are some ideas:
Lower the price – The market has spoken and if your home has not sold in a reasonable time as other homes in the neighborhood get listed and sold, your price is too high.
Make the house look better – Sometimes you have to spend money to make money. Take an objective look at your house, maybe it needs a paint job, some new counter tops or a replacement for the green shag carpet. I have nothing against green shag, I grew up with green shag. I love it, you love it but buyers DO NOT love it.
Do some staging – Maybe you have all the pieces, but they are all in the wrong places. A little staging goes a long way in making that all important first impression.
Make sure your curb appeal is the best on the block – Do some landscaping, buy some flowers, or this time of year make sure the snow is shoveled.
