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Sometimes it’s easy to forget that change is the only constant. A few years back I created the graphic below. It depicts the real estate cycle and I find that it’s really good to refer to it periodically. It seems that much of what is happening in our current market can be found in the upper right hand corner, “hyper supply”. Of course, it’s not always as easy as pointing to the wisdom of the past and predicting the future. But it’s a good place to start!
Sales during the third quarter of 2019 were higher than a year ago, up by 8%. However, the market dynamics have changed. Instead of lack of inventory and a strong sellers market, we are seeing increased inventory, longer time on the market, more price reductions and fewer showings. In summary, demand has slowed and supply has increased. This has resulted in less upside pressure on prices and the balance of power in negotiations is shifting away from sellers and towards buyers.
We are not alone, many of the strongest markets over the past five years are seeing softening. This includes San Francisco and Seattle, among others. For the one year period ending June 30th, appreciation in Boulder County was 3.41%.
This ranked us in the bottom half of U.S. metropolitan areas and below the U.S. average of 4.99%. For reference Colorado’s appreciation was 5.36%, San Francisco’s was -.05% and in Seattle it was 1.37%. As the graphic says, purchase prices are increasing, but at a lower rate.
Inventory hasn’t recovered to historical levels, but there are more properties on the market now than at any time since 2014. Over the past few years buyers have been operating in a scarcity mindset – “not enough homes to buy, better act quickly”, “not my ideal house, but I better grab it”, “how much over full price do I need to pay?” Now that there are multiple choices available for most buyers, they are taking their time, pouring over the details of each home and then considering offer price carefully. Higher inventory also has led to more sales – more buyers are able to fulfill their goals in a shorter amount of time. From the Seller’s perspective, there are fewer showings and pricing is more important than it has been for a long time. We are seeing many price reductions as Sellers and their agents try to capture the attention of prospective buyers. A recent search in Longmont between $300k and $500k resulted in over 100 active listings!
The economic conditions that drive our local market are still very positive. In Boulder County unemployment is under 2% and Boulder businesses are still creating jobs. Our area is still on the national radar as a place to live if you value a vibrant, outdoor lifestyle as well as a strong economy. People are still coming to the area for a variety of reasons and there are many housing options out there to fill the demand. As we have moved through past real estate cycles we have seen prices go flat, not decline. We’ll see what the next few years have in store. Homes continue of sell and as always I’m actively helping buyers and sellers successfully close transactions. I’m always happy to be of service. Enjoy the report!
Here are a few charts from the section on Boulder County.
[pdf-embedder url=”https://www.neilkearney.com/wp-content/uploads/2019/10/The-Kearney-Report-3rd-Quarter-2019.pdf” title=”The Kearney Report 3rd Quarter 2019″]
