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The Tax Bill and Its Effect on Real Estate

The Tax Bill and Its Effect on Real Estate

The recently passed federal tax bill will definitely have an impact on real estate.  In general markets with high taxes and high values will be most affected.  Despite the recent increase in local property taxes, Boulder County is considered a low property tax area compared to other parts of the country.  However, we are a high value market.  Here is a summary of the main points of the tax bill that affect real estate. Mortgage Interest Cap – This is in regards to how much of the interest paid for mortgages can be used as a deduction.  For those whose mortgages balances are less than $750,000 this will not affect anything.  Previously the cap was $1 million and it has now been reduced to $750,000.  Not many people have loans in excess of $750,000, but in our area where the luxury home market is very robust, we may see fewer buyers able to make those purchases. The interest on the first $750,000 is still deductible.  This may dissuade some luxury home purchasers to buy a less expensive home, thereby reducing the demand for the very high end. Local and State Tax Deduction – The Boulder County Treasurer was inundated before the new year with property owners pre-paying their property tax bill in advance.  This was in response to the section of the tax bill which caps the deduction for state and local taxes at $10,000. Previously, homeowners were able to deduct from their federal tax return the amounts paid for state income tax, various ownership taxes and property taxes without limit.  Now the deduction is limited to $10,000.  Buyers may...
Boulder County – November Real Estate Statistics

Boulder County – November Real Estate Statistics

Boulder real estate statistics. The numbers are in.  Sales during November 2017 were down 4% when compared to a year ago and are down 6% for the year.  Inventory is just below where we were a year ago.  We have had some good recent activity so I expect that sales in December will be relatively strong. At the end of November 46% of the listings on the market were already under contract. Please see the embedded slideshow for all of the details. All data is taken from IRES MLS.   Boulder County Real Estate Statistics November 2017 from Neil...
Boulder County Appreciation Goes Negative In the 3rd Quarter

Boulder County Appreciation Goes Negative In the 3rd Quarter

I began reporting in June that the market had shifted around Memorial Day.  Since then, sales have declined when comparing same month closings.  FHFA.gov recently released their quarterly “U.S. House Price Index” which reports on price appreciation in the 253 metropolitan areas in the United States.  Looking at yearly appreciation, Boulder (the Boulder MSA includes all of Boulder County) shows an annual increase of 8.57% which is 57th best in the nation.  Boulder County has been ranked in the top 20 each quarter since the 2nd quarter of 2015 so this recent ranking is a bit of a fall from the lofty perch we have recently been inhabiting.  However, nearly 9% annual appreciation is still impressive and certainly above our historical average. What was more concerning in the report was the appreciation rate for the 2nd quarter.  The average home appreciation in Boulder County between July 1 and September 30th was a negative .59%.  This is the first negative quarterly reading since 2nd quarter 2012, just before our market took off.  This quarterly appreciation rakes us 12th from the bottom of the 253 markets.  One quarter does not a trend make but it is something to watch and confirms the shift in the market.  The first chart below shows the four quarter trailing annual appreciation for Boulder County and the United States.  Over the past five years the cumulative appreciation has been 58.29%. The second chart below shows the ranking since 2006 (lower numbers show a better ranking). Here are some other related articles that may give you some added context: http://www.neilkearney.com/2017/09/05/summer-wrap-whats-next-boulder-real-estate-market/  http://www.neilkearney.com/2017/06/05/tracking-boulders-home-appreciation-time/ http://www.neilkearney.com/2017/12/05/the-real-estate-cycle-where-are-we-now/...
The Real Estate Cycle – Where Are We Now?

The Real Estate Cycle – Where Are We Now?

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. Recession  Think back to what was in the news...