I have just published The Kearney Report for the 3rd Quarter of 2016. I have streamlined the design and hope you are able to find the key information more easily. The entire report can be viewed below on this page or you can download the PDF link here The Kearney Report 3rd Quarter 2016
Real Estate Market Update
At the end of the second quarter the Boulder County real estate market was ranked #1 in the nation for annual home appreciation. It was a testament to the unrelenting demand, low inventory and the pent up frustrations of buyers who had finally realized that the price they needed to offer didn’t have anything to do with what the last home in the neighborhood sold for. Since June the market has slowed down. In the same way a car eventually needs to refuel and a horse needs to cool down, a market, real estate or otherwise can’t run at full speed forever.
Don’t get me wrong the market is still good, houses are still selling. In fact, in the 3rd quarter 42% of all sales sold for over the asking price (down from 50% in the 2nd quarter). The difference I have been seeing in the market over the last few months is this; inventory is slowly rising, houses are staying on the market longer, when a house does get multiple offers it’s more commonly two or three offers rather than a dozen, there are more price reductions happening, there have been fewer showings per listing. It is no longer a given that a house will sell. It’s back to reality, where a house must be priced correctly compared to the competition in regards to condition and location.
The total number of residential sales in Boulder County is down roughly 10% year-to-date. Third quarter sales were down 4% from the second quarter of this year and down 12% from Q3 of 2015. Interestingly, sales within the City of Boulder are down 24% from Q3 of last year. This steep decline within the City has been noted in six of the past seven quarters. In looking at the sales mix by price range for Boulder during the quarter, it seems that the sales declines in the lower price ranges are not necessarily translating into increases in the upper ranges.
Change in sales in the City of Boulder During the 3rd Quarter by Price Range
$0 – $250,000 Down 82%
$250,000 to $500,000 Down 25%
$500,000 to $750,000 Down 16%
$750,000 to $1 Million Up 5%
Over $1 Million Up 5%
Total Sales Down 12%
Another sign that the market has cooled a bit is the fact that prices decreased 5% from the second quarter. This doesn’t necessarily mean that the market has shifted (prices are still up 14% above where they were a year ago) it just means that the homes that sold during the most recent quarter didn’t follow the torrid pace of the second quarter. Most likely when the FHFA.gov Home Price Index comes out for the third quarter we will no longer hold the top spot. But I predict that we will still be near the top since the results are cumulative.
Could this slight slow down in the market be just a downshift, a pause before even more people to move to Boulder and its surrounding area? Absolutely, I don’t see anything out there that has fundamentally changed what is fueling our market. Vestros Real Real Estate Solutions, a company who provides real estate risk analysis to the mortgage industry predicts that Boulder will have another 10.5% appreciation over the next year. Second nationally only to Denver.
Interest rates are still favorable, people are still moving to our area and Google’s new offices are still under construction. Speaking of Google, other areas in which they have set up a large office have seen a fundamental shift in the real estate market after they arrived. Many predict that Boulder will follow this trend. It seems that we already have a head start.
You may have noticed that there are not many for sale signs out there. The inventory of “for sale” homes in Boulder County at the end of the 3rd quarter is up 3% from a year ago but down 12% when compared to 2014. Fewer homes are coming on the market and those homes are selling quickly. Even though inventory has increased slightly, it’s still slim pickings for buyers.
Here is our advice for buyers and sellers in the current market.
Buyers – After two years of frustration this might be a good time to step into the market again. This time of year you typically have a bit more time to make a decision regarding a home purchase and you may just get lucky and find a diamond in the rough that has been overlooked by the market. On average, homes are still selling for just below asking price. In the 3rd quarter 21% of homes sold closed at the asking price; 42% sold for above asking price (on average a 4% premium was paid) and 37% sold for under the asking price (at an average of a 3.4% discount).
Sellers – Properties are still selling. This may be a good time to lock in the price gains over the past few years. Condition matters! You may have more competition so it’s important to have your home ready to go in order to maximize price. If you are planning to sell in the winter let me know so that I can come out now to take some exterior photos before the snow flies.