As many of you know Jeni and I have been in the real estate industry (in one capacity or another) for nearly two decades. I can say without hesitation that this may be the most unique market moment that I’ve experienced. We have several variables in play that make sweeping generalizations and categorizations difficult, so I want to point out the variables that are really affecting us locally and share a few thoughts on what we can expect this fall.
Low Inventory: Nothing new here. Boulder and the adjacent towns are largely land-locked by mountain parks and conservation easements. We basically have a finite supply of housing. Yes inventory is “up”, but a balanced housing market typically has 6 months of supply and depending on your zipcode, we have between 1-3 months.
High Interest Rates: Though still historically low, the difference between a 30 yr. fxd that locked in January versus today is roughly two full percentage points. That’s a punch to the gut for many consumers and has caused many buyers to stay on the sidelines or exit the market completely.
High Demand: Despite increased mortgage rates, our part of the world is still in high demand. Yes, days on market have increased, and list to sale-price ratios have come down, but the market is still appreciating steadily year-over-year, and the good properties are still selling quickly (this latter point is obviously my anecdotal sentiment, but if you’re actively looking you know what I mean).
High Employment: The most recent report from the Bureau of Labor and Statistics stated that roughly 528,000 jobs were created in July…more than double what economists were previously predicting.
Inflation: Inflation remained largely unchanged in July. The drop in gas prices offset the rising cost of (surprise) housing.
Global Conflict and Supply-Chain Shortages: We’re seeing construction delays with both commercial and residential projects everywhere. Big builders and small infill projects alike are at the mercy of global commerce and the knot that it’s in.
Discern Fact from Noise: We’re a small market, so outliers have a greater impact on our data. Month-over-month numbers often leave a lot untold. For example, days on market jumped in Boulder County from May to July significantly (9.5 to 17). Was this a huge slowing of the market? Not really. Several new construction projects, notably the townhomes at Odonata on West Pearl, had closings that occured en masse and skewed data. Those townhomes alone had an average of 610 days on market!
Colorado’s Commercial Market is Setting Records: The two largest sales of commercial space in Colorado history occurred in Boulder County in just the last 3 months. The Colorado Tech Center portfolio for $393MM and a portfolio at Flatirons Business Park for $625MM. What do you think this will do to housing demand in the long term?
As we mourn the end of summer and brace for all things pumpkin spice, I think we’re going to see a return to our “normal” market seasonality. Think 2018 and 2019. Real estate in the Front Range slows during the summer months because we’re all out playing, and picks up speed again after Labor Day. The fervor and market pace of the last few years is probably over, but I do think we see healthy activity and continued appreciation in the near term.
We hope this finds you well!
-Ethan, Jeni, and the SPRUCE Residential crew.