Are Boulder County Sales Prices at a Tipping Point?
Thank you all for reading this article I write every month. I know I can get a little off subject sometimes and even dig a little deeper than you may care, so your continued readership is appreciated. The difficult part of this job is to come up with something interesting month after month. A big swing upward or downward makes it a lot easier, but a nice, slow, consistent, two-year growth is probably the hardest thing to write about. This month I think I’ve found something that may be worth your time.
As I just mentioned, we have had a nice, slow, consistent growth over the past two years. Actually, it has probably been a little longer. Either way, we have had a bunch of minor bumps along the way. During this time we’ve seen rising interest rates for a while, low inventory for most of the time, and lower sales volume for most of this year. Despite these bumps we’ve also seen rising prices, incredible demand, silly low days on market. I think all this good may be starting to point to a less than good.
In a market where you have rising prices over a long period of time, there becomes a tipping point to this price increase. I am not suggesting a bubble burst where prices drop through the floor, but a tipping point where the landscape changes just a bit. I think I see one of those coming about, but it will be a few months before this can be proven right or wrong. No matter what the result, it isn’t bad…I don’t think.
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My observation from October, 2014 is that we may have hit a high on prices of single family homes for a while. This, of course, would be until the demand heats up in earnest again. That time could be right around the corner (March) or a year from march. My feeling is that it will just result in a late surge in summer sales.
My evidence to support this theory is in the sales results from Boulder, Lafayette, Louisville, Superior and Broomfield. In every single case the number of single family homes sold last month were DOWN from October of 2013 AND the number of attached dwellings sold is UP over the same time period. The significance is that attached homes are usually viewed as a secondary, lower priced option. They are good in some metros, but they aren’t a primary option in most areas of Boulder County – with the City of Boulder being the only real exception. So, when the price of a single family homes become more and more expensive, attached dwellings go from being a secondary option to becoming a primary one due to the more reasonable price point. People don’t have to dig as deep to get into a condo in today’s pricing conditions and the perceived downside to condo living becomes less of a deterrent when the price of a single family home rises above a certain point. I think we’ve reached that point.
It will take some time to see if this is a good, bad or neutral situation. The buying surge of next summer will be the tell-tale sign one way or another. In the meantime, if you know and understand this, you can offer more condo and attached options to buyers so you don’t keep running them around to homes that have no chance of measuring up to their value meter. An idea for these times is to make sure you know a lender or two who will lend on non-warrentable condos. If you don’t know any, give me a call and I will give you a few names.
I hope you are enjoying our first taste of winter. Look for another exciting report next month. Until then, have a happy turkey day.
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