When people read this report and look at the attached charts month after month, they begin to focus on just one or two areas or data points that makes most sense to their business. Or they choose one or two items they can regularly bring to their clients for the upcoming month to answer that ubiquitous question “How’s the market”? I try to address some of these on a regular basis to give you a little something more to bring to the masses. Not today.

Today we are going to look at the effects of low supply and high demand. Maybe I should call these the after-effects. We all know the basic effect is higher prices, fewer days on market and fewer total units sold during the year. So then, “What are the after-effects,” you ask?

From what I know about economics and the formidable theory of supply and demand, when demand is higher than supply, prices rise. When prices rise to a certain pain threshold we start to experience substitution. Substitution is when the quality or quantity of object of desire becomes negotiable. In our business, this is when a buyer might say to himself that it is better to live further away from my perfect location rather than pay those high prices. I mentioned this a bit in last months article where I indicated another substitution where people who really want a single family home end up in a condo because the price is more in their range. If enough people do this, it will eventually drive up the prices of condos because of the greater demand and then a scarcity of inventory occurs. If you look at the attached dwellings numbers for Boulder I am sure we are currently experiencing this.images


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Two other very good examples of this can be found in the stats report for the Mountains area and the Frederick, Firestone & Dacono (aka the Carbon Valley) area. You don’t need to look too hard to see that people are finding the prices – and I’m sure the scenery – in the Boulder mountains much more attractive then in Boulder itself. The same can be said for people finding greater value in the Carbon Valley than in Longmont, Lafayette or Erie. Just look at the average prices of these areas compared to the rest of the report. The mountains are $120,00 less than in Boulder. The Carbon Valley is now the same as Longmont, $160k less than Lafayette and $110k less than Erie. These two areas also have another very important factor in common. They are the ONLY two single family areas in this report that have higher sales total year to date.

From the rise in prices of attached dwellings in nearly every area to the higher YTD sales totals in the Mountains area and the Carbon Valley I think it is safe to say we are seeing a perfect example of substitution. Balance is the key to a healthy market. Demand is good, but without supply, the buyers will go elsewhere. The problem is that you can’t make people sell their house, so do your best to encourage strongly while you are at your upcoming holiday parties and hopefully you will start the New Year off with a handful of listings.

Best,

Kyle Snyder
303-328-7157
ksnyder@ltgc.com

When you think of choosing a Title Insurance partner think of Land Title. We have been locally owned and operated since 1967, with 100% of work produced in our 40+ Colorado offices.

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