Price of Smaller Homes Exceeds that of Million Dollar Homes on a Price/sf Comparison
|As far as the closed sales in most areas of Boulder County go, 2022 started out very similar to 2021. How were these two years similar? Fewer closed sales in January. Fewer Listings. Fewer days on market and higher prices? Who is benefitting from these conditions? Sellers would be the answer for sure. Agents too, I guess. Having spoken with many sellers and agents, the stress and complications created by these conditions are taking their toll.
Of course, we know sellers benefit from the rise in prices to net more on their sale. Once those sellers sell, they become buyers and are thrust into a position we don’t envy. They now must face all the stressors the market can dish out. Current conditions with rising interest rates, low inventory, fewer days on market and higher prices put them into new and uncomfortable situations. Extremely low inventory begets both buyers and sellers additional problems during negotiations and while under contract with appraisal issues, confusing escalation clauses, crazy inspection resolutions and cancelled contracts. The landscape has changed. It began about two years ago and it’s only getting worse with skyrocketing prices and extremely low inventory.
In stats there are people who like median prices and others who prefer average prices. I’m an average kind of guy. Neither one is more right (or righter?) than the other, but variation and extreme results can happen in either method with smaller data sets. Who in their right mind thinks prices went down 21.4% in Boulder in January 2022 vs January 2021? Well, that’s what the stats say and that’s why we are here for you. Left alone, this data point in the Boulder single-family housing results for the month could make the media scream and make it sound like the sky is falling. They still might, but you’ll know better. This year we simply had fewer (8) homes sell below $1M in January than last year (11). Since the median is the number in the middle, we moved the middle up a few slots this year. If we’d had 3 fewer sales below $1M last year we would be in the EXACT same spot we are with median price this year. Nothing to see here…
The attached market in Boulder appears to be even more robust than last year. There were a few more units closed in January 2022 than the prior January and they sold at 101% of asking versus 98% of asking last year. The dramatic drop in days on market that you see wasn’t even the biggest one in the region. It was aided by the fact that of the 42 attached homes sold last January, 15 of them were on the market for over 100 days, with one in the Peloton at 254 days (an Offer Pad deal of course). This January, just 5 of those closed units were on the market for over 100 days…a 67% decrease. Oh, and an interesting side note regarding inventory – as of 2/9/22 there were a TOTAL of 134 active listings of both single-family AND attached homes in ALL of Boulder County.
Fewer sales resulting in fewer listings are the norm in the entire region. I have evidence of this in the Longmont, Loveland, Greeley and Ft Collins areas. Just find those posts on this pager and check them out. Those reports will be posted within the week. And, in her most recent report, the great, the wonderful, and epically brilliant Megan Aller of First American Title in Denver says listings are on their way. The Denver area is already seeing a slight rise in listings already. This doesn’t usually occur until mid-March or April, but with the mild weather we’ve had this winter and prices climbing, I think some sellers are trying to get ahead of the curve.
From my experience doing stats for 15 years, it’s easy to see how the under-contract numbers correlate into sales in the following month. The biggest surprise I’ve seen in many years are the closing numbers for Superior, Lafayette and Louisville. Their close to list prices were 102%, 104%, and 106% respectively, for those areas. It’s a testament to the strength of this market that even the biggest disaster in generations didn’t deter buyers from closing on more homes this year than last in both Superior and Louisville. And if you were following some of the reports, it’s even more amazing that lenders got all their approvals in to close deals in a declared disaster zone.
One of my predictions for 2022 is that the Carbon Valley will narrow its traditional price gap with Longmont. The yearly average price between the two areas runs between 16% and 19%. My guess is that the value difference finally pays off for the Carbon Valley and they have a bigger average price increase than Longmont by the time the year is over. Why does this matter? The Carbon Valley – east of I-25 – now represents the most affordable market within 30 minutes of Boulder.
This month’s graph is one of my most favorite ever. I wish it turned out a little sexier, but the information is finally in front of us. This is an evaluation of single-family homes sold in Lafayette, Louisville and Superior in 2021. I’m guessing this isn’t a huge surprise for those of you who have thought this through. The green bars correlate to the left side axis. They also indicate the average square feet of a house sold in that price range. As prices rise, the size of the house gets bigger… most of the time. The red line corresponds to the right-side axis. This shows the average price per square foot of the homes sold in that price point. The number above the green bar indicates the number of closed units in that price range.
In most markets the red line is more of a U-shaped curve that doesn’t have the little wiggle on the far-left end, and this is very interesting. I did the same graph for Longmont and Loveland. They were both U-shaped. I looked at the 16 homes sold below $450k and noticed that most were either very small or needed major updating. For some reason, investors aren’t overpaying for flip-type properties like they are in other markets, neither are first-time buyers. I guess that’s a good thing. Of these 16 sales, 8 of them were on the market for over 20 days. You’d think there would be more of a rush to buy these. Another interesting item it observed – ALL 36 homes sold between $500,001 and $550,000 were in Lafayette.
Looking at the chart, you can see that the homes sold from about $450,000 to $700,000 are more expensive on a price per square foot basis than all other homes except for those that sold above $2,000,000. This would indicate value investors and first-time home buyers might be better off if they could find a way to get into something between $700k and $2M. This also shows that the better dollar value per square foot is in that same $700k-$2M range (can you believe how many homes (139) that sold between $1M and $2M?). And lastly, it looks like investors should probably push a little harder to get those under $450k homes. It’s probably the fear of going through the permit process to fix things the way they need to be fixed that keeps many of them away. I’ve been there and done that and it can unexpectedly cost a bucket full of money.