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Economic Snapshot: A Look at Boulder County Real Estate (Feb. 2014)

Economic Snapshot: A Look at Boulder County Real Estate (Sept 2013) The following economic snapshot was provided by Re/Max Alliance on Walnut.

Finally, we’re out of the deep freeze. That’s what it felt like around the Boulder Valley as January gave way to February. Unfortunately, Punxsutawney Phil, the Seer of Sears, the Prognosticator of Prognostications, predicted six more weeks of winter when he saw his shadow on February 2nd. I’m betting on (hoping for) an early spring.

The holidays are a distant memory and real estate buyers and sellers focus now turns to what they do best – buying and selling. The inventory of available properties will begin to grow as the weather improves, but will remain at a low level as demand continues to exceed supply.  For Boulder County, active single family home listings stood at 725 at the end of January/2014. At the end of January/2013 there were 861 active single family home listings. For those math majors out there, that’s a 15.80% reduction year-over-year in available inventory, which means the overall market is getting tighter.

Mortgage interest rates, those harbingers of things to come (either good or bad), seem to have settled in for the time being (no promises). The traditional thirty-year fixed rate loan has vacillated around 4.25% (with no origination fee or discount points) for the past few months. A fifteen-year loan, with the same parameters, can be had for 3.375%.

In the fall of 2013, mortgage interest rates trended up, moving from the mid-3% range to the mid-4% range. For Boulder County, single family sales for the last quarter of 2013 mirrored the last quarter of 2012 (710 vs. 702). Collectively as a whole, Boulder County single family home sales were up 7.27% in 2013 when compared to 2012 (3495 vs. 3258).

In January/2014 there were 132 single family homes sold in Boulder County; 167 sold in January/2013. That nearly 21% reduction can be attributed to several things – less available inventory, higher mortgage interest rates, the deep freeze noted above. It’s difficult to put a finger on exactly why sales activity was down when comparing time frames twelve months apart.

The Absorption Rate (the time it takes for the market to sell through assuming no new inventory surfaces and the same rate of sales activity) stands at 170 days (5.6 months) for January/2014 for Boulder County single family homes. Since real estate is a bottom up entity, homes priced at the lower end of the market traditionally sell faster because there are more prospective buyers. As prices go up the funnel gets smaller for both buyers and sellers, which relates to a longer time between sales. The Absorption Rate is always higher at the beginning of the year as buyer motivation warms with the weather. Look for this to be true again in 2014.

Here are some things to think about as we sprint toward the spring (the most active time of year for the real estate market).

  • Sellers: In certain price ranges, new home inventory will continue to be a source of competition. New homes normally sell for more than resale homes for one reason – they’re new. Production builders across the Boulder Valley are gearing up for another active year. From a pricing perspective, sellers need to be aware of what is happening in their price range and area with new home construction.
  • Buyers: Can you remember the days of double digit mortgage interest rates? Sellers were the lenders with owner carry loans and assumable FHA & VA loans. Those days are gone forever. As the economy strengthens (that’s what the government envisions) mortgage interest rates have a tendency to rise. Thirty-year rates at less than 5% are a good value compared to what we’ve experienced in the past.

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