Boulder Housing Bubble

The Mythical Boulder Housing Bubble

Housing markets do cycle.  Values go up, places become popular, a once hot area fades.  Repeat.  And we are witnessing a repeat of a hot housing cycle here in Boulder. However, if you are thinking to yourself, “this is just like before the recession…” you are WRONG.  The Boulder housing bubble might occur some day, but not now.

bear canyon boulder colorado trail and housing
I dream of living in luxury. Gorgeous custom home along Bear Canyon, Boulder Colorado, as seen from my recent hike on an 80 degree day in late March, 2015.  Hiking on Boulder Open Space.

Currently, our market is in a cycle identical to 1992-1995, during which time home prices leaped 40%.  Then, as now, I heard buyers talk of waiting for the inevitable Boulder housing bubble to occur. It never happened and unfortunately a good number of home buyers missed an excellent opportunity in the early nineties.  And a good number will probably miss their opportunity in today’s red hot market as well. Sigh.

Seven Unreasonable Boulder Housing Bubble Fears  Or, Why You Will Never Own In Boulder 

1. I’m going to wait for things to become more affordable.  I hear this one all the time.  Rents are going to come down.  Housing values are going to reverse this current course of gains. I’ll wait for the market to become more affordable.  The graph below tracks affordability.  It shows that housing is actually more affordable right now, even as Boulder home values are increasing.

affordability index
The affordability index reveals it is more affordable to purchase a home in Boulder today than during the recession

Sure, during the recession there were some deals, some foreclosures, owners willing to take less than list.  But who could really buy? Jobs were at a premium, uncertainty was in the air, interest rates were higher.  It was stressful to buy a home during the recession and besides, rents were considerably lower than they are today.

2. I’m waiting for mortgage rates to improve!  Yeah, right.  Rates have been hovering at all time lows for the longest time.  Buyers today have it great. When I started in real estate, I heard rates had been around 18% back in the 80’s. Throughout my career, six percent has been considered good. Today, rates are under 4% and increasing.  Anyone waiting for lower rates is fooling themselves.

mortgage rates increasing
Mortgage rates hit a low several months ago and are now heading back up; chart courtesy of Your Castle R.E.

3. New construction homes are going to swamp the market and send Boulder home values down.  This is a huge myth. First, there are very few places left to build in Boulder.  Most projects are In-Fill – small areas where housing can be added or a reuse of parcel.  And second, construction fell off dramatically during the recession.  Building was far below what was required just based upon normal population shifts. The irrational fear of a Boulder housing bubble caused by new builds is just that.  We actually need far more construction than is taking place. The Construction Defects law recently passed is dramatically hurting the condo market (more on that another time).

new construction data for boulder and denver colorado
New construction remains incredibly low.  Reason # 3 why a Boulder housing bubble is nowhere in sight.

But here’s the thing. There are plenty of people ready to make the move. To stop living in their parent’s basement, to get out of that college like rental with six roommates, to start a family.  And there are some great opportunities for new construction around Boulder County at a variety of price points.  Just recently, I helped Sherry and Steve get their first Colorado home under contract – it is a new construction project in Erie Highlands.

new construction is one option to overcome High Demand Short Supply by constructing a new home like buyers steven and sherry, pictured with bob gordon realtor
Steven and Sherry, new home buyers working with Bob Gordon at Oakwood Homes. There are some great opportunities in Erie

 4. It’s safer to rent than risk the impending Boulder housing bubble and lose my house like my friends did during the recession.  Sounds legit.  A lot of good people lost their homes in 2008-9-10.  Would it help to say the market then and now is completely different?   It is.  Then, there were unreasonable no-money down loans to the least qualified buyers – sub prime and the whole Wall Street fiasco.  So, while renting might sound super safe to avoid catastrophe, landlords have figured this out as well. 

The result? Rental rates are at all time highs even as inventory is plummeting.  It is actually a much worse Boulder rental market than purchase market — if you can believe that.  Renting is not a good investment, and with ever skyrocketing rates, saving for your down payment is going to be harder in the future.

rental rates skyrocketing in boulder
Vacancy rates are down while rents are pricing people out of the market

5. This so-called Sellers Market is about to reverse to the good old days.  Most Realtors I know, wish the Boulder Sellers Market was over.  It is frustrating for our buyers and we know it.  But, there is absolutely no data to support a reversal in the near future of the current conditions.  Buyers shouldn’t expect a Boulder housing bubble nor any relenting of the current sellers market.  All indicators point to fewer homes for sale with more buyers tomorrow.  Well informed buyers are prepared for the multiple offer, above-list-price market conditions we are experiencing.  Why wait for an even more difficult market?

strong local sellers market is counterpoint to talk of a boulder housing bubble
a Boulder housing bubble is unlikely with the strong sellers market gripping the area

6. There are plenty of foreclosures and ghost inventory that is going to spike inventory of homes for sale up and cause values to tumble.  Absolute myth.  Colorado foreclosures have been on a significant decline for years.   The Great Recession ended five years ago by most accounts.    Foreclosures were few and far between in Boulder then and nearly nonexistent today.

foreclosure data indicates up market
Foreclosures are plummeting. Not a sign of a Boulder housing bubble, More an indicator of a recovering economy

7. Historically, Boulder real estate is not a safe investment.  Baloney.  Boulder County home values have been appreciating for decades. Our market is one that now attracts out of state investors.   The market is considered safe with its open space policy, wide variety of jobs and robust economy (more on Boulder Economy), the ever expanding CU Boulder, Federal labs and all around great lifestyle. 

long term value gains in graph show boulder housing bubble unlikely
Long term tracking of the Boulder real estate market suggests a strong safe market, not an impending Boulder housing bubble.


Additional Boulder Real Estate News and Resources

  • An in depth look at the local economy and what drives Boulder.  
  • Landlords, Boulder has instituted Smart Regs, policy designed to promote energy conservation and improve the rental stock in our community. Make certain your property meets code.
  • Mortgage information information from Aaron Crowe ideal for First Time Home Buyers!
  • Thinking of selling? Eighteen Home Seller suggestions to maximize value and minimize the hassle.

Contact Bob Gordon now to get your home search started or your house on the market!


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