Evolving market conditions are impacting the region. As I jot this November economic snapshot of the marketplace, I’m reminded real estate never stands still. It is a constantly evolving thing, with a life of its own.
Scarcity creates demand and often leads to an increase in price.
The storms that have battered the East coast recently have caused major issues with utility services, transportation, police and fire department response times, etc. Demand for gasoline has triggered a situation where gas is being rationed based on even and odd license plate numbers. And here in Colorado, as I jot my
November economic snapshot, we are seeing an impact on our housing market place.
Emerging Sellers Market
From a real estate perspective, the Boulder Valley and Denver Metro real estate markets have been moving toward a scarcity mentality as the inventory of available homes continues to decline as a result of increased sales. For Boulder County, single family homes sales are UP 23.02% YTD when compared to through October/2011. Attached unit sales are UP 22.26% for the same time periods. Active listings for single family homes were down 13.07% in October/2012 compared to September/2012.
If that trend continues, there will be approximately 900 single family home listings available in Boulder County at the end of the year. That would be 20% fewer single family home listings than at the end of 2011 (1,121) and 33.5% fewer single family home listings than at the end of 2010 (1,353).
The Absorption Rate (the length of time it takes for the market to fully turn, assuming a continued level of sales activity and no new inventory coming into the market) stands at 130 days YTD at the end of October/2012 for single family homes in Boulder County. The Absorption Rate for single family homes at the end of 2011 for Boulder County was 156 days; for 2010 it was 189 days. On average single family homes are selling 17% faster this year than last year and 40% faster than in 2010.
More Homes: a Bright Spot in the November economic snapshot
From the depths of despair, new home construction has resurfaced the past couple of years with production builders once again seeing the light. In-fill projects have provided new homes for buyers looking to buy who couldn’t find what they wanted in the resale market. As the availability of in-fill lots has begun to decline, new home builders are now beginning to move dirt for new home projects that were sitting on community planner’s desks for several years gathering dust.
Scarcity creates demand and often leads to an increase in price.
Lack of available inventory, be it resale homes or new home construction, normally results in an increase in value. New home builders have historically raised the base prices on their homes as they build through a project. This, of course, is determined on the level of sales activity. Resale home values are a product of the marketplace. As home values in a certain price range, geographic location, etc. expand or decline, the market in those segments follows suit. Normally it’s a bottom up scenario for home values increasing and a top down scenario for homes decreasing in value.
In simple English, home values begin to increase initially on less expensive homes and have a tendency to decline when the market shifts downward on higher priced homes at first.
Most of the drama surrounding the recent election has ebbed and now the focus moving forward will be returning to normal life patterns; dealing with the stress and anxiety around the holidays, and the economics that go with that. For the foreseeable future, look for home mortgage interest rates to remain stable and reasonable, and the Boulder Valley real estate market to begin its natural slowing as 2012 comes to a close.