This post is based upon the Re/Max Alliance February Boulder Housing update, a service of my office. Boulder is warming up, out of the deep freeze of winter. I think.
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. Like me, you might have missed this chilly note while watching the Denver Broncos fall miserably to the Seattle Seahawks.
Where’s the beef?
The holidays are a distant memory as I write my February Boulder housing update. It is time to focus on home buyers and sellers. The biggest question, will the inventory of available properties begin to grow as the weather improves? Or will Boulder homes 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.
Bottom line: The overall Boulder housing 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%. Rates in the three’s exist for those buyers amendable to adjustable rate notes.
Interesting Thing About Rates
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.
Key Stat
The Absorption Rate is the key statistic of this February Boulder housing update. Defined as the time it takes for the market to sell through assuming no new inventory surfaces and the same rate of sales activity. The absorption rate 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.
Forward Ho
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. As I jot notes for my February Boulder housing update, 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: As the US economy strengthens (that’s what the government envisions) mortgage interest rates have a tendency to rise. Interest rates are projected to be higher in the near future.
Thank you for stopping by to view my February Boulder housing update. Be sure to see my blog each and every Saturday when I post the high and low Boulder sales sold updates.