Ryan McMaken, communications director and economist with Colorado’s Division of Housing, thinks there could be some tapering of home-value appreciation. But as for a bursting bubble, he says that’s not a concern at this point. Interest rates, after all, are still strong. The economy is still improving. And inventory, particularly in Boulder County, remains extremely low.
“The general consensus is that things look quite optimistic for 2014,” McMaken said.
While the September flooding caused a hit to the local market for a few weeks in the fall, 2013 remained the strongest since before the recession. Foreclosures in the state are at 10-year lows and dropping, a trend McMaken expects to continue.
Home prices in some parts of Colorado like the Denver metro area and northern Front Range increased as much as 9 percent or 10 percent compared with 2012. Through the first 10 months of 2013, D.B. Wilson of Re/Max of Boulder said the median single-family home price in Boulder County was $411,000, and the average was about $495,000. In the city of Boulder, those numbers were $642,000 and $747,233, respectively.
Confidence in the local and national economies and decreasing unemployment rates are all playing factors in the strong market locally, Wilson said. But the low inventory continues to be a major factor. At a real estate conference in November, he said Boulder County’s inventory for single-family homes was at just 3.2-months-worth, roughly half of the absorption rate of what he termed a healthy market.
Wilson said he expects that tight inventory to lead to another competitive spring full of homes attracting multiple offers as inventory of single family homes in Boulder County heading into winter was about 16 percent lower than a year prior.
Wilson agrees with McMaken that it’s unlikely that the area is ripe for a bubble-burst in the near future. For one thing, tighter federal lending rules go into effect this year that will make landing mortgages and refinances more difficult. Those rules include, among other things, mortgage applicants not being allowed to have a monthly debt-to-income ratio above 43 percent.
“I don’t think we’re going to see runaway appreciation because it’s subject to a fairly tight appraisal,” Wilson said. “I don’t think we’re out of control, and I think some of these lender requirements are going to help keep that in check.”
The home market has shown growth in every price range locally. At the top end, Boulder County had more than 40 homes sales eclipse $2 million in 2013, a leap from just 18 such sales in 2012 according to figures from Legendary Properties broker Scott Franklund.
Franklund, who specializes in homes priced at $1 million and up, said he doesn’t expect to necessarily see the same volume of luxury sales in Boulder County in 2014.
The 2013 surge, he said, included the absorption of most of the high-end homes that had been languishing on the market in recent years due to the economic downturn. Franklund said the appreciation, however, because of a lot of that absorption, should remain strong in 2014. And that appreciation should coax enough people to sell to help keep the high end healthy.
“If it was a million-dollar home in 2012, they’re going to want a million-five for it now,” Franklund said. “And they’ll probably get it.”