How long can Boulder County’s steep appreciation last?

Anyone who even casually follows the residential real-estate market in Boulder County understands that we are in the midst of a period of steep appreciation. One question I hear frequently from both sellers and buyers is, “How long can this incredible rate of appreciation last?” Homeowners interested in selling are, of course, trying to time the market to maximize their captured appreciation, whereas buyers are not so secretly hoping for some price relief.

One thing to understand is that this present cycle of steep appreciation is not unprecedented.  In fact, going back to 1978, this is the fourth such period of rapid growth.

Very similar growth periods occurred from 1978 to 1982, 1990 to 1994 and 1997 to 2001. In each case, our average single-family home value increased between roughly 52 percent and 54 percent in about a 48-month period. While the duration of the steep appreciation cycles is very consistent, the time between these cycles has lasted anywhere from three to 12 years. As you can see in the accompanying chart, our current steep appreciation cycle in Boulder County began in early 2013 and so far homes appreciated about 32.9 percent through the end of 2015.

boulderAppreciation_gpx

Based solely on the pattern outlined above, one can make the following prediction for Boulder County: This period of steep appreciation will last into early 2017, and homes will appreciate another 20 percent from the end of 2015.

The IRES MLS statistics show that Boulder County single-family homes already have appreciated 8 percent in the first four months of the year.

(IRES MLS statistics will vary slightly from the FHFA statistics used elsewhere in this column, but still are an accurate indicator of appreciation in Boulder County.)

While the data and chart are pretty compelling, there are new factors in our market that make it more likely that this period of rapid growth may continue beyond early 2017. The most prominent factor is our perceived proximity to buildout in Boulder County. That is, in each of the previous rapid appreciation cycles, we were nowhere near to running out of buildable lots in Boulder County. This time, there is a perception that we are running out of space to build, and this perception is compounded by our rapidly expanding population. The U.S. Census Bureau just estimated that Colorado’s population grew by more than 100,000 people and the building industry simply cannot keep up. The deficit last year was a reported 15,000 homes.

Even when this period of steep appreciation ends, the data above show that we will likely continue to appreciate, just at a lesser rate of appreciation.  Looking to history again as a guide, if you bought a home at any time since 1978 and held it for at least six years, your home would have appreciated in value.

My advice to sellers: It is likely you will continue to enjoy rapid appreciation at least into early next year, so this year or into next spring is a great time to sell.

As for buyers, I recommend buying as quickly as you possibly can because, even if the appreciation rate becomes less steep, it’s not likely prices will ever be as low as they are today. Get into the market now and enjoy the next several months of high appreciation.

Jay Kalinski is broker/owner of Re/Max of Boulder. He can be reached at jaykalinski@remax.net.