When we reviewed the year-end numbers 12 months ago, we talked about continued sideways movement. What a difference a year makes. Residential home sales were up 24.4 percent and attached homes sales were up 20.7 percent. With the lack of homes for sale that we experienced, 2012’s sales pace felt even stronger than the numbers imply.
||Single Family No. of Sales
||Attached No. of Sales
While the market is definitely stronger, the percent of homes successfully sold still struggles, with 48 percent of the homes listed for sale in 2012 not selling. Homes have to be priced well, show well and not have any negative issues such as busy roads, power lines, poor condition, etc. Buyers are not yet settling for less desirable homes due to a lack of home choices.
One of the bigger stories in our market last year was the continued low number of homes for sale. The number of single family homes for sale in Boulder County, 753 homes for sale at the end of December 2012, is the lowest number I’ve recorded since I started tracking this number back in 1997. With a total of 81,112 existing single family homes in Boulder County as of the end of 2011 (the last year of available data), we have less than one percent of our existing homes for sale. An incredibly low, and potentially problematic number. While the low inventory is good for sellers who are seeing appreciation, it is really hard on buyers who are having trouble finding homes to buy and are frequently being out competed for the homes that do come onto the market. We expect, and hopefully we’ll be correct, that this year we will see a gradual increase in the number of homes for sale.
Mortgage rates remain incredibly attractive, around 3.5 percent for 30-year fixed mortgage. While we have all been predicting that this rate must rise for a couple of years now, the rates have remained low. Hating to break a tradition, we still believe that mortgage rates must rise through 2013, although that rise, if it does occur, is expected to be mild with rates ending the year in the 4 percent range, still a historically low rate. A buyer who buys now versus waiting until rates hit 4 percent will have 6.3 percent more purchasing power for the same payment, another incentive to take advantage of current market conditions.
This chart shows the relative strength and weakness, as measured by the percentage of homes under contract, of the various Boulder County municipalities. For a number of years now, we’ve noted that the market has become hyper-local, meaning that countywide statistics may paint a different picture than the local city or even neighborhood may be experiencing. You can see some of what we mean by this when you look at the difference in the chart above. Where Superior is more than 60 percent under contract and rising higher, the Plains are only 19 percent under contract and dropping lower. These two parts of Boulder County are within 20 minutes of each other, yet they are having vastly different experiences of market strength.
This chart shows the disparity between the number of homes for sale versus the number of homes actually selling across all of Boulder County. It’s a little hard to see in the chart until we get the next data points, but we have fewer homes for sale in Boulder County than we’ve had at any time in the last 12 years displayed on the chart. This occurring at the same time that demand, as measured by the number of sales, has increased. I think we haven’t seen as much price appreciation as possible due to the brakes on the market of tax policy, economic uncertainty, and tight lending guidelines. If these brakes on the market are removed, we will be primed for potentially strong price appreciation.
This chart shows the annual number of single family homes sold in Boulder County as compared to previous years. On its own, the annual sales number doesn’t tell us much unless we look at and compare it with other metrics. While we bottomed out in 2009 and the recovery in 2010 and 2011 was weak, this last year there was no question that the market had changed. The last time we saw a jump this large in annual sales was from 97 to 98. While the total number of annual sales is still below where we should be, this jump was a refreshing change and a signal that the market is strengthening. If some of the brakes on the market are removed, we are primed for market appreciation, possibly like we saw in the late ’90s.
This graph shows sales volume as an average over the last three months. This graph really shows the ups and downs in the numbers of home sales over the last few years. We also can clearly see the seasonal nature of the market. Almost twice as many homes sell during the summer months compared to the winter months. We have a consistent upward trend in this chart for single family homes, red line above that we hope to see confirmed by the winter trough in sales. The winter trough in this chart usually comes in February or March due to the averaging of the sales data. While the existing trend is upwards, we expect to see this winter’s trough break that trend line in a dramatic fashion much like the annual numbers showed.
The current number of homes listed for sale divided by the number of homes sold during the previous month creates an estimate of the months supply of homes currently for sale or “Available Supply.” The light blue horizontal band in this chart signifies a balanced market. In 2012, we spent two months above the band, in buyer’s market territory, three months in the balanced market territory and seven months in the seller’s market territory. We’ll be watching this chart closely to see where the January data puts us. The expectation is that we will remain in the seller’s market area or possibly jump into the balanced band. I doubt we would see a change into the Buyer’s market territory but we’ll have to wait for the January numbers.
We feel that the market is primed for further price appreciation. Many areas in the lower price points and tighter markets are already experiencing price appreciation, but the appreciation we are seeing is not uniform across all of Boulder County. The upper price points, the plains and the mountains are lagging. While the Boulder County economic picture is healthy, the national and overall Colorado economy aren’t as positive, which with still tight lending standards, are the drags against future price appreciation. Hopefully we’ll work through these outside issues and enjoy a great market in Bolder County in 2013.