Residential market will be in uncharted territory in 2018

BOULDER — Despite attractive mortgage interest rates and a strong job market, the 2018 outlook for the residential real estate market in the Boulder Valley may not be all that rosy.

D.B. Wilson, manager at ReMax of Boulder, told a group of Realtors on Wednesday at BizWest’s annual Boulder Valley Real Estate Conference that he is concerned about affordability as home prices continue to increase throughout the region, and because there is an “extremely low” inventory of homes in local markets.

“I’d say we are in uncharted territory, and there are no big housing developments planned,” Wilson said. “The number of home sales through the first three quarters of 2017 is up compared with last year, but lower than 2015.”

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Wilson said the median sale price for a single-family home in Boulder has continued to climb, (exceeding $1 million during two months so far this year) and homes here are more expensive than the rest of the state. He said the number of sales for homes exceeding $1 million has increased 230 percent compared with 2011.

“Affordability has taken buyers out of the market,” he said. “Home prices continue to appreciate, but at a lower rate. … The market has slowed, but it is still balanced.”

Commercial forecast

On the commercial real estate front, as Angela Topel of Gibbons-White put it, “2018 will be a good time to sell, a good time to buy and a good time to hold. It will just be a good time.”

Topel, a senior broker associate at Gibbons-White, said there is plenty of product in the planning and construction stages or recently delivered. “There are about 2,500 multifamily units that could come online in the future,” she said, and cited a list of commercial projects totaling hundreds of thousands square feet of space.

Lynda Gibbons, chief executive of Gibbons-White, said new inventory will be needed to offset lowering vacancy rates throughout Boulder County.

The trend of institutional investors making $100 million-plus deals for commercial property in Boulder will continue, but Topel pointed out that the majority of deals are still being done by locals in the $3.5 million of less range.

Gibbons expects there will be “plenty of money for transactions” in the coming year. Investors will be looking for stable tenants when considering acquisitions.

OFFICE OF THE FUTURE: Topel said the shift from private office suites to open co-working spaces may come full circle in the future. Baby boomers, she said, who liked the private-office design of workspaces, are not leaving the workforce as expected. And that millennials, who drove the concept of open co-working spaces, may give way to the next generation, Gen Z, which according to studies cited by Topel, will have the tendency to want to return to basics for office settings.”

RETAIL IS FOOD, FUN, FITNESS: Topel said food, fun and fitness businesses are absorbing space created by the closing of large department stores. She said the majority of retail sales are still made at brick-and-mortar stores, and that about half of online sales deal with gaming. She predicts that retail in 2018 will remain strong, experiencing a 4 percent to 4.5 percent growth.

TAX-REFORM: Earlier in the conference, keynote speaker Lawrence Yun, chief economist of the National Association of Realtors, said the association was against the current tax-reform legislation because it, in general, would be detrimental to the real estate industry. Gibbons said that while that may prove true for the residential markets, she doesn’t believe it would adversely affect commercial real estate.

“The tax-reform legislation is business-friendly, I think it will have a more positive affect,” Gibbons said.