Kalinski: Winter is coming, and impact on real estate uncertain
Winter is coming and, much like the Game of Thrones series, no one can predict exactly what will happen with the Boulder Valley real estate market, but you can be sure that there are going to be some crazy plot twists — and we can hope that the forces of good will win out in the end. So, rather than make bold predictions, this article will look back at the first three quarters of 2020 and identify a couple of trends that are likely to affect Boulder Valley real estate into 2021.
Looking Back at 2020
2020 has been a rollercoaster of a year in real estate. The second quarter of the year was by far the most volatile, with a large dip due to the initial COVID-19 surge and accompanying lockdown, and then a burgeoning resurgence as the situation improved. By the close of the third quarter, you could look at some of our statistics and think that we have had a pretty typical, even robust, year in real estate.
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Trend 1: Growing buyer preference for detached homes
While the foregoing statistics indicate an overall strong market, other statistics point toward the first trend we are observing, the change in buyer sentiment in favor of single-family homes over attached dwellings.
As you can see, the inventory of single-family homes available for sale has dropped significantly (to the lowest amount on record) while the percentage of these homes already under contract has gone up tremendously, indicating a very strong demand for these homes. On the other hand, the number of available attached units has actually increased over last year and the percent under contract has only risen modestly. The most compelling explanation for this phenomenon is that, due largely to COVID-19, buyers (and their families) are anticipating working and schooling from home for many months to come and are, therefore, seeking larger homes with at least some separation from their neighbors. I would anticipate this trend to continue well into 2021.
Trend 2: COVID-19 impacts
It appears that COVID-19 will continue to significantly impact people’s lives — and the economy — for months (possibly years) to come. We discussed its ability to affect buyer preferences above, but COVID-19 may likely have a more direct effect on the real estate market in several ways. First, if COVID-19 cases continue trending upward and cause local or state officials to issue another full lockdown (i.e., a stay at home order), it could freeze the market again and have devastating consequences that could take even longer to bounce back from than last time. Second, as COVID-19 continues to be a drag on the economy, the more would-be buyers will lose their jobs and with them the ability to purchase homes. Thus, the longer COVID-19 persists, the more it is likely to erode buyer demand, even with mortgage rates at historic lows.
What can we do?
Looking at the numbers and likely trends, it appears that there are a couple of things we can do to improve the situation going forward. First, it is imperative to drive the COVID-19 numbers back down, which means practicing social distancing, wearing masks, etc. Second, if you own a single-family home and are considering selling, this winter will be an unusually favorable time to sell, given the strong demand and paucity of inventory. If, on the other hand, you own an attached home, you might consider holding off on selling until conditions are more favorable (if you are able to do so). Finally, if you are a buyer, you should carefully evaluate your financial situation before deciding whether to move forward. If you decide to do so, expect stiff competition for single-family homes but also know that you could find some potential deals if you are looking to buy a condo or townhome.
Keep in mind that owning a home Boulder Valley has been one of the best investments you could make over the past 30 years and that trend is likely to continue after COVID-19 is just a terrible memory. Take care of yourselves and each other and we will make it through this better than before.
Jay Kalinski is the 2020 chair of the Boulder Area Realtor Association and owner of ReMax of Boulder and ReMax Elevate.
