For real estate, ‘we can always see a silver lining’

BOULDER — Todd Gullette says he wishes 2025 would be free of challenges for the residential real estate market.

“Next year, I’d like to stand in front of you and say something like, ‘Phew, we got away with one,’” Gullette, managing broker of RE/MAX of Boulder, told the packed house during a BizWest Boulder Valley Real Estate Conference last week at the Embassy Suites in Boulder.

After years of a red-hot housing market, the Boulder Valley is seeing a cooling in sales activity and appreciation, but Gullette said that just means the market is ripe for opportunity.

“There’s some deals out there,” he said. “Any time you have an environment like this where you have some downward pressure on price come some deals. Remember 2021, where there were maybe 20 offers on a property that we were looking at? That’s so uncomfortable for a buyer. So I think that we can always see a silver lining. There may be only a few of them, but that’s one of them.”

That downward pressure, he said, comes despite the fact that 10% of the homes for sale in Boulder County, including one in four in the city of Boulder, are listed for $2 million or more.

“Sometime in June 2022, the Federal Reserve decided to combat inflation by bringing up interest rates. So that domino that got kicked over, that has spurred on most of the issues we’re having now,” Gullette said. “For the buyer’s side, we have the double whammy of higher interest rates, but we’re also coming off this hangover from really extreme appreciation, one of the nation’s most powerful economic expansions. Basically, what was really hard to afford before is now really, really hard to afford.”

Still, the Boulder Valley technically is in a “seller’s market” but “moving into a balanced market,” Gullette said. “But it sure feels like a buyer’s market coming off of 2021.”

President John F. Kennedy 63 years ago said the United States was choosing to go to the moon “not because it is easy, but because it is hard.” Although Gullette didn’t mention JFK, he made the same analogy about real estate.

“The idea that the ease of the market is what creates a good time to buy is actually the reverse,” he said. “A difficult time to buy is when you create a buyer’s market. A discouraged set of buyers not entering into the market is what brings back competition, and that’s when you have your negotiating power. That’s what brings downward pressure on prices, the ability to go look at a house that doesn’t already have a few offers on it.

“So that’s kind of nice,” Gullette said. “Maybe we’ll look back on this and think, ‘We should have bought back then.’”

He asked real estate brokers in the audience to remember that “high interest rates affect sellers too, especially sellers that are going to be buyers.

“They’re going to sell their house, but we forget that they don’t have it easy, either,” Gullette said. “They’re trading maybe a 3%, 3.5% mortgage for a 7% mortgage when they go to buy. So that’s definitely one of the things that may be keeping sellers from selling.”

However, he added, “a down market for a seller is actually a pretty good time to move up in price, to move up in the quality of your home. So if you have a $500,000 home that lost 10%, and you’re looking at a million-dollar home that lost that same 10%, the math works. You can move over, take advantage of that $100,000 drop in that price.

“So this notion of ‘buy low, sell high’ may be a stock-market kind of ideology, but in real estate, it’s OK to buy and sell laterally,” he said. “You can take your money out of a house that you may have lost that money in, and it’s OK to just keep that in real estate and move back into a different house. Don’t feel like you’re having a loss, if you’re a seller.

“For our clients who are sellers,” he told the brokers, “explain to them that it might not be a loss; it’s an opportunity. If you feel like you’re losing money on your property, the property you’re about to buy is in the same boat. So it’s worth mentioning.”

There are ways to get around worries about interest rates as well, he said.

“You have clients who will say, ‘I’ll buy when rates are back in the 3%, 4% range,’ but I’m not sure what it takes to pull those rates down,” Gullette said. “Maybe another Great Recession? I don’t think we’re looking at that. So I think we may see modest reductions in our interest rates, but I think we have to be realistic about that. It’s something we’ve gotten obviously used to in the past, and we can do that again.”

Gullette said he expected the area’s low inventory to be permanent, and noted that up to 90% of the homes destroyed in the 2021 Marshall Fire are at least somewhere in the building process. “You don’t see rows of empty lots there,” he said.

“Patience is required if you’re a Realtor,” Gullette said. “It’s a little more difficult for an agent to work. It’s hard to be a real estate agent when you’re chasing the market down.”

However, he added, “the shift to a buyer’s market has started, for sure.”

Watch this exclusive interview from the 2024 Boulder Valley Real Estate Conference.

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