annual report on boulder real estate [house einstein]

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Market Research: Boulderan analysis of real estate market conditions in

Boulder, Colorado

January, 2014

Sponsored by:



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HouseEinstein.com ph: 303 746 6896 3

Legal

This presentation was prepared exclusively for the benefit and use of the Realty Unique clients to assist their study of real estate market conditions. This presentation is for discussion purposes only and is incomplete without an in-person, oral presentation by Realty Unique. This presentation reflects opinions of prevailing market conditions on this date, which are subject to change. Realty Unique recommends careful and complete due diligence before buying or selling real estate or other investments. The following presentation is not to be construed as legal, tax, or investment advice. Realty Unique will not be held liable for investment decisions derived from this presentation. Previous market performance is not a guarantee of future results and there is financial risk associated with buying or selling property. Consult with your financial, legal, and real estate advisers before making an investment decision. The data in this presentation was obtained by private and public sources, without independent verification.



“You can’t make a smart real estate decision without knowing the facts about market conditions.”

- Osman Parvez, FounderRealty Unique, LLC



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About

Osman Parvez: Osman’s professional experience includes investment analysis, economic consulting, real estate development and investment banking. Prior to Realty Unique, he served as an Equities Research Associate for Kaufman Brothers, Research Director for Windwalker Real Estate, Associate Director for Capital Markets at Republic Financial and co-founder of Silver Fern Homes. Outside of real estate and investing, he loves being in the wilderness and has research experience studying the impacts of climate change. Osman holds an MBA in finance, a B.S. in biology and is a Certified Negotiation Expert (CNE).

Email: [email protected] ph: 303.746.6896

mailto:[email protected]



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A Note About The Data

The following slides represent data from various sources, as cited. Understanding the limitations of each data source is important.

Data from the Boulder Area Realtor Association (BARA) is based on the IRES MLS. This MLS contains the majority of real estate sales in Boulder, Longmont, and Louisville but not in others, where Metrolist has a large market share.

The resulting potential error is unacceptably large in areas like Broomfield and Erie (see chart). If you see other analyses on area real estate conditions, confirm the data source.

Please see An Open Letter to BARA.

http://boulderrealty.blogspot.com/2014/01/bad-data-open-letter-to-boulder-realtor.html



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Market ConditionsRegional Overview



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Regional Summary

• Inventory remains at record low levels throughout the region. Longmont, Boulder, and Boulder Attached Dwellings (AD) are experiencing about the same level of shortage.

Months of Inventory, a metric based on sales volume relative to inventory, shows unbelievably low levels of inventory in Louisville and Superior. Experts believe about six months of inventory is normal in a healthy market.

• The new regional summary excludes Erie, Mountains, and Plains due to incomplete data from BARA.

Inventory DecemberYoY

% ChgMoM

% ChangeBoulder 123 (25.5)% (26.3)%Boulder AD 125 (23.8)% (17.8)%Lafayette 54 8.0 % (14.3)%Longmont 173 (24.1)% (21.7)%Louisville 20 (4.8)% (37.5)%Superior 15 (16.7)% (21.1)%

Sold Volume DecemberYoY

% ChgMoM

% ChangeBoulder 47 (9.6)% 20.5 %Boulder AD 40 (9.1)% 21.2 %Lafayette 14 (26.3)% (33.3)%Longmont 62 10.7 % (27.9)%Louisville 15 (16.7)% 0.0 %Superior 9 28.6 % 0.0 %

Absorption(Sold/ Inv**) December

YoY % Chg

MoM % Change

Boulder 28.1% 16.9 % 34.9 %Boulder AD 26.3% 19.6 % 27.6 %Lafayette 22.2% (28.7)% (23.8)%Longmont 28.1% 32.3 % (10.0)%Louisville 46.9% 9.4 % 31.3 %Superior 47.4% 82.7 % 31.6 %

Months of Inventory (Implied)Based On -> December Prev. Month 3 Mo. AvgBoulder 2.6 4.3 3.1Boulder AD 3.1 4.6 3.9Lafayette 3.9 3.0 3.0Longmont 2.8 2.6 2.8Louisville 1.3 2.1 1.9Superior 1.7 2.1 2.0



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City of BoulderSingle Family Houses

(detached dwellings)



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Inventory

• There was a normal long term seasonal pattern for inventory during 2013, despite the ongoing shortage.

• Inventory peaked in June with 311 houses on the market and bottomed in December with just 123 homes available.

• New listings are “like throwing meat to wolves” according to Chris Sweeney, the Managing Broker of Pedal to Properties.



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Sales Volume

• Sales volume also followed a normal seasonal pattern during 2013.

• On average, peak sales volume occurs in June but was pushed to July this year.

• Note the small spike in sales volume during October, likely the result of delayed closings caused by the historic flood.

• 47 houses closed during December, precisely the long term average for the month.



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Sales Volume

• In a small market like Boulder, it’s important to look at data from longer periods of time than a single month to establish a trend.

• The accompanying chart shows cumulative sales volume over the past six and twelve months, ending in December.

• According to BARA (chart), volume increased 4.3% during the twelve month period, year over year. Combining data from both MLS systems shows a 12.2% increase in annual volume.

• A much larger spike occurred in 2012, with 25.9% increase in annual sales volume from the prior year.



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Absorption

Note: Absorption is the percentage of inventory sold in a given period of time.

• Absorption remained highly elevated during the full twelve months of 2013, with a noticeable lack of volatility from March through August.

• For sellers with less than perfect properties, high absorption is a good thing. It will lead buyers to even consider homes with deferred maintenance and in poor locations.

• For buyers, high absorption means intense competition for the most desirable homes. The best approach is to work with an experienced Buyer’s Agent who will help you understand the market and move aggressively when the right property becomes available.



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Days to Offer

• This chart shows average days to offer for deals that closed during the month.

• Note that sales which close during January and February are often properties that have been on the market for a long time, driving the average DTO higher.

• The summer months are, on average, the period with the lowest DTO. While selection is also highest during summer, competition between buyers is more intense.

• DTO during 2013 (red line) remained well below average even during the shoulder seasons. Buyers and sellers should plan accordingly.



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Price Range Analysis

• This chart shows the change in sales volume by price range, 2013 vs 2012.

• Sales volume fell dramatically for entry level homes (priced below $400,00).

• The mid range experienced low to moderate increases in sales volume.

• The $1.0MM to $2.0MM segment saw only a mild increase.

• The most dramatic change occurred for homes valued at $2.0MM or more, with a 333% increase in sales volume.



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City of BoulderTown Homes and Condos

(attached dwellings)



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Sales Volume

• Sales followed a fairly typical pattern during 2013 (red line) compared to the long term average (shaded area).

• An unusual dip in sales volume occurred in June, followed by a slightly elevated July, August, and September.

• 40 condos and town homes closed during December, up 21% from the preceding month but a decrease of 9% from last December.



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Sales Volume

• Sales volume reached 715 units during 2013 (on the IRES MLS), the highest level since 2007. This represents a 12.6% increase from 2012.

• If both MLS systems are considered, sales volume reached 804 units – an increase of 31.6%.

• Increasing sales volume during a period of record low inventory is a very strong market signal for an upward movement in prices.



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Inventory

• Inventory peaked early during 2013, reaching a high of 250 units.

• Last year’s peak was less than half of the average peak inventory.

• Just 125 units were on the market in December, 24% below last year and a new record low.

• Inventory will rise through the spring, but it remains shocking below the long term average.



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Absorption

Note: Absorption is the percentage of inventory sold in a given period of time.

• Absorption was well above the long term average throughout 2013, reaching a peak of 42% in August.

• Absorption ranged from 1.9x to 2.6x the long term average during 2013. There is no shortage of demand for attached dwellings in Boulder.

• Demand was not equal for all property types and price ranges. See slide 22 for sales volume by price range.



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Days to Offer

• Deals that closed during December were on the market for an average of 70 days before receiving an acceptable offer. This is 34% below the long term average for the month.

• As the chart shows, days to offer was well below average throughout the year, reaching a bottom in September.

• Keep in mind this the average. Marketed well, the most desirable properties were under contract within a few days of hitting the MLS during 2013.



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Price Range Analysis

• This chart shows annual change in sold volume by price range.

• Keep in mind that nearly 80% of the market is priced below $300,000. There is far greater depth of market at the lower end but this analysis suggests the change in demand was greatest at the higher end.

• Record high absorption would have likely driven sales volume much higher across the market if additional inventory had become available. In other words, the reason that the volume of sales fell below $100,000 was due to the inventory shortage– not a lack of buyer interest.



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Lessons from the Trenches

• In many ways, last year’s market was a dream for sellers. Professionally marketed properties sold well and even marginal real estate attracted buyer interest.

• In some cases, sellers left money on the table by not allowing adequate time for the full pool of potential bidders to view the property.

• Buyers Agents were forced to be vigilant and responsive to new listings. With little leverage on price, smart buyers negotiated on inspection and appraisal contingencies in order to win bidding wars.

• In this market, it’s important to discuss and agree on negotiation tactics well in advance of writing (or receiving) offers. This cannot be over-emphasized. Talk to your agent for details.

http://boulderrealty.blogspot.com/p/about-osman.html



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Read Up! Recent Articles From Our Blog

The Top 10 House Sales in Boulder

Don’t Blow the Negotiation [Strategy]

Contractors, Competence, and the One Strike Out Policy

Fresh Boulder Listings, Get ‘Em Hot

Image: mkhmarketing

http://boulderrealty.blogspot.com/2013/12/top-10-house-sales-in-boulder-best.html

http://boulderrealty.blogspot.com/2014/01/dont-blow-negotiation-strategy.html

http://boulderrealty.blogspot.com/2014/01/contracts-competence-and-one-strike-out.html

http://boulderrealty.blogspot.com/2014/01/contracts-competence-and-one-strike-out.html

http://boulderrealty.blogspot.com/2014/01/fresh-boulder-listings-get-em-hot.html



http://www.flickr.com/photos/mkhmarketing/



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Get A Great Deal

• Buying and selling real estate is one of life’s largest financial decisions. It’s not just an important investment, it’s where your family and friends will gather for many years and memories will be made. Make a smarter decision, get a professional advisor.

• At Realty Unique, we love to negotiate. Give us a call. We can advise you on current market conditions, help you find your dream home, or get the most value from the sale of your property.

• We work with buyers and sellers – long time residents and those relocating to Boulder.

Image Johnny Goldstein

http://www.flickr.com/photos/jonnygoldstein/

