the silver fern report - july 2010

THE SILVER FERN REPORT: BoulderAn analysis of real estate market conditions in

Boulder, Colorado

July, 2010

Phone: 303 586 1241 | www.silverfernhomes.com

Boulder, ColoradoPhone: 303 586 1241

www.silverfernhomes.com

“Our goal is help you get the most value from your unique real estate situation. We offer our clients the latest market information, straight forward advice and the highest standards of service. ”

- Osman Parvez, Co-Founder

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www.silverfernhomes.com ph: 303 586 1241

Legal

This presentation was prepared exclusively for the benefit and use of the Silver Fern Homes clients in order 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 Silver Fern Homes. This presentation reflects our views of prevailing market conditions on this date, which are subject to change. Silver Fern Homes 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. Silver Fern Homes 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.

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The TeamOsman Parvez: Co-Founder and Associate Broker. Osman’s professional experience includes investment analysis, real estate development, and investment banking. He also loves being in the wilderness and has research experience studying the impacts of climate change. Osman holds an MBA in finance and a B.S. in Biology Email: [email protected] ph: 303.746.6896

Dallice Tylee: Co-Founder and Managing Broker. She holds a GRI and CRS. Dallice is also a Certified Negotiation Expert, EcoBroker, and Accredited Staging Professional. A native of New Zealand, Dallice's attention to detail and thorough, disciplined approach comes from previous professional experiences in health sciences. She is passionate about interior design and landscaping. Email: [email protected] ph: 303.746.6765

Crystal Callipari: Associate Broker. Crystal’s experience as a real estate investor and home builder provides unique insight on buying, selling and marketing strategies. Prior to joining Silver Fern, she was a frequent client of the firm, giving her perspective on the quality of service clients should expect from their broker. Crystal has lived in Colorado for over 13 years with her husband. She has two grade school aged children, one of whom is a competitive figure skater and the other a black belt in martial arts. Email: [email protected] ph: 720.841.2701

Robbin Merta: Administrative Assistant. She has a B.F.A. in graphic design, experience owning several small businesses, and is studying for her Realtor's license. Her strong interest and experience in home renovation, both personally and professionally, is a practical complement to the Silver Fern team. She is a stained glass artist who also enjoys volleyball, cooking and martial arts. Email: [email protected] ph: 303.993.6139

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City of BoulderSingle Family Houses

(detached dwellings)

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House Inventory

• 507 houses were available for sale in the City of Boulder during May, a slight increase from the previous month but dramatically lower than last year. Inventory remains above the long term average.

• The season has likely peaked and inventory should begin to decline for the rest of the year.

• The dip in May was unusual, created by home buyer tax credits.

Boulder Inventory

300

350

400

450

500

550

600

650

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Average ('04-'08)

2009

2010

Data: BARA© Silver Fern Homes

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House Sales Volume

• 80 homes sold in the City of Boulder during June, up nearly 13% from last year.

• Sales volume is ahead of least year but remains well below the long term average.

• Over the past six months, 339 units have sold, an increase of 44% from the same period a year ago.

Boulder Sales Volume

0

20

40

60

80

100

120

140


Average ('04-'08)

2009

2010


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House Absorption Rate

• Absorption is the number of properties that sell each month as a percentage of available inventory. It reached 16.2% last month, an increase from the month before.

• Happy days are not here again. Although higher than last year, absorption remains significantly below the longer term average.

• As the chart shows, average absorption in June for the five year period (2004 – 2008) was nearly 25%.

Boulder Inventory Absorption

5%

10%

15%

20%

25%


Average ('04-'08)

2009

2010

Data: Boulder Area Realtor Association© Silver Fern Homes

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What’s Under Contract?

• Inventory under contract is a forward look at property that is likely to close in the near future (generally within the next 30 days). As usual, demand is strongest at the entry level.

• The market is generally stronger during the 2nd quarter, which is reflected in most price ranges shown.

• There are some price ranges for which nothing is currently under contract.

Percent Of Inventory Under ContractBoulder Houses

0% 5% 10% 15% 20% 25% 30% 35% 40%

$300 to 350K

$350 to 400K

$400 to 450K

$450 to 500K

$500 to 600K

$600 to 700K

$700 to 800K

$800 to 900K

$900 to 1MM

$1.0 to 1.5MM

$1.5 to 2.0MM

$2.0 to 2.5MM

$2.5 to 3.0MM

$3MM+ As of July

As of May

Price Range Analysis

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Sales Volume Breakdown

• Over the last six months (1Q+2Q), sales volume has been highest at mid-range of the market.

• As expected, there were more closings in the 2Q. At some price ranges, markedly so ($800 to 900K, $1.0 to $1.5MM).

• Above $800,000, sales volume falls off dramatically. This is not due to a lack of inventory.

Sales VolumeBoulder Houses

0 10 20 30 40 50 60

$300 to 350K

$350 to 400K

$400 to 450K

$450 to 500K

$500 to 600K

$600 to 700K

$700 to 800K

$800 to 900K

$900 to 1MM

$1.0 to 1.5MM

$1.5 to 2.0MM

$2.0 to 2.5MM

$2.5 to 3.0MM

$3MM+ 1Q

2Q


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Inventory by Price Range

• The middle of the market, generally $500,000 to $800,000 contains the highest inventory of homes available.

• Despite intense demand, there is little available below $400,000.

InventoryBoulder Houses

0 10 20 30 40 50 60 70

$300 to 350K

$350 to 400K

$400 to 450K

$450 to 500K

$500 to 600K

$600 to 700K

$700 to 800K

$800 to 900K

$900 to 1MM

$1.0 to 1.5MM

$1.5 to 2.0MM

$2.0 to 2.5MM

$2.5 to 3.0MM

$3MM+

v


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The Listing Failure Ratio

• This chart shows the ratio of withdrawn/expired listings to sold listings over the past six months (Q1+Q2).

• Statistically, listings have a better chance of success when priced below $800,000. Above that price point, there are many listings and relatively few buyers.

• Seller disappointment is most palpable from $2.5 to $3.0MM, where for every listing sold nearly 10 listings expire or are pulled from the market.

Ratio: Withdrawn/Expired to Sold Listings (Q1+Q2)Boulder Houses

0% 200% 400% 600% 800% 1000% 1200%

$350 to 400K

$400 to 450K

$450 to 500K

$500 to 600K

$600 to 700K

$700 to 800K

$800 to 900K

$900 to 1MM

$1.0 to 1.5MM

$1.5 to 2.0MM

$2.0 to 2.5MM

$2.5 to 3.0MM

$3MM+


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Not Easy Being Green

508 Pleasant Street

Key Statistics: 4 Bed, 4 Bath4,874 SQFT

Sold: 6/18/10Days On Market: 151Sold: $1,975,000Percentage of Original Asking : 87%

A LEED certified, eco-home. This house was beautifully designed and staged, beating out many competitive listings to attract a buyer.

Notable Sales

Lightning Fast Sale

2995 Jefferson Street


Sold: 6/18/10Days on Market: 5Sold: $730,000Percentage of Original Asking : 97%

Remodeled kitchen, baths, and a great location helped this mid-range listing break free from the pack. Proof that pricing it right means selling it quick.

Spec Project Escape

1936 Mapleton Avenue


Sold: 6/01/10Days on Market: 487Sold: $1,305,000Percentage of Original Asking : 71%

A beautiful restoration originally listed in January ‘09. At the steeply discounted sale price, it was far from lucrative for the developer. Take home lesson: know the market before your attempt a flip.

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City of BoulderTown Homes and Condos

(attached dwellings)

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Town Home & Condo Inventory

• 463 units were available for sale in June, 1 less than last month.

• On average, inventory peaks in June. This year it occurred in April, a phenomenon created by federal tax credits.

• Inventory remains well below the long term average, a surprising fact but some builders do not put their full available inventory on the MLS.

• Available inventory should continue to decline from this point until the end of the year.

Boulder Attached Dwelling Inventory

300

350

400

450

500

550

600


Average ('04-'08)

2009

2010

Data: BARA

© Silver Fern Homes

Note: several developers are not listing full inventory on the MLS. True inventory is substantially higher.

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Town Home and Condo Sales Volume

• 77 units sold in June, down 11.5% from last year. Perhaps surprising given the tax credits, but it’s likely that many stimulus buyers closed in April and May.

• Over the past six months, 357 units have sold, 31% more than the same period a year ago.

• The market for attached dwellings is highly influenced by CU. Many parents and graduate students are inclined to purchase, rather than rent, which is why volume peaks later than for detached dwellings.

Boulder Attached Dwelling Sales Volume

0

20

40

60

80

100

120


Average ('04-'08)

2009

2010

Data: BARA

© Silver Fern Homes

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Town Home and Condo Absorption Rate

• The absorption rate was 16.6%, up slightly from last month.

• Unlike single family homes, the absorption rate for attached dwellings is a little more stable during the summer.

• Absorption this year was higher than normal during March and April and is now running slightly below the long term average.

Boulder Attached Dwelling Absorption

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%


Average ('04-'08)

2009

2010


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Town Home and Condo % Under Contract

• Inventory under contract is a forward look at property that is likely to close in the near future (generally within the next 30 days).

• Not surprisingly, the number of units currently under contract is lower at nearly all price levels than in mid-May.

• The $350 to $400K and $550 to $600K tranches have experienced a dramatic reduction in activity.


Boulder Percent Of Inventory Under ContractAttached Dwellings

0% 5% 10% 15% 20% 25% 30% 35% 40%

$100 to $150K

$150 to $200K

$200 to $250K

$250 to $300K

$300 to $350K

$350 to $400K

$400 to $450K

$450 to $500K

$500 to $550K

$550 to $600K

$600 to $1MMJuly

May

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Town Home and Condo Sales Volume• For investment oriented

buyers, depth of market is a important indication. Stable prices and high volume suggest market momentum.

• The $150,000 to $200,000 price tranche is the highest selling by volume. Nearly 100 units have sold during the first half of this year.

• Despite the higher cost of capital, a market exists for premium attached dwellings. This is likely to grow in future years as affluent boomers seek lower maintenance, luxury quarters on one-level (preferably with a view and an elevator).


Sales VolumeAttached Dwellings

0 20 40 60 80 100

$100 to $150K

$150 to $200K

$200 to $250K

$250 to $300K

$300 to $350K

$350 to $400K

$400 to $450K

$450 to $500K

$500 to $550K

$550 to $600K

$600 to $1MM Q1

Q2

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Town Home and Condo Inventory

• This chart paints an unexpected picture; much more inventory is available at lower price levels. Contrast this with unattached dwellings (houses), where few properties are available at the entry level of the market (slide #11).


Boulder InventoryAttached Dwellings

0 10 20 30 40 50 60 70

$100 to $150K

$150 to $200K

$200 to $250K

$250 to $300K

$300 to $350K

$350 to $400K

$400 to $450K

$450 to $500K

$500 to $550K

$550 to $600K

$600 to $1MMAs of May

As of July

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The Listing Failure Ratio

• The failure rate of attached dwellings rises somewhat as the asking price increases, but nowhere to the same extent as for detached dwellings. See slide #12.

• The lowest listing failure rate is for those properties priced between $150 and $200K.


Ratio: Withdrawn/Expired to Sold ListingsAttached Dwellings

0% 20% 40% 60% 80% 100% 120%

$100 to $150K

$150 to $200K

$200 to $250K

$250 to $300K

$300 to $350K

$350 to $400K

$400 to $450K

$450 to $500K

$500 to $550K

$550 to $600K

$600 to $1MM

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The East End

1505 Pearl, #301


Sold: 6/30/10Days On Market: 58Sold: $910,000Percentage of Original Asking : 94%

The developers of this unit originally envisioned a much stronger high-end market. Listed for nearly $1.4MM two years ago, this unit found a buyer in only 3 weeks when priced right at $969K

Boulder: Notable Sales

Mapleton Condos

429 Mapleton Ave, Unit: A

Key Statistics: 1 Bed, 1 Bath674 SQFT

Sold: 6/24/10Days on Market: 235Sold: $370,000Percentage of Original Asking : 93%

These cute historic condos are in the ideal location, near Santas and a few blocks from downtown. Formerly a women’s boarding house, it was built in 1906.

Rooftop Swimming

3601 Arapahoe, #D314


Sold: 6/11/10Days on Market: N/ASold: $390,000Percentage of Original Asking : N/A

With now solidly competitive pricing, the Peloton sales office continues to roll ahead. Expect new buildings to come on-line shortly. This unit was on the 3rd floor, east facing.

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Vacancy Rates

• The US Postal Service tracks vacant homes. The data is available via the US Department of Housing and Urban Development.

• For this spotlight, we focused on three key areas of Boulder: Martin Acres, Central Boulder, and West Boulder. These areas are highlighted on the right.

• Trends were also reviewed for Gunbarrel, Southwest Longmont, and Boulder County as a whole.

Research Spotlight

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Vacancy Rates

• Of the studied neighborhoods, Martin Acres (blue) experienced the highest annual increase in vacant properties.

• Despite the increase, the vacancy rate in Martin Acres remains well below North/Central (green) and West Boulder (red).

• A review of market conditions in Martin Acres does not suggest weakness. Based on sales volume over the past twelve months, there is less than 3 months of inventory currently available.

Residential Vacancies: Boulder Neighborhoods

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2Q/2008 2Q/2009 2Q/2010

Martin Acres

North/Central Boulder

West Boulder

data: USPS© Silver Fern Homes

Martin Acres

0

10

20

30

40

50

60

70

On Market (Not Under Contract)

Sold (Last Twelve Months)

data: IRESIS© Silver Fern Homes

Research Spotlight

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Vacancy Rates

• Central Gunbarrel (blue), Southwest Longmont (lavender), and all of Boulder County (orange) have much lower vacancy rates than the studied neighborhoods in Boulder.

• The ultra low vacancy rate is Central Gunbarrel and Southwest Longmont is an indication of strong demand and a positive sign for income property investors.

• The growing trend of homes vacant for more than 36 months is troubling. Could this be shadow inventory held by banks?

Residential Vacancies: Beyond Boulder

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

2Q/2008 2Q/2009 2Q/2010

Southw est Longmont

Central Gunbarrel

All Boulder County


Residential Vacancies Greater Than 36 MonthsAll of Boulder County

0

50

100

150

200

250

300

350

400

450

500

2Q/2008 2Q/2009 2Q/2010


Shadow Inventory?

Research Spotlight

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Months of Inventory

• 5 to 6 months of inventory is considered a normal or “healthy” market.

• Most markets in Boulder County (and Broomfield) are near normal levels.

• Now that the buyer tax credits are not stimulating activity, inventory is widely expected to climb somewhat.

• Historically, Louisville often has the lowest inventory level. It’s often viewed by buyers as a less expensive alternative to Boulder.

Research Spotlight

Months of Inventory

0

1

2

3

4

5

6

7

8

9

Boulder Boulder AD Broomfield Erie Lafayette Longmont Louisville Superior

3 Mo. Avg

Latest Month

www.silverfernhomes.com data: BARA

based on:

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Lessons from the Trenches

On Inspection:

• To resolve inspection objections, sellers tend to choose the lowest cost contractor. As a rule of thumb, buyers are usually better off to seek a credit than have sellers correct inspection issues.

• The exception is for items with potential large cost overruns such as sewer line replacements, foundation issues, etc. Here it’s better for buyers to specify a mutually agreeable, licensed contractor to perform the work.

On Seller Circumstances:

• Unfortunate or tragic circumstances occasionally force people to make real estate decisions. Buying or selling real estate is often an emotional process but in these situations, it’s even more important to remain compassionate, patient, and understanding.

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Get A Great Deal

• Buying or selling a home is one of life’s largest financial decisions. Shouldn’t you have a professional adviser?

• We believe agents should add value and earn their commission. The sooner we get started, the more value we can add.

• Give us a call. The real estate experts at Silver Fern Homes can advise you on current market conditions, help you find the right home, and negotiate the best possible deal.

• We work with buyers and sellers throughout Boulder County and beyond, including international relocations.

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