The Verge of Correction?

by Osman Parvez
In my last market update, a reader left the following comment.

Osman - are we finally, then, on the verge of the correction here in Boulder? Your comments suggest a Buyer's market in 2009, but I do not sense in the listings yet what I am sensing on the street (poor jobs outlook and economic instability). Will Boulder real estate owners lower their prices, or will the lack of inventory (greenbelt, draconian building regs) continue to inflate prices and insulate owners from the bloodbath just outside?

It's difficult to get a sense of the market without a look at the data.

From my last in-depth analysis, there is a buyer's market in Boulder right now. While inventory levels have shrunk, sold volume has fallen far further. You may not have noticed it because, depending on your price range and the neighborhood you've targeted, it may not be readily apparent.

If you're a client of ours, you should have received my breakdown of the 2008 market by price range. This analysis shows sold volume, withdrawn/expired, and current inventory... in essence a road map to where a buyer's market exists in Boulder. If you're a potential seller, it also shows you where you should be extra cautious in your strategy.

If you're not a client and would like us to help guide you to a smarter real estate decision, call me at 303.746.6896. I can point out where the bargains are and we utilize uncommon strategies to get the best deal.

As for the future, it's very difficult to predict the bottom of a market. Yesterday the idea of the government creating a "bad bank" to buy up toxic assets (a.k.a. Resolution Trust Corp) drove shares up on Wall Street. Tomorrow, another big lay off could drive shares downward.

While the housing market won't show you daily trading fluctuations, it's still subject to highly volatile expectations for the future. The House passed the Obama economic stimulus bill yesterday. Republican Senators are adding a key provision for a 4.0% mortgage rate before it faces a vote. Current mortgage rates are already historically low and lenders are busy processing refis and new mortgages. Anecdotally, I'm working with a record number of potential buyers (for January). This is a complete turn around from November and December, which were slow. If the modified stimulus package passes the Senate, the President will sign it and this will probably motivate even more buyers to get moving because, right or wrong, the cost of financing affects affordability and therefore, the price of assets. Meanwhile, the Fed isn't waiting. It's buying mortgages and getting ready to buy long term debt to keep rates low.

Bottom line. If the recovery starts to take place within the next 6 months, I believe the next 1-3 months are probably the bottom of the cycle. If it turns out that recovery takes 12-18 months, prices should be even better at the end of this selling season.

How much better in the long scenario? My analysis of market conditions suggests a price decline should occur at the high end of the market. The mid range could see some compression. I doubt the low end will decline much, even if the recession takes 12-18 months. But all of that assumes to some extent that the near term past is the future. The economic stimulus package will change things. How fast is the question. Stay tuned.

The next Boulder Real Estate Meetup is February 2nd and you're invited! This is an opportunity for you to learn about important real estate related issues in a friendly, low-key environment. This month we're talking about tree pruning, staging, tankless hot water, historic renovations, and how to avoid buying a meth lab (the wild card). Learn more and RSVP HERE.

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

Please Note

This document contains forward-looking statements. You are strongly cautioned that investment results are subject to business, economic and other uncertainties. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time. Always consult your financial advisor before making an investment decision.