Is Boulder Real Estate Headed for a Fall? [Analyze This]

Believe it or not, Governor Polis declared a state of emergency in Colorado almost a month ago.  

Should I still wait to list my home for sale?  

Will there be buying opportunities ahead? 

These are the types of questions we are receiving from our clients every day. 

Unlike the stock market, the real estate market tends to react slowly to changing conditions. This inefficiency creates opportunity, for buyers who understand the market and have the patience to wait, or for sellers who see what's coming and want to get ahead of the trend. Either way, it's important to have a strategy based on market data, not wishful thinking. 

It's not the same story at all price ranges and neighborhoods. Table Mesa, Martin Acres, Newlands, and Old North Boulder are not driven by the same market dynamics. Remember, intelligent real estate decisions are based on deep market knowledge. There is no substitute.

The charts below show how the Boulder real estate market is currently performing, based on an analysis of available inventory, deals under contract, and sales volume over the past twelve months. This data analysis is not a crystal ball, it's an early indication of where we might be headed. 

- The chart above shows inventory in $100K price bands, from $500,000 to $2.0M. The light blue bars are homes under contract. The darker blue bars represent available homes. The data is for the City of Boulder, which includes Gunbarrel, but excludes unincorporated Boulder County. 

- No surprise, the entry level has the least amount of inventory. Some things haven't changed. 

- Inventory is deepest in the $1 to $1.25 price band. 

- There are currently 50 homes on the market priced above $2M. It's not shown because it would obliterate the rest of the data shown in the chart. 

- Under $2M, there are currently 166 homes on the Boulder market, of which about 45% are under contract. 

- From $600K to $1M, the higher the price, the more percentage of inventory is under contract. All homes listed in the $900K to $1M range are under contract. 

- In the $1.0 to $1.25M price band, more than half of inventory is under contract. 

A large percentage of listed homes have found buyers from $1.25M to $1.75M, but it's not as active as lower price bands.   

- Above this price band, the market changes dramatically. Only a very small percentage of homes with asking prices above $1.75M are under contract. This is the price range most likely to see declines and hefty negotiated discounts. 

Does that sound familiar? If you're a long-time reader of this blog, you know that it's exactly what happened during the Global Financial Crisis. Like last time, this downturn will almost certainly be driven from the top down. 

Did your real estate agent tell you that Boulder property only goes up? Oops. Either they didn't know or, more likely, they were trying to sell you something. During the last downturn, some homes at the upper end of the market lost 20% to 30% of their value. I know because I tracked it obsessively.  

In Boulder real estate, downturns have been short but they absolutely have occurred and will likely occur again. Next time, get a better Realtor.

This chart shows the ratio of sales during the past twelve months to current inventory levels

The higher the ratio, the more active the market and the more confidence sellers should have in listing their home. If the ratio is high, say in the $700,000 to $800,000 range, it will be more challenging for a buyer to negotiate a discount or concessions. The market is more forgiving for sellers at certain price points, but not every home deserves a bidding war. 

The lower the ratio, the more sellers better have done their homework before listing their home for sale. It's absolutely critical to have carefully analyzed the competition, set reasonable expectations for time on market, and be prepared for tough negotiations. We advise our buyers in these price ranges to walk away and wait if a seller refuses to negotiate. There will almost certainly be another house, and likely a better one, at a better valuation. There's no point in having leverage if you're afraid to use it.

The image above shows the same information as the preceding charts, displayed as a data table. 

-For every home priced in the $600K to $700K range, there are almost 5x the number of +$2M homes listed for sale. 

- Only 4% of homes priced above $2MM are currently under contract

- Expect massive discounting ahead at the high-end of the market. The key question is when. Talk to your professional real estate adviser and don't forget, you can't play this game from the sidelines. 

Note: If you'd like to have a private conversation about your real estate situation, we're happy to talk to you. Our goal is to help you make a smarter real estate decision. You can reach me at 303.746.6896.

Osman Parvez  is the Founder and Employing Broker of House Einstein. Originally from the Finger Lakes region of New York, he lives in Boulder with his wife and their Labrador Retriever. He has been a Realtor since 2005.

Osman is the primary author of the House Einstein blog with over 1,200 published articles about Boulder real estate. His work has also appeared in many other blogs about Boulder as well as mainstream newspapers, including the Wall Street Journal and Daily Camera. For more information, click HERE.

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Thinking about buying or selling and want professional advice?  Call us at 303.746.6896. Your referrals are deeply appreciated.  

The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties. House Einstein strongly recommends conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. image: Ayko Neil Kehl.  

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.