This Crazy Market [Market Update]

The current real estate market is extreme. At House Einstein, we've known this since things opened up after the Covid lockdown. We're market participants. As Realtors, we directly advise buyers and sellers through the real estate transaction process and serve clients from Denver to Fort Collins. 

First quarter data is now in. Rather than share typical Realtor anecdotes (and hyperbole), let's take a deep dive into the data. As my momma used to say, facts don't lie. 

The chart above shows the distribution of premium (or discount) paid for single family home transactions vs. the list price. The blue dots represent 1Q20. The orange dots are 1Q21. 

Keen viewers will note that while there were several sales that exceeded a 5% premium last year, they were rare. You'll count only 15 blue dots in the chart for 2020. This year, there were 141 sales which exceeded 5% above the list price - a 9.4x increase. 

This next chart shows the average monthly active inventory (shaded green) with the most recent data (yellow line). According to the MLS, there were
only 170 houses available to purchase last month - i.e. houses not under contract.  This is a record low and more than 70% below average for the month.  

This next chart shows new listings being added to the MLS. Although rising in a normal seasonal pattern, new inventory is increasing at a rate far below the average. Last month, only 325 single family house listings hit the market, 24% below average.  

What about sales volume?  Good question. 

After an elevated period last year, from July through December, sales volume has been closely tracking the average. Last month, 305 single family houses sold, only 1.4% below average and well within 1 standard deviation.

This final summary table compares the entire quarter, year over year. It shows sales volume, the percentage of properties that sold for more than the list price, and the median premium paid for those properties. I also included the median sale price for all properties, whether there was a premium paid or not. 

A couple of takeaways from the summary table: 

- Sales volume for the full quarter is up slightly for condos (+1.6%) and down dramatically for single family houses (-9.8%). 

- Homes sold for a premium to list price have increased markedly for both property types: 1.9x for attached dwellings and 2.5x for single family houses. 

- The median premium paid, when there is a premium, has increased at about the same rate: 3.1x for townhomes and condos and 3.0x for single family houses.  

The median % is a useful benchmark, but isn't the answer for how much you should pay. Actual on the ground demand for a particular property can vary dramatically. We commonly utilize this sort of data to guide our clients, but it's far less valuable than what we often gather in direct negotiation with listing agents and custom analysis specific to our client's situation.

- The median sale price increased only 2.4% for condos and town homes, year over year.  For houses, the median sale has increased a shocking 19.2%. I've been closely tracking the Boulder market since 2003 and don't recall ever seeing that sort of year over year increase in value for the entire County. Sure, there have been pockets of rapid appreciation, especially in the City of Boulder, but not for the whole County. This data was so surprising that I double and triple checked this statistic to see if I made a calculation error. I didn't.  

Our Advice
The data analysis presented above is representative of Boulder County as a whole. This is far too broad a scope to make intelligent and strategic decisions over large asset acquisitions or sales. 

We strongly recommend both sellers and buyers use a deep understanding of the latest market conditions specific to their price range, property type, and location. Whether you choose to work with our team or prefer another Realtor, the most recent and relevant information can add up to tens or hundreds of thousands of dollars. Don't go in blind. 

Also, history shows that the real estate market is both seasonal and cyclical. There is downside risk to overpaying. There's also risk in keeping substantial cash positions when the government is about to flood the economy with stimulus. While we don't have alternative investments to offer you outside of real estate, our promise to you is to help you make the smartest real estate decision possible. 

Remember: if it feels like a crazy market out there, the antidote is market knowledge. Stay sane, friends. 

Data Notes: 
-When it comes to "active" listings, it's unclear whether the MLS simply takes a data point from the middle of each month or takes an average over the whole month, but this is the most official data available on inventory. 

- Several outliers exceed +/- 40% paid to to the list price. One even approaches a mind blowing 80% premium paid to list. If we extended the Y-axis to include these data points, it would squish the rest of the data and make it far less useful to analyze.   

- Looking for data on Denver, the City of Boulder, and more?  Check out socials. Charts galore... 

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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.  

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.