Hello Everyone!
Welcome to 2021! I hope that you are rested and ready to take on whatever comes to be in this new year. As we turn the page to a new year, I thought it would be beneficial to provide in-depth information on the housing market across the sate as well as share a few thoughts on the housing market in Boulder County so that we are able to close 2020 understanding what happened - and why – and start to formulate reasonable expectations for what is likely to occur in 2021. The 2020 Year-End Micro Market Reports, which include analyzed data for 170+ neighborhoods that LIV SIR services throughout Colorado are available on
Colorado Real Estate Diary.
The circumstances of 2020 gave rise to a new meaning of the word home. Home became our refuge, our safety, our office, our school, our restaurant, our gym, our everything. This sudden, elevated importance of home generated intense demand for housing. It led to red-hot home buying and home selling, and a home renovation boom so unexpected in the midst of a global pandemic, social unrest and economic turbulence. But there were other powerful factors also at play. The largest age cohort in the Denver Metro area, 28- to 30-year-olds, entered the housing market and drove up demand. The Fed’s monetary policy added to the buying frenzy by pushing the equity markets to new records and reducing mortgage rates 16 times in 2020 to new lows, even though its policy was intended to brace us against the effects of a recession. The equity market’s exuberance, combined with low borrowing rates, allowed buyers to increase their purchasing power and thereby bid above asking prices, which in turn fueled the accelerating appreciation as seen in this hot sellers’ market. Finally, seller’s reluctance to allow people into their homes during the pandemic not only exacerbated our already tight existing home inventory, but resulted in builders selling off existing inventory and putting reservations on future projects. All in all, a perfect storm that seemed to defy logic set up a very robust housing market that has not cooled down since last May.
2020 was a record-setting year for real estate across Colorado and Boulder County, particularly for single family homes. We ended with a 10-year-low in inventory with only 352 active listings in Boulder County - the previous low of 450 was in December 2016. We experienced record-breaking demand, record-lows for days-on-market, and higher year-over-year sold prices. The average sales price for single family homes across many of the communities in Boulder County grew by more than 10% YoY with the county as a whole showing 15.7% YoY increase in average sales price.
Homes that were in good, move-in-ready, turnkey condition and located in nice neighborhoods that were asking a fair price sold within hours or days, usually with multiple offers well above asking price. While multiple offers have become quite common, buyers were picky and did not reward sellers who ambitiously priced their homes or failed to present them in their best possible light. The extreme seller’s market continued to gain steam throughout the year and even made its way into the $3M luxury market.
The December 2020 numbers continue to show interest rates, housing inventory supply and housing days on market at or near historic lows, while buyer demand and new mortgage applications are near historic highs. Needless to say, nothing really changed over the holidays; if anything, the market is more active and earlier than in prior years.
What can we expect for 2021? The short answer is probably more of the same. Analysts and economists are pointing toward the likelihood of another incredibly strong housing market fueled by low rates, favorable demographics, rising wages, and wealth created by a staggering, out of control stock market. With interest rates currently at record lows, buyers and investors alike are taking advantage of increased purchasing power and are willing to pay what a seller asks, and often more, to get their own piece of real estate. There is also an expected increased demand from buyers who waited to purchase a home because of the pandemic; demand from existing homeowners who need larger spaces to accommodate working from home or children attending school virtually; and from condo or townhome owners who are seeking single-family housing to decrease exposure to the virus. Lastly, Colorado continues to be a top destination for those fleeing dense urban environments, as well as those looking for a second vacation home.
What does this mean for sellers? Is now a good time to sell, or should we wait for the market to improve? According to the data, the odds of selling a property have historically never been as good as they are now. The general guidance is that it is better to act early in the year versus later in order to secure access to the largest pool of potential buyers who, thanks to extremely low interest rates, are able to maximize their purchasing power. The potential downside to waiting is that once COVID-19 conditions improve and people return to work, consumer spending will increase, the national GDP will go up, and there will be increased inflation. Unless there are controls put in the place by the government, interest rates will start to rise with inflation. Rising interest rates have a sudden, exponential effect on affordability, which will likely cause a sudden decrease in buyer purchase power, and the pool of buyers that are able to qualify to homes will be reduced.
Having a selling plan is essential for all sellers, for two main reasons. First, it is important to have realistic expectations around finding a replacement home. This involves careful evaluation of your finances and determination of your purchase ability, as well as understanding the time, energy and logistics that are required to secure a replacement home in a competitive marketplace. Second, realize that in order to achieve a top price, the seller should make repairs or improvements to make the property attractive and in desirable condition, the asking price should be realistic, and there should be an effective marketing plan. Homes that don’t meet those criteria are often overlooked - even in this high demand market.
What does this mean for buyers? Does it make sense to wait for the market to improve? There are two main reasons why it is probably not wise to wait to purchase. First, now is the time to take advantage of historically low rates. The current low borrowing costs are maximizing buyer purchase power. Although interest rates are forecast to stay low for some time, buying power will diminish rapidly and many buyers may no longer be able to afford a home once rates increase. The second reason why many advise against waiting to purchase is that the cost of waiting is substantial: the longer buyers wait to purchase, the more money they will need to pay for a home whose price has increased during the waiting period.
Let’s look at the cost of waiting for a single-family home, based on Boulder County data. A year ago a median sales priced home sold for $603,250. One year later that same home is now $645,493, an increase of 7% or $42,243. The cost of waiting one year was $42,243! This dynamic was even more dramatic across many of the communities in the area like Longmont that saw an average sales price increase of more than 20% YoY! Economists are projecting another 7%+ increase in appreciation for the greater Denver Metro in 2021. Few people are able to secure a 7% YoY increase in their job earnings year after year. Those who are able to qualify for a low interest rate loan and purchase a home now, however, have the opportunity to pay substantially less than what the cost of the same home will be 6-12 months from now and start the wealth building process sooner than later.
Similar to sellers, buyers also need a plan to be successful. You will need to be prepared, knowledgeable, targeted, patient and ready to compete. While there are many nuances to helping buyers establish an edge in this market (which I am more than happy to share on a one-off basis), the critical points include: (1) be prepared financially; (2) expect to make some compromises; and (3) don’t be afraid to make a strong offer because the market, for all the reasons stated above, is likely to continue to appreciate. Of the three mentioned above, financing is arguably the most critical. Many buyers are resistant to investing time into this important first step, which can be a critical mistake. Begin the process by identifying a strong, reputable, trustworthy lender. Get pre-approved or pre-underwritten prior to looking at homes. This will allow buyers to shop within a realistic budget range, and it provides the creditability needed for listing agents and sellers to accept offers in a competitive environment when decisions are often made on a moment’s notice.
In 2020 my business was comprised of equally representing buyers and sellers. I have experienced the turbulence, uncertainty, frustration and successes of this real estate market, day-in and day-out. While 2020 was a challenging year, I feel fortunate that I was able to live through it so that I could learn, grow and come out the other side stronger, more knowledgeable and better able to effectively represent my clients. I am a huge believer that home is everything and a proponent in its power to transform and enrich lives. I love what I do and I am here to serve. I will continue to share relevant market information as it becomes available. Until then, please contact me at any time with real estate related needs. I wish you all a safe, healthy and prosperous year.
Yours Truly,
Josh Jackson
