In a trend that seems to defy the odds, the housing market surges on. It’s a national phenomenon and alive and strong in Boulder County.
Boulder-area median home list prices are sharply higher for year-to-date in May 2021 than last year at this time, according to statistics from the Boulder-Longmont Realtors Association, which draws on data from Information Real Estate Services (IRES). The range is from 45.1% in the plains area east of Boulder with a median price of $953,500 to 10.2% in Niwot, which has the highest median price at $1,369,000. While prices have risen, the number of days a home spends on the market has dropped for all areas but Niwot.
Nationally, median home list prices increased 17.2% year over year in April, to hit a new record high of $375,000, according to Realtor.com data. And across the Denver metro area, home prices are at a record high, yet homes are being purchased in record time.
But as home prices rise, incomes aren’t nearly keeping up. So what does this mean for home prices? Is there a decline on the horizon?
In contrast to 2008 and 2009, experts don’t expect a crash, reports Realtor.com. To distinguish the situation then from the current market environment, they point to today’s market drivers and the economic principle of supply and demand. The current out-of-sight prices are driven by the number of buyers far exceeding the properties for sale. Prices rise when there is more demand than supply.
But the frenzied rate of increase is not likely to continue. Experts expect the market to calm over the next couple of years: Prices may continue to rise, but at a slower pace.
“There’s no way the double-digit price growth can continue long term,” says Realtor.com Chief Economist Danielle Hale.
Many home buyers wonder if their home will hold its value once the impact of COVID-19 is truly over. Experts say most buyers shouldn’t worry. The supply and demand imbalance should keep most home prices stable.
“It’s certainly possible that home prices can decline. But I don’t think it’s likely we’ll see big declines,” says Realtor.com’s Hale. “It’s more likely prices will flatten where they are.”
Areas with lots of amenities and short commutes to bigger cities with plentiful jobs are likely to continue increasing in value, say experts, as well as vacation markets.
What could cause prices to drop? Mortgage rates rising quickly and a sudden increase in number of homes for sale.
If rates that are currently in the 3% territory go up to 4% or 5%, buyers will not be able to afford the same home they can with a 3% mortgage rate. If those homebuyers decide to sit on the sidelines, there would be fewer buyers, which would reduce demand.
One other factor that could cool the market is the ending of the pandemic and the effect “staying at home” had on the housing market. As we leave that period, people may be less focused on their home, which could take the pressure off of home buying and cool the rise in prices.
Read the full story on the nationwide situation at realtor.com/news/trends/housing-market-crash.
By Tom Kalinski. Tom is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in residential and commercial real estate. For questions, e-mail Tom at email@example.com, call 303.441.5620, or visit boulderco.com.