The global economy was hit very hard in 2020 with the pandemic. The economy here in Colorado and the Front Range were no exception, but we have fared better than many other areas of the country.
I recently had the privilege of listening to and speaking with Todd Gullette, managing broker of RE/MAX of Boulder. Todd is a sought-after speaker in the Boulder-area, and he oversees operations supporting over 100 active Realtors® at RE/MAX of Boulder. His finger is directly on the pulse of what is happening in the local housing market.
Todd presented his annual “state of market” address this past week to RE/MAX of Boulder Realtors who attended virtually, anxiously awaiting to see the year-end real estate statistics. I connected with him afterwards to discuss his thoughts on our market.
Can you give us a brief update for the local residential market?
A significant part of the story is the acute lack of inventory of homes to buy. Inventory has dropped to historic lows due to three key factors. One, as a nation, we have not been building enough homes to keep up with population growth since the start of the great recession in 2007. Two, we don’t really know exactly how many potential sellers have steered clear of putting their homes on the market due to the fear of showing their homes during COVID-19. However, it certainly has kept many homes from coming onto the market. Third, demand has been strengthened with historic low interest rates. We continue to see multiple offers on many listings as they come on the market.
Home showings were shut down for a couple of months at the start of the pandemic. How did the year end up, statistically, even with a two-month pause?
In April, when we were not able to show homes, everyone was pretty nervous about what might happen to the housing market. As it turned out, the pause created a tremendous pent-up demand. Eventually, the state of Colorado determined that Realtors were an essential business. Realtors adapted to the crisis and were able to safely show homes either virtually or in person with COVID-19 precautions. At the end of 2020, the statistics reveal that it turned out to be a banner year for residential real estate.
Would you say it is a buyer’s market or seller’s market?
In order to answer that question, we must consider a variety of data points. Those data points include: time on the market, months of inventory, % under contract, and the sales price to list price ratio.
Time on the market – In a balanced market, the number of days on the market is in the 90-day category. Greater than 90 days leans towards a buyer’s market, under 90 days leans towards a seller’s market.
Months of inventory – A balanced market starts closer to 4 months of inventory and a buyer’s market is after 7.
% under contract – In a balanced market, the % under contract is usually in the 30-40% range. Under that, it leans towards a buyer’s market, over that, it leans towards a seller’s market.
Sales price to list price ratio – In a balanced market the sales price to list price ratio is about 95%. Under 95% leans towards the buyer’s market, over that, leans towards a seller’s market.
Now, with all that in mind, let’s take a look at a sample of some local single-family home statistics for 2020.
Simply put, in all of the categories below, every single indicator leans toward a seller’s market as of the end of 2020.
According to all those indicators, the market is very strong. How has this affected home prices?
There is no question that these market forces have placed upwards pressure on prices. This graph shows increases in every category, except for Lafayette, where the median price actually decreased slightly.
Do you have a positive outlook for the real estate market in 2021?
Yes, absolutely. The National Association of Realtors® has upgraded their outlook on housing sales based on the national numbers they are seeing. The market should remain strong in 2021, especially from a seller’s point of view. It will be a tougher market from a first-time homebuyer point of view.
The purchasing power of buyers will be reinforced with continued low interest rates, but low inventory and high demand will likely put upwards pressure on prices. Rising prices will cancel out some of the increased purchasing power from low interest rates.
Freddie Mac has averaged the current 30-year mortgage rate at under 3% and that should continue to strengthen our buyers and the investment community.
Remember, all real estate is local, right down to the street, so be sure to consult your Realtor® for analyzing statistics specific to your own property.
By Duane Duggan. Duane has been a Realtor for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed by RE/MAX International: The Lifetime Achievement Award and the Circle of Legends Award. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail DuaneDuggan@boulderco.com, call 303.441.5611 or visit boulderco.com.