Boulder County Market Update - 11/22
Here's a brief market update to take stock of where we are as we wind down on 2022. We'll use a few charts to illustrate the situation. As you know, the market shifted big time this year. We took off like gang busters in the first quarter with crazy over list price competitive bidding that sent sale prices 10-20% over list price on a routine basis. Here's a chart to illustrate that. It shows the percent of original list price compared to the sold price of houses in Boulder County from 2019 to the present.
The peaks are in March of 2021 and March of 2022 at around 107% of list price, meaning houses sold on average for 7% over list price. Then you notice the steep dive in 2022 to where we are now at about 97% of list price. This isn't bad, in the historical sense, but it's a big change from where we've been the last few years.
The shift in the market is being driven by the well known economic factors we hear about every day....Inflation/Rising interest rates and the decline in the stock market. Mortgage Interest rates back in March were around 3% and now they're around 6.5%. So no more multiple offers 15% over list price. What we see instead is...... Increased Inventory of homes for sale, for the first time in years, as illustrated in this chart:
Inventory of homes for sale typically follows a bell shaped curve. It's lowest in January and highest around May, then it drops throughout the year. The first bell curve in this chart shows that perfectly in 2019. But if you look at this year, inventory keeps going up! In fact at the end of October 2022, we had twice as many homes for sale in Boulder County as in Oct 2021. It's the old supply and demand thing. Buyers have backed off buying houses, sales have dropped and inventory has gone up.
As you can imagine, this is affecting prices. As shown in the chart below. Each line running horizontally represents $100,000, going from $500,000 on the bottom to $1,000,000 at the top.
Median sale prices in Boulder County marched up from $535,000 in Jan 2019 to a peak of $975,000 in March of 2022. It's common for the top sale prices to occur in the first quarter of the year and things tend to level off after that. But this year you can see that median sale prices have dropped steadily throughout the year. The median sale price at the end of October was $795,000. That's a big decline. The tricky thing is that because prices went up so high at the beginning of the year, overall, for the year as a whole, we will show an increase in median sale price compared to last year. However, if you just compare the end of October 2022 to Oct 2021, the median sale price is about the same.
What this means for sellers, is that you need to be conservative when choosing a list price for your home. If you compare your house to comparable ones that sold in the first half of this year in your neighborhood, you'll think your house is worth more than it probably is right now. Your neighbor was lucky to sell their home last March, and get $150,000 over list price. But that's not going to happen now. It would make more sense to look at prices from the end of 2021 when prices were more in line with current sale prices, or at ones that have sold in the last few months. That will give you a more realistic value on your home's current value.
So, what we're looking at is a market where:
There are a lot more houses for sale than what we've been accustomed to. In the grand scheme of things, inventory levels are still lower than the historical average, but they are rising at a fast clip.
Prices have declined since the beginning of the year and are relatively flat compared to the same time last year
It takes longer to sell a house than what we've seen in the last few years
Multiple offers are gone
Buyers have more to choose from, can take more time to buy and have more leverage than they've had in quite a while
Most homes are still selling. However, since buyers can be more selective, the houses that sell quickly are the ones that are priced right and are in good condition. Over the last few years just about any house could sell. That's not the case now. Sellers who take the time to fix up their home and have it in great showing condition and price it competitively can be successful in this market. It still may take several weeks or more to go under contract, instead of in the first weekend on the market, as has been common. On the other hand, if a home isn't in great shape and/or it's priced too high, it will end up sitting on the market for an extended time period, going through price reductions until it's priced low enough to sell.
Who knows what the New Year will bring, but if interest rates remain at their current levels, we can expect the current trends to continue, particularly higher inventory levels and softening prices.