Impact of The Rental Market

A recent survey showed that rents in Boulder are the most expensive in the state and increased 5.6% over last year. Zillow reports the breakeven horizon (the number of years a renter must live in a home before ownership becomes a better financial proposition) is 2.5 years in the Boulder market. The national average for breakeven horizon is 1.7 years and the most expensive markets in the country have breakeven horizons of 3.6 years. Because of Boulder's high rental rates and relatively reasonable breakeven horizon, purchasing a home in Boulder County is still attractive and continues to contribute to price increases. 

Based on these stats and the fact that interest rates are 1/2 percent lower than a year ago, it's no wonder the market remains hot with more buyers than sellers. Now is obviously a great time to be a seller, but buyers (homeowners and investors) who act sooner rather than later can derive enormous value from this market too.

Using Your IRA to Invest in Real Estate

Join RE/MAX of Boulder and New Direction IRA for an interactive workshop on Self- Directed IRAs and purchasing real estate with your retirement plan. Come learn how you can grow your retirement funds by investing in real estate. Details below. Please let me know if you plan to attend.

Thursday, Feb 20 | 5:30 - 7 p.m. RE/MAX of Boulder 2425 Canyon Blvd

Read my FEB 2014 e-newsletter.

Precipitous Price Increases Unlikely to Last

With the median Boulder County home sales price up 7.8%, and the average sales price up 4.9% this year, many of you have asked if I think prices will continue to rise as precipitously.  I don't. The market took off this year due to pent up buyer demand and very low interest rates. The current pace of price increases isn't sustainable for three reasons: 

1. Inventory should expand. Property owners who have been hesitant to sell because they were concerned that they couldn't sell their home for an acceptable price are feeling more confident.

2. Mortgage rates are rising. Rates are up .625% this month over last month. The 30 year fixed rate was 3.5% and it is now 4.125%.

3. Investor interest will fade. Undervalued prices attracted investors who then helped push up home prices. But as prices rise, investor interest fades.

The next question is whether expanding inventory, rising mortgage rates and declining investor activity will cause home prices to drop? Slow down, yes, but not drop. Just as these factors should cause home prices to slow, job growth and increased household formation should support a continued recovery in housing demand. My sense is that the market will level out for the year by the end of summer. Historically, our market sees prices rise in the first and second quarters, leveling off by August when most buyer demand has been met for the year.

Read my JUNE 2013 e-newsletter.