- Hot micro-markets can generate a very strange picture of average national home appreciation of about 6 percent, made up of many places at zero and a few on fire.
- Every locality reports low inventory, obviously drawn down in the hot places, but the strangest single phenomenon continues: Where is the new construction?
No matter how many markets in which any real estate pro has worked, we always know our home towns best. And my market today is in a situation common to most hot markets in the U.S., shedding light on distorted national housing data.
The Boulder micro-market
Since 1952 (age 3), home for me has been Boulder, Colorado. The town is a few loopy square miles, but the surrounding county is 740 square miles. That’s 473,600 acres.
However, half of it is Rocky Mountain foothills, jagged 7,000-to-10,000-foot “hills” unsuitable for development or part of National Forest land. Of the half on the plains, about one-third is permanently reserved as open space (we bought it with tax revenue).
Rather suddenly, it seems to us, after the recession-plagued last dozen years, we are out of land. Incredible: 310,000 people, an acre-and-a-half for each, and we’re done. Nothing left to develop.
Same for nearby Denver Metro counties. East of the area, we have land — oh-my, howdy, do we ever — but being near the mountains is the idea, and also being near a job.
We have barely enough water to bathe in, but we might as well be any of dozens of other hot-economy places on either sea coast, land-locked by ocean. Other great big metro areas are also in land-exhaustion, as peripheral land presents impossible commutes.
The rest of the state — and the micro-market
In the last 15 years, Colorado added one million people to the 4.3 million already in the state.
Most landed near Denver. We had overbuilt housing in the stupid-mortgage era, 2003-2007, but then stopped dead.
Since then, we have built almost exactly half the housing necessary for new household formation — the same shortage of new construction plaguing a couple of dozen metro areas. By perhaps 2010, we had absorbed the overbuild, shortage deepening since. Economic fear held back purchase demand even among undamaged households until the dawn of 2013.
Metrics. In 2011, the fraction of single-family homes selling at or above asking price: 18 percent. Attached homes: 21 percent. In 2015, 56 percent of single-family sales were at or above ask, and 75 percent of attached sales.
Various media and “analysts” say that first-timers and millennials are missing? Uh-huh. They are elbowing in crowds to get at the affordable attached dwellings. Our overall market is a huge, rolling auction.
The economy here has had it good. We’re tech-heavy (bio-, info-, energy- aerospace…tech tech tech), entrepreneurial, diversified (no big employers), and a noteworthy quality of life, people moving here just to be here. However, dozens of places have the same good fortune, from Austin to Minneapolis, Charlotte to Seattle.
[graphiq id=”aj5ocNqbnQ9″ title=”Boulder County, CO Real Estate Market Trends” width=”600″ height=”694″ url=”https://w.graphiq.com/w/aj5ocNqbnQ9″ link=”http://places.findthehome.com/l/15368/Boulder-County-CO” link_text=”Boulder County, CO Real Estate Market Trends | FindTheHome”]
Since 2000, home prices were flat from 2002-2013, per capita income here has doubled, still rising 5 percent per year, almost double the national rate. Home prices here depending on micro-neighborhood since 2013 have jumped 25 percent to 40 percent and still have not consumed the purchasing power accumulated between the stock-tech bubble-bust in 2001 and the end of the Great Recession.
Compare these stats to national ones, and you get the very strange picture of average national home appreciation of about 6 percent, made up of many places at zero and a few on fire.
Every locality reports low inventory, obviously drawn down in the hot places, but the strangest single phenomenon continues: Where is the new construction? If raw land is too far from city centers, where is the re-zoning of under-used commercial developments (wildly excess retail shopping centers, for one category) into new attached housing?
If you have those answers…you have my email.
Lou Barnes is a mortgage broker based in Boulder, Colorado. He can be reached at lbarnes@pmglending.com.
