It can be hard to read the trend lines in Colorado’s real estate market, especially in Boulder County. Factors that move prices in other parts of the country don’t always apply here.
For example, Boulder County has seen steady growth for the last five years, and 2017 was no exception. Annual sales of single-family and attached homes were up 7.15 percent and 4.7 percent respectively from 2016. So where’s all the inventory?
In most markets, a few years of strong sales would bring higher inventory as sellers cash in and move up. But the local population is aging—according to the Colorado State demographer’s office, Boulder County will see a 77 percent increase in people over the age of 65 between now and the year 2030. Moving is physically demanding, especially for seniors, so many are simply staying put.
Another factor affecting low inventory: In 2017, Colorado’s population increased by more than 200 people a day*. This not only created intense competition for limited inventory but also reduced the number of sellers willing to enter the market. Many were concerned that if they sold their homes, they’d have trouble finding another place to live.
Beyond inventory, another metric—the percentage of for-sale properties that are under contract—provides an additional lens for trying to read the local market. The overall percentage is currently trending down, which mirrors a similar trajectory from 2005 to 2009. But that’s where the similarities end. The percentage of for-sale homes that are under contract is above the crucial break point of 30 percent. That indicates a market that is becoming more balanced but is still running very strong.
Rising interest rates for 30-year mortgages are another factor to keep in mind. Under normal circumstances, rising rates tend to hold prices in check, but the movement of interest rates is not always predictable. Will the upward trend in mortgage rates be permanent, or will rates slide back down as happened in July 2013, early 2015 and again in early 2017? The answer will have at least some effect on how fast and how high prices appreciate in Colorado in the coming years.
*Source: Denver Post, December 20, 2017