Will the Boulder Housing Bubble Burst?

The Local housing market is the most stable in the US
 According to the rest of the state, residents of Boulder, Colorado, live inside a bubble. Within an invisible force field created by public open space and mountains, lives a people known for liberal attitudes, advanced degrees, healthy lifestyles and outdoor casual fashion. But lately, as home prices climb at a pitch as steep as our iconic Flatirons, friends have been asking me if we are in a housing bubble that’s about to burst.
The short answer is no. Last summer, Boulder’s housing market was named the most stable in the country, according to SmartAsset.com, which looked at price trends over the past 25 years. “Over the past 25 years, home prices have grown an average of 4% a year in Boulder and are approaching a price level nearly quadruple that of 1990,” the article said. Even during the foreclosure crisis and Great Recession, our prices never declined more than 5%.

Instead of the roller coaster ride other housing markets have seen, our home price index trajectory looks more like an alpine ascent with a gradual uphill, a plateau/small dip during the recession and a really steep pitch over the past two years. (The HPI is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinances on the same properties.)


This steep climb in home prices is leaving many buyers (and their agents) feeling out of breath. The inventory of homes for sale has decreased even as the number of closings and eager buyers has increased, meaning that almost every new listing sparks a feeding frenzy followed by a bidding war.
Within city limits, the median house price has increased by 15% to $788,000 in the first three quarters of 2015, and the average sales price is over $955,000. But 2015 may end up being known as the “year of the condo and townhome” in Boulder as the median price is on track to increase over 20% from 2014, reaching over $340,000. As more homebuyers and cash investors are squeezed out of the house market, they are turning to lower-priced condos and townhomes.

 Median Sales Price of Detached Single-Family Homes:

Median Sales Price of Condos and Townhomes:


The question is, can this steep incline in sales prices continue – is it sustainable? As long as cash keeps flowing into Boulder, prices will keep climbing. With Google moving 1,500 employees into its new Boulder campus in 2017, and another 300,000 square feet of new office space coming on-line over the next two years, demand for housing will increase, if anything. And with almost no new homes being built for sale within our bubble, the supply will remain limited.

Once the new employees are settled and when mortgage interest rates start increasing, then I think the housing market will calm down into a more gradual upward increase (but prices won’t drop significantly). And while this blog has focused on the City of Boulder, surrounding communities are seeing similar sale price increases. Rather than bursting, the Boulder housing bubble is merely expanding to encompass Louisville, Gunbarrel, Superior, and beyond.

Inspect the Sewer Line, Every Time

My kids joke that I’m obsessed with sewer lines. So on a recent vacation, I threatened to take them to the Paris Sewer Museum (yes, it exists) instead of the Louvre.

Why this obsession? Because I recommend a camera scope of the sewer line as a standard inspection for every buyer I represent.  And about 70% of the time the scope reveals some sort of problem, from minor root intrusion to major breaks.

If you think this is a gross subject for a blog, then you should see my sewer line DVD collection. Glamorous, no. Important, yes. 

In Boulder, most of the older lines are clay, which is susceptible to cracking, settling, and root intrusions. Even newer PVC lines can have low spots or "bellies" that cause slow drains or backups. Sellers are often blissfully unaware of any issues with their home’s waste line, until a buyer scopes it.

Repairing or replacing a pipe that is 6 to 15 feet underground is expensive, running anywhere from $2,500 to $25,000. Excavation is most often required, which can destroy landscaping and be impossible if the ground is frozen. 

When buyers discover a problem during their inspection period, they can cancel the contract and get their earnest money returned, negotiate a price reduction or closing credit, or ask the seller to complete a repair prior to closing. The cost to hire a plumber or inspector to run a camera down the line is $100 - $200. I’d say that’s a good investment.

Most technicians will also “locate” the line by going outside with a detector that can find the camera through the ground and then marking the spot on the surface with chalk or tape.  The detector can also reveal how deep underground the line runs. It can tell a buyer if, for example, the sewer line passes through a neighbor’s property.

On a recent transaction, the buyer discovered exactly that. To make matters worse, the neighbor’s sewer line then tied into the line before it met the City main in the alley. The triple whammy was that the line appeared to run UNDER the neighbor’s house. The bad news kept coming: without a City main in the street out front, the house was landlocked and couldn't tie into the City main without running through a neighbor's land.

Unfortunately, I was representing the seller who had been blissfully unaware of all these facts. She had bought the home a decade prior, before camera scopes had become popular with buyers.

With no legal easement and no shared sewer line maintenance agreement with the neighbor in place, this discovery scared the buyer away. After six weeks of fruitless negotiations with the neighbors and spending over $1,500 in legal fees, my client finally sold her home to a different buyer for $31,000 less than the original buyer had offered. Another expensive lesson learned.

Now I know way more than a normal person should, not only about sewer lines in general, but also about sewer lines that serve more than one house. Although it is a violation of current building code, shared sewer lines are fairly common in older parts of Boulder, along with Lafayette, and Longmont, where large, multi-building estates were later subdivided into smaller parcels. They are more or less “grandfathered” in by Boulder’s code unless there is a way to tie in directly to a City main line.  So, they’re not really a problem … until there’s a problem.

Ideally, there will be a recorded maintenance agreement between the owners of all the homes that are tied into the common sewer line answering these questions: What can and can’t be flushed down the toilet? What happens if a backup occurs? Who pays for the repair and how are the costs split? What if the line needs replacing – will the neighbors separate their lines? If a backup occurs in one house do all the owners share cleanup costs?

After this listing sold, I said I never wanted to utter the phrase "shared sewer line" again, yet here I am writing a blog about it. I figured that I might as well share what I learned about shared sewer lines.

It's a Seller's Market on the Hill!

University Hill, Boulder, Real Estate Market Snapshot

There’s good news all around for the real estate market in Boulder’s University Hill neighborhood as we roll into 2015 ... unless you are a buyer trying to find a home here.  I can’t remember a time when it was more of a seller’s market.

Last year, there was a significant drop in the number of homes sold in the neighborhood – only 22 homes sold compared with 33 in 2013. Meanwhile, the median sales price increased by 13% to $871,000, and homes sold very close to their list price. Sales prices ranged from just under $480,000 for a tiny two-bedroom house on 18^th St near Baseline to over $1.6 million for a historic Tudor on the corner of 11^th and Cascade Avenue that had been on and off the market since 2012.

In terms of low inventory and climbing home values, the Hill is trending in the same direction as Boulder, only steeper. Last year, Boulder saw a 13% decline in the number of homes sold and an 8% increase in median sales price.

2015 promises even more price increases as we have high buyer demand and a low inventory of homes for sale. You may see and hear about new developments in Boulder, but most of them are rental apartments and commercial projects with very little in the way of new homes for sale.  Thankfully, there are new home developments in outlying areas like Lafayette, Longmont and Superior adding inventory. But I predict the housing shortage will not ease in Boulder anytime soon.

If it’s such a seller’s market, you might ask, then why aren’t more people selling? The simple answer is that they don’t want to be left homeless. Unless they are moving out of the area, home sellers face the same challenges as other buyers as they try to find a replacement home. Rest assured that I have developed some unique strategies to help get buyers into homes. Feel free to contact me with any questions or for a free market analysis of your home!

University Hill Home Sales	2013	2014	% change
# of homes sold	33	22	-33%
Median $ per sq ft	$323	$323	0%
Median sales price	$767,500	$871,000	13%
Discount off of list price	-3.04%	-2.46%	-19%
Average days on market	60.50	68.00	12%

2014 Home Sales on University Hill

2012 Sales Strong for University Hill - Statistics and Forecast

Homes Sold on the Hill in 2012

You don't have to search far to find good news about real estate on the Hill. Homes sold faster in 2012, for higher prices, and a better price per square foot than in 2011.

While the number of homes sold remained steady compared with 2011 (27 versus 26), they sold for much higher prices. Average days on the market decreased from 135 to 104, with more closings in July than any other month.

The median home sales price increased from just under $600,000 in 2011 to $782,000 in 2012. And the median price per square foot increased from $243 to $280. Homes also sold for closer to listing price, with the average discount decreasing from 4.8% to 3.2%.

The most movement was seen in the $700,000 to $1 million price range where 16 homes sold in 2012, up from 6 the previous year. On the lower end, the number of homes sold for less than $600,000 was almost halved in 2012 from 15 to 7. Lot size continues to have a significant impact on sales price. Only two homes sold for less than $400,000 last year, and both were on tiny parcels of less than 3,300 square feet.

University Hill's rental market is also strong with high rents and low vacancy. As prices increase, however, single-family homes become less attractive to investors. Demand is high for duplexes and other multi-family buildings, as well as houses with zoning that allows for higher occupancy.

Increased optimism, higher rents and continuing low mortgage interest rates have combined to create a bigger pool of would-be buyers. However, these buyers continue to be disappointed by the lack of homes available. Throughout the recession, would-be sellers put off listing their homes for sale -- now that prices are on the rise, let's hope that 2013 will be the year that this "pent-up supply" will be released.

I predict that 2013 will bring brisker sales volume and moderate increases in price. Spring tends to be the busiest season for new listings. Why not get a jump on other home sellers by listing now?

For a no-obligation analysis of what your home is worth or for a customized home search, please feel free to contact me at (303) 473-2773 or monique @ moniquecole.com.

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Boulder Home Values Are Going Up - Someone Tell the Appraisers!

What do you do when the appraisal comes in lower than the contracted sales price? This is a question that is coming up more often as prices rise in the Boulder area.

During a recent transaction, a week before closing, the appraisal came in $10,000 lower than the contracted sales price. It also revealed that the home was about 200 square feet smaller than we thought (assessor records mistakenly included the detached garage in the home's square footage).

What to do?

The Colorado contract allows for buyers to cancel at this point and get their earnest money returned. But most buyers don't want to. Typically, this becomes another "opportunity" for the buyer and seller to negotiate on the purchase price.

It's fairly common to "split the difference," but my client felt she had already given plenty of discounts. Through initial price negotiations and inspection repair issues, she had already agreed to lower the price by $13,000. We had lots of logical arguments for why the home was worth more than the appraiser thought it was, but in the end it came down to how badly the buyer wanted it. We settled with my client giving another $2,000 discount and the buyer purchasing the home for $8,000 above appraised value. Thankfully, he had a large down payment, so the lender did not baulk.

The problem with appraisals is that they only look at where the market has been and not where it is going. They are based on comparable sales in the previous six months. But home values are rising in Boulder County. With more home buyers than last year and fewer homes for sale, the good old law of supply and demand dictates that prices will inevitably rise.

In my example, the home was in Lafayette, which had seen a 10% increase in average home sale prices in the second quarter of 2012 versus the same period of 2011. When you think about it, if buyers only ever paid appraised value, which is based on the past, then home values would never be able to rise.

In the end, my client sold her home for much more than she had expected to when she first decided to sell nine months prior; the buyer got a home he loved and that he could afford; and area appraisers now have a good comparable sale to use on future appraisals.

If you are thinking about buying or selling a home, be sure you have a Realtor who understands where the market is going and who can help you negotiate over the many hurdles along the way. Feel free to contact me anytime through my website: www.moniquecole.com.

Beware of Wood Roofs in Boulder! They will need to be replaced soon.

Back in 1994, January 1, 2014, must have sounded like the distant future of science fiction, but now it’s not so far away.  It is the deadline for homeowners in the city of Boulder with wood roofs to have them replaced, a date set in 1994 when the ban went into effect.

All wood roofs will need to be replaced by January 1, 2014.

Homebuyers take note: If the home you’ve fallen in love with has a shake roof, this will be a significant cost in the thousands of dollars to you in the future.  

The actual wording of the building code is a model of confusing bureaucratic jargon:

“No person owning a building with wood roof covering materials shall fail to remove or cause to be removed from the building all wood roof covering materials before January 1, 2014, and to replace the removed roofing with approved roof covering materials which conform to the International Building Code as adopted, and no person shall thereafter take possession or ownership of a building with wood roof covering materials.”

And, in case you’re wondering if your wood composite roof needs to be replaced, the answer is yes, if it’s more than half wood, or in the words of the code: “’Wood’" for the purposes of this definition, means any natural or composite material containing at least fifty percent wood by volume.”

My guess is that 2013 will be a busy year for local roofing companies, and you want to time a re-roof for the dry season. If you need replace your roof, you might as well do it now. Email me at monique@moniquecole.com for my recommended roofing contractors.

West Boulder Market is HOT! Spring 2012 Sales Data Encouraging

The weather heated up early this year in Boulder and so did the real estate market in my home neighborhood -- the greater Flatirons area (University Hill, Rose Hill, Chautauqua). Spring sales show that the pent-up demand we’ve been hearing about during the recession is becoming “un-pent.” See table below for 2012 sales through mid-May. Confidence has returned and motivated buyers are coming out of the woodwork – from CU parents to investors and homebuyers. The problem is that there are not enough quality homes on the market for them to buy. In mid-May there were 43 active listings under $2 million in this area, of which 19 were already under contract!

SOLD! My listing at 990 Lincoln Place went under contract in two weeks.

Chautauqua, Rose Hill - West of 9th, South of Canyon
Closed	Address	List Price	Sold Price	Discount	Beds	Bath	Gar.	DOM	Total SF	$/ SF	Fin. SF	$/fin
3/30/12	474 Marine	$499,000	$450,000	9.82%	2	2	1	79	1,740	$259	1,200	$375
4/18/12	924 8th	$525,000	$485,000	7.62%	2	2	1	170	1,121	$433	1,121	$433
4/6/12	623 Marine	$585,000	$551,400	5.74%	3	3	2	81	2,592	$213	2,592	$213
4/23/12	834 7th	$599,000	$599,500	-0.08%	2	2	2	46	1,679	$357	1,492	$402
1/3/12	627 Marine	$674,900	$640,000	5.17%	3	2	2	100	2,110	$303	1,724	$371
1/31/12	835 Grant	$849,000	$774,553	8.77%	4	3	0	185	3,284	$236	3,100	$250
3/20/12	470 College	$1,295,000	$1,220,000	5.79%	5	3	0	75	2,916	$418	2,750	$444
3/30/12	445 Christmas Tr.	AUCTION	$1,650,000	0.00%	4	4	2	51	5,804	$284	5,804	$284
3/30/12	900 6th	$1,975,000	$1,980,000	-0.25%	4	3	2	54	3,360	$589	3,360	$589
	AVERAGES	$875,238	$927,828	4.73%	3	3	1	93	2,734	$344	2,571	$373

The Hill - East of 9th, between Canyon and Baseline
5/3/12	965 10th	$405,000	$385,000	4.94%	3	2	1	109	1,406	$274	1,406	$274
2/17/12	896 17th	$499,900	$485,000	2.98%	3	2	0	19	1,849	$262	1,849	$262
5/11/12	833 Lincoln	$549,000	$550,000	-0.18%	3	2	1	32	1,508	$365	1,248	$441
4/12/12	1260 Cascade	$589,900	$565,000	4.22%	3	2	2	58	1,359	$416	1,359	$416
1/26/12	1315 9th	$575,000	$575,000	0.00%	4	2	2	12	1,824	$315	1,824	$315
3/30/12	932 Marine	$639,000	$600,000	6.10%	5	4	0	43	2,172	$276	2,172	$276
4/24/12	811 15th	$750,000	$720,000	4.00%	3	2	2	76	2,058	$350	1,966	$366
2/29/12	1035 10th	$799,000	$725,000	9.26%	6	4	4	93	3,043	$238	3,043	$238
3/30/12	990 Lincoln	$799,000	$764,000	4.38%	4	2	0	15	3,335	$229	2,389	$320
3/29/12	1026 Lincoln	$835,000	$800,000	4.19%	4	3	0	242	2,841	$282	2,561	$312
3/28/12	904 15th	$839,000	$820,000	2.26%	5	4	2	109	2,712	$302	2,642	$310
2/29/12	1139 12th	$868,400	$825,000	5.00%	7	4	0	365	3,898	$212	2,660	$310
4/26/12	766 16th	$995,000	$950,000	4.52%	4	4	3	107	3,402	$279	3,402	$279
3/29/12	842 13th	$1,195,000	$1,100,000	7.95%	3	3	3	312	2,620	$420	2,620	$420
	AVERAGES	$738,443	$704,571	4.26%	4	3	1	114	2,431	$301	2,224	$324

Discount = Percentage off of list price; DOM = Days on the Market;  /SF = Price per square foot (total) $/fin = Price per finished square foot

Source: IRES MLS. Information deemed reliable, but not guaranteed.