Friday, April 14, 2006

The Bubble - Should You Worry?

by Osman Parvez


With all the doom and gloom housing scenarios sprouting on various blogs and being carried by the national media, it's easy to feel pessimistic. You might even start to think the Sky is Falling.

Well, should you be worried about Boulder real estate? Are you even wondering if you should sell your property and rent while the market sorts out?

The answers lie in research about your local real estate market. Unless you live in Phoenix, Las Vegas, or Miami, don't base your real estate decisions on (often sensationalized) news blurbs about rising inventory and slowing sales in those communities. Know what's happening in your city, in your neighborhood, and on your street.


For most would be Boulder homeowners, our advice remains the same. Think long term holding period and true housing needs, not short term speculation. Purchase property at a price that comfortably fits your budget and be conservative when choosing a mortgage. Over the past six months, the spread between adjustable rate and fixed rate mortgages has narrowed and your monthly payments may not be all that different. Do your research and, if you're still thinking about buying with an adjustable rate mortgage, be sure to understand how your payments might increase in the future.

As I've said previously, while the bubble markets sort themselves out, we could see some increased inventory and slowing sales. In times of uncertainty, people tend to go into "wait and see" mode. I believe the fundamentals that underlie the value of Boulder homes are not rooted in speculation, and any short term slowing of our market could spell a rare opportunity for savvy home buyers.

If you're an investor looking for ways to maximize your return in the local real estate market, there remains potential in many types of investments. We've been talking to local investors about their experiences with "Pop Tops" in Martin Acres, "Fix and Flips," and even the business of importing custom luxury homes from Germany.

There are success stories and many lessons to be shared (stay tuned).

p.s. If you bought investment property in a bubble market and are wondering whether to get out, this piece from the Wall Street Journal may be useful.



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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

4 comments:

  1. Boulder is far from a bubble, it leveled off here back in 2001 and prices will only go up from here. Check out the properties at Legendary Property. The real-estate in Boulder is doing pretty well!

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  2. Thanks for commenting George.

    FYI: I'd prefer readers use the Silver Fern Team's site to search the MLS for properties. We've invested significant resources to make our tools and resources very user friendly and there is no required registration/login.

    Feedback, as always, much appreciated.

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  3. Have you seen this: http://www.frbsf.org/publications/economics/fedviews/index.html

    I think there's lots to be said for consumer attitudes - no matter what your research says, if everyone THINKS there's a bubble, that might actually cause one.

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  4. Since when does "doing pretty well" equate to huge increases in housing costs? That's like saying that transportation is "doing pretty well" because of gas prices. By no means is the wild increase in real estate value a good thing.

    It's illegal to buy extra tickets to a sporting event and scalp them. Why? It's not fair and unreasonably drives up prices. But for some reason, we don't have a problem with people cornering real estate markets and driving up prices.

    I think the time has come to tax real estate not based on how much the property is worth alone, but on how much property the owner has. If you own more property, directly or through equities, you should pay a much higher tax rate -- just like progressive taxes work. What we're seeing is too much land concentrated in the hands of too few people, and that's the problem.

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