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Boulder Market Strength Myth Perpetuated [Politics as Usual]
At a meet the candidates event today, I was stunned to hear a City Council Member applaud the current strength of Boulder's real estate market. The Council Member (who is running for re-election) cited a "national survey."
It's amazing how an article published in the Main Stream Media can become like a virus. Returning to my office, here's the email I fired off to City Council.
Dear City Council Members:I just returned from the Boulder Area Rental Housing Association meeting which featured a forum for City Council candidates. During the meeting, Matt Appelbaum stated something to the effect that a national study recognized Boulder as having the best housing market in the country. I'm concerned that this misperception exists among other council members and I'm writing to offer you better information.The "study" that Matt referred to was likely the feature article in Business Week, printed August 11, 2009. Here's a link to the article.At the surface, the BW article sounds like good news, but if you dig just a little deeper, you'll find that the underlying data is unreliable. The article relies on Zillow's estimate ("Zestimate") of market value. While Zillow protects the actual formula for Zestimates, the core component is median sale price. It's not an indicator of market value, it's an indicator of what sold. In a small market like Boulder, median prices show tremendous volatility. It's a function of sample size.In short, the Business Week article is erroneous. What's REALLY happening in Boulder's market is that inventory levels are high (supply) and sales volume is low (demand). Specifically, as of August inventory was up over 30% for single family homes, year over year while sales volume was down 30.8% and 31.8%, over the past six and twelve months, respectively Low demand and high supply is a formula for falling prices. And indeed, this is what is happening at the mid and high end of Boulder's market. The entry level of the market remains strong (for now).For charts, tables, and market research galore - please see the following articles:The data for my reports are based on summary reports from the Boulder Area Realtor Association and IRESIS, the MLS for Boulder. This is far better information than Zillow's 20,000 ft analysis.
NOTE: Elephant Journal and New Era Colorado are hosting another Meet the Candidates event at the Fox Theatre on October 12, 7pm (link) These events are a great opportunity to hear from candidates first hand.
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4 Comments:
Nice Osman. Stick it to 'em - esp. Applebum. As far as I can tell, he is a major source of the ridiculousness of our current Council, and it does not surprise me that he relies on erroneous information in his decision making - just look at the decisions he's making. It is a sad state of affairs that Boulder is led by folks who read their own press, who drink the kool-aid, who have little foresight or business acumen, and little compassion for those outside their immediate sphere. Applebee also wants to implement a commuter tax on those who work in Boulder and cannot afford to live here (in spite of policies that make it impossible to build enough housing for those employed in Boulder). Philadelphia (go Phils!), my hometown, has had such a tax for years, and it served only to hasten the retreat of business out of the City to the suburbs, and revenues declined over the long term. Very shortsighted policy idea. Proof, meet pudding.
I was at the meeting on Tuesday night when the local building community turned out to speak on the subject of the retroactive taxes on construction materials the City may/may not try to collect. After many impassioned pleas for fairness and rationality in determining whether or not to ask local business owners to return to 3 years worth of clients and ask for tens of thousands of dollars in 'delinquent taxes', several members of the Council admitted that they had not realized the impact such a request would have on the livelihoods of so many. I was astounded. What is it that Council thinks about, then, when such a decision comes before them? In this case, a decision was made based on a real lack of revenues, a supposed revenue source, and a lack of communication between the money-collectors at the City and those elected to act in the best interests of the citizenry. The City rules and permitting process have operated a certain way for decades, and now the City decides to change the rules - after the fact. Amazing. I should say I am not against a tax on 'actual costs' of construction (they use an extimated cost now to collect prior to construction instead of waiting until the project is complete and taxing the full monty). However, the City also proffers a letter at the time of Occupany at the end of project which implicitly - perhaps explicitly - states that all taxes and fees are paid in full, and you may occupy your new/remodeled home. This letter signifies the end of your project in the City's eyes. To ask builders to return, post-letter, and ask clients for more money damages their reputations and their clients pocketbooks. If the City wants the rules to change - do it - but start now and go forward.
I sense a slight change in your tone, Osman, regarding the trickle down effect of falling prices at the top. This spring I suggested that the falling prices at the high end ($1M+) would necessarily have to impact those at just under $1M, and this in turn would cascade downward, all the way to the bottom. I took an educated guess that the impact would really kick in after the summer selling season and following the lifting of the foreclosure moratorium. That would be starting now. You indicated that market absorption was strong, particularly in the lower price ranges and that this would buffer the market. Are you starting to think about singing a different tune? In your letter, you added "for now", which sounds to me like you are no longer so confident about the entry- to mid-level market. Unless an economic miracle occurs, there's still nowhere to go but down. Why would anyone buy a home listed for, say, $900K when you can buy a $1M home for the same money? When those $1M+ homes start going for less than $1M, the homes currently listed in the $800-$900K are going to have to come down in price, or they are going to end up in your walk of shame. There is no escaping this. Resistance is futile.
Interesting how the City Council talks out of both side of their mouths about the strength of Boulder's real estate. From today's DC:
http://www.dailycamera.com/boulder-county-news/ci_13535350?source=rss
Ann Goodhart, division manager for real estate services for Open Space and Mountain Parks, said very few properties are on the market now, and those that are, are over-priced, in the city's view.
"Sellers have not adjusted their expectations to reflect market conditions," Goodhart said.
"Clearly, there was a setback," Boulder Mayor Matt Appelbaum said. "It may ultimately be in our favor if property values start to reflect what we see as the new economic reality."
Osman, I too appreciate your candor, and your realistic take on our true market here. I hate it when the media blows sunshine up everyone's you-know-what. Things have been dire here in many of the Boulder area submarkets and will continue to be through 2012 - at least that is my prediction! Thanks again - I appreciated the read and the analysis.
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