Monday, February 10, 2014

Slicin' and Dicing Boulder Real Estate [Analyze This]


by Osman Parvez


Record low inventory and record mortgage rates created interesting market conditions for Boulder real estate last year.   Sales volume was up 12% for single family dwellings despite about half the normal level of available inventory.  See Sales Volume Spikes in Boulder and Understanding Market Conditions in Boulder for more details.




The median sale price in Boulder during 2013 was $629,000.  By definition, half of the sold homes in Boulder fell below this level. $1MM+ sales represent only 15% of the market. $2MM+ sales are an even small slice of the pie, only 3%.  

Why?
A lack of inventory at certain price ranges likely contributed to poor performance, particularly at the entry level. But what about the volume increase at the high end? The stock market probably had something to do with it.   


Yachts are so 1980's
Equities performed exceptionally well during 2013. The S&P 500 was up nearly 30% and the Dow Jones Industrial Average had its best year since '98.  It's a time honored tradition for investors to take gains from a highly volatile asset class and put it in something less volatile - like real estate.  Plus, you can't live inside a stock portfolio and you certainly can't exactly impress your friends with your investment savvy unless you actually buy something. What can be more impressive than a extravagant estate with a Tesla S in the driveway?

If you were to analyze the relationship between high end sales and stock market performance, I suspect you'd see a strong correlation.   

Additional Reading
Luxury Home Sales Boom
Stocks: 2013 is one for the record books

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