Ignition '98

Despite the name, most real estate booms do not explode into life all at once. Instead, hot markets usually arrive in gradual fashion, fire-like, gathering heat and spreading over time. Also, most booms appear to ignite by spontaneous combustion, with no immediately identifiable cause.

For example, the last substantial boom in these parts began in late 1990 as prices in South Boulder began to rise rapidly after a seven-year flat spot. Accumulated purchasing power, scarcity, and location combined with some untraceable competitive accident -- maybe only a half-dozen buyers looking for the same sort of house -- and off we went.

But... slowly. Percent-a-month appreciation didn't cross Arapahoe, headed north, until mid-1991; and the early-90's boom didn't hit maximum until 1993.

1998 is different: it is sudden, arriving all at once, County-wide in early April; and its cause specific, reflecting the deeply changed nature of the Boulder County economy.

The first 90 days of 1998 were a good market, with 15-20% more home sales than the 1996-1997 pace; but prices weren't doing much, rising no more than the 5% year-over-year typical since 1995.

Then... April. We don't yet have the Assessor's figures for numbers of sales, but that's not the important part: prices are the boom signal, and we already know what happened to prices in April.

For the first time since 1993, prices are moving so fast that appraisers can use (and lenders will accept) time adjustments for comparable sales. We're not (yet) to the percent-a-month mark, but if a home identical to yours sold for $200,000 in January, an appraisal might come in today at two-ten or even two-fifteen. Of course, in these multiple-offer, auction conditions, a couple of buyers might compete near two-twenty. Do I hear two-twenty-five?

What happened in April? Why the great divide?

The theory here rests on a pattern too strong for coincidence. In the first week of April, Level 3 Communications announced the construction of its headquarters at Interlocken, and began to move the first of 3-5,000 employees. Not gradually move-and-hire, like Sun Microsystems and Amgen; but to transfer hundreds of people all at once. Average salaries: above $75,000.

A market already in delicate supply/demand balance blew to smithereens. All at once.

Roughly 5,000 homes sold County-wide in each of the last two years, but a third of them were in Longmont. In the first 90 days of 1998, new home sales rose 85%, but half the increase was in Longmont -- a long commute for Interlocken housing demand.

Dump several hundred Level 3 buyers into the remaining, 3,500-home-per-year South County market, and you have a boomlet on your hands.

How long will this last; and will we drop the "-let" and go full scale?

It will be hard to reach -- let alone sustain -- the percent-a-month mark. These are zero inflation times, and high South County prices will inevitably attract supply in Northern Jeffco, just as high Boulder prices spawned supply in the East County last time around.

And, as much fun as it is to watch the value of your home click up month by month like the S&P 500, there is another, long term limit to Boulder County home values: whether or not we can maintain an attractive quality of life. The central challenge to that quality is the massive and intractable transportation problem caused by rapid job growth and scarce housing.

Until now, the housing/employment mismatch was limited to the City of Boulder: 95,000 residents, 95,000 workers, half driving in to work every day. In five short years, the mismatch has spread throughout the South County.

A fixed supply of housing is in sight: Louisville is out of land, Rock Creek is approaching build-out, Lafayette has growth control, Erie is too small, and most of the developable land in Broomfield County lies in its Wyoming Panhandle. On the other side of the mismatch: Interlocken and the FlatIron interchange by themselves have almost ten million square feet of commercial space yet to be built.

Of Boulder's "solutions" to the mismatch (bikes, buses, bumps, barricades, and blame), down-zoning has been by far the most effective. I doubt the nouveau tax-and-job riche boomers to the east can see the benefits of slowing down their commercial success, even a little, and that oversight will prove painful.