A Whiff Of Appreciation

For the first time in two years, there are signs of increased value in Boulder County homes.

Now, having read that sentence, don't pick up the phone to badger your Realtor about raising your asking price. On the other hand, the news is good enough that cripple shooters should give up hope of picking off a victim.

Price gains are almost imperceptible, on the order of two or three percent since early 1994, and limited to homes with values under $300,000. The gains are also highly localized, and some places, like Rock Creek, are still in relatively soggy shape.

The important part of this report is not so much the gains which have taken place, but the arrival of conditions for more significant price gains in the future.

Jupiter has its Great Red Spot, and Boulder County had its Great Flat Spot, almost nine years long, from 1983-1991. When our market slowed down in 1994, the two main questions were how long the next flat spot would be, and whether we would escape some declines in prices before the market got going again.

Perhaps the most basic measure of the health of a housing market is the relationship between inventory and sales.

In the last two years, the greatest surprise in the housing market has been the slight growth in the inventory of listings. In early 1994, I thought the listing inventory would have to double before we would again see price appreciation. Instead, the listing inventory in the County as a whole has grown only by about 25% -- and that heavily weighted to top end homes.

The drop-off in the number of sales has been substantial, but stabilized during 1995. In 1993, about 7,500 dwellings of all kinds sold in the County. In 1994, monthly sales figures held at 1993 levels into the spring, but declined sharply in the fall, and total sales in 1994 dropped to about 6,900. Monthly sales in 1995 were stable at the same rate as the end of 1994, and totaled about 5,800 -- roughly a 25% decline from the boom peak in 1993.

The matched increase in listings and decrease in sales has restored a healthy balance. Buyers feel as though they have a selection of homes among which to choose, and no longer feel pressure to compete with a panicked crowd.

The best indication of modest appreciation is new appraisals on refinances. Many people who bought in 1994 (when mortgage rates were 8.50-9.75%) have refinanced this winter, and we are seeing modest -- very modest -- gains in those appraisals. Two or three percent gains may not seem like much, but it sure beats worrying about whether the house is worth what you paid for it.

We have not seen a single refinance defeated by a low appraisal.

In another indication, the Colorado Division of Housing reported on apartment vacancy rates at the end of 1995. Denver Metro had the "high" at 4.1%, while every other Front Range community had rates under 3%. Most housing people will tell you that vacancy rates under 5% reflect a very tight housing market, and contrast well with the 15%-plus rates of the late '80's.

Though the outlook is positive, appreciation is likely to stay on a modest slope, if only because we are in an era of very low inflation.

There is also the Law Of Flat Spots to consider: the longer the flat spot, the bigger the rise at the end. The converse is also true, and the flats of 1994-1995 were at the short end of such formations.