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Pardon Me, Brother... Can You Spare A House?
Each substantial slowdown in Boulder County home sales during the past twenty-five years was distinguished by falling demand: new listings came on the market and failed to sell; the inventory of un-sold homes grew, and prices flattened out.
That's how it worked in the 1980 slowdown; during that grisly, sequential drop in sales 1984 through 1989; and in the most recent slowdown year, 1994: buyers went on strike and listings piled up.
Not this time.
Last August marked the beginning of a new decline in Boulder County home sales. However, buyer demand is as healthy as at any time in the 1995-1999 expansion, prices are rising rapidly, and listings are in as short supply relative to sales as any of us has ever seen.
1998 was the biggest year ever for County single-family home sales: 6,857. Through July, 1999 it looked as though we were on the way to a new record, as sales were 12.5% ahead of the 1998 pace. Then, beginning in August... well, have a look at the chart nearby.
8/99 9/99 10/99 11/99 12/99 1/00
Total detached
home sales,
% change vs.
prior year: -5 -13 -17 -23 -24 -42
New home sales
% change: -27 -27 -43 -46 -45 -53
Rather a trend, there. While these figures are for single-family homes, the pattern has been about the same for condos and townhouses.
In the August-January interval, total home sales fell by 19%; within that overall figure new home sales plunged 41%. It's possible that a temporary interruption in new construction is responsible for the overall trend, but such interruptions are going to be frequent in our near future.
A shortage of new homes does not adequately explain the low inventory of listings of existing homes, which has fallen like a load of brick veneer. There were 1504 homes on the market in the County in August '99, and only 1177 today.
Sales are down because buyers can't find homes to buy
-- new or old. Homes are so scarce that "Many listings are conditioned on the seller being able to find a replacement home", says Jerry Curry of Wright Kingdom Realtors.
The popular press says sales are down because interest rates are high, which is perfect nonsense. Today's low-eight percent mortgages are close to the 1990's average: it took 9.50%-plus to produce the 1994 slowdown. Besides, high rates limit demand, not listings.
Are too-high prices causing this slowdown? Nope -- not yet, anyway. The only accurate measure of price appreciation is an appraiser's "paired sale" tracking of specific homes, but in a market as thin as this it's hard to estimate an average appreciation rate. The few data points available suggest price gains in the last six months are ramping up at an astounding 20-40% annual rate in multiple-offer, auction conditions. Claims that prices are "too high" do not account for the parking problem in front of new listings.
Has Boulder County entered the end stage of the mismatch between jobs and housing? That's a good argument, but it's not the end stage, it's just a new one in an ever-tightening spiral.
However, there is something odd going on in statistics from larger markets. The whole Metro Denver market shows the same pattern we're dealing with: falling sales, a shrinking inventory of listings, yet strong demand and rising prices. The National Association of Realtors (NAR) reports the same phenomenon in all the Western states: sales down 27% in January, scarce listings, and plenty of demand.
Odd indeed: as of January, NAR also reported the fewest listings in the entire U.S. relative to sales since NAR first began to gather the statistic (1981).
While growth control adds special spice to the Boulder County soup, three powerful national forces are in play.
First, demographics: the population of the U.S., now 275 million souls, is on track to rise to 325 million by 2020. Second, developable land is scarce in every desirable plache City's tortured efforts at housing analysis, remember that our households-by-income are distorted (permanently, I hope) by the presence of 25,000 students. That's why 56% of Boulderites are renters, versus the 30% national average -- not because the filthy rich are crowding out the middle class.
Useful efforts? Assistance for the deserving groups mentioned above; convince CU to provide better housing for students, staff, and faculty; and wise use of our remaining land -- neither mansions, nor multiplied density. Get to work on transportation for Boulder's 45,000 in-bound commuters, for whom there is no home in Boulder at any price.
And drop this disgraceful, envious, demonizing class-war rhetoric.
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