Friday, April 18, 2014

Boulder House Inventory - Get it Hot [Osman's Picks]

by Osman Parvez

Wow, it's been a busy week.     53 listings hit the market in Boulder this week, 7 of which are already under contract. 

As I'm writing this, it's nearly 6pm on a Friday night.   I've been a little busy negotiating on a contract and I still have to get my run in so I'm going to skip the usual Friday inventory run down. Instead, I'll give you only my picks. 

790 10th Street - Start Working on Your 3Pt. Shot.
Of the 53 houses hitting the market, 10 are worth seeing (and still available).  These are Osman's picks for the weekend of April 18th.  Here's the full list.   Individual property's and notes are below. 

Call me to see any of the following properties. ph: 303.746.6896.

3461 28th Street - Nice 2/2 in a decent location.   Possible investor play or CU kiddie condo.  

1634 17th Street #9 - I generally don't recommend 1 bedroom units for investment purposes but this one is in a killer location.   It's tiny, but would rent very quickly.   For people who occasionally visit Boulder or would like a low impact, minimal lifestyle, this could be a good choice. 

2932 Shadow Creek #108 - Gold run is ideally situated on the bike path and near CU.  Units are very easily rented to undergrads and grad students alike.  A quick hop on the bike and you're downtown, too.    Due diligence tip:  there have been several fires in Gold Run in recent years.  Read the HOA docs.

70 Benthaven Place - I could have sworn this has been on the market recently, but perhaps it was another one on Benthaven.    Devil's Thumb is very desirable for families and has the best schools in Boulder.  This unit could be a reasonable choice if you've got children and you're not into doing your own maintenance.   

711 Hawthorn Ave - I don't normally post about vacant land in Boulder because, frankly it's not that common and most of my clients aren't interested in building their own.  This particular location is spectacular, however.   You're right next to the Community Gardens and in central Boulder.    If you're willing to take construction risk, this is a plot worth considering.

3822 Lakebriar Drive - This unit could use some updates, but the location is spectacular.    There's a shortage of higher quality attached dwellings in Boulder.   This could be a great choice for Baby Boomers looking to downsize. 

2248 Nicholl Street W - Solid location, decent finishes, reasonable layout.   Looks turnkey.   

1989 Beacon Ct - Now we're talking.   This location is ideal for strolling to downtown or hitting the trails.  West Pearl is very desirable and these town homes are distinctive.   
  
790 10th Street - Historic but already updated and in a great location only a block from Chautauqua.   I'm not sure about the basketball court but it's a quirky conversation piece, if nothing else.   If you buy it, I'll knock off (rebate) a half point on my commission if you can win a one on one with me.     Ok, best of three.

3500 4th Street - This house was on the market a long time in 2009 and 2010.  The asking price started at $1.9 before falling to $1.5.   Back then, I took a few clients to see it and after serious consideration, we passed on making an offer.  It's now back on the market at $2.0.   I'm not sure what's changed or whether it's been updated.  Has it appreciated that much?    I'd need to see it in person (again) to find out. 

I'm in town this weekend, so feel free to call me if you'd like to set up a showing on any of the above properties.  ph: 303.746. 6896. Happy house hunting!
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Wednesday, April 16, 2014

Mid Week Fresh Listings - Buttoned up and Ready [Get 'Em Hot]

by Osman Parvez

A couple of fresh listings caught my eye.   They may not make it to the weekend, so I thought I'd post up before they're gone. 


2040 Balsam.    Offered at $1.4MM.   

It last sold for $882,000 in 2011.    The owners appear to have invested a lot of resources into upgrading the finishes in the living areas, kitchen, and bathrooms.     The location is pretty spectacular for its proximity to down town, but the outer ring of the butte this neighborhood is built on is where the valuation anchoring views lie. 

Here's one of before.   



Here's after
More pics are here ->BEFORE and  AFTER

Call me if you'd like to see it.  303.746.6896

3795 Martin Drive - Offered at $449,000
Two car detached garage, decent size lot, lots of updates including solar and tankless hot water.   In this price range, the demand is outrageous.  This won't last the weekend.     Call me if you want to see it.  303.746.6896



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Tuesday, April 15, 2014

Boulder Market Slows, House Sales Drop 26% [Analysis]

by Osman Parvez

Here's something no other Boulder Realtor will tell you.  

The Boulder market slowed during the 4th quarter of last year and dramatically hit the brakes during the 1st quarter of 2014.   

Take a look at the following chart.


You're looking at the change in sales volume during the quarter vs. same period a year earlier for the City of Boulder.    For houses, sales volume dropped 5% during 4Q13 and then fell a whopping 26% during 1Q14.   For condos, the drop was less severe.  Volume fell 9% in 4Q13 and then 7% during 1Q14.  

As you probably already know, inventory is part of the reason why.  Take a look at the next chart. 


The chart above shows the change in inventory for houses and condos/townhomes in the City of Boulder for the month of March.    There were 25% fewer houses available for buyers to consider this past March than a year ago.    For condos, inventory is 16% lower.  

Obviously, low inventory is a big deal but it's not the only factor to consider.  Rising rates could pull a big chunk of buyers out of the market and drop demand considerably.   

Let's Talk Strategy
Buyers -  it's more important than ever to carefully evaluate whether you're paying too much for a given property.  Although market momentum is a considerable factor, it's not a given that a particular property will continue to appreciate.    The market varies tremendously by price range, location, property type, and overall desirability.   Meanwhile rates are rising which will likely cool demand and result in better selection.   Overpaying is risky.  Buy smart, get yourself a Realtor who thinks like an adviser

Sellers - the clock is ticking.   Get your property on the market as quickly as possible.   Market conditions could change very quickly and if you're trying to sell real estate that doesn't have broad market appeal, you could be left holding the bag for a long time.   Don't be fooled by the sales pitch. Choose a listing agent who gives you the straight talk

What Me, Worry?
Think it's just me that's concerned?    Guess Again.   Check out the following excerpt from management's notes on Pulte's (PHM) latest annual report (bold emphasis is mine).  Can you read between the double talk? 

"Our results in 2013 showed significant improvement in the majority of our key operating metrics in the first half of the year, while demand conditions slowed for us in the second half of the year as consumers adjusted to higher home prices and a moderate rise in mortgage interest rates. For the full year 2013, the overall improvement in market conditions, in concert with our own tactical actions, contributed to our seventh consecutive profitable quarter. Home closings, revenues, average selling price, inventory turns, gross margin, overhead leverage, and income before income taxes all improved in 2013 compared with 2012.


Our net new orders declined 10% in 2013 compared with 2012. A lower number of active communities contributed to the decline in net new orders as we maintained 14% fewer active communities in 2013 compared with 2012. The lower active community count resulted from the close-out of a number of long-term projects and is consistent with our more disciplined land investment strategy. In addition, demand slowed in the second half of 2013 in response to higher home prices and a rise in mortgage interest rates. We will continue to calibrate sales pace in each community to improve our gross margins and maximize returns on invested capital. We expect that this approach will continue to result in a moderation in our net new order volume in the short-term relative to overall growth in the U.S. homebuilding industry and relative to certain of our competitors. While we believe higher mortgage interest rates are inevitable and may have a moderating effect on demand and pricing, we believe this impact will be outweighed in the long-term by other factors driving increased sales volume as overall new home sales in the U.S. remain low compared with historical levels.

p.s. I'm adding this post to the series, What Your Agent Isn't Telling You

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Monday, April 14, 2014

Thanks for Stopping By! [Analysis]

by Osman Parvez

Ready for more disclosure, more transparency, more openness? Take a look at the following analysis from my Google Analytics account. 

You're looking at an analysis of web traffic data for House Einstein over a 30 day period ending yesterday, April 13th, compared to the same period a year ago. 

Maybe you've noticed... I've been working diligently on producing higher quality content for people interested in Boulder real estate and exploring new ways to drive traffic to this blog.   I think the results speak for themselves.    Overall visits are up nearly 17% and unique visitors are up nearly 30%.    The most satisfying statistic?     The duration of each visit is up over 80% and the bounce rate has dropped 15%.   

Boulder is a small market, so we're talking thousands of visitors during the last 30 days - not hundreds of thousands, but these results are highly satisfying.  I just wanted to let you know how much I appreciate the interest.   Thanks for stopping by!

Note:  Over the next couple of months, the volume of blog posts are likely to slow.  My buyers and sellers always come first and we're about to enter the peak season of real estate for Boulder.    To point, I'm heading out in a few minutes to a client's house to meet a contractor for estimates on pre-listing remodeling and repairs.  

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Friday, April 11, 2014

Finding The Signal in the Noise [Weekly Wrap Up]

by Osman Parvez

It can be hard to find the signal in the noise.   Let's face it, when you're buying real estate in Boulder - there's A LOT of noise. 

Here's an overview of this week's posts - all very high signal, if I say so myself: 

Fresh Listings, Get 'Em Hot - an analysis of listings hitting the market in Boulder this week.   

It's Not Bragging If You Back It Up - a success story of a buyer finding a perfect house in Louisville and beating the competition without being the top priced offer in a bidding war.   

Why Are There So Many Rookies? - An answer to the question of why it's so hard to find a competent agent.     Part of a series called What Your Agent Isn't Telling You.

Finding Houses - A Competitive Advantage?   - Strategies for the current inventory deprived market.

A Museum Dedicated to '81 - a glimpse into the past.   Part of a series of what I sometimes find in houses called Stage This

p.s. Did you know that there are nearly 1,500 articles on Boulder real estate on this blog?    This is our 10th year of obsessing over Boulder real estate. 
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Fresh Listings, Get 'Em Hot [Inventory]

by Osman Parvez

The inventory shortage continues.  Let's take a look at this week's fresh inventory hitting the market in Boulder. 

First, the numbers for the week of April 11, 2014.


47 Listings Hit the Market
8 Refreshed Inventory
41 Truly New Listings
9 Under Contract Already 
16 Actually Worth Seeing (Osman's Picks)
22% under contract the first week.

I'm available this weekend, if you'd like to see the fresh inventory first hand. Click HERE to download my analysis. 

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p.s.  There is a lot more to see than what's brand spanking new and seller's are more reasonable when their listing is a little seasoned. 

457 Properties on the MLS
269 Available for Purchase (58.9%)


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It's Not Bragging if You Can Back It Up - [Sold!]

by Osman Parvez

I just got back from a closing and while I don't usually brag about my deals, I'm going to make an exception (with my buyer's permission).    This one is worth talking about. 




Here's the story. 

After a year of looking at houses, we found this buttoned up 3 bed, 2 bath in Louisville.    Lots of updates, a great backyard, surrounded by homes of equal or higher value in a excellent neighborhood.   It's really a fantastic house.  I would have bought this house and lived there.  As my client's know, I'm conservative in my praise for houses and I rarely say that. 

Like Boulder, Louisville has obscenely low inventory and as you might expect, there were many competitive offers.  It's a killer house with a great layout that would suit a variety of potential buyers.   

When we saw it, we were also only a few hours away from the listing agent's deadline for offer submission.   It might be the fastest I've ever gone from seeing a property to submitting a contract. 

There were three clauses in our contract that kept us in the game.   Only one of them I can tell you about. 

One of our competitors came in with cash but the clause structured our offer in such a way as to make it functionally equivalent.   This involved a lot of communication with the lender and thinking through potential scenarios.   There was slightly more risk involved for my buyer but in the end, it worked out just fine. 

The other clauses to the contract I can't tell you about because I need to maintain a competitive advantage for my clients.    I will say this, however.   At the closing table, the listing agent leaned over and mentioned that he plans to use my tactics in his next competitive bidding situation.   

Now that's a feather I'll put in my cap. 

A couple of other factors: 

Trust
.    My client put massive trust in me.   He was also a referral from another client, which helped establish that trust.    It allowed us to move quickly.  


Team  It helped to have a great lender and frankly, a skilled listing agent.   You've probably noticed that I'm not always complimentary to my fellow real estate professionals.   These guys earned it and I'll give you their names.   The lender was Mike Roth at Elevations and the listing agent was Dustin Sagrillo

Market knowledge.   It helped my buyer to have seen a lot of houses and understand market conditions.   Part of my job as a Realtor is to educate buyers and sellers.   Mission accomplished.    Market knowledge gave my buyer the confidence to make a strong offer.   

Skill.   The clauses written into that contract were creative and savvy.   From start to finish, it kept us in the game without overpaying for the house.   When the listing agent tells you so, you know this factor had impact.   As Mohammed Ali once said, "It's not bragging if you can back it up."

Say it, Mr. Ali: 



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Tuesday, April 08, 2014

Why Are There So Many Rookie Agents? [What Your Agent Isn't Telling You]

by Osman Parvez

note:  This post is part of the series - 
What Your Agent Isn't Telling You

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Take your typical real estate office.   You might find a few seasoned brokers but more often, you'll find inexperienced agents with three or less years of experience.   In other words, rookies.     

Why are there so many rookie agents?


Trust me, I'm the best.
1.   Most consumers can't tell the difference.   
People rarely buy and sell real estate, so they don't really know what to look for in a good agent.  They aren't in possession of the measurement tools to evaluate agent quality.  
Agents are also salesy by nature.  They're full of confidence and bravado.  It's hard to tell a good agent from a bad one when you first meet them.  Most people just go with a friend.  

2.  Low licensing standards and strong incentives to keep it that way.   

The large brokerages want to keep low licensing standards.    These shops - you know the names - Coldwell Max, Re/Bankers and Keller Fins of the world make money by selling services to agents - especially rookies.   As a buyer or seller, you are not their customer.   Their customers are real estate agents and the typical agent is out of the business within 3 years.  During this time they will pay somewhere between 25% and 50% of their income to these franchise owners.    Why do you think Dave Liniger and Gary Keller are billionaires? 

Zillow has the same model by the way.    As a consumer, you get their services for free.   Agents pay to advertise and obtain leads. It's not cheap. 

Competency
What's the Colorado Real Estate Commission's position on competency?  Frankly, they're part of the problem.   Rather than require higher educational standards and training, they leave it up to the agent themselves to decide.   

See Commission Position Statement CP-41.

Prior to performing any acts that require a real estate broker’s license, a broker should determine whether he or she possesses the knowledge, experience, and/or training necessary to perform the terms of the transaction and maintain compliance with the applicable federal, state or local laws, rules, regulations, or ordinances.  If the broker does not have the requisite knowledge, experience and/or training necessary to consummate the terms of the agreement, the broker should either decline to provide brokerage services or seek the assistance of another real estate broker who does have the necessary experience, training, and/or knowledge. 

Give me a break.    Can you actually see a real estate agent declining to help a buyer or seller because they feel they are not competent?   The opposite is usually the case, chest puffery and feigned competence.   The phrase "fake it till you make it" comes to mind.  

Remember, Don't be Fooled by the White Jacket.

My intention isn't to bash my fellow real estate agents.   I'm calling it like it is.    Where there is a problem, I also see an opportunity.  This blog was born with the mission to better educate buyers and sellers, especially those here in Boulder. 


Additional Reading
Think I'm wrong about competency? Please visit Terrible Real Estate Agent Photos for a refresher. 

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image: Ben Peregrinari

Sunday, April 06, 2014

Finding Houses - A Competitive Advantage?

by Osman Parvez
Some of the larger brokerages in town are apparently pitching that they have an advantage by having access to unlisted properties.    Is it truly an advantage?  Not really. 

The Unlisted Sale
The rare unlisted sale
I've been tracking new listings obsessively this season as an effort to help my clients see and evaluate inventory faster.   Occasionally, a property will be listed as already under contract or even sold.   735 Mapleton for example. 

If you dig back through my "Get it Hot" series analyzing fresh inventory, you'll see it's a rarity - probably less than 1%.   Why?  Because it's a huge disservice to the seller and a potential conflict of interest.   

There could be a better offer lurking in the pool of potential buyers.    The only way to find out is to let the open market see the property.

What's a Better Offer?   
Obviously, more money but there are other ways that an offer might be better.   How about removing contingencies like the property inspection?   How about cash and a shorter closing date?    Personally, I like to write my offers so that we deal with a potential low appraisal situation ahead of time - giving my clients a clear advantage over other offers.

Sellers, make no mistake.  If you accept an offer written by your listing agent without letting the open market see it first, you could be leaving a lot on the table without knowing it. 

Pre-sold listings are rare, but what we do see on a regular basis are listings which are put under contract within a few days of hitting the market.   It's a small percentage but it's out there.  This is a lesser disservice but at least, in theory, buyers had a chance at seeing it.   

Buyer Strategy
A strategy worth considering
Get a highly responsive agent and go see inventory as soon as it hits the market.   If you are concerned with being skunked on pocket listings, feel free to maintain open lines of communication with seasoned brokers in other firms.    Let them know you're interested in pre-listed inventory and get on their mailing list.   Even better if you choose a listing agent with a large book of business in the particular neighborhood you desire.   

Don't know who to talk to?   Ask your buyer's agent.   We can look up past sales and tell you who handle the majority of transactions in neighborhood.


Whoa... did I just advise you to not go under buyer agency?   In certain circumstances, yes, it's a strategy worth considering.   I'm not saying you should finish the transaction without a buyer's agent, but there may be some advantage to not signing the agency agreement until you're ready to write the offer.   In a normal market, I wouldn't recommend it but in today's inventory deprived market - you should at least discuss it with your buyer's agent

I don't know about other Realtors, but I'm open to this arrangement and have experience working with it.   Last year, I represented buyers on two purchases who had concerns about missing pocket listings.   We discussed it and decided to not go under buyer agency until they had selected the house they wished to buy.   This allowed them to continue to remain in communication with listing agents from several firms, just in case a pocket listing opportunity arose while maintaining their right to have their own agent. 

One of those buyers ended up seeing the house they eventually bought first with the listing agent (they saw it a day before it hit the MLS), but they asked me to write the offer.    The listing agent didn't even blink an eye when I contacted her with an offer because the buyer had made it clear at the time of the showing that they might seek independent representation. 

In the second case, my client knew about it before it hit the market through his own relationships with a neighbor.   When I contacted the listing agent, she claimed she had another buyer interested in the property and that she had a discounted commission with the seller for representing both sides (a.k.a. double ending the deal).    I wrote a variable commission clause into the contract to neutralize the potential advantage that an unrepresented buyer would have in this scenario and we submitted the offer.   Turned out it was smoke and mirrors, there was no other buyer.   I got the strong impression that the listing agent simply wanted to earn both buyer's agent and listing agent commissions.   

The Bottom Line
Not that bottom line
You're spending a large amount of money on an investment.     Even if the listing agent shows you the house, you should strongly consider getting your own agent - whether it's me or someone else.   Yes, there's a risk of a procuring cause dispute.  Discuss this with your agent, in most cases the risk is minimal. 

Remember... who pays?    You do.   You should get what you're paying for.

Although the commission is already built into the deal, it's funded by the buyer.   Get your money's worth.    

This isn't the 1950's.  The services of a buyer's agent are not only about "finding the house."  In the vast majority of cases, we all know about the listings hitting the market but if anything, early knowledge about pocket listings may give you a little more time to evaluate.  The smart seller (and ethical listing agent) is still going to turn your offer into a first right of refusal and put the property on the open market.   

The Value Add of a Buyer's Agent 
If it's not about "finding the house," what is it about?   Buyer agency is about valuation analysis, negotiating intelligently and supporting due diligence.  It's about helping you make a smarter real estate decision.  Independent representation (i.e. not the listing agent) is the smart move when you're making such a large investment decision.  Something to think about. 

From the Colorado Real Estate Commission's How to Choose a Real Estate Broker

"Choosing a real estate broker is a key element in a successful real estate transaction. The largest single financial transaction that a family makes is often the purchase or sale of the family home. The importance of that real estate transaction cannot be minimized. The assistance of a competent real estate broker can go a long way towards making this most significant purchase a smooth and happy one. Deciding how to proceed when you decide to buy or sell real property should be a result of careful consideration."

Note:  I'll be discussing competency in the next post.

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image credit:  ybot84, rafeejewell

Saturday, April 05, 2014

It Was Like a Museum Dedicated to 1981 [Stage This]


"You know what they say about the curtains matching the wallpaper... "  - Anonymous client




Friday, April 04, 2014

Fresh Listings, Get 'Em Hot [Inventory]

by Osman Parvez

Ready to see some property this weekend?   

Here's how new inventory from this week shakes out. 



54 Shiny new listings

14 Refreshed listings

6 Already under contract

18 Worth Seeing (Osman's Picks)

Click HERE TO DOWNLOAD (pdf).


There are currently 437 properties in inventory on the MLS.  264 are not under contract and available for purchase (60.5%).   That's a 4% improvement from last week. 

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Thursday, April 03, 2014

The Job Market and Real Estate Prices in Boulder [Analyze This]

by Osman Parvez

Sipping my coffee this morning, I found myself pondering the sustainability of rapidly rising prices in Boulder.   Last year, the average sale price increased 11.2% for houses and 9.8% for town homes and condos.  

I ended up looking at unemployment charts.  
   
The job market and housing have a direct relationship in primary (not vacation home) markets.  It's not difficult to fathom that to purchase homes, buyers need to be well employed. 

A couple of charts to consider: 


This chart above shows the unemployment rate in the United States (red line) compared to Colorado (blue line).    Looking at the chart, it's clear that during strong economic periods, Colorado experienced a far lower unemployment rate.   It also lost jobs slower and recovered faster than the United States in general.  

None of this should be surprising.   In recent years, Colorado has had a stronger economy than the rest of the country and increasingly is a powerhouse of innovation.  Boulder in particular has attracted a surprising number of technology companies and has a healthy startup community. 

Of course, the unemployment rate is a flawed metric for many reasons.   It's consistently wrong (in recent history), so still a useful metric to consider but let's flip it around and look at employment itself. 


The chart above shows seasonally adjusted employment in Colorado (blue) and several neighboring states.   What's evident is that the volume of jobs in Colorado is approaching the 2008 peak.     Other states have similar patterns but the growth rate is steeper for Colorado since 2010.  


Looking at just the period since 2010, the job growth between Colorado and our neighboring states becomes clearer.    Utah added 6.8% and Colorado 4% to the employment rolls last year.    Arizona skidded sideways and New Mexico added only 1.3%.   See the table below.     


Here in Boulder, our housing market has unusual features including a deeply constrained supply of new construction and an extremely stable employment base (CU and federal institutions).  It also doesn't hurt that Boulder continues to rack up awards and accolades, year after year, for being a fantastic community.  

Nobody has a crystal ball but it's smart to track the job market.     Tomorrow morning, the BLS will release new employment numbers and as our economy continues to recover, it's worth paying attention to it.    If you care about housing in Colorado, it's particularly important to track how our state (and region) is performing relative to other parts of the country.   

Additional Reading

Rising Home Prices and Falling Unemployment:  Don't Trust the Numbers

Unstoppable Demographics Drive Housing Demand in Colorado

Understanding Appreciation Rates

note:  The charts above are from Google Public Data Visualization.   Check it out.
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Wednesday, April 02, 2014

Introducing Nickel Flats [Development Update]

by Osman Parvez

Scheduled for completion in the 2nd quarter of 2015, Nickel flats consists of 16 units on 3 floors.    The building will be modern with elevator access.   The location is just north of Boulder Junction and adjacent to a pocket park. 

Here's what it will look like. 


Prices start at $229,000 for the 1 bedroom on the first floor with 533 SF.   That unit is already under contract, as are several others.      There are currently 8 units on the MLS.    Click HERE for more detail. 

Additional Resources:

Floor Plans for Nickel Flats

Boulder Development Map (updated)




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Friday, March 28, 2014

This Week's Fresh Listings [Get 'Em Hot]

by Osman Parvez

Time again to review this week's fresh Boulder listings.  

First, here's how the numbers play out: 

38 New listings this week
3 Refreshed (previously listed)
6 Already under contract
2 Pending (i.e. offers being negotiated)
1 Listed as sold
11 Worth seeing (Osman's Picks) 


The average time on market for property already under contract was only 2.8 days. This likely means that offers were received the first day the property was available.    

Word to the wise:  If you're a serious buyer, you cannot afford to wait.   Make sure you're on instant listing alerts (available via your favorite Realtor).  When you get a notification, drop everything and go see the property.

CLICK HERE for this week's fresh listings.

As for the rest of inventory, there are 427 properties in total available.   Of these, 56.4% are available for purchase (i.e. not under contract).

 Are you ready for some showings?   Call me.  303.746.6896.

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Thursday, March 27, 2014

Understanding Prices in Devil's Thumb [An Interesting Question]

by Osman Parvez

A new client recently asked me about the sustainability of upwardly moving prices in Boulder.   He was specifically interested in the Devil's Thumb neighborhood.    

It was an interesting question.   


Devil's Thumb is an attractive neighborhood in Boulder but do the fundamental economics of supply and demand support continued price appreciation?  Given my investment analysis background, I'm probably more qualified than most Realtors to answer.

If you're a regular blog reader, you know what happened next.  I'm not about to answer by the seat of my pants.   Although I've done several transactions in Devil's Thumb (two last year alone), and many more in Table Mesa,  I dug into the data before writing a response.  

This particular buyer is early stage and wisely shopping Realtors.   I strongly support that process.   If you're a buyer, it's smarter to shop Realtors than shop for a specific house.  While he makes a decision, I'm going to share the analysis. 

To help answer the question, I pulled sales data for Devil's Thumb going as far back as 1997. Take a look at the following charts.  



The yellow bars in the chart above represent the volume of houses sold in the Devil's Thumb neighborhood.   The blue line is the average negotiated discount from asking.  

Observations:    


- First, Devil's Thumb is a low volume neighborhood.   The highest volume year was 1999 when seventeen homes sold.   Last year, there were only ten.    Note that between the years 2000 and 2007, the neighborhood typically only saw eight to ten sales per year.    The inventory shortage doesn't seem to be impacting the number of transactions in Devil's Thumb. 

- The average negotiated discount fell to near zero during strong seller's markets, most notably 2000 and 2006.     Both of these years were at or near the cyclical peak of the real estate cycle.    Last year's average discount was a little over 1%.    

- The most recent downturn produced average negotiated discounts from 4.5% to nearly 7% (from asking). This was far higher than the past.




This next chart (above) shows median and average sold price.   I'm including both because with such low volume, the average can easily skew higher or lower.   The change in median is a little more reliable but both pieces of information are useful. 

Observations

- Prices continued to climb for one year past the peak of the real estate cycles in 2000 and 2006.   This is what I consider market momentum.   It's also evidence that a lot of buyers simply aren't getting good market information from their Realtors.  They should have hired a better one

- Prices recovered relatively quickly after the downturn.   There was no bubble market bust where prices fell 40-50% in Devil's Thumb.   

- Everyone wishes they bought a house 1997.   I wish I bought several. 




This last chart shows the distribution of sold prices over time in Devil's Thumb.  I added the blue line to emphasize the psychological $1MM threshold. In the version I sent to my client, I included a third order polynomial regression to show a trendline but the R-squared wasn't great, so I removed it. 

Observations

- The gap between the lowest and highest price home sales in Devil's Thumb is widening.   My theory?  It's caused by the increasing premium buyers are willing to pay for homes that are built around open space views.   These ultra premium luxury homes appear to be appreciating at a faster rate than mere ordinary homes.   This phenomenon, by the way, is inline with an analysis I did a few years ago on ultraluxury property on the island of Nantucket which showed waterfront homes exhibited the same pattern.    If you can swing it, buy unobstructed open space views.  They are the equivalent of waterfront in Boulder. 

- Prices seem to have flattened somewhat beginning in 2007, about a year after the peak of the last real estate cycle.  The exception is for the highest value homes which continued to accelerate upward.  Note, I see a trend but the sample size is so low that it's likely not statistically significant.    The ghost of my old b-school statistics professor insisted I write the preceding sentence. 


Conclusions
My last clients who bought in Devil's Thumb are very satisfied.   To help them feel confident about valuation and their decision, we spent a lot of time evaluating alternative neighborhoods.  The conclusion we reached was that Devil's Thumb simply doesn't have as many high end homes as N. Boulder (less depth of market) and thus availability is even more limited than in neighborhoods like Newlands.   This can have both positive and negative consequences for eventual resale.   It can also exacerbate the low appraisal problem.    See Low Appraisals, What Your Agent Isn't Telling You for more reading.

I hope you've enjoyed this analysis.   If you'd like to view property in Devil's Thumb with me as your buyer's agent or are considering selling your property, contact me.    My goal is to add value and help you make a smarter real estate decision.   ph: 303.746.6896.

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Like this analysis?    Subscribe to my research.       Want to meet me in person?    Attend a Boulder Real Estate Meetup.    Ready to buy or sell?  Call me at 303.746.6896.  

Monday, March 24, 2014

The Truth about Bidding Wars [What Your Agent Isn't Telling You]

by Osman Parvez

Note: This post is part the series, What Your Agent Isn't Telling You.
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How's the market? 

Ask most Realtors and you may get an educated guess.   Most of the time, they'll talk about their own business activity which can be highly volatile.  

I could tell you what the Boulder market "feels like," but I prefer to analyze the data before sharing my opinion.   So I spent a little time this morning crunching numbers.   It reveals a few surprising facts about bidding wars.   

Take a look. 


The chart above shows the relationship between days to offer (DTO) and sold price as a percentage of asking for the Boulder real estate market from January through today.    

116 properties have sold so far this year.  The chart shows 94 sales which occurred within the first 100 days of listing.   The red circle represents the most intense area of market activity,  the ones most likely to have experienced bidding wars.   These are properties that were under contract within a week of hitting the MLS.   I'll discuss that red circle in more detail below.

FACT: The median sale occurred in 26 days at 98% of asking, closing at $623,500. This suggests less than one month of inventory currently on the MLS (six months of inventory is considered a healthy balance between buyers and sellers).  

Now let's take a closer look of properties that went under contract quickly.   The chart below is the same data as above, just constrained to twenty days.

   

FACT:  A whopping 32% of sold property in Boulder went under contract during the first five days of the listing period (year to date).   

This is astounding.   Note the density of activity. 

Although it's risky to accept an offer the very first weekend the property hits the market, nearly a third of sellers did so most likely under advice of their listing agent.   

Why is this risky?   Because a number of potential buyers haven't actually seen the property.    Buyers under intense pressure to write an offer, submitting their "highest and best," are also prone to experience remorse down the road. There is also little time for a listing agent to play one offer against another to drive up the price and/or remove contingencies.  Accepting an offer in the first few days of a listing is not a smart negotiation strategy.
FACT: 43% of closings that went under contract within the first five days eventually closed at a price below asking.  

The standard contract is full of contingencies for a buyer to flippantly change their mind with little recourse.     Cold feet is a common outcome.    As a seller, once you're under contract, a huge amount of negotiation leverage shifts to the buyer. 


As you can see from the chart, there were many properties that sold substantially over asking but also many which did not - including ones that went under contract quickly.   Remember, a full or above asking price offer doesn't always equal a closing.   Buyers who feel they gave in on the original offer are more likely to play hardball when it comes to negotiation over inspection items. 

So, How's the Market?   

The answer is that for most buyers it remains intense.    At the current pace, a third of listings will no longer be available within 5 days of hitting the MLS.  This rabid pace is not necessarily the case in certain locations and price ranges.   You should talk to your agent about market conditions specific to your situation.

In practice, agents are slow to update the MLS.   We're not talking about five days on market. The reality is that many listings are gone within 48 hours.     Although it has risk to sellers, this practice remains common. 

For sellers, bragging rights about the number of offers received doesn't translate to a high closing price or low hassle.   Multiple offers are an opportunity for listing agents to strengthen offers and remove contingencies but the evidence clearly shows a surprising number are unable to even hold onto the full price.    And that, my friend, is What Your Agent Isn't Telling You.

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Like this analysis?    Subscribe to my research.       Want to meet me in person?    Attend a Boulder Real Estate Meetup.    Ready to buy or sell?  Call me at 303.746.6896.  

image:   Refracted Moments