Price Appreciation 1991-2010

As indicated in our last newsletter, we've put together pricing stats that track median prices from 1991 to 2010.  A quick glance at our tax record data on mid-sized homes (1600-2300), for example, will show you that the median price for this size of home in Boulder in 2010 was about $632,000, while in Longmont it was just over $265,000.  In 1991, these homes would have sold for about $162,000 and $109,000 respectively.

Scanning these charts on the history of pricing trends over the past 20 years quickly raises the question of which communities have experienced the greatest price appreciation over this time frame...and when.  Our new charts summarizing long term price appreciation  help answer these kinds of questions.

With a quick glance at these charts, you can see that prices of mid-sized homes in Boulder appreciated 178% from 1991 to 2001 and 20-30% from  2002 to 2010, for a total of about $257% over the 20 years from 1991 to 2010.  For Longmont, the corresponding figures are 124% from 1991 to 2001, 0% to 3% from 2002 to 2010, for a total of 124% from 1991 to 2010.

If you take a look at our chart on price appreciation for mid-sized houses, you'll see that there is a clear pattern in the price appreciation rates for the 10 communities we cover over this time span.  For Longmont, Erie, Arvada, Broomfield and Westminster, appreciation from 1991-2001 ranged from about 115% to 125%, while those from 2001-2010 ranged from -1% to 3%.  For the whole of the 20 year period from 1991 to 2010, this translates into a cumulative price appreciation in the 115% to 125% ballpark for these communities.  In contrast, communities like Gunbarrel, Louisville, Lafayette and Superior that are closer to Boulder, had price increases in the 124% to 138% range from 1991 to 2001 and 12% to 23% from 2001 to 2010, for a total appreciation in the 162% to 185% range from 2001 to 2010.

A final point:  While appreciation rates in the 1990s for Boulder and nearby towns like Louisville and Superior exceeded those of Longmont, Erie, Arvada, Broomfield and Westminster, it has been the continued price appreciation in the down market we've experienced since 2002 that has really separated the long term appreciation rates for communities for the 1991 to 2010 time frame as a whole.

Note:  If you'd like to compare appreciation rates for various home types and sizes within a single community (e.g., small homes to condos/townhomes), that data is available in our section called Data for Each Community.

Neighborhood Prices: Boulder Longmont 

 While most real estate stats are based on composite data for entire communities (e.g., Boulder or Longmont), everyone knows that there are often substantial price differences between similar homes in different neighborhoods within a single community.  Many also assume that different neighborhoods within the same community appreciate at different rates over the long term.

To provide some statistical basis for looking at these issues, we've recently completed stats on median prices for various neighborhoods in the two largest communities in Boulder County, Boulder and Longmont.  These stats are posted on our web site in the sections titled Median Sale Prices and Change in Price Over Time.  We've also posted maps there outlining the sections of each town that we've defined as "neighborhoods" for purposes of producing these neighborhood stats.
As one might expect, pricing varies fairly dramatically from one neighborhood to the next in both cities.  There are also some fairly consistent and substantial differences in long term price appreciation from one neighborhood to the next.

If we consider the pricing of mid-sized homes (1600-2300 sqft) in Boulder, for example, pricing in the 3 neighborhoods along the west side of town has ranged from about $725,000 to $775,000 over the past few years.  Similar homes on the eastern edge of town ranged from $450,000 to just over $500,000 over the same time frame, a price differential of more than 50%.

In Longmont, the pricing differences between different parts of town are less dramatic, but still significant.  The Old Town neighborhood, and the neighborhoods on the west and southwest side of town, tend to have the highest prices.  These prices ranged between $275,00 and $310,000 in recent years for a mid-sized house.  Neighborhoods on the east side of town tended to have the lowest prices, running in the $230,000 to $250,000 range for a mid-sized house over the past few years.

In Boulder, long term appreciation rates also tended to be higher for neighborhoods on the west side of town.  For mid-sized homes, price appreciation from 1991-2010 was in the 300% to 320% range for all three of the neighborhoods we've defined in west Boulder.  For the neighborhoods on the east side of town, price appreciation tended to range from about 150% to just over 200% over the same time frame.  The exception was southeast Boulder (Martin Acres plus), where the appreciation of mid-sized homes was 301% from 1991 to 2010.

In contrast to Boulder, the more expensive neighborhoods didn't seem to appreciate any more rapidly than the less expensive ones in Longmont...at least not with any consistency.  In part, this may just reflect the fact that there were very few homes in areas like southwest Longmont or east Longmont (the neighborhoods east of Pace) in 1991.  Because almost all the homes in these areas were built in the past decade, trying to generate long term appreciation stats running from 1991 to the present may not provide very reliable data.  We'll have to look at this more carefully in the future.

Big Drop in Sales in 3rd Quarter 2010

In our last newsletter, we noted that one of the big stories in our local real estate markets over the past few years has been the dramatic drop in the number of home sales.  For most of the communities and housing types we track, sales in 2008 and 2009 were generally down 20-40% when compared to sales of prior years.  And drops of 50% or more haven't been uncommon.  You can look at these stats in on our web site under Number of Sales.

In that same section of our web site, we've just posted stats showing how the number of sales for each quarter of the current year compare to the average sales for that quarter in 2008 and 2009.  To return to the stronger market we had in the years prior to 2008/2009, we'll be watching these quarterly sales hoping to see sales begin to increase substantially over the numbers posted for 2008/2009.

If you take a glance at our new charts on quarterly sales, you'll see that we're not there yet.  In fact, by this measure, things are getting worse rather than better.  As indicated by the red bar on these graphs, the cumulative sales through the 3rd quarter of this year are down from the average of 2008/2009 in 80-90% of our measurements.  Worse yet, sales in the 3rd quarter of 2010...when compared to the average number of sales for 3rd quarters of 2008 and 2009...were down an additional 20-40% in almost every case.  As these charts show, we had some indication of increasing sales in the first two quarters of the year, increases that may have resulted from the federal tax incentives offered to buyers.  But in the 3rd quarter of 2010, the market softened again, fairly consistently and fairly dramatically.

We're now half way through the 4th quarter of 2010, and we're certainly not seeing any dramatic improvement in the market with respect to sale numbers. We'll be tracking this as we go into 2011 to see if things begin to pick up then.

Preparing Your Home for Winter 

As the fall equinox comes and the weather begins to change, there's a lot you can do around your home besides putting up the holiday decorations.  This time of year is the perfect time to give your home a once over and make sure that everything is working like it should be.  The following maintenance tips will make your house better and could help you save some money.  We have highlighted some of the most important tips, but at the bottom of this you can find links to a couple websites that will give you even more information.  Good luck, call us with any questions, and stay warm! 

Indoors:

• Call an HVAC professional to inspect your furnace and clean the ducts
• Stock up on furnace filters and remember to change them monthly
• Test smoke and carbon monoxide detectors to make sure they are in working order
• Add an additional layer of insulation to your attic
• Install and replace weather stripping on doors and windows
• Reverse your ceiling fans so they are pushing warm air down
• Uncover south-facing windows to let sunlight in your home.
• Use draft blockers, foam plates that fit behind light switches and electrical outlets, to reduce drafts

Outdoors:

• If your home has a basement, cover the window wells with plastic shields to reduce the clean up when the snow thaws
• Check gutters and clean them if necessary
• Trim trees away from the house
• Rake all debris and vegetation away from the siding and foundation
• Shut off water faucets, disconnect hoses, and blow out sprinklers
• Seal driveways, brick patios and wooden decks

Helpful Websites:

About.com - Home Buying and Selling

http://homebuying.about.com/od/buyingahome/qt/92607_WinterHom.htm

MSN - Winterizing Your Home

http://realestate.msn.com/article.aspx?cp-documentid=13107899

The Daily Green

http://www.thedailygreen.com/green-homes/latest/winterize-home-tips-energy-461008

The Home Energy Saver

http://www.earthshare.org/2008/09/button-up-your.html?gclid=CLu42IiCiqUCFQFoKgodcmCpMw

How to Winterize your Homes

http://www.productivity501.com/50-ways-to-winterize-your-home/5986/

What's Happening with Home Prices? 

In the 1990s, whatever your measure or area of focus, pricing stats consistently indicated increasing prices.  The current picture is much more complex.

The big picture isn't great, but it isn't consistently bad either. Different measures provide different perspectives on what's happening and the same measures provide varying results for different segments of our market.

Broadly speaking, the FHFA House Price Index indicates that Denver metro area prices began dropping in the range of 1/2% to 1% annually since about the 3rd quarter of 2007.  This depreciation got significantly worse in the first two quarters of this year, with an annual price drop in the 3.5% range.  For Boulder County, this index indicated slight price increases continuing until the 3rd quarter of 2009, when prices began to drop very slightly for the County.  This negative trend has continued for the first two quarters of this year, with the annual rate of depreciation at just under negative 2%.  See the following chart: 

• Chart of FHFA House Price Data

While relatively small in size, these price drops are historic.  In the Denver Metro area, this index last reported price depreciation in the 2% to 5% range in the 10 quarters beginning with the spring of 1987 and ending in the spring of 1989 (oil industry bust).  During that same period, Boulder County saw 3 quarters of 1% price depreciation, from the fall of 1987 through the spring of 1988.  While they are historic in the sense that we haven't seen any falling prices for 20 years, these price drops are relatively trivial in size...particularly when compared to drops of 30% or more in other parts of the country.

Given the trivial size of the price drops for these large metro areas, it is no surprise to find that the pricing trends are mixed when we shift focus from metro areas to local communities.  You can look at the details for various housing types and communities in the area by following the following links to our stats:

• Median Prices: Compare Housing Types Across Communities
• Median Prices: Look at What's Happening in Specific Communities

Following are the general conclusions I would draw from the recent pricing data we've compiled on our local community level housing markets:

1. Price changes over the past few years have been relatively minor, whether they've been in a positive or negative direction.
2. There is currently no clear picture whether 2010 will end up as a positive or negative year for home prices in our area.
3. Boulder, and the communities nearest to Boulder like Louisville and Superior, have faired better than others.
4. Smaller, more affordable homes have done better than larger and more expensive homes.

Interest Rates at 40 Year Lows 

Given current interest rates, it is one of the best times ever to either refiance your current home or buy a new one.  In July 2010, one of the major providers of mortgage loans (Freddie Mac) in the United States published a history of mortgage loan interest rates since the early 1970s. We've reproduced these data in the chart below:

•  Average Interest Rates (1972 through July 2010)

Ignoring the dramatic contrast between the current 4% to 4.5% rates to the historic highs of 14% to 16% in the early 1980s, these data remind us that interest rates were generally in the 7% to 8% range throughout the 1990s...a time of real estate price and sales booms in Boulder County. Rates didn't drop below 6% until 2002 or 2003.

The significance of these interest rates hit home more directly if expressed in terms of what you would have to pay on a monthly basis for a loan...or what you could borrow for a given monthly payment. We translated Freddie Mac's interest rate data into these more consumer friendly terms in the following two charts:

• Monthly Payment on a $300,000 Loan (1972-2010 Interest Rates)
• Loan Amount for $2000 Monthly Payment (1972-2010 Interest Rates)

By way of illustration, you would have paid more than $4000 monthly for a $300,000 loan in the early 1980s and roughly $2000-$2200 through most of the 1990s.  In July of 2010, your payment on that loan would have been about $1600. Reversing our perspective, lets keep the monthly stable while focusing on borrowing power.  Here we find that a $2000 monthly payment in the early 1980s would have got you a loan of $150,000 to $175,000.  In the 1990s, this same monthly payment would have bought you a loan of $275,000 to $300,000, while in July of 2010 $2000 it was the requirely monthly payment for a $375,000 loan, $200,000 more than in the 1980s and $100,000 more than in the 1990s.

Big Drop in Number of Sales

 While housing prices haven't moved much in either direction over the past few years, there has been nothing subtle about the changes in the number of sales in our local housing markets.  While there is certainly variation from one type of housing or one community to the next, sales for 2008 and 2009 were generally down 20% to 40% from prior years, with some drops of 50% and even 60%.  We've put together a variety of data on the number of home sales in our new real estate stats.

 In our section called Number of Sales, you'll find data on the number of sales on an annual basis since 1990, the number of sales in 2008 & 2009 compared to prior years, and the number of sales in the first 6 months of 2010 as compared with the first six months of 2008 & 2009.  You'll find a similar breakdown of annual sales data on a city by city basis in our section called Data for Each Community.

Some brief comments on these stats: 

• For communities like Arvada, Broomfield, Longmont and Erie, you'll see much larger drops in the number of sales if you focus on the stats derived from the tax records than the stats derived from the MLS.  This reflects the fact that there were large numbers of sales of new homes in these communities prior to 2008 & 2009, while the bottom dropped out of that part of the market in 2008 & 2009.  Many new home sales aren't reported through the MLS systems.
• These dramatic drops in the number of sales impacted not only communities like Longmont, Erie, Arvada and Broomfield where prices were generally level or dropping, but communities like Boulder and Louisville where prices were relatively strong.
• Generally, while the number of sales in 2008 were dramatically lower than those of prior years, the number of sales dropped further in 2009.
• Generally, while the number of sales in the first half of 2010 have been a bit lower than 2008, they show improvement over the numbers for the first half of 2009.

While the details are intriguing, the general news is that 2008 and 2009 were very tough years for home sellers...and for real estate agents and their income...in both Boulder County and the Denver metro area.  And while early data indicate that 2010 may be a bit better, this is still clearly a very good market for home buyers.