3 Reasons We’re Definitely Not in a Housing Bubble

from Keeping Current Matters

Home values appreciated by about ten percent in 2020, and they’re forecast to appreciate by about five percent this year. This has some voicing concern that we may be in another housing bubble like the one we experienced a little over a decade ago. Here are three reasons why this market is totally different.

 

1. This time, housing supply is extremely limited

The price of any market item is determined by supply and demand. If supply is high and demand is low, prices normally decrease. If supply is low and demand is high, prices naturally increase.

In real estate, supply and demand are measured in “months’ supply of inventory,” which is based on the number of current homes for sale compared to the number of buyers in the market. The normal months’ supply of inventory for the market is about 6 months. Anything above that defines a buyers’ market, indicating prices will soften. Anything below that defines a  sellers’ market  in which prices normally appreciate.

Between 2006 and 2008, the months’ supply of inventory increased from just over 5 months to 11 months. The months’ supply was over 7 months in twenty-seven of those thirty-six months, yet home values continued to rise.

Months’ inventory has been under 5 months for the last 3 years, under 4 for thirteen of the last fourteen months, under 3 for the last six months, and currently stands at  1.9 months  – a historic low.

Remember, if supply is low and demand is high, prices naturally increase.

 

2. This time, housing demand is real

During the housing boom in the mid-2000s, there was what Robert Schiller, a fellow at the Yale School of Management’s International Center for Finance, called “irrational exuberance.” The  definition  of the term is, “unfounded market optimism that lacks a real foundation of fundamental valuation, but instead rests on psychological factors.” Without considering historic market trends, people got caught up in the frenzy and bought houses based on an unrealistic belief that housing values would continue to escalate.

The mortgage industry fed into this craziness by making mortgage money available to just about anyone, as shown in the  Mortgage Credit Availability Index  (MCAI) published by the Mortgage Bankers Association. The higher the index, the easier it is to get a mortgage; the lower the index, the more difficult it is to obtain one. Prior to the housing boom, the index stood just below 400. In 2006, the index hit an all-time high of over 868. Again, just about anyone could get a mortgage. Today, the index stands at 122.5, which is well below even the pre-boom level.

In the current real estate market, demand is real, not fabricated. Millennials, the largest generation in the country, have come of age to marry and have children, which are two major drivers for homeownership. The health crisis is also challenging every household to redefine the meaning of “home” and to re-evaluate whether their current home meets that new definition. This desire to own, coupled with historically low mortgage rates, makes purchasing a home today a strong, sound financial decision. Therefore, today’s demand is very real.

Remember, if supply is low and demand is high, prices naturally increase.

 

3. This time, households have plenty of equity

Again, during the housing boom, it wasn’t just purchasers who got caught up in the frenzy. Existing homeowners started using their homes like ATM machines. There was a wave of cash-out refinances, which enabled homeowners to leverage the equity in their homes. From 2005 through 2007, Americans pulled out  $824 billion dollars  in equity. That left many homeowners with little or no equity in their homes at a critical time. As prices began to drop, some homeowners found themselves in a negative equity situation where the mortgage was higher than the value of their home. Many defaulted on their payments, which led to an avalanche of foreclosures.

Today, the banks and the American people have shown they learned a valuable lesson from the housing crisis a little over a decade ago. Cash-out refinance volume over the last three years was less than a third of what it was compared to the 3 years leading up to the crash.

This conservative approach has created levels of equity never seen before. According to Census Bureau  data,  over 38% of owner-occupied housing units are owned ‘free and clear’ (without any mortgage). Also, ATTOM Data Solutions just released their fourth quarter  2020 U.S. Home Equity Report,  which revealed:

“17.8 million residential properties in the United States were considered equity-rich, meaning that the combined estimated amount of loans secured by those properties was 50 percent or less of their estimated market value…The count of equity-rich properties in the fourth quarter of 2020 represented 30.2 percent, or about one in three, of the 59 million mortgaged homes in the United States.”

If we combine the 38% of homes that are owned free and clear with the 18.7% of all homes that have at least 50% equity (30.2% of the remaining 62% with a mortgage), we realize that 56.7% of all homes in this country have a minimum of 50% equity. That’s significantly better than the equity situation in 2008.

 

BOTTOM LINE

This time, housing supply is at a historic low. Demand is real and rightly motivated. Even if there were to be a drop in prices, homeowners have enough equity to be able to weather a dip in home values. This is nothing like 2008. In fact, it’s the exact opposite.


 

Market Updates & Listing Outreach from CLR Agent Phil Booth

We are in a VERY UNIQUE WINDOW right now, which reinforces that there may not be a better time to sell than the second quarter of 2021!

We are currently in an extremely strong sellers market.  There is very little housing inventory (low supply) and an abundance of buyers (high demand).   This situation is a direct reflection of concerns around COVID and super low mortgage interest rates.  These factors are colliding to create a ‘perfect storm’ for sellers.

To explain concisely, there are two forces at play:

1. SUPPLY (SELLERS) – There are many would be sellers who have chosen to hold tight over the past year and not sell because of COVID.  They simply do not want to open their homes up to buyers!  As such, we have had and continue to have historically low inventory.

2. DEMAND (BUYERS) – There is super high buyer demand based on COVID… there is a dramatic influx of people moving from denser population centers to the area, there are many people who, having spent more time than ever at home over the past 12 months, have realized that their current home does not meet their needs  Couple these factors with the fact that money is ‘cheap’ at present… people looking to capitalize on historically low interest rates.

THE RESULT.  When properties come onto the market that are well prepared, well presented, and well priced, we are seeing extremely high showing demand and multiple offers, at well above asking price.   This phenomenon is causing rapid appreciation.  In the last 12 months in Boulder County we have seen appreciation of up to 20% for single family homes and 10% for attached dwellings.  And, this pattern is continuing stronger than ever here in 2021, with 2% appreciation per month in certain areas and price points!

However, this supply and demand imbalance is likely to balance out in the second half of 2021. WHY?

1. SUPPLY – As we see higher vaccination rates (hopefully by mid summer) home owners will feel less wary about COVID and will feel more comfortable about selling, and will be HIGHLY motivated to realize the rapid appreciation they have seen in their homes.

2. DEMAND – We are likely to see interest rates creep up, which will cause buyer demand to wane somewhat.

It is still promise to remain a Sellers’ market, but not to the degree of imbalance we are seeing at present.

Hence, the second quarter of 2021 is a fantastic opportunity to sell and realize the benefits of  THE PERFECT STORM!

Phil Booth

REALTOR®

303-817-8307

Phil@ColoradoLandmark.com

 

Landmark Moment: SRQ Magazine Features CLR Agent Anja Deichmann

At Colorado Landmark, Realtors, we recognize that each home, buyer, and seller has a unique story, as do our agents that represent them. CLR agent Anja Deichmann is no exception: she is a top agent that splits her time between Sarasota, Florida and Boulder, offering her clients a diverse and dynamic perspective when it comes to finding the perfect place to call “home.”

Click  here  to read SRQ’s entire feature on Anja in the magazine’s latest digital publication, which can be found on page 3.


 

Spring 2021 Buyer, Seller + Millennial Guides Are Now Online

Great news! Spring 2021 Buyer & Seller Guides are now available! Both Guides speak of present, crucial information about today’s housing market in an easy-to-understand way.


Seller Guide

Selling your house when the fewest number of homes are available to buy is what puts you in the driver’s seat. With today’s high buyer traffic and low inventory of houses for sale, this power combination makes now the optimal time to sell, if you’re ready. Whether you want to move-up or downsize, here’s the breakdown on supply and demand and why this imbalance in the current housing market positions this season as the optimal time to make your next move.

 

Buyer Guide 

The housing market recovery has been nothing short of remarkable. Many experts agree the turnaround from the nation’s economic pause last year is playing out extremely well for real estate, so it’s an ideal time to buy a home for those who are ready to make a purchase. Here’s a dive into some of the biggest wins for homebuyers this spring.

 

Millennials Guide

If you are one of the millions of millennials who has seen their peers begin to buy homes recently and are wondering what it would take for you to do the same… you’ve found the right eGuide!

There are many stereotypes and myths about the millennial generation as a whole, AND about what it takes to buy a home in today’s market. These myths have prevented many millennials from even considering homeownership as an option for them and their families.

The goal of this eGuide is to provide you with the information you will need to make the best decision for you and your family in regards to homeownership. We will break down the myths and stereotypes that have long been believed to be true, as well as shed light on the opportunity you have to build wealth using your monthly housing cost.


 

The Spring 2021 Luxury Portfolio Magazine is Now Available

NEW LUXURY PORTFOLIO MAGAZINE: NATURE AND HOME DESIGN

Just released, LPI’s Spring edition of Luxury Portfolio magazine explores biophilia, or the desire to be near nature, and how it relates to home design. The issue also notably features second home market trends, sustainable luxury brands, celebrity homes, and more.


NATURE AND HOME: BIOPHILIA IN DESIGN

Biophilia has been steadily trending in home design for years, and it’s only been exasperated with greater time at home and the need for a tranquil and healing space. In our exclusive four-page spread “Nature and Home: Biophilia in Design,” we explore the definition and its incorporations by exceptional designers and architects. The piece offers everything from eco-friendly design tips to a Disappearing Pool (yes!).

The nature theme is found throughout the issue, also showcasing outdoor furnishings, our favorite houseplants, and tips for exterior living.

 

A LOOK AT ETHICAL LUXURY

In our latest edition of recurring article “Jet Set,” we looked at four ethical luxury brands from around the world, including recognizable names Stella McCartney and Bobbi Brown, as well as beautifully crafted sustainable jewelry and clothes made from seaweed.

Additionally, LPI conducted a Q&A with the Chief Sustainability Officer of Tiffany & Co., Anisa Kamadoli Costa, to gain insight into how Tiffany has been influential in promoting ethical practices among luxury brands.

 

BREAKING TRADITION: THE SECOND HOME MARKET

Second home markets have shattered expectations in 2020. To gain insight into various markets, we interviewed experts from Brown Harris Stevens – The Hamptons; Chase International; John R. Wood Properties; Turks and Caicos Property; VALLAT; and The Whistler Real Estate Co. Ltd. The article explores how the markets are performing and the most popular amenities within the respective regions.

 

NOTABLE OWNERS

Every issue, we make a point to showcase celebrity homes. The most recent lineup includes athlete Derek Jeter and popular musical artists, like John Lennon, Katy Perry, and Sonny Bono.

 

BONUS: EXTENDED INTERVIEWS

In the coming weeks, be sure to keep up with our blog. Every week for six weeks, LPI will share extended interviews from the issue. Including designer insight on biophilia, a look at various second home markets, and an extended interview with Tiffany & Co.

 

Read the  digital edition, request your  print copy, or view our  press release for additional details.

 


 

Landmark Moment: CLR Wins Two Prestigious LeadingRE Awards

A big shout out and congratulations are in order for all of our amazing Colorado Landmark agents for making 2020 such a successful year in more ways than one!

Together, we are celebrating a monumental Landmark Moment: winning both the 2020 Million Dollar Club Award AND the 2020 Momentum Club Award through LeadingRE. It is an honor to be a LeadingRE-affiliated company, and highlighted as leaders within this incredible, unmatched network of independent brokerages.


CLR earned The Million Dollar Club Award, which is presented to the affiliate with the most outgoing closed referrals with an actual sales price of $1,000,000 or greater.


We are grateful to be recognized with the Momentum Club Award for achieving notable improvements in our broker-to-broker referral production in 2020.


 

Landmark Moment: atHome Colorado – Luxury Edition features CLR Agent Mia Ness

from atHome Colorado – Luxury Edition February 2021

Mia Ness, Colorado Landmark, Realtors

atHome Colorado – Luxury Edition recently featured Colorado Landmark, Realtors agent Mia Ness in a fun and informative Q & A feature. Check out the full publication and download here!


Known for discretion and privacy, Mia Ness will use her broad network and expertise to find you the perfect luxury home.

Give us a brief background on you. How long have you lived in Colorado? How did you get into real estate?

Having moved a family twice myself, I understand that the packing and unpacking can be the most stressful part of a home move. My passion to get into real estate came from my career background in the luxury hotel industry. I realized I am so client focused and hands-on with attention to detail that I would offer a more personalized, boutique, luxury, white-glove service than what we experienced when we moved.

 

What is your favorite part of your job?

My favorite part of being a Real Estate Advisor is walking into a home with a buyer and seeing their face and reaction that “This is the one.” The greatest compliment and most rewarding part of my career is repeat clients and my clients’ network referrals. I am so thankful and grateful that they put their trust in me and lean on my market knowledge and strategies to achieve their real estate goals.

 

What is your favorite luxury activity in our region? 

One of my favorite places to visit and where we visited over the holidays was the Westin Avon in Beaver Creek, Colorado. What better place to enjoy the sunshine after a day of skiing than by their salt water pool and salt water spas? It was great to relax by their cozy fireplace, meeting others that traveled here from around the world while enjoying conversations over spirits and charcuterie while listening to live music.

 

 


Landmark Moment: Top Agent Magazine Features CLR Agent Deborah Read Fowler

Colorado Landmark, Realtors agent Deborah Read Fowler was recently featured in Top Agent Magazine.   


Based in the historic town of Niwot, Top Agent Deborah Read Fowler of DRF Real Estate, specializes in the Luxury Market in Boulder County, Colorado

Deborah Read Fowler became involved in real estate at a young age, buying and selling investment properties in London. She earned a degree in Business and Marketing, and for many years she enjoyed a successful career working for a large supply-chain company, managing multiple regions, business development, and operations. When Deborah moved to Colorado with her family, she decided to change things up and follow her first passion. “I decided it was the right time to make a change and dive into real estate, which I have always loved,” Deborah says. “I haven’t looked back. It’s been a wonderful experience.”

She set up DRF Real Estate LLC and operates under employing broker Colorado Landmark, Realtors – the leading in the Luxury Market in Boulder County, Deborah and her team are based in the charming historic town of Niwot, Colorado, Deborah has grown her business and her reputation, and has become one of the top agents in the region. With seven years of experience and an unflagging passion for what she does, Deborah averages forty transactions per year, averaging at 1.1 million dollars. Committed to constant improvement, Deborah has earned the prestigious CRS certification, which puts her in the top 2% of realtors nationwide. She also has her GRI, GREEN, LHMS (Luxury Home Marketing) and HSE (Home Staging Expert designations) But it is not accolades that drive Deborah to new heights; for her, it is her clients who fuel her passion and her love for what she does.

“People refer me because of my proven record. I have a passion for doing the right thing, and getting the job done. I love this job, and I think clients can feel that energy.”

Read the entire article here!

Service Line Coverage from State Farm

 

 

 

 

Do you know that municipalities and utility companies are typically not responsible for the water, sewer, electric, gas and other service lines on your premises? Any repairs are most likely at your expense.

State Farm® Service Line Coverage may be added to your Homeowners Policy for a low annual cost with a $500 deductible and a $10,000 limit per occurrence to provide coverage for loss or damage to service lines. In some states, coverage includes a limitation of $2,500 on service lines 50 years old or older at the time of loss. Ask your agent about what’s covered in your state.

 

What does this coverage include?

This is not warranty coverage. Under the Service Line Coverage, a covered service line refers to “exterior underground piping and wiring,” including permanent connections, valves or attached devices providing the following services to your home:

1. Communications
2. Compressed air
3. Drainage
4. Electrical power
5. Heating, including geothermal, natural gas, propane and steam
6. Waste disposal
7. Water

A service line failure is defined as a leak, break, tear, rupture, collapse, or electrical arcing of a covered service line not otherwise excluded. A service line failure may be caused by, but is not limited to, the following:

  • Wear and tear, marring, deterioration or hidden decay
  • Rust or other corrosion
  • Mechanical breakdown, latent defect inherent vice
  • Weight of vehicles, equipment, animals or people
  • Vermin, insects, rodents or other animals
  • Artificially generated electrical current
  • Freezing or frost heave
  • External force from a shovel, backhoe or other forms of excavation
  • Tree or other root invasions

Blockage or low pressure of a covered service line when there is no physical damage is not a covered service line failure.

 

Here’s a coverage example:

Say, for instance, your sewer line cracks as a result of tree root invasion and the covered repair costs total $10,000. With Service Line Coverage, your responsibility for the loss is your $500 deductible. Payment for the loss would be the remaining $9,500. Payment for the loss would be $2,500 if your state has a sublimit and the damaged sewer line was 50 years old or older.

 

Covered service lines also include:

• Excavation costs – We may pay the necessary and reasonable excavation costs that are required to repair or replace your covered service line.
• Expediting costs – We may pay reasonable extra costs to make temporary repairs and expedite permanent repairs or permanent replacement.
• Loss of use – We may cover additional living expenses and fair rental value due to a covered loss.
• Outdoor property – We may pay for your outdoor property, such as trees, shrubs, plants, lawns, walkways or driveways that are damaged as a result of a service line failure or are damaged during the excavation of the covered service line.

 

Choosing the right supplemental coverage is important. Your State Farm agent is here to help guide your decision.

 

Call us 24 hours a day!

Jeannie Hulse Ins Fncl Svc Inc
Jeannie Hulse, Agent

303-828-4002

525 Briggs Street, PO Box 1005
Erie, CO 80516-1005

 

Landmark Moment: BusinessDen’s January Top Home Sales Features CLR Agent Marybeth Emerson

Colorado Landmark, Realtors agent Marybeth Emerson’s sale of the historical 809 Pine Street in Boulder was included in BusinessDen’s feature of January’s Top Home Sales.  

 

January Top Home Sales: 3 Cherry Hills Village Mansions Sell for Over $7M

by LilyO’Neill  

809 Pine Street, Boulder

Built in 1877, this Boulder home sold for $4.95 million.

Listed by  Marybeth Emerson with Colorado Landmark – Boulder

Built around 144 years ago, this historic Queen Anne Victorian home “exudes charm,” according to the listing. It sits on more than half an acre, the second largest lot in Mapleton Hill.

Inside, the 4,825-square-foot layout includes six bedrooms, four bathrooms, a formal living room, family room, parlor, kitchen, dining room and two wood-burning fireplaces.

There’s also a carriage house with a private office on the property.


If you are a subscriber to BusinessDen’s exclusive reporting, view the entire article here.