Boulder Real Estate Undervalued?

Do you think Boulder real estate is undervalued? I’m not so sure that’s the situation locally, but nationally it could be a different story. And what happens on a national level tends to have some effect on the public perception of what’s going on in the real estate market, even if the data shows it differently.

Chief economist of the National Association of Realtors, Lawrence Yun, recently made some comments about the national situation regarding home prices and the overall housing market.

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Yun says that after dropping for nearly three years, nationally speaking, home prices appear to be stabilizing.

In our local market, home prices have been slightly up and down, but basically stable for the last four to five years, so in essence we’re ahead of the curve and expectations are that we’ll see upward trends in price going forward.

When we add to that expected trend, national messages that housing prices are improving, the momentum will likely carry forth to our market.

Yun went on to say that foreclosures and short sales comprise about 50 percent of transactions currently in the national housing market. This, he said, causes distortions in otherwise stable neighborhoods.

One of the reasons that the Boulder County area hasn’t seen the same market distortions is because the percentage of foreclosures isn’t anywhere near the national averages.

Another unhealthy trend is that what Yun call “widely cited projections that a third or more of home owners are underwater might be off the mark”, is due to the fact that when determining valuations of homes, we’re capturing only transaction prices. If that’s the case in markets with up to 50% of the transactions being short sales and foreclosures, which in many cases can be up to 20% below the value of what we’d consider true market value of the homes in a given neighborhood, those are skewed numbers.

Here’s where the trouble begins. Lenders are shying away from refinancing mortgages of otherwise creditworthy borrowers just because they have this perception that they are ‘underwater’ in terms of their home’s value. Hence, lenders are exacerbating the financial difficulties of these homeowners, and are perhaps responsible for perpetuating the volume of the swirl down the bowl, so to speak.

The bright side? The first-time home buyer tax credit, combined with the elimination of the repayment requirement (if you keep the home at least three years), and increasing the benefit to $8,000 is ramping up home sales. Lower housing prices in many areas has provided increased affordability, and combined with all time record low interest rates keeps things moving in the right direction.

One of the challenges in markets like Boulder, where high-cost homes put borrowers into the jumbo loan category tends to slow things down and increases the typical month’s supply of homes in the higher price ranges.

Yun emphasized that the biggest hurdle is getting credit moving for everyone, at every price range. When that happens, we’ll see things break loose at a much faster rate. But, until that happens, we will see some markets distorted by the disproportionate number of short-sale and foreclosure homes for sale.

Thankfully, in our local Boulder area market, we’re seeing fewer of those as time ticks forward.

Whether it’s vacant land for sale, neighborhood profiles, or Boulder county business profiles, I strive every day to give you the useful information and critical support you need to make an informed decision.

Call, Text, or Email me. I’m never too busy for your referrals, as a real estate professional intent on giving back to the community, my relationship-based approach is exactly what you’ve been looking for in a helpful Realtor, and I will listen to you.

So you may not be moving, but if you know someone who is, I’d love to hear from you. Call, Text, or Email me anytime.

Zachary Epps, full-time professional Realtor® and EcoBroker® at RE/MAX Alliance Boulder

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