Market Update - May/2009

If you read the newspaper, watch the news on television or religiously track the ups and downs of the stock market, there appears to be a general feeling in people’s minds that things are getting better economically in this country. At least on the surface, they don’t appear to be getting worse.

According to the Federal Government, job losses continue, but at a slower rate than has been experienced recently. The stock market has rallied over the course of the past few months and regained a portion of its losses. Home mortgage interest rates continue to vacillate between 4.75% and 5.25% for a fixed-rate thirty year loan. Most of us have survived the two great government revenue source days – income tax day (April 15th) and property tax day (April 30th).

One of the methods of evaluating today’s local real estate market is to take a look back. To compare what has happened in the past to what is happening now. An area that many homeowners are concerned about is the value of their home. How has it been impacted over the course of the past few years?

Since 2006, the average sales value for a single family home in the Boulder Valley real estate market has declined approximately 6.94% or slightly over 2% per year. What are some of the reasons for this?

The one you might initially consider is that home values have declined. There is some degree of truth to that. In a negatively impacted economic environment, more expensive homes normally feel the price pinch first. As such, the average sales price of all the homes in a particular market drops.

Another reason for a lower average sales price is that more homes are selling on the lower end and thus the average sales price is less. This is true of the Boulder Valley real estate market as lower mortgage interest rates and government tax incentives have brought more first-time home buyers into the market.

A third reason is the impact on values from bank foreclosures and HUD properties. These properties often, but not always, sell below area home values. This impacts the average sales price of a neighborhood and geographic area. It also affects appraised values of other homes.

Finally, there are the occasional “fire sales”, where a homeowner desperately needs to sell. This is most often because of personal reasons i.e. job loss, divorce, health reasons, change of life circumstances, economic conditions, etc. Basically, the seller simply needs to rid themselves of their home so they can move-on with their lives.