According to Todd Gullette, RE/MAX of Boulder Managing Broker, the start of 2022 showed a continuing record-low number of homes available to buy. In fact, as of March 2022 there were only a total of 307 single family homes listed as available in the IRES Multiple Listing System (MLS) in all of Boulder County. For many home buyers, the most common question has been, “Why is there such a shortage of homes to buy?”
Looking back just a few short years ago during the Great Recession of 2007 to 2012, I used to conduct “unsuccessful seller” studies for subdivisions. In some subdivisions, 50 to 60% of the homes available on the market did not sell. Now in Boulder County, an expired listing, especially below the $1 million price range, is very rare. That being said, for a variety of economic reasons, it will be interesting to see the end of second quarter of 2022 statistics in terms of inventory and sales levels.
New housing starts vs. Population growth
There are many reasons why there is not only low housing inventory in Boulder County, but a housing shortage in most markets across the nation. The first reason is sheer lack of supply compared to demand. The graph below from Statista, based on U.S. Census Bureau data, shows the country’s population steadily growing. In order to provide housing for a rising population, the housing industry needs to build.
The Chief Economist for the National Association of Realtors®, Dr. Lawrence Yun, has remarked in his presentations that the housing industry needs to build approximately 1.5 million homes per year just to keep up with population growth.
When you look at the next graph from the U.S. Census Bureau displaying national housing starts, you can see the industry is just now getting back to the level it needs to be. However, since the start of the recession in 2007, there has not been enough new construction to keep up with the demand.
Within the city limits of Boulder, apart from a few small in-fill projects, there are virtually no new single-family subdivisions. As you drive through the suburban plains, you will see new home projects, but there are still difficulties meeting demand. Builders are facing a variety of challenges keeping them from building affordable homes in a timely manner. Challenges include a shortage of supply of entitled lots, municipal regulation and expenses, and a shortage of shortage of construction labor and supplies, and increasing material costs.
Not to be confused with a buyer from Australia, Boomerang Buyers are individuals who possibly lost their home to short sale or foreclosure but are now back in the market to buy a home. As time passes, they are able to recover their financial footing and obtain a loan again. The Boomerang Buyer returned to in the market in around 2015 as those who lost homes early in the recession repaired their credit. According to Realty Trac, 7.3 million Boomerang Buyers per year nationally are coming back into the market.
The dormant seller
With inventory so low, the biggest fear of many prospective sellers is being able to find a replacement property. With that thought in mind, they develop a “stay put” attitude and don’t place their home on the market. It is not clear how many potential sellers have decided against putting their home on the market due to COVID-19 and not wanting to have potential home buyers touring their home.
People are living in their homes longer
According to ATTOM Data Solutions, the average number of years homeowners lived in their home was 4.21 years during 2001-2007. As the graph shows, more recently, homeownership tenure has averaged 8 years, and in some cities, even longer. As more people remain in their homes to the tune of 8 years instead of a little over 4 years, the result is less turnover and less inventory.
New household formation creates demand
The US Census Bureau has been keeping track of new household formation for years. Since the 1940s the number of households in the U.S. have continued to increase. Each one of those households needs a place to live, putting more demand on available real estate.
Keep an eye out for Part 2 of this two-part series in which I explain additional reasons for the very low inventory of homes in our market.
By Duane Duggan. Duane has been a Realtor for RE/MAX of Boulder since 1982. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail [email protected], call 303.441.5611 or visit boulderco.com.