Buyer demand for newly constructed and existing homes and the lack of homes for sale continues to impact the past, present and near-term future of the U.S. housing market.
For new construction, 2020 was the best year in home building since the Great Recession, with new-build single-family homes coming in 11% higher than 2019. A shift in housing preferences – including a growing demand for larger spaces, home offices and outdoor amenities – along with ultra-low mortgage rates drove the increase, according to Robert Dietz, chief economist of the National Association of Home Builders.
The growth is expected to continue in 2021, increasing by 5% and reaching more than 1 million housing starts for the first time in years, says Dietz.
Meanwhile home builders are seeing construction costs rising. Lumber prices are up 169% since mid-April, resulting in increased new-home prices for buyers.
And inventories for existing-homes are low nationwide. Lack of homes for sale is entrenched in Boulder County where inventory – persistently low for years – hit an all-time low at year-end, writes managing broker of RE/MAX of Boulder Todd Gullette in the recently released Boulder Valley Real Estate Report.
He notes that in the final week of 2020 Boulder County “produced a meager 313 homes for sale, down from 498 a year ago.”
That lack of inventory, as well as historically low interest rates, is driving price appreciation. Boulder County has risen to the seventh most expensive metro, according to a recently released fourth-quarter report by the National Association of Realtors. In the city of Boulder, year-over-year median price increased 37.3% through January 2021, rising from $932,500 in January 20 to $1,280,000 at the same time in 2021, as cited by Boulder Area Realtor Association statistics.
But some inventory relief may be on the horizon. Experts expect more homeowners to list their homes as COVID-19 vaccines are distributed and a return to more normal lifestyles improves the economy. The increase in inventory will help ease the shortage of homes for sale.
What does that mean for 2021 Boulder County housing? Gullette says too many variables make it difficult to predict. He points to significant factors including:
• A strong local economy holding up despite COVID-19, thanks to the many Boulder County businesses that adapted to new business practices and are thriving.
• Interest rates are likely to remain low, even though the threat looms of rate increases to curb inflation.
• Inventory challenges will continue as sellers choose not to move and new construction is inadequate.
• Continued home price appreciation will result from low supply and high demand.
Another area of the new-home market seeing a rapid increase in demand: build-to-rent. Economist Dietz predicts the build-to-rent market will make-up 5 to 6% of single-family starts over the next two to three years. “Builders are preparing to expand this sector,” Dietz says. “Not everyone has money for a down payment, even with low interest rates. So there could be a window of opportunity for this particular market to grow.”
For more information on the local and national real estate market:
• Read the Boulder Valley Real Estate Report at: irp-cdn.multiscreensite.com/cfe51746/files/uploaded/010920_2020_ROB_RealEstateReport%20copy.pdf.
Read the full National Association of Realtors story at: magazine.realtor/daily-news/2021/02/10/new-home-buying-rush-likely-to-continue-in-2021.
By Tom Kalinski. Tom is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall
of Fame in 2016 and has a 40-year background in residential and commercial real estate. For questions, e-mail [email protected], call 303.441.5620 or visit boulderco.com.