Yellowstone Financial, Inc.

Now’s a great time to buy a home in Boulder County

Change is afoot in the Boulder County real estate market.

A year ago, homebuyers could consider homes in their price range at a leisurely pace. If they missed an opportunity to buy, they were confident that there would be plenty of other options in their price range.

This spring is different. Realtor phones are buzzing. Title companies are in hiring mode — a far cry from the days of layoffs and canceled holiday parties. There are anecdotes of homes going on the market with multiple offers later that same day. In some cases, it’s not enough to put a bid in above asking price. Like the bubbly times of last decade, new offers are being submitted with compelling biographies of the hopeful buyers.

In the darker hours of the housing collapse, the National Association of Realtors was well known to trumpet that “now is a great time to buy or sell a home!” In some segments of Boulder County, today this statement may finally ring true.

There’s no doubt that the local real estate market is healthier than in years past. According to April data from the Boulder Area Realtor Association, the pace of local housing markets has accelerated. Boulder, Lafayette, Erie and Longmont all had six months of house inventory or less, while Superior, Louisville and Broomfield had fewer than four months of inventory.

If you are waiting to purchase a house, now might be a good time to move. While housing prices may fall in the future, home affordability may not improve.

Let’s say you’re thinking about a $300,000 house and putting 20 percent down on it. If you take out a 30-year mortgage at 3.75 percent interest (which is commonly available today), your payment would be $1,111 a month with $361 of that amount going toward principal. You would be paying $750 a month to borrow $240,000 not even considering the deductibility of home mortgage interest.

If you’re on the sidelines waiting for prices to go down 10 percent, imagine that $300,000 house can later be bought for $270,000. You put the same $60,000 down on the home, leaving you with a $210,000 mortgage. Let’s say 30-year mortgage rates have increased to 5 percent, still at low levels. Your mortgage payment would be $1,127, with $252 of principal paid down a month. That $210,000 mortgage would cost you $875 a month.

The point is that 3.75 percent interest for a 30-year fixed mortgage presents us with a tremendous opportunity for those with long-term horizons. If you’re looking for a home that you plan to own for five years or more, your monthly payments and the high rate of principal repayment could trump the fact that housing prices may not be heading up.

For sellers in healthy markets, it’s not too late to list your home. If
you’ve been thinking about selling your home, consider listing it now. Sellers now have the advantage of a buyer pool that can afford to pay more with historically low interest rates. If interest rates even tick up to 5 percent, the number of prospective buyers of your home would shrink significantly. With most Boulder County cities having healthy or low levels of inventory, buyers will be motivated to bid on a well-priced home.

As always with real estate investors, cash flow is king. Looking at real estate as an investment? Scour the market for properties in areas where you won’t have to “feed” your rental. Building in reasonable expenses for maintenance, vacancy and the cost and hassle of managing a rental, with today’s interest rates you should be able to find local homes that generate positive cash flow.