The Impact of the Coronavirus on Boulder Real Estate [Does Anyone Know How To Fly a Plane?]
In the last few weeks, I've had many private conversations with clients about the impact of the Coronavirus. After yesterday's +1,000 point drop in DJIA, it's time to talk about the potential impact, publicly. 1. As with any market forecast, take it with a grain of salt. Although I have professional training and experience in financial analysis, and some understanding of basic biology, nobody has a crystal ball. There are many elements of this situation. It's also unfolding very quickly, which makes it challenging to make predictions. 2. Early data shows Covid19 may have an R0 of +3 and a CFR of ~2%. [...]
The Latest Case-Shiller Data on Denver [Analyze This]
--- by Osman Parvez The latest Case-Shiller HPI update is out this morning. Home prices in Denver inched up to 7.7% year over year in August, compared to the 7.2% for the same period a year earlier. Meanwhile, the 20 city composite increased 5.5%. Anecdotally, we're seeing a surprising number of options for our buyers hit the market and starting to have strategy discussions with sellers who are concerned with missing the peak of the market. Although Denver is still appreciating, the pace of gains is beginning to slow nationally. I expect appreciation rates to flatten in the next 12-24 [...]
Remember When?
by Osman Parvez I was digging through old blog posts this week and came across a little gem. From Fed Takes a Breather: For the first time in two years, the Federal Reserve took a break by not raising interest rates. From what I've read, investors aren't sure whether this will be a long pause or a short one. For now, the discount rate (a key benchmark for all interest rates) will stay at 5.25%, a welcome relief for many borrowers. What does this mean for housing? Mortgage rates nationwide have recently begun trending lower so the Fed decision today [...]
Understanding the Marijuana Market in Colorado [Analyze This]
by Osman Parvez Dude, where's my tax revenue? Eight months have passed since recreational Marijuana became legal in Colorado. It's a big deal for our state and local economy. It has cultural impacts. The rest of the country is watching. future tax revenue? Today, the majority of Americans favor legalization1 but medical marijuana is legal in only 23 states. Recreational pot is legit only Colorado and Washington state (map). Implementation is already being called a success2 and despite the hoopla, Colorado has not become the Amsterdam of the Rocky Mountain region. Sure, you catch the occasional whiff of pungent [...]
Down and Out in Boulder Colorado
by Osman Parvez ---- How strange! Mark Perry recently noted that despite the (now 12 month) recession, unemployment has actually fallen in Arkansas, Oklahoma, and West Virginia. What about unemployment in Colorado? The current estimate shows that it has risen from 3.6% to 5.3%, year over year. In the Boulder MSA, unemployment has risen from 3.2% to 4.5%, with an additional 2,500 unemployed people. The BLS report also shows the civilian labor force. Guess what? It's up year over year. There were an additional 1,500 people working in October, cutting the year over year change in unemployment by 60% . [...]
New Housing Bailout – The Osman Plan
by Osman Parvez ---- A few weeks ago, my parents were visiting from upstate New York. At some point, we had an intense discussion about bailout and economic stimulus efforts. I argued that enormous amounts of liquidity were being "injected" into the financial system by central banks, but it wasn't addressing a fundamental problem. Housing was still way too high in the former bubble markets and yet prices were continuing to collapse. My idea was simple. Use the GSE's (Fannie, Freddy) to underwrite new low, fixed rate mortgages to highly qualified buyers in select zip codes. My recently built investor [...]
Time to Stop, Drop, and Roll?
by Osman Parvez ---- The financial market meltdown today was historic. Wall Street reacted to the failed bailout plan with a 780 point drop (8%) in the Dow, the largest one day point drop in its history (though not on a percentage basis). As I recently wrote in Stock Market Crash - A Few Thoughts, it's important to understand that our local and regional housing markets are not immune from what happens in the financial markets. With that said, since the sub-prime driven credit crunch began we haven't had a single client walk away because of a lack of mortgage [...]
Stock Market Crash – A Few Thoughts
by Osman Parvez ---- A stock market plunge may have unexpected consequences. At first glance, you may not think that yesterday's roller-coaster drop (+500 pt in the DOW) has anything to do with real estate. Guess again. Both primary and vacation home markets are affected by a downturn in the stock market. Primary home markets are supported by the job market. A strong stock market encourages new investment. In our region there are dozens, perhaps hundreds, of employers dependent on that investment capital continuing to flow. If institutional investors don't see an exit strategy... they won't be investing. Meanwhile, vacation [...]
Calling the Bottom
by Osman Parvez ---- The New York Times recently ran a story on how economists calculate the state of the housing market. The article focused on methods for determining over or under valuation, in an effort to indicate where the bottom lies. Models built on these variables show that while some markets – such as California – are on a road to recovery, others – such as south Florida – have a way to go. These signs cannot possibly tell the whole story, especially since they point more toward where prices should be valued than where they will be. But [...]
7 Reasons to Love the Post Housing Bubble
by Osman Parvez ---- "It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness..." - Charles Dickens, A Tale of Two Cities There's a silver lining to the housing bubble. Sure, it's less sensational than upside down borrowers being tempted to walk away from their mortgages. It's clearly less sensational than what Britney or her sister are up to. But guess what? It's information you can use. Here's 7 reasons you should love the (post) housing bubble. 1. Fewer speculators. Get rich quick schemes are no [...]
What Does My Mortgage Have to Do with Wall Street?
by Osman Parvez ---- Why is it that the Fed is cutting rates but mortgage rates haven't changed? Ever wonder what your mortgage has to do with Wall Street? I could spend a long time writing about this subject. The simple answer is that a complex web of global financial institutions take monthly mortgage payments and repackage them into securities that other investors and institutions buy and sell. Because the relationship is indirect, the impact to mortgage rates is not linear. A quarter point cut to the discount rate doesn't necessarily translate to a quarter point cut in mortgage rates. [...]
Fed Rate Cuts – Does it Help?
by Osman Parvez ---- If you want to make a smart real estate decision, it's important to understand the factors that affect the real estate market. When you're getting ready to buy or sell, you need to know what's happening at the micro level of your neighborhood right down to the street level. But if you're watching how things are shaping up for the longer term, look at the big picture. As you know from my frequent updates, foreclosures are a problem for the housing market in Colorado. As I've illustrated, the depth of the trouble varies dramatically from region [...]
Funny Money
by Osman Parvez ---- No doubt you've heard this sad, sad story. In the past, each generation of Americans saw better standards of living and higher pay. But today, the situation has changed. Wages have been stagnant for years. The American middle class is struggling, and now work longer hours for less money. Oh, but is it really true? Those decrying the end of the middle class would have you believe so. However, the analysis that most commentaries cite ignores fringe benefits. Because fringe benefits, including health care coverage, impacts standard of living. Once you add this back (and use [...]
The Crystal Ball of Real Estate
by Osman Parvez To honor the passing of widely admired, free market economist Milton Friedman perhaps it's time for a post on economic forces in real estate. If you're not into economics, market drivers, etc., you might want to skip this post. I'll try to write this so it's more interesting, but remember Economics is called the dismal science for a reason. Many recent clients are asking whether to buy/sell now or to hold off on their real estate decisions. They're reading the national news about dropping prices and increasing inventory and rightly wonder whether local prices will be up, [...]
