Area inventory needs to shrink to bring about market recovery

Boulder areas home prices continue to hold “reasonably well,” based on August’s market statistics, but it’s the number of homes on the market that concerns Ken Hotard, Boulder Area Realtor Association senior vice president of public affairs.

While the city of Boulder’s inventory hovered at a near-optimum six-month supply of 435 homes for sale in August, 450 homes were listed in the mountains and 308 on the plains. Hotard says even if only half of those homes were for sale in the mountains or on the plains, it would still be too many given the condition of the market. Meanwhile, Longmont saw a much-needed drop of homes on the market from 892 in August 2007 to 547 last month.

Hotard says one positive sign is that several builders with approved developments are putting off building, including one in an urban renewal district with favorable financing, because the market is not ready for their projects. “I think that’s a real statement on how real professional builders are viewing the market and they are showing some restraint, which is to their credit,” he says.

Inventory will slowly reduce over the next year and tighten up by this time next year, bringing the Boulder market closer to a balance between buyers and sellers, Hotard says. “The buyer rules today, whenever they happen to show up, which is not often enough.”

It’s too early to tell the impact the federal government’s move to take over operations of Fannie Mae and Freddie Mac, he says, but it should help stabilize the financial market and could lead to another interest rate cut. For home buyers and sellers, that means credit will become more available for qualified borrowers.

Hotard says he will wait before making any predictions about what kind of impact on the local real estate market Lehman Brothers filing for bankruptcy protection, Bank of America’s buyout of Merrill Lynch or the potential of a federal bailout of American International Group Inc. (AIG), will have. And until new government leaders are in place, how they will address economic issues is still unknown, he says.

“I don’t know how insulated our area might be from that fallout,” Hotard says. “I can’t imagine we’re completely insulated, but I suspect we’re better insulated than much of the country to weather it.”