Short answer: Anything could happen, but it sure is pretty here.
Long answer: Based on current economic trends, historical data, and
finely tuned scientific gut feel, it would probably be wisest to buy
within 6 months to a year. I should note that some of my information
is based on the fact that I live in the area, and have watched my
property value pretty closely over the years. It surged very sharply
in Broomfield in the past couple of years, and is now declining very
slowly.
The factors involved would be as follows:
Home building trends: Boulder has fairly strict limitations on growth
within the city itself, and several of the surrounding areas have
followed suit. Broomfield, for example (an old city, but a brand new
county) has a great deal of designated open space, so new building is
necessarily limited, and Boulder (discussed more below) has a long
history of limiting growth within the city. Although building trends
are currently dominated by demand right now, there is a finite amount
of space in which to do so. Boulder is bordered on one side by the
Rocky Mountains, so it can't extend to the west, and to put it
bluntly, it's pretty much full, anyway. Water rights are also a big
factor in this, as builders are limited by their ability to provide
running water to newly constructed homes.
The economy in general, and Boulder's place in it: I won't even try to
sort out the economy overall, as I'm sure you can easily find expert
opinions on this. This can affect your decision profoundly, so your
conclusions about the future of the economy will necessarily be a
major factor in your decision. But the other relevant question here
is, "How will Boulder and the surrounding areas fare in relation to
the US economy?"
Employment trends: A Venn diagram would show that this factor overlaps
with the previous one. Boulder and the surrounding areas tend to
attract high-tech businesses, so a general increase in, say, retail or
manufacturing employment wouldn't have as great a positive effect on
Boulder as it might on communities whose workforce was more
concentrated in those areas.
Miscellaneous: It may be difficult to buy right now because of the
fire season. Other areas experiencing wildfires have had to cut off
home sales entirely because insurers simply will not issue new
policies while there are fires burning in the area. I haven't
specifically heard that Boulder is cut off for insurance purposes, but
if the fires continue, it is likely this will happen.
Here are two almost identical (but not quite) articles about the
recent slowdown in building in Broomfield (once partly located in
Boulder County, Broomfield is a growing new city/county just south of
Boulder):
http://www2.dailycamera.com/bdc/broomfield_business/article/0,1713,BDC_2505_1245176,00.html
http://www2.dailycamera.com/bdc/local_business/article/0,1713,BDC_2461_1243921,00.html
And here's a link to a cached article describing the sunny outlook
from August 2001, ranking Colorado home values as 6th in the US. (This
seems to have expired from the main site.):
http://216.239.33.100/search?q=cache:1-NduCFSbIoC:www.thedailycamera.com/news/local/06lhous.html+boulder+country+real+estate+values&hl=en&ie=UTF-8
The Boulder County Business Report provides a generally optimistic
outlook for Boulder, tempered with realistic insecurity about the
economy in general:
http://www.bcbr.com/display.phtml?VI=P2115&Section=News&Page=29
Specifically addressing the real estate market, this report says, in
part:
"Although mortgage rates have remained around 7 percent for most of
the past year, the residential housing market for new homes in Boulder
County has drastically slowed. There were 2,676 residential building
permits issued for the four quarters ending first quarter 2002, which
is about 13 percent less than the four quarters ending first quarter
2001."
Slowdowns in building, of course, are primarily related to demand for
single-family homes, and a slowdown in demand indicates a buyer's
market.
For more links to reports about the current Boulder economy, see this
page:
http://www.bcbr.com/econ/
This report describes Boulder's history of growth management:
http://www.ci.boulder.co.us/cao/x-bgmcs1.html
This is an ongoing issue, and a hotly contested issue in the area,
but, in a nutshell, they do limit growth in Boulder, and as such, the
buildings that do exist are less likely to decrease in value due to
glut than they would in areas that make little or no attempt to limit
sprawl.
This page provides links to more specific information about the growth
issues in Boulder:
http://bcn.boulder.co.us/lwv/know.html
To address economic factors, Boulder has relatively high-value homes
and a high quality of life. See the following for details on social,
economic, and cultural indicators:
http://www.bococivicforum.org/indicators/
As always, you'll need to reach your own conclusions about the data
presented, in light of overall factors. If you believe, for example,
that the future economy will sustain the particular demographics of
the area, then it would be a good idea to get in fairly soon. If you
think it will not, the best bet would be to either wait until that
demographic has hit bottom, or buy a home in an area with a
demographic that is likely to prosper.
For more on the demographic as it relates to the economy, see this
detail page from the previous link:
http://www.bococivicforum.org/indicators/economy/40.html
This article also offers general information about quality of life
indices for Boulder:
http://money.cnn.com/best/bplive/details/BOULD_CO.html
From this page:
"Most noteworthy is the fact that the number of jobs in the services
sector has increased by 175% from 1985 to 1999. In 1999, nearly 1 in 3
employees in Boulder County were employed in the services sector. It
is also interesting to note that nearly 84% of the jobs in Boulder
County fall within only four of the ten broad industry
categories-manufacturing, retail, services, and government. The
manufacturing and government sectors have seen only nominal growth.
Retail has seen an increase of nearly 56%."
As you see, the categories are pretty broad. The following paper
provides a little more granular information:
http://www.state.co.us/gov_dir/govnr_dir/ospb/
specialreports/AdvancedTechnology.pdf
Including the following, from the summary:
"In 1998, advanced technology jobs comprised 6.1 percent of all
nonfarm employment, a total of 125,000 out of 2,051,000 workers in
Colorado.
Wages in the advanced technology sector were 46 percent higher than
the average Colorado nonfarm wage in 1998, $47,000 compared with
$32,192.
The largest share of the advanced technology work force - an 18.9
percentshare -in Colorado is located in Boulder County."
This data show that the Boulder area is fairly strongly associated
with high-tech industries, including information technology, hardware
manufacturing, and telecommunications. As we are all painfully aware,
these industries have suffered some difficulties of late.
The question you must ask yourself, though, is whether you believe
they've hit bottom. If they have, the Boulder area would likely
benefit from the impending upturn, and real estate prices could begin
to rise again along with the industry in general.
The area is in a good position generally to benefit from any economic
upturns within the industry, as it has an infrastructure in place
already to do so. See information here about a newly constructed
technology park in Broomfield (just a few miles from Boulder on the
highway):
http://www.interlocken.com/
Recent layoffs in the technology industries have left much of this
space vacant. The park had leased space to a number of internet
startups, as well as companies such as Level (3), Sun Microsystems,
and Storage Technology, all of which have experienced sometimes
drastic layoffs in recent months.
See this article for information the general office space market,
including details on Interlocken:
http://www.iecre.net/reports/mkt-denverq102.htm
And if you do decide to buy real estate in the area, keep in mind the
general rules for buying individual property that is likely to
increase in value. Get any building you're interested in inspected
thoroughly, compare it to similar property in the area, look at it
objectively (from personal experience, houses with ugly or outdated
carpets, fixtures, and other cosmetics are the best investments, and a
good investment can definitely overshadow other economic factors),
hope for the best and prepare for the worst.
Good luck, and please let me know if this hasn't answered your
questions.
Lisa.
Search Terms:
boulder county real estate values
boulder colorado growth limits
technology boulder country employment industries
"best places to live" colorado |
Clarification of Answer by
lisarea-ga
on
23 Jul 2002 15:57 PDT
No problem. I realized with this question that I was making some
assumptions about the type of property and scope and focus of the
question.
I did largely ignore the short-term income aspect of the issue in my
initial answer. Essentially, when investing in a rental property, you
look for both the short-term income provided by your rent income minus
your expenses; and a long-term income, from appreciation of the
property.
Unfortunately, the personal financial risk issue is pretty complex,
and comes down, in large part, to whether you expect the market to
sink further, or to spring back, and when you expect that to happen.
And also unfortunately, it's difficult to get a real, subjective
opinion on the state of the economy. Everybody who knows what they're
doing (or pretends to) seems to have an interest to protect, and their
advice, as such, is often swayed by that. I think my original answer,
though not as absolute and succinct as I'd personally like, provides
some angles for gauging the economic factors involved specifically
with the purchase and subsequent real estate values for Boulder area
property.
However, what I failed to address sufficiently, I think, is that your
question relies also on the state of the rental market, which is not
entirely parallel to the housing market in general. Factors to take
into consideration here are, in a nutshell, market demographics. The
market for rentals will rely more heavily on lower income and more
transient populations than the general housing market does. This means
students, blue collar workers (note that the barrier to entry for
homebuyers is higher in Boulder than in most areas), and some of the
more transient technology workers.
Here is information from HUD on areas in the Rocky Mountain region in
which it expects either growth or decline:
http://www.hud.gov/local/den/denhmf02-08.html
While this information doesn't apply directly to your situation, it
could be used as a guide to determine which markets HUD currently
considers soft and which it doesn't. Boulder doesn't appear on this
currently, but you can probably get an idea of potential based on
surrounding areas, and you can watch these reports as they come out to
see if anything about the area does show up in the future.
And, as you are no doubt aware, the market in the area for affordable
housing is very tight right now. See this article in the Boulder
Weekly:
http://www.boulderweekly.com/archive/112200/newsspin.html
From the article:
"But things look bleaker for poor folks in Boulder, where voters
decided to nix a tax supporting affordable housing. Terry Benjamin,
executive director of Emergency Family Assistance Association, says
the tax would have helped the families his organization supports, most
of whom are teetering on the brink of financial disaster. While
passing the tax wouldn't have solved the issue of affordable housing
entirely, Benjamin says, "this would have provided the financial
muscle to make a lot of good things happen. Anything we can do as a
community that increases the supply of affordable housing, we ought to
be doing. It's just moving so fast.""
This trend, which is ongoing, would indicate that, if you can get your
hands on a multiple-unit property such as a duplex or other unit, the
prospects would be great for generating rental income. (That is, you
can spread out the income among two or more units, and make mortgage
payments by spreading it out among multiple renters.)
But overall, the data seem to show that the Boulder rental market is
strong, and will probably remain so.
As far as your personal risks, that is very hard to address. A
conservative view is that you should never gamble anything you can't
afford to lose. Because, of course, anything can happen. However, the
market does appear to be fairly soft now, and economic factors aside,
the nature of Boulder proper is such that it's not likely to go too
low, simply because it's a desirable area, because sprawl is limited,
and it has an infrastructure in place to immediately support any
future upswings in the tech market.
You'll also need to consider who your specific market is. Location
will be a factor, in that if you want to rent with students, you
should look at properties either on the Hill or as near the campus as
possible, but families and high-tech workers would probably not be
interested in units too close to all those college kids. (Also note
that college kids tend to be seasonal renters, so you probably won't
get year-round occupancy with them.)
Other personal risk factors with rental property include protecting
your investment, dealing with maintenance issues, legal issues and
collections, and so forth. Unless you are both willing and able to
make yourself available for midnight plumbing jobs, you will have to
hire a maintenance company to do this for you. You must also be
prepared for potential situations in which you'll have to evict a
tenant, collect back rent, or comply with other rental property laws
and guidelines.
A search on -landlord issues boulder colorado- (dashes not included in
search) provides this link to a number of informative booklets on
renting issues that you'll want to look over before deciding to become
a landlord:
http://www.landlord.com/landlord_law_coloradoframe.htm
and backtracking from that link to http://www.landlord.com brings you
to the main site, which provides tons and tons of information for
landlords that might prove useful. If nothing else, it can give you a
broad overview of the sheer volume of potential issues.
A search on -"property management" boulder colorado- (again, don't
include the dashes) provides a number of links to local property
management companies that can deal with your repair and maintenance
issues, including these phonebook listings:
://www.google.com/search?sa=X&oi=fwp&pb=f&q=%22property+management%22+boulder+colorado
and this listing:
http://www.manageproperty.com/state/colorado.htm
Of course, you should gather data about the area you want to focus on
regarding both the sale prices of properties and the monthly rental
prices for similar units.
This report on the Colorado economy provides a listing of economic
indicators, including housing sales and rental prices as of October
2001:
www.denverchamber.org/area/ecdev/Oct01Indicators.pdf
Note that this report shows housing prices falling and condominium
prices rising.
(search terms -boulder colorado rental market indicators-)
Here are a few resources if you want to check current rentals
yourself:
http://www.aptratings.com/rate/vccbc/0/CO/Boulder/_n_/15/_n_/
http://market.boulder.co.us/apt_rent.html (scroll down past the ads)
(search terms -boulder condominium townhouse rentals-)
So, your final equation will look something like this:
The amount of rent you expect to be able to charge for the whole
property
minus
Your mortgage payment (property, interest, taxes, and insurance) +
maintenance fees + any loan payments for initial improvements +
(monthly fees for any optional legal plans)
This should give you a general idea of what kind of income you will
generate monthly. If you come up with a negative number, the property
will not generate income, and you should probably not do it.
If you can expect to earn enough income each month to cover your
expenses, then you should be able to count on both the additional
income and the long-term potential for appreciation of the property.
I hope I was able to come up with more of what you were looking for
this time.
Good luck,
Lisa.
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