Archives for January 2018

Historic Lack of Inventory… It’s getting serious, folks

How to describe this ridiculous market?
On the first day of 2018, there were a total of 510 properties of any type for sale in Summit County. 182 of these were land, 304 were residences. 88 residences were priced under $700,000 and nothing priced less than $225,000 was for sale at all.
There was a six month supply of residences priced over $1 million and 3.5 weeks’ supply under $700,000. Residences priced over $1 million took an average 148 days to sell. Those on the market averaged 234 days since listed.
Residences priced under $1 million took 44 days to sell and those on the market had been offered for 120 days. Clearly the market had slowed by the end of the year.
So the market has been over-supplied with expensive homes and severely under supplied with lower priced ones.
This lack of inventory in the most sought-after segment of the market is largely responsible for the third flat year of sales in 2017.A total of 2250 properties sold in 2017, 6.8% more than the year before and only 3 percent higher than in 2015. There has been a net gain of less than 2 percent over the past three years in the total number of properties sold.
The average sale price jumped by 15 percent, however, to $650,500 – a new record by far for Summit County. The median price was $505,000, a substantial disconnect from the average and atypical for our market where median and average prices are usually very close.
Clearly all prices increased, but the high-end dragged the whole market skyward. The $million plus market now accounts for 14.5 percent of residential sales, up from about ten percent last year. As construction costs continue to increase, and because nearly all new construction is in high-end single family homes, the average price for a single family home is now well over $1.1 million.
While prices have recovered and surpassed the previous historic high in 2009, sales volume has not recovered from the Depression of 2010. It’s running about 33 percent below the all-time high of about 3000 properties sold in both 2005 and 2006.
The number of listings in July, when the inventory peaks every year, has declined for the past five years. The all-time high for listed properties was about 3000 in July of 2010. In 2017 it was 904. At this rate, there will be fewer than 800 properties of all types for sale next July.And chances are good that a third of those listed will still be land. Despite the lack of existing residences for sale, land has not kept pace with the total market. In fact the average price for 182 sales of vacant land fell to $327,300 in 2017, a decline of 4.5 percent.
This is partly because all the easy to build on lots in Summit County are gone. It is also because the homes built on these $300,000 plus lots will need to be worth about four times the lot price, or $1.3 million, when completed and there are many existing homes to choose from in this price range. And million+ range represents only 14 percent of the whole market. So about a year’s supply of land remains on the market year after year.
Market conditions like this have never before existed in the 32 years I’ve been in business. Anyone thinking of selling a residence should grab the prices this market will bring while they can.
Everything changes with time and usually before you think it will. And then it’s usually too late.

 

 

 

Short Term Rental Paranoia: There’s no conspiracy to steal local housing, folks

You know, I’ve been a Realtor in Summit County since 1985. I’ve rarely seen anyone or any group “snap up” housing for short term rental, as described in a recent Summit Daily News article about worker housing shortages. There are no evil, shadowy groups lurking out there, waiting to snatch housing from the workers.
A few million-dollar homes in Breckenridge have been bought by groups who hire a resident housekeeper and use the place for kind of an upscale hostel for European guests who are used to staying in zimmers in Switzerland. And I’m not even sure any of them are still operating.

The Grinch Who Snatched All the Local Housing.. and Other Fables

This continual outcry about how short term rentals are taking housing away from locals is just nonsense.
Any responsible Realtor tells buyers that at these prices the only kind of rental that makes any business sense in Summit County, i.e. that will break even or cash flow, is long term rental. And even then you’ll probably need to pay cash because the property won’t break even let alone cash flow if you have a mortgage in addition to taxes, dues and other costs.
And any responsible Realtor tells buyers that if they really need to rent to be able to keep a second home, this isn’t the market for them.
The shortage of worker housing stems largely from increasing numbers of owners who want to use their second home during the year.They understand that short term rentals will only defray some of the cost and often don’t need or want to rent at all.
About half of second homes in this county are never rented. Yes, you can say it’s a shame that these properties sit vacant for most of the year, but the owners can afford to do that and are paying to be able to use it whenever they want.
But there are other barriers to affordable housing including high construction costs and expensive land pushed by the severe lack of private land in Summit County. We can’t build our way out of this problem as they do in other markets.
Housing has always been really expensive in Summit County. Even when houses were $60,000 rent was $300 month and you were probably making $500. And yet about 30,000 of us have found a way to live here.
So what will happen is what has always happened. Employers will continue to raise wages slowly. The County, towns and ski resort operators will build deed restricted and employee housing until they run out of empty parking lots. Current owners will age and spend less time here and start renting long term before selling and beginning the cycle again.
And all the way along, the only thing everyone will agree on is that it is hard to live here. And I for one think it’s worth it, none the less.

Sellers Aren’t in Any Hurry… Until They Are!

“We aren’t in any hurry.”
I’ve heard this from sellers more times than most Realtors have heard the words “under contract.” It comes up when we talk about the marketing process and the outlook for a sale.
For the past year or so, if you put the property on the market at any rational price, it will sell in days or even hours.
“But we’re not in any hurry”, sellers insist. At which point I tell the sellers to either be prepared for a quicker sale than they are expecting or to wait until it is really time for them to sell.
Often the property is rented and the seller wants to keep the income up until the day before closing or the seller wants to take advantage of the strong market but wants to use the place for just a few more months before closing.
“Can’t the buyers wait?” Or worse: “We’ll just have to find the right buyer”: meaning one who will pay us now and then let us use the place for another year.
Well, good luck with that. It’s never been a great idea and it’s even worse right now. In today’s short inventory market, if you put it out there, you need to mean it. You’ll probably have multiple offers from folks who have recently been out bid or missed the chance entirely. They want to buy today. They have the money today. They want to close yesterday. Mess around too much and you may insult and lose all the buyers.
“But we’ll just find some more buyers”, you say, “there’s more where they came from.”
Well, this is a small town and word gets around about unreasonable sellers or ones who are not serious. Brokers and buyers really won’t put up with too much more than they already must to get an offer accepted. You probably won’t see offers as good or as numerous after the initial rush.
As a seller, you need to consider several things: Will the market remain like this until all the pieces – your schedule, your rental agreement, your ability to let go – line up perfectly?
Will the buyer you are asking to wait still have the money when it finally comes time to close? Will the stock market tank and take the buyer’s second home cash – and maybe the rest of the market – away? Will the buyer get hit by a bus next week? How much is the extra income and enjoyment worth compared to hundreds of thousands of dollars in sale price? How much will it cost in future sale price or peace of mind for you to lose the sale?
Time is absolutely not on your side once you go under contract. Everything happens before you think it will, even failure. Trying to slow or delay the process adds many kinds of risk and cost to you. Even in a solid seller’s market, there are limits.
So how long did you want me to take to sell your property?

 

 

 

2nd Homes Largely Unscathed by Tax Reform

So there’s a new tax reform bill now. Say what you will about who benefits and what the damages will be, real estate and second homes in particular dodged several bullets.
Despite much anticipation that the second home mortgage interest deduction and 1031 exchanges would be eliminated, they were not. Quite.
You may still deduct interest on a second home mortgage, but limited on new loans to the amount under $750,000. Interest on old loans continues to be fully deductible to $1 million. So don’t pay that old mortgage off if you want to keep the big deduction. There should be no appreciable effect on our market from this change because half of our sales are for cash and those borrowing more that $750,000 probably aren’t that worried about the interest deduction anyway.
1031 exchanges are largely unchanged which is quite a surprise. The only appreciable change is that now personal property, such as art and airplanes, is no longer considered “like kind”. This change seems aimed largely at Bitcoin which has been used to evade capital gains apparently. It’s personal property and no longer useful for 1031 exchange.
Here in Colorado, property taxes are very low (and the roads show it) so the $10,000 cap on deductions won’t affect many people. And once again, if your property has more than $10,000 in tax, you won’t feel a thing. Apparently real estate used in business is not subject to the cap.
All in all, it seems like business as usual for most first and second home owners tax-wise. The effects on the Summit County real estate market will probably minimal.
Get some advice on all of this from a real tax professional, though. If you tell the IRS that your Realtor told you that deduction was OK, prepare to be laughed at. Or worse.

Rumor, Gossip & Innuendo!

This short-term rental issue is getting out of hand…. some HOA’s are restricting rentals to a month or more, the County may soon crack down on VRBOs not paying tax, and towns are getting tougher, too. And now locals are short-terming deed-restricted worker housing and getting busted. No good deed (restriction) goes unpunished, it seems.

Speaking of affordable housing… a new hostel is being built in Silverthorne – out of shipping containers… really… cargo containers. Customers will be refered to as stowaways. You know, just to add that hip millennial edginess. So is this reverse gentrification?

And after checking in to their container… hipster/stowaways can head to Breck to sip a cocktail at the new ice bar at Beaver Run. We’ve come a long way since the hippest thing you could do in Summit County was close the cover on F lift and get stoned before your first run at Copper. No, dope wasn’t legal then.

What will the Summit High Girl’s Rugby team have to do to get noticed?… They won the state championship for the 10th (TENTH) straight year! And they’ve been undefeated just about every damn year to boot! John Elway should hire our rugby coach… if not the whole team. The Broncos could use somebody who knows how to win. Congratulations, ladies.

By January 1 Lake Dillon still had not frozen…. that makes it about two weeks behind average. And as for snow, well, it was scarce. We’ll see if we catch up, but this looks like a long, cold, dry winter shaping up. Now that I’ve predicted, it’ll probably dump for the next 3 months. And kite skiing on the lake could be damp.

The Final Word…

With no inventory, I still had my best year ever in this business.
List one, sell it, list another one… repeat 42 times.
But it worked and I passed the 1000th career sale and the $225 million mark by quite a bit. Here’s where experience and longevity paid off.
Had I not been sending this newsletter four times every year for over 30 years, I’d have been out of business.
Thank you for your support for over 3 decades.
Years like this remind me of just how important it is.
Chuck Leathers, CRS    owner/broker     Chuck Leathers Real Estate Company

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