It has been a year characterized by record high prices, record low inventory and wild swings in activity.
For the first time in history, the average price for Summit County properties climbed above $700,000 and stayed there for four consecutive months reaching nearly $800,000 in August. The July average price was 33 percent above the previous July. Yet September brought the average down by over 16 percent from August and many price reductions appeared.
Once again, for the entire year, the inventory remained at alarmingly low levels, beginning the year at about 500 properties for sale and never rising above 780 properties of all types for sale at one time. In 2017 the inventory peaked at about 900 properties. In contrast, 2010 saw over 3000 properties for sale in the depths of the Bush Depression.
On the morning of October 5 there were 64 residences priced under a half-million dollars for sale in Summit County. There were 233 properties priced under $1 million.
1073 properties priced under $1 million had sold to that date. See the problem here?
As a result, the average sale price is 98.9 percent of list this year and it is taking an average 71 days to sell and close a property.
It is concerning that the market is in its 4th year of stagnant sales. There will be another 2150 or so properties sold this year, still stuck in the same 2100 to 2200 sale range that began in 2015. This is partly because of the lack of inventory, but buyer resistance to current prices is becoming a factor.
Buyers who have been waiting months for availability in their preferred locations find that new listings are more expensive than when they began looking. And then they sell in days. Potential buyers are being discouraged by these prices.
Current owners aren’t selling because many want to move up to a larger or different type of property. Besides there being nothing available, even selling at the highest price in history for their property won’t pay for the replacement. So they are stuck.
The market is left with sellers who are buying elsewhere for less money, those whose lives have changed and don’t need a second home any longer or for whom selling makes economic sense in paying for college or retirement.
Rising interest rates have had some effect, but half of our market is cash sales. Interest rates affect mainly first time buyers and primary residents, a small part of the market. Rising prices have made that segment even smaller.
Record stock market levels have caused some investors to take money off the crap table and put it in real estate, hence the record number of $1 million plus sales. The average Summit County single family home is now worth over $1 million.
So we’ve got marginally more buyers than sellers, nothing for sale to speak of and prices at historic highs. The odds of all these factors remaining in place for very long are low.
At some point, a bunch of owners will decide to sell because of a stock market correction, recession or some change in the economic cycle and supply will equal or exceed demand for a while. When this happened in 2009, it took several years to recover to the previous price levels. The number of sales never did recover.
But through all of the cycles, the fundamental force that keeps our prices high is lack of private land in Summit County. The 15 percent of the County that is private is nearly all built. That’s why you see so many structures being demolished and new construction going up. It’s often the only way to build.
Cycles will come and go, but the basic value of Summit County real estate will remain, just as it has for all of my three-decade career.
When things look the most uncertain, back up and look at the big picture. Real estate is a long term investment and those who have planned well over the years, myself included, have profited greatly. This won’t change.
It has been a year characterized by record high prices, record low inventory and wild swings in activity.
There are some changes coming that will have a significant impact on property owners in Summit County, and every other tourist destination, in the future.
The rise of the VRBO and AIRB&B Internet property sharing industry is quickly forcing changes in law and regulation as well as in the established rental management industry.
All of the towns, the County and even individual homeowners associations in Summit County are writing or have already put into place restrictions and registration requirements on short-term rentals by owners.
A lot of this has been caused by the lack of supervision by absentee owners of their short-term renters now that local management companies are handling perhaps only half of the short-term properties they used to.
Regulations vary a lot but owners usually have to hire a local supervisor of some kind to control noise, parking, trash and other nuisances quickly. They will also increasingly be required to register short-termed properties with local government and buy a license to enable enforcement of these rules.
Many homeowners associations are limiting or halting short-term rentals. This has not impacted property values to any great degree so far because about half the second homes in Summit County are not rented. The impact will probably be limited in the future, especially since rentals can only defray some of the costs of ownership at present levels and are not needed by most second home owners to be able to afford the property.
Long-term rentals of six months or more are generally not being restricted except in two or three neighborhoods where occupancy even by the owner is limited to less than 12 months per year to prevent the properties from becoming de facto affordable full-time housing.
This is not just a Summit County thing. Most resort and tourism oriented areas in the US and other countries are feeling the impact of over-visitation and support among the permanent residents is building to restrict visitation to sustainable levels (think Venice Italy). As the world population has grown and approached economic parity with the First World (think China) tourism has become the largest sector of the global economy.
Watch for more restrictions like noise ordinances (Frisco) occupancy restrictions (certain HOA’s), and limitations on visitor numbers (Yellowstone, Kauai, etc.) attempting to keep things the way they used to be in the olden days. Good luck with that!
Since 1985 I’ve pretty much lived and breathed Summit County real estate. And the business has been very good to me. Along the way I’ve learned several things that it’s better to have someone tell you than to experiment until you discover for yourself. Here’s some of them.
Buy and never sell.
OK, maybe not NEVER, but be sure you’ve got a really good reason. Like paying off other mortgages – not a vacation in Acapulco. Corollary: your home is not an ATM.
Never do anything solely for tax purposes.
I rolled 4 or 5 rental properties into a home using a 1031 exchange to “beat” the capital gain. The year after I bought the home, it was worth $100,000 less than I’d paid wiping out all the benefit of the gain I’d avoided. Buy and sell because it makes sense for other reasons, not just to avoid taxes.
Don’t get tied to the outcome.
It’s amazing how much stress you dump when you just do your best and let the chips fall where they may… and how often the outcome is just fine, too. Corollary: What’s the worst that can happen?
Drive your own race and don’t worry about the competition.
It may look like you’re falling behind and they’re getting way ahead, but that’s probably not true. Pay attention to your own plan and when you finally look up you’ll probably discover that your competition has disappeared from the race. This gets a lot easier as time goes by. Most people don’t have the patience, talent or perseverance for the long haul.
There’s four big things you won’t have to discover for yourself.
This is it folks… the last Real Estate Insider after 32 years of writing them. Those of you who have owned in Summit County for that long have received this newsletter over 120 times and have seen it grow from an ugly one page dot matrix printed black and white publication to the four page full color issues of recent years.
The content has not changed, however.
I’ve reported honestly and accurately on market trends through boom and bust periods alike. Tough times like the 1986 DOW panic (down over 200 points in one day!!), 9/11, the Dot.com bust, the Lehman melt down, and heady times like the first home sold for $1 million in Summit County, the 75% run-up in average price from 2004 to 2008, and from prices that averaged under $100,000 in the mid-80’s to nearly $700,000 toda
Since 1985 I’ve given you my best opinion of what was to come and advice on how to prepare for it. Many of you have thanked me over the years for that advice and have done very well because of it.
I’ve never resorted to puffery or hype to boost my business or our market. I learned early on that over promising doesn’t pay. This has not sat well with some buyers and sellers, but I’ve rarely been proven wrong. I’d rather be considered too conservative than to promise what can’t be delivered.
Sometime in the next few months I’ll be wrapping up my practice. Until then I’m still in the same full time business. I won’t become a part-time broker.
In my opinion, as I have indicated over the years in this newsletter, there is no such thing as a part-time broker. There’s a lot more to serving the public in the most complex and expensive transactions they’ll do in their lives than making a few phone calls from the couch and getting a big check.
When I stop taking listings and working with new buyers at some point in the next few months, I’ll turn my client base over to Jason Smith, owner of Colorado Real Estate Company.
I chose Jason because he’s established and works in a lot of the same neighborhoods that I’ve specialized in for the past few decades. A lot of you already know of him through his mailings. He’s got ten fewer years experience than I do, but has averaged the same number of transactions as I have per year.
Most importantly, he’s a serious full-time Realtor who takes care of his business in the same spirit that I have. I’ve found in my dealings with him over the years that he’s more about fairness and honesty than just getting the next deal done. Just like me, I don’t think he cares enough about the money to lie.
If you get to work with Jason, I think you’ll be just as impressed with him as I have been. I know you’ll be taken care of at the same high level as I have worked to do for all of these years. I’ll send you all his contact information when I get closer to the time.
I’m available until then, of course.
So after nearly 1100 transactions and after 32 years of being on three ring alert seven days a week, after well over a quarter-billion dollars in sales, soon I’ll take the rest of the day off.
I want to thank each and every one of you who have supported my practice for all these years. I wish you all well and many happy years of enjoyment of your place in Summit County.
Despite fears that drought would kill the fall color season… we had one of the earliest, longest and brightest finales of leafy splendor in recent memory. The aspens lasted over 4 weeks this year before dropping off by themselves instead of being frozen and snowed off as usually happens. The roads were clogged with happy leaf-peepers!
Just an idea ahead of its time… those two wheeled juggernauts called Segways will not be appearing on the streets and, more importantly, the sidewalks of Breckenridge any time soon. Can you imagine packs of Kansas grandmas wobbling through weekend crowds? Bring your steel toed boots.
Shared E-bikes, on the other hand…are piling up all over towns in Summit as hipsters grab them to ride to the bar and leave them for the next guy, usually right in the middle of the sidewalk. No ban on them yet, but it’s probably coming. I see them piling up behind the Police Dept.
Half of Downtown Dillon was demolished and hauled away last week… as they make way for a new hotel and condominium complex at the entrance to town on Lake Dillon Drive. After years of starts and stops, it looks like these projects have finally begun. So you know what that means… the next recession is imminent!
And in a remarkably accurate, informed and prescient prognostication… Chuck Leathers has predicted that Summit County will continue to grow and prosper for decades to come with big but not unbearable changes. Snow will still fall, leaves will sprout in spring, mountains will still stand, no home delivery of mail will ever become available, and Texans will continue to be Texans. Spooky how I know all this, eh?
THE FINAL WORD…So it’s the last Insider. When I began writing this in 1985 or so, I never anticipated this moment 32 years later when it would be the final issue.
If my message in this one seems familiar, though, it’s because my message has been essentially the same since 1985 and has proven to be true.
If you are in it for the long term, Summit County has been and continues to be a solid investment in both financial and lifestyle terms.
I hope all of you have enjoyed and profited from my analysis for all of these years. Thank you for reading it.
You’re on your own now.
Chuck Leathers, CRS
Dotti Augustine and Chuck Leathers
Thanks from both of us for your three decades of support and patronage! Now get out there and enjoy the mountains.
2018 is on track to be the fourth year of stagnant real estate sales numbers. If the present trend holds, there will be fewer than 2200 sales this year. This is a far cry from the peak years of the mid-2000’s when about 3000 per year sold.
Stagnation in the midst of a market where new listings are snapped up in hours at record prices: this is what a no-inventory market looks like.
And the result is fewer properties are sold for ever-higher prices. There was only one month of the first six in 2018 where more properties sold than the previous year. Overall, there were nearly 7 percent fewer sales in the first half of the year than in the previous year.
The inventory of properties for sale at the end of June, always the peak inventory for the year, was fewer than 750. And 200 of them were vacant land. That left about 500 residences of any kind or price for sale.
But wait… only 280 of them were priced under $1 million and 90 were priced under $500,000 and 10 of those were deed restricted.
372 residences were under contract, 150 of which had sold in seven days or less.
Each year since 2010, the peak inventory in Summit County has been lower than the year before. Eight years of declining availability has created a chronic undersupply situation that has driven prices up steadily and sometimes alarmingly. In 2017 the average residential sale price increased by over 15 percent.
So far in 2018, residential prices have increased by only 3.8 percent and this during the part of the year that historically brings the highest average price for the year. So the price inflation may be slowing. In fact single family home prices are down about 3 percent so far this year.
Days on market are getting shorter. So far in 2018 it has averaged 84 days to go under contract. Last year it took 102.
Land is making a minor comeback with an average price that increased by 13 percent in the first half on 91 sales as opposed to 69 in the first half of 2017. This reflects the increase in the price of a single-family home to an average of $1.1 million currently. It is starting to make sense to build instead of buying an existing home. It still takes 311 days on average for land to sell, however, down from 353 last year.
Remember, there were still 200 lots for sale on June 30 however.
In a normal market, an urban area for instance, the shortage of property for sale would bring builders in to fill the void. This is what is happening on the Front Range where urban sprawl stretches from Colorado Springs to Ft. Collins and every piece of buildable land is being used.
But in Summit County, we are out of land. What new construction there is has been in ones and twos on infill lots. Or County government acquires some unwanted Forest Service land or uses some vacant land the towns have been sitting on to build affordable deed-restricted local worker housing.
New market priced development such as Angler Mountain Ranch, Silver Trout and Summit Sky involve a relative handful of new construction homes at prices beginning in the $900’s and way up from there.
It’s only gonna get tighter, folks. No relief from new construction, more people with disposable income wanting to be here, and those who are already here holding on like sea urchins in a heavy tide.
Interesting times ahead.
With prices rising quickly, many owners who haven’t been thinking of selling now want to take advantage of the current market conditions while they last. They suddenly decide to sell and want to get that property on the market ASAP.
But wait… what about the renters they put in years ago when it looked like prices would never recover?
You know, those long-term renters who pay every month faithfully, raised their kids who are now in high school there and will have a really hard time finding another rental in the tight market? Or those seasonal renters who have booked the place for the last ten years from November to April and paid a premium while treating the place like it was theirs and adding hot tubs and furniture? Or all those VRBO short termers who come year after year on the same dates and have already booked for next ski season?
What was a steady stream of automatic pilot income is now a problem. Most buyers will want to use the place themselves immediately after closing. And the move-out cleanup and repair will take weeks before the property is ready to show.
And it’s mid July already, the best season for selling is here and this property won’t be showable until maybe September.
Folks, real estate is an investment that demands long-term big picture thinking and planning.
Here’s some tips:
Plan to be on the market not later than June 1 of the year you want to sell.
Give your tenants plenty of notice. Law demands 30 days but in this market that’s just not reasonable for the long termers to find replacement property. Your short term and seasonal tenants should be notified at the end of the season, not the beginning of the next.
Get into the property yourself well in advance of the move-out to make a list of repairs and renovations that need to be made. Last minute work will cost more and won’t be as good as when the contractor has time to schedule his crew and order the things that need to be replaced.
Talk to your tax advisor and get advice about the capital gain you’ll probably be paying so you’re not shocked just before closing… or worse, just after getting under contract.
And don’t neglect the property while it’s rented then try to catch up just before selling. You won’t get $45,000 more when you sell to compensate for the kitchen and bath remodel you finished last week. But renovating two years before will reward you with the highest current price when you finally do sell.
Best advice: always have your property in shape to sell quickly when market conditions dictate.
Summit County, and Silverthorne in particular, made a big Olympic splash… It began when Red Gerard won the first gold medal of the games and before it was over, four more locals won medals. The town threw a parade and celebration and Gerard was nominated as Male Olympian of the Year by ESPN. Goldthorne, indeed!
The packing crate hotel is a go… the gentrification of Silverthorne continues. “The Pad” was approved by Silverthorne recently and will go on the banks of the Blue across the street from Town Hall. It’s going to be a hostel made out of trans-oceanic shipping containers… really.
The Buffalo Mtn. fire scared the bejeezus out of Wildernest and Mesa Cortina residents in mid-June… but no residences burned. They threw everything from AS350s to DC10s at it and stopped it 50 feet from homes. Everyone was relieved and grateful except for a few ingrates complaining about the red fire retardant on their homes. We can’t even agree that stopping a fire is a good thing… forget climate change or gun control.
And speaking of climate change… A-Basin barely made it to June 3rd this year. Remember when you could ski through July and only had to stop because they stopped running the lifts?
It was the biggest bike race event for Summit this year… that no one’s heard of. The seven day, 526 mile Mavic Haute Route Rockies came through town in late June with a hundred riders or so on a race over Loveland, Hoosier, Tennessee, Guanella and other passes in addition to Pike’s Peak and Battle Mountain. Makes the USA Pro Challenge look like wimps. And women were right there in every stage… Imagine!
Be careful what you say, it could cost you money… or make you some.
A study by the University of Guelph Ontario looked at 20,000 Canadian real estate advertisements over 3 years and found that when it comes to descriptions of property for sale, style sells, substance doesn’t.
Using the phrase “good value” cost owners 5 percent in sale price. Pointing to “landscaping” sold the home 20 percent faster and “move in condition” homes sold in 12 percent less time. “Beautiful” homes sold 15 percent faster and for 5 percent more.
“Motivated seller”, “foreclosure”, and “handyman special” all cost sellers money at closing while “granite”, “maple” and “gourmet” brought higher prices.
Some material facts helped (“golf” or “lake”), while other presumably good features (“new paint”, “new carpet”) hurt sales prices.
And the ubiquitous “must see” had no effect whatsoever.
So if you’ve just listed your beautiful granite and maple filled gourmet home with great landscaping and curb appeal on a lakeside golf course lot in move-in condition, get ready to move out!