Have We Seen This Movie Before? Price increases continue, sales are flat

The average sale price in Summit County was the highest in history for the month of March.  Averaging over $600,000, March sales capped off three months that brought the highest 1st Quarter average prices in history as well.
Before you pop the champagne corks, however, consider that the number sold, 319, was only about 1.5% more than 2015 and still lags way behind 2006 when the most properties in history closed in the 1st Quarter, 543.
Those of us who have been here long enough know that when sales volume levels out or declines but prices continue to climb, trouble usually follows.  This exact thing has happened at least twice in Summit County.

1st qtr graph
September 11, 2001 began three years of declining sales and flat prices.  The latest example was in 2008 when the average sale price peaked out at about $569,000 while the number sold that year dropped by over 20%.  That started a four year decline in sales and prices in our market.
Part of the flat sales performance so far this year is due to the severe lack of inventory that continues into the second year.  At the end of the 1st Quarter there were still only 800 properties for sale,  just over twice as many as had sold to that point, and nearly 300 of those were vacant land.
The shortage will likely continue through the year as owners who would normally sell after seven or eight years see prices just now returning to where they bought.  That’s about 5200 buyers from 2007, 2008 and 2009 that should be selling after the typical hold time here in Summit County.
Even though properly priced new listings are selling in a week or so, the number of buyers is below average.  Prospective buyers receive automatic notification of new listings and act quickly because they have been waiting for something to buy.  Many have missed the last property to dribble onto the market and don’t make that mistake twice.
It is difficult to determine if the flat sales are a result of lack of inventory or lack of buyers or both.  But coupled with 1st Quarter prices running nearly five percent above the previous highest in history there is cause for concern.  If history is any indication, we could be heading into a stagnant period.
Second homes are completely discretionary purchases.  No one absolutely has to buy a second home, or to sell one at this point, either.  Distressed sellers are a thing of the past having already left the market one way or another years ago.

Number Sold by Month
Second home buyers need to feel secure and confident in their financial circumstances.  It doesn’t take very much uncertainty to make them freeze up and thanks to the current disaster unfolding in domestic politics and continued attacks on soft targets overseas and at home, there is plenty of uncertainty to go around.
It may be wise for owners who are waiting for better prices before selling to act sooner than later.  This may be as good as we’ll see for a while.
Usually election years don’t have as much impact on our market as this one seems to be having already.  And the way it’s going, this could be the lull before a real storm in the middle of our busiest season.
We normally sell more than half the properties that close in the second half of the year peaking in August, September and October.  Last year those months brought sales numbers well above average for the first time in several years.
This year is on track to just about equal last year, but not much more.  And while average prices usually decline through the year due to a disproportionate number of high dollar sales in the 1st Quarter, the year-end average should be a little ahead of 2015.
So while prices look great and will probably at least equal last year’s, 1st Quarter sales may be a straw in the wind.  By this time next year, there could be a couple of thousand long-time owners stuck in a market with more properties than buyers and wishing they had sold this year.
Don’t be that guy.

Avg. Price by month
For 15 years starting in about 1986 until 2001 this market went nowhere but up.  Despite two depressed periods, average prices still increased by over 400 percent from 1985 through last year.   Since the 2008 peak they have decreased by about five percent through last year.
This year prices will probably recover to those of the peak in most neighborhoods.  However it is clear that since 2001 we are in a new era and it will be more cyclical.
Over the long term, this market still has a lot of upside due to being largely built out, relatively affordable for a resort area, and discretionary incomes that continue to rise in Colorado.  The short term is less certain.
Decide how long you plan to be involved here and make your decision accordingly.

Land Still Won’t Move… But help may be on the way

Land sales continue to be the weakest part of Summit County’s real estate market.  At the end of March there were 254 lots for sale, 24 were under contract and 16 had closed since January 1.

Since 2008, You Can't Give This Away... till now
Since 2008, You Can’t Give This Away… till now

Prices are the lowest in a decade and many premium lots are offered and selling for tens of thousands less than when they were first sold. Land sales are now averaging about 90% of list price, up from 85% last year, so the market is improving slightly in some ways.
But recent developments may signal an end to the several year long land sales drought.  Lenders have actually been soliciting for construction borrowers.  I’ve received calls from lenders actually asking if I know anyone who would like to apply for construction loans, including spec builders.land avg. price by year
If this trend continues and spec building loans become more available, land will begin to sell again.  Contractors were about half of the market for land in the years when land was the hottest part of Summit County real estate.  Every builder had two or three lots in reserve as they built homes with no buyer already in place.
Now lenders (OK, two) are calling with offers to finance vacant land purchases. Offers of 50% loan to value rolling to construction loans with 20% builder equity and 60% loan to value on the finished product have been made.
We’ll see how many of these loans are actually made, but if available, the remaining vacant land in Summit County will become a lot more saleable and expensive.Lots by year
And as regular readers of this newsletter already know, there is no new vacant land to be had in Summit County.  What we have now is all there is and most of that has already been built upon.
It might be a good time to take another look at land as a mid-term (3 to 5 year) investment.  

Things That Are Absolute Deal Killers

Some things are absolute deal breakers for buyers and often they are things that a lot of people wouldn’t even consider a problem.
I was showing a very expensive home in a very upscale neighborhood to buyers who had seemed quite normal… until I opened the massive front door and the wife caught sight of the huge rock fireplace with an equally huge trophy elk head hanging over it.
She immediately returned to the car in a complete huff.  Each new house brought the question: are there any animal heads in there?
Since then, I’ve seen many other deal-killers.

How to create a really inviting introduction to your house
How to create a really inviting introduction to your house

Cigarette smell, pot smoke, cat or dog odor, old fireplace smoke, metal roofs, faux painting, animal skin rugs, bidets, large parrot cages, terrariums with lizards, snakes or spiders, and even faux Indian or big eyed children artwork can trigger reactions bordering on violent in some buyers.
Probably the worst was showing a condominium only to come face to face with a very neatly arranged shrine to Adolph Hitler, complete with a Nazi uniform mounted on a mannequin.  Even worse, the buyers I was working with were Jewish.  Needless to say we left.
I won’t even mention the obscene seven foot tall African carving involving monkeys I once encountered.
The point is there’s a good reason to depersonalize your property when you put it on the market.
Some people can smell cat before you open the door.  Ozone treatments might help for a while, but better to avoid the problem by not stinkin’ the place up in the first place.
Rude posters, religious icons, taxidermy, pet travel containers, pet beds, bongs and your collection of tarantulas should be ditched or stored off-site for the duration.
Old cars, lawn mowers, appliances or other stuff sitting on your lawn should go.  Buyers often won’t get out of the car if the yard looks like a recycle center.
Same goes for your “big, friendly” barking, jumping dogs.  Inside or out, buyers may cross your place off the list without looking.
“Take it or leave it”, you say, “I’ll wait for a buyer who likes dogs or cigars or Hitler”, but it’s not like buyers grow on trees no matter how good the market is.  You need to make a good impression quickly when buyers visit your home, not have them buy your lifestyle.
It’s a small town.  If Realtors know your place as the one with the python tank, they’ll be a lot less enthusiastic about showing it.
When you live in a home that’s on the market, you’re living in a show home and you aren’t on your own time any more.  You’re working for the sale, not yourself.

Phishing Pollutes Real Estate Transactions

E-mail scammers are getting better and better.  It used to be really easy to pick up on the “You’ve won the Nigerian Lottery” scam or the “Help! Mom’s stranded in India, please send money” dodge.
But now, these punks have figured out how to pose as participants in real estate transactions using actual information about sales in progress.  

Elvis1
We’ve had scammers try to get clients, brokers and title companies to send wire transfers for earnest money or closing proceeds to bogus destinations.  They reference specific closings currently in progress but usually lack the detail that would normally be found in such messages.  So  if it doesn’t look the same as previous e-contract messages, e-mails or links, beware.
Our customers are encouraged to call us to confirm that we sent any message that seems suspicious.
This could cripple the real estate business by making e-mail unusable for sending and receiving sensitive documents.
For now, we are being extra vigilant and making a lot more phone calls to confirm that these messages are real.  
Remember when the Internet was supposed to make business easier and more efficient?

Rumour, Gossip & Inneundo

radar-dishesYou can tell that nobody has any listings… by the size of the ads in the Summit Daily News.  Just about every Realtor has a double sized ad containing mostly their own picture.  Thus a new genre is born, the selfie ad.  And you thought it was all about your property.

Slowly but surely the Summit County bike path system continues to expand…. this year it will be extended to the top of Fremont Pass by the Climax mine.  Hope it relieves some of the crowds on the Frisco to Copper to Vail section which gets as busy some days as I-70. When this all began 20 years ago, the usual Aginners called it more wasted government spending, who was ever gonna use it?

Ya know how there’s never a hipster around when you need one?… well, that problem will be solved  when the new Natural Foods/Starbucks complex on Summit Blvd. is finished and joins Whole Foods.  That end of the boulevard will become Hipster Central.  All it needs is some lofts, some co-working space, lots of steel siding, wifi and a B Cycle rack or two.…

You can tell it’s spring in Summit County… the traditional potholes (some have names) are unfreezing and expanding. Traffic is lighter although it’s mostly cops lurking for locals.  Everyone you call for business is in the Virgin Islands for a week and the osprey and bald eagles have returned to their nests all over the place.  Oh, and it’s snowing harder.

The Last Word

Every time I go out to a city or some supposedly great place to visit, I return to Summit County with a new appreciation for what we have here.
Just when I think the traffic here is out of control, I go to Salt Lake or San Diego and see what busy really means.
Just when I’m “bored” with the same old view of mountains, lake and valley, I go to someone else’s paradise and find it wears out fast.
Just when I think I’m “tired” of kite skiing,  hiking or paragliding, I go somewhere where most of that can’t be done.
So I guess I’ll just stay here. I seem to have it all.
If you’d like to be here, too, give me a call.
Chuck Leathers, CRS
broker/owner

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