There’s Still Nuthin’ for Sale! Low Inventory Plagues Market for the 3rd Year

Number Sold by MonthThe Summit County real estate market ended the 3rd Quarter with fewer than 900 properties for sale continuing a historic lack of inventory for the third year.  The supply has not reached even 1300 properties for sale since mid 2015 and this year barely climbed to 1000 at the height of listing season in July.

The accompanying graph shows that the market is terrible for buyers  in the under-$600,000 price range.  If you are looking under $600,000, good luck.  Only 129 properties in that range are for sale in the whole county.  868 of them sold in the first nine months of 2016.  There is about a one month supply.

If you are looking for something under $200,000, get ready to rumble.  There were 7 for sale on October 1, about a 3 week supply.

Multiple offers and bidding wars occur on almost every sale in the lower end of the market.  Lots of hard feelings ensue because the losers generally have to wait days or weeks for the next opportunity and then the scuffle begins all over again.

For the first time in my 30 years of experience, I’ve seen buyers adding escalator clauses to their offers promising to beat any other offer by $500 or more.  Some put a cap on the price they will go up to, others don’t knowing that their competitors will just go $500 above that cap and win the property.

Meanwhile, at the other end of the market, million dollar properties are the only over supplied segment of our inventory – and way over supplied at that.  Nearly half of the residential inventory is in the over-million dollar range.  And this segment represents only ten percent of the market.
One hundred more million-dollar homes are now on the market than have sold so far this year.  Of the 254 such homes for sale, probably less than one hundred will sell in the rest of the year.

The $700,000 to $1,000,000 market is generally in balance with just about as many for sale as have sold this year.

By area, Frisco is the tightest market with only 27 residences for sale at the start of the 4th Quarter, less than a 2 month supply.  144 had sold to that date.  Keystone, Dillon/Summit Cove and Wildernest/Silverthorne had about a 3 month supply each. Breckenridge had a 4.5 month supply reflecting the large number of slower selling million dollar homes offered there.  Copper Mountain had a whopping six month supply, although that is probably the tightest that market has been for years.  For reference, Summit County normally has about a year’s supply of property for sale.

Generally this screamingly tight inventory would be driving prices up like a rocket, but not this year.  Through the 3rd Quarter prices were about 3 percent higher than this time last year.   Average price usually doesn’t increase much if at all in the 4th quarter so this will be a slow appreciation year.

number sold 3 qtrsAlthough buyers are standing in line for the next listing to drop, they will only pay so much.  As prices regain the historic highs of 2008 and 2009, buyers are getting cautious.  And appraisers are as well.

Sellers must set asking prices precisely right to avoid getting stuck on the market with no showings or offers or to not appraise if they do go under contract.  Every day the MLS shows about as many price reductions as new listings so many sellers are miscalculating and expecting the low inventory to save them.
Properly priced properties are selling in days if not hours and closing in an average of 113 days.

So what’s going to happen?  Will the inventory increase rapidly after the election?  Will more buyers appear once the massive uncertainty and fear are over?  Will the Fed raise interest rates once it looks like things are settling down?  Will that drive buyers to act or cause them to shrink back?  Will Frodo take the Ring to Mt. Doom and save humanity?  
Yes. Definitely. Or no. Or whatever…

This market will probably muddle along at about this rate with prices and volume in this same neighborhood for a year or two while sellers slowly dribble back to activity.  We’ve just been through a long period of events and negative economic climate, mostly self-induced, that have made second home buyers and sellers hang back.

The damage has already been done and it will take both buyers and sellers a while to get over it.   

Be Smart About Updating Renovate early, not right before you sell

The phone call usually begins: We’d like you to see our place and give us an idea of what we need to do to make it ready to put on the market.
Well, I can give the caller the most important piece of advice without even seeing the property.

Don’t spend $20,000 on your powder blue and harvest gold kitchen the week before you sell!

Don’t spend $20,000 on your powder blue and harvest gold kitchen the week before you sell!

Don’t spend a fortune on renovation the week before you sell it.
Many owners have either done some renovation since they bought or the previous owner had updated the property.  Even if nothing had been done since then, the property is better than in original condition.  In that case, do the absolute minimum to dress up the property and price it to sell in that condition.

Generally spending more than a few thousand dollars to paint or replace carpet won’t bring a much higher price but it might bring a quicker sale.  And even that should only be done if the carpet and paint or other such items really create a terrible impression with buyers.
Sometimes you walk into a condominium that looks exactly like it did the day Kennedy was shot.  OK, there were no condominiums in Summit County that day.  But occasionally the blue shag and mahogany Packard-Bell stereo unit are still there.  Even in that case my advice is to price the property as it is and not to renovate the kitchen and baths just ahead of the sale.  You won’t get a price high enough to repay your improvements right away.

This is particularly true of condominiums which are basically interchangeable.  Except for location in the building, there’s not much difference between them that can’t be replicated with renovation.  $40,000 will generally make a condominium a show place.

But will it sell for $40,000 more than the one next door right after your new kitchen is done?  Probably not.  The appraiser will take the renovations into account, but not enough to justify $40,000 more than the recent comparable sales.  Unrenovated, it will probably sell for not much less than the fully renovated competition.

Homes are different and that kind of investment can perhaps be justified, but barely.  So you sell for $40,000 more and break even on the renovation.  Congratulations, you just did a large construction job for no pay.  The new owner will probably reward you with a hearty handshake.

If you are going to hold the property for more than a couple of more years, do the complete renovation immediately and enjoy the granite and tile and new carpet and appliances.  When you finally do sell, your property will show better and sell for more money than the one next door which did little or none of that.

But whatever you do, don’t let your property languish in a bygone era.  Re-evaluate its condition periodically and do the repairs, maintenance and improvements as you go along.   It will take effort to keep it up to date, and it’s supposed to be a place you come to relax, not work.  But neglect will catch up with you, probably at the most inconvenient time.

Buyers Are Feeling More Angst Than Ever

This will be recorded in the Official Log of the Real Estate Business (I’m sure there is one) as The Year of Reluctant Buyers.

Every day the MLS shows the number of new listings, pending listings, sold listings, price reductions and back on market listings.  And for the second half of this year, the number of properties coming back on the market has been about the same as the number of new listings each day.anxiety

Personally, I’ve had more terminations this year than in the previous 30 years combined.

Buyers seem just barely able to convince themselves to buy and are quick to terminate, usually because of buyer’s remorse.

But there is no Buyer’s Remorse clause in the purchase contract.  There is a Good Faith clause, though.  That means using the inspection, HOA documents review, due diligence documents review, survey review, property insurance review, or loan conditions to terminate and have the earnest money returned to them.  So buyers have lots of outs.  And they are using them.

The underlying cause for this termination epidemic seems to be free-floating anxiety. Every time the stock market loses a thousand points or some presidential candidate who shall not be named sends another stupid tweet buyers rethink their position.

One buyer returned from attending the Republican Convention and immediately terminated his contract.  
Usually there’s a back-up contract that results from the multiple offers we get for most properties, so things still get sold.

Should You Buy An Aging Condominium? Well, They’re All Aging…

Condo AvgThe odds are high that the Summit County condominium that you buy will not be new construction.   It could have been built as early as 1972.  That means up to 45 year old wiring, plumbing, fireplaces, windows and exterior siding and roof.
Should that keep you from buying one?  If you do buy, what can you expect as the building ages even further?
Well, age hasn’t kept condominium prices from rising.  In the past 10 years, the average sale price for condominiums in Summit County has increased by 29 percent, even through the Bush Depression.
Age obviously isn’t holding prices down.  Then what’s going to happen to these old condominiums?  The best-located ones might be bought out and torn down for new construction, but in the vast majority of locations, Homeowner Associations will have to invest in updates and improvements.  And guess who pays for that?
The good news is that when building-wide renovations are done values have always increased as much as the assessment, often as soon as the job is done.  And most owners have stuck with the complex when major improvement projects take place; there’s been no mass exodus driving down prices.
Several complexes have undergone such a makeover with great results.  Silver Queen East and West, Summit Point, Deck Gore Range and several others have done major renovations and have increased in value. But many have not even begun the process and owners face expenses in the future.
There is real value in buying at an unrenovated complex, as long as you know what you are in for.  These complexes generally lag behind the curve of appreciation for a few years as owner sentiment builds for change.
Improvements are generally paid for with a large special assessment (some have run as high as $20,000 per unit) because no association budgets for major renovations 40 years in advance. But as soon as the job is done, values increase.
Buyers who want to avoid the cost or inconvenience of exterior renovation projects should stick to complexes that have already done the work or are new enough that it won’t be an issue for several years.  But this later category is shrinking and every complex will face the renovation issue eventually.
When evaluating these costs before buying or deciding whether to stay in a unit you already own,  remember why you wanted a condominium in the first place.  It’s more convenient to pay HOA dues than separate bills each month for water, gas, electric, cable, and maintenance.  And it costs the same or less as well.
Just because a condominium complex is aging doesn’t mean it’s a bad deal.  Like any investment, it requires some attention to maintain its value.

Rumor, Gossip & Innuendo

radar-dishesCan you hear me now?… In Summit County the answer is often NO!!!  Service is generally bad. But when it gets really busy, the cell towers (both of them) are overloaded by visitors sending selfies (Hey y’all! Here’s us with the bear!) back to Texas.  So since free enterprise has failed us, it looks like the towns are going to have to build their own if a ballot measure allowing them to do that passes.  Remember when phones were a public utility?  Hell, remember operators and directory assistance?

And the reason phones don’t work… is because I-70 traffic set new records this year.   1.3 million visitors came through here in June alone and the average is about a million per month.  No wonder you can’t get into a restaurant or find a room.  Shoulder season used to be when locals went out to eat (at the 3 restaurants still open).  Now there is no shoulder season and we all go to Denver to dine out.

Wait… something’s missing… Oh, it’s a big chunk of The Thorne aka. Mt. Silverthorne.  Looked like a forest fire one Saturday morning with a big white plume rising above the Gore Range.  Later there was a new white rock face and a giant debris pile at the base of the peak. You can see it from downtown Silverthorne.  Always an adventure in Colorado.

Experts agree: It will either dump snow in epic amounts this winter… or it won’t.  The usual El Niño/La Niña debate is in full swing with many prognosticators warning us to lay in supplies for a long deep winter.  Looking back, La Niña has brought just as many huge winters as it did dust on crust winters, so flip a coin.  Your chances are just as good as the forecasters.

You can always tell it’s an election year… highway maintenance needs ignored for years all become a priority and the roads are ripped up at exactly the same time cutting Summit County off from the civilized world.  And yet the traffic count still made a new record… go figure.

The Last Word…

The resort market is always at the mercy of larger events.OLYMPUS DIGITAL CAMERA
It takes confidence to buy a second home and if anything erodes the feeling of financial security, luxuries are put on hold.  Similarly, existing owners will sit it out and hope for the best until there is a definite reason to act.
Right now this market is caught between action and inaction.
This will change.
And when it does, I’ll be here to advise you based on my 30 years of local experience.
Call me if I can be of service.
Chuck Leathers, CRS
Owner/broker

Meet Your Professional

Tel:

,

The Real Estate Insider