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!
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.
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?
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!
They say that the result of the perfect negotiation is that neither party is entirely satisfied. That sums up the Summit County real estate market pretty well right now.
Sellers still expect 10% more than the last sale and buyers are already prickly about the historically high price they are going to have to pay. The result is inspections are becoming a hard negotiation instead of sticking to items of safety, habitability and working condition. Sellers are very resistant to concessions thinking that there will be another desperate buyer along any moment.
At the end of the transaction we often have two parties who both feel shorted.
Realtors know that there are elements of truth in both positions. There are enough buyers to keep demand higher than supply, but if the seller blows the first one off the holding costs of increased time on market may outweigh the gain of another offer. And some properties get a reputation for difficult dealing which never helps.
If there were a normal number of properties for sale, our market might be in trouble because demand is actually not increasing. The number of properties sold over the past few years been essentially flat. But the lack of inventory has created an artificially “hot” market that could evaporate if events move everyone to sell at once. It’s happened before. Think 2009.
Meanwhile prices increased by15% last year. Higher prices take some buyers out of the market due to sticker shock. Rising interest rates this year means other buyers can no longer qualify for a mortgage.
Realtors are always walking a tight rope between buyer and seller expectations. And the disconnect between those expectations has rarely been greater.
Sellers need to remember that if the national economy or world events change substantially, the number of buyers will probably decline and the number of properties on the market will increase.
Summit County is still a second home market and those buyers don’t have to buy. Our primary home buyers are usually stretching to get into the home already and any problem can take them right out of the market.
At any moment, Summit County’s market momentum could tip back towards buyers. This will require flexibility, a concept that has been dismissed by sellers for quite a while in our market.
Sellers may need to price more aggressively than they are presently willing to do. This doesn’t mean slashing the price or “giving the property away”. It means pricing with or even slightly below the last sale. That will probably still bring the highest price ever paid.
Buyers need to recognize that there is an historic low number of properties for sale, prices are increasing and for as long as that lasts, sellers have leverage.
Well it’s summer again in Summit County and the visitors and second home owners are all back again.
Lake Dillon has become a stand-up paddle mecca and there are more bicycles than can fit on the paths. The Buffalo Mtn. trails affected by the fire in June are open again and hikers are all over the back country.
Despite the fire ban that cancelled all fireworks over July 4th, the parades and concerts were jammed and no one complained about the lack of pyrotechnics for a change.
Just another Summit County summer… enjoy it while it lasts!
See you here!
Chuck Leathers, CRS
Frisco Bay is going to be deepened…. Can cruise ships be far behind? The project has no expected start date yet, but is in the planning stages. 75,000 cubic yards of dirt later, Carnival cruise lines will be able to pull right up to Main St. where colorful locals will weave baskets and hats for happy cruisers to take home. Steel drums, anyone?
Having won about half of the medals from the Korean Winter Olympics… residents of Silverthorne have changed the name of the town to Goldthorne. Doesn’t roll off the tongue like Goldenthorne would, but townies didn’t want to be confused with that other Golden down in the Front Range. Silverthorne must have the highest gold medal per capita number in the world right now.
Now if Lindsey Vonn (82 wins) and Mikaela Schiffrin (43 wins) would just move to Silverthorne… every other ski town could just give up. Well, they only live 30 miles away. We could just claim them. You know… East Vail, West Vail, Eagle/Vail, why not Silverthorne/Vail?
And the debate is on… should Colorado host a Winter Olympics? We turned them down once before and there are great arguments both for and against. Some think we should have them just to get I70 fixed properly. Good luck with that. Seems that Nordic events couldn’t be run in Summit County, though. Olympics big-wigs think it’s too high here. Wimps.
It surfaces every Spring so maybe we should change the name of mud season… the innovators at the Town of Breckenridge are considering DNA testing (Really!) to track scofflaws who don’t pick up after their dogs. Fill in your own joke here.
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.