Sales Are Down, Prices Are Up…. Inventory Still Tight As A Tick

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.

Take Your Rentals Off Autopilot and Start Driving

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.

Rumor, Gossip and Innuendo!

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!

The Perfect Negotiation: No One Is Completely Satisfied

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.

“Give me $3000 for the window!”
“I’ll be dammed if I will!!”

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.

The Final Word

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
broker/owner

Rumor, Gossip & Innuendo!!

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.

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.

What to Know About Shared Ownership – Your options range from solid to sketchy

Occasionally buyers and sellers ask about shared ownership.  How does it work, what is a share worth, are there any available?  
It’s a complex question and every share situation is different.  Sharing a property can work well for some, not so well for others and the difference is in details of the share set-up.
Often the owners are a group of friends that go together to buy a property and share the use.  It’s pretty loose.  Often they don’t bother with a written partnership agreement or maybe even a calendar of use.  They are all friends, after all, and have owned the place forever and there’s never been a problem.  Then one of them wants to sell his share.partnership-cut-650w
What do we do now? How do we decide what price to ask?  Do the others get a chance to buy it first?  How do we decide who to let into the partnership?  If none of this is written down anywhere or hasn’t even been thought about, new owners are walking into an unknown situation.
Other times the owners have covered all of this in a written agreement, maybe even formed an LLC to run the property.  These partners generally have a set calendar of use, a budget, rules and an exit strategy.  This kind of shared ownership has more value and is saleable because new owners can understand what they are buying into.
The most organized situation is a Quarter Fee Association or some other arms-length management entity.  It administers the unit, sets and enforces the rules, collects dues and maintains the property.  These shares are freely transferable and pretty easy to buy and sell.
Any shared interest will be hard to finance and shares generally sell for cash.  Sometimes another partner or the seller will finance for the new owner.  Sometimes, one partner got the loan and sold shares without telling the lender so the lender thinks there is one owner.  You can imagine the risk in this.
The best financing strategy is for the buyer to use a line of credit from another property for the cash to buy the share.
Generally, quarter ownership is the smallest fraction that maintains its value.  There are fifth shares, tenth shares and timeshare weeks but anything less than a quarter is generally hard to sell for what you bought for.
As to time shares, you only need to know that they are not real estate and not an investment.  The real money for timeshare operators isn’t from selling all the weeks.  It’s the ongoing dues from 52 owners for each unit.  You can always rent a week or two just like at a hotel without buying into the “opportunity” to trade weeks.  Just say no to time share.
If you are part of a small share partnership and want to sell, your easiest exit is if another partner buys you out.  If many of the partners want to sell, selling the whole property will bring the partners the most return.
No matter what kind of shared interest you have or want, be sure there’s a written agreement that outlines all of the rights and responsibilities of the owners.  
Otherwise you are a test pilot.

Ridiculously Low Inventory Still Hinders the Market

This has been an exceptionally up and down year for sales in the County.  
In the first nine months, three have had significantly lower numbers sold than in the previous year.  September was the latest with eleven percent fewer sales than the previous year.  This is troubling because August, September and October usually bring the highest number of closings for the year.buyers-sabotage-02
August was up by only four percent.  October needs to be busy to bring the market back up to last year’s total number of sales at 2107.
There have been two months with significantly more sales than the year before.   The rest have followed last year pretty closely.
Average prices, on the other hand, are still well above $600,000.  Again, this is the first time in history that the average sale price has been above that number.  It looks like prices will stay at this record high for the rest of the year.
Both of these trends are the result of the near total lack of attainably priced inventory.  At the start of October, the number of properties offered fell back to just over 700, about the number that were offered last May.
There have never been even close to 1000 properties on the market at one time this year.  
And many properties that are listed are vacant land.  There were only 440 residences for sale at the beginning of October and only 235 of those were priced at under $1 million.
For reference, 1179 residences sold for less than $1 million through September while 239 sold for more than that.
Yes, the million-dollar market is still over supplied and the under $1 million market remains severely under supplied.
New construction can’t fill the gap in Summit County.  There isn’t enough land left to build on and that which can be built is too expensive to make sense of building lower priced residences.
There is no relief from this situation.  When demand spikes in the future, the affordable/attainable market will disappear.  
With Dillon Valley East one-bedroom units going for nearly $200,000, it probably already has.
The model for this kind of market is Aspen.  It, too is surrounded by National Forest or deed restricted land and is largely built-out.  There is essentially no affordable housing for 40 miles and prices average in the mid-millions.
Summit County has already experienced the demise of the under $200,000 market with only 100 or so sold this year, usually in minutes.  A grand total of seven residences sold for under $150,000.
While prices may… probably will… decline in the future, we’ll probably never see the average price under $500,000 again.
No wonder no one’s selling.

Rumor, Gossip & Innuendo

radioThe solitude of a 14,000 foot mountain top… along with 300,000 of your closest friends.  That’s the estimate of how many times Colorado’s 14’ers get climbed per year. It’s getting attention due to the dozen or so deaths on those peaks this year.  Having often found a giggling group of Texas kids in T-shirts and flip-flops up there, it’s always been a mystery why more of them don’t die.  Guess Darwin was wrong.

Resistance is futile… prepare to be assimilated.  Most of Utah skiing is now owned by Colorado companies.  Aspen Skiing bought Deer Valley this year and Vail assoc. jumped on a lease that Park City had failed to renew in time so every ski area in striking distance of the Salt Lake airport save one is owned by two Colorado companies.  And most major skiing in North America is in the same boat.  In Summit County… home planet of the Borg. We don’t even think about it any more.

After a couple of years without a big bike race… one came back this summer.  The Colorado Classic spent a day racing around Breckenridge.  It’s not as epic as the USA Pro Tour, but it’s good to have the event return for a while.  As both ski and bike racing have proven, however, Coloradans would rather be doing than watching, so crowds and the revenue they bring, are hard to come by.

No college, no theater, no nuthin’… certainly not a 48 unit complex in Dillon next to the CMC building.  Once again, forces in Dillon want to stop development as happened with the Lake Dillon Theater (went to Silverthorne) and the Colorado Mtn. College expansion (went to Breck).  With no new buildings for 20 years and a town center that has never launched, recent town approval for the Dillon Flats complex threatens to break the streak.  Maybe guard gates like in Beaver Creek would cut down traffic.

And finally… Summit County governments are trying to come up with regulations to limit those annoying drones.  You know, they make pistol shot shells in .44 magnum… just sayin’.

Meet Your Professional

Tel:

,

The Real Estate Insider