How’s the market?

Summary: Expect some new properties on the market in the Spring (April to June), but not an abundance of listings. Pricing is softening in certain sectors, especially where STR restrictions are in place, but prices are by no means slashed. Dollar volume and number of transactions are slowing – at least by ⅓. Days on market are increasing and list to sale ratio is at around 97-98%.

In Summit County, like the rest of the nation, we are faced with the shake up from higher interest rates which started in May of last year. Number of sales slowed to a level not seen for over 10 years, but prices remained strong. But Summit County also had another layer of market volatility created by Short Term Rental regulations. With over ⅓ of Summit County’s properties under STR restrictions, the downward pricing pressure of losing this important property right is showing up now in decreasing pricing in neighborhoods with STR restrictions. Last month, I wrote an article on this topic. This month, I am continuing to see signs of price softening. For example, in the last few days a Timber Ridge 2/2 unit in Wildernest closed for $527,500. In December 2021, the same size unit closed for $660,000.

I had a phone conversation with a local appraiser on March 1. He was doing an appraisal for a Wildernest condo. We hashed through the numbers together, and he told me that his analysis shows a 17.5% price decline for Wildernest condos in the last year. This is the first time he is now noting in his reports that the market is in decline, and the signs continue to point in that direction.

But what about the rest of the markets? It’s easy to single out Wildernest because it has a lot of comparable condos, and we know that there hasn’t been a STR license available since May of 2022 (and there won’t be any available for many years). I had a colleague send me the following information about Zone 3 Breckenridge sales comparing 2021 to 2022. Zone 3 has no more STR licenses available, and it is estimated that wait time for new license could be up to 30 years.

ZONE 3 SALES

ALL PROPERTY TYPES
2022 Solds= 145
2021 Solds= 264
-45%

SFR
2022 Solds=77
2021 Solds=134
-42.5%

CONDO/TOWNHOME/DUPLEX
2022 Solds=68
2021 Solds=130
-47.6%

I also reported last month that dollar volume was down 25% from 2021 to 2022 and number of sales were down 37% Comparing January 2022 to January 2023, monetary volume was down 58% and number of transactions were down 48%. We did see increased activity in February over January indicating that the market is picking up a bit. But we won’t see 2020 and 2021 levels of activity because we aren’t in a 3% interest rate environment, and the inventory is not abundant. (People are probably keeping their 3% mortgages and STR licenses and only selling if necessary).

In case you missed my 2022 year end report, you can find it here. 

What does it mean for you?

If you are a seller, be prepared to price at or just below market to be the next sale. Also, days on market could creep up to 30 or more.

If you are a buyer, the investment return numbers on STR’s are tough with current interest rates. You will need >50% LTV to begin to break even. If you are a buyer not interested in STR, then be looking in areas with STR restrictions where you will face little competition.