Welcome to Mountain Real Estate – this is Candice De with Your Castle Summit coming to you with an update on some national trends, some Denver trends, and Summit County Colorado.
I’ll start with the national update of some of our macroeconomic factors that impact real estate:
The first one is consumer confidence about housing.
Fewer people actually think prices are going to go down. The current forecasts for how much prices will change actually range from 1 1/2% to 5 1/2% in appreciation (so prices going up). Last year’s average appreciation across the US was 5 1/2% and it was about 2 1/2% in Denver, so even though it felt doom and gloom prices were going up.
The next factor is inflation.
While there’s been some good news as inflation expectations are down, they’re not down enough, so mortgage rates have stayed in that mid-6 % and have ticked up a little bit lately. That affects new mortgage applications which is how many people are getting in the game for buying. New mortgage applications are at their lowest in the last 10 years and really that’s a result of inflation’s impact on mortgage rates.
With mortgage rates higher, it really impacts your affordability and what you can buy. To put that in perspective: in 2021 you could buy a $750,000 home and have about a $2,500 mortgage payment. Now in 2024 for that same mortgage payment of $2,500, we’re looking at closer to $450,000 homes, so there’s a big impact on what you can afford given the mortgage rates.
As far as sales, we’re lower than pre-pandemic sales.
In 2021 there were about 6.9 million sales and last year in 2023 there were an estimated 5 million sales. So we’re still not back to that pre-pandemic level of the number of homes moving.
We are still in a seller’s market. There’s less than three months of inventory when we look at a national scale, and I’ll touch a little bit on where we’re at in Denver and Summit County in a minute. Six months is a balanced market. Anything less than that is a seller’s market, and that’s where we’ve been for the last several years.
Some of that is due to sellers sitting on the sideline likely due to the fact that they have low mortgage rates that they locked in the last few years. Over 60% of the mortgages out there have less than a 4% rate so those folks are not very motivated to transition or move to a different home and take on a 6% or 7% mortgage rate.
There are some talks from the Biden administration about trying to find ways to encourage people to release those golden handcuffs on low mortgage rates, but time will tell if anything comes through.
One other thing to note as we talk about housing and affordability across the US is really that gap in net worth between renters and homeowners, which is increasing quite a bit as prices go up. Those folks that have been able to become homeowners have an increase in net worth. Back in 2010 that delta was around $181,000 so if you owned a home in 2010 versus rented you had on average $180,000 more in your net worth. Then when we move over to 2022 (we don’t quite have the stats for 2023), but in 2022 that rose up to $385,000. That gap in net worth relative to home ownership is growing. Home ownership is really a pathway to success. This is one reason why everyone is focusing on housing and affordability and “how we can get more people in homes” because wage rates certainly have not kept up with that type of growth.
Now I’m going to move into a Denver update.
There’s a couple statistics that I want to share as we’re entering that peak market season in the spring in the Front Range.
First, showings are nearly the same as pre-pandemic levels so we’re seeing still good showing activity but not like we saw the last couple of years.
New listings are up compared to last year so there are more listings coming on the market compared to last year when there was more volatility.
The median sales price is also up about 3%, which is around $600,000 for single-family homes on the Front Range on average. We can look at a neighborhood level if anyone would like to as well.
So what we’re seeing in Denver is you’re not getting any steals of deals, and things are that are priced fairly are still moving quickly. Unfortunately for buyers, we are still seeing multiple offer situations on competitive buys where homes are priced well. So it’s not total relaxation in the buyer’s market.
Now we’ll shift over to the Summit County update.
We have seen median sales prices continue to climb, so the median sales price in Summit County is up about 4% from last year. The price per square foot has actually stayed steady. It’s around $650 per square foot across all of Summit. It varies by the neighborhood and area you’re in and the housing type. We’re seeing on average across the county single-family homes priced around $550 per square foot and condos around $850 per square foot. In your populated areas like Breck, Frisco, Keystone, Silverthorne, and Dillon it’s a little bit higher, and in some of your more rural areas, it’s a little bit lower.
We are back to pre-pandemic levels of showings, similar to Denver. We’re seeing around 2 1/2 showings per listing versus at the peak we saw over 5 showings per listing. It feels slower but it’s back to normal levels.
Another thing I want to touch on in Summit County, which is a question we get a lot, is about cash flow. We hear “I want to buy a Mountain House and I want it to make a little bit of money”, so I want to talk through a couple of scenarios.
So let’s take one scenario here: a middle-of-the-road average 2-bedroom condo that will make around $30,000 in rental income. This is a conservative estimate based on some recent projections that we’ve seen accounting for the market slowdown in the last six months and some actual estimates from property managers in the area. On average a two-bedroom condo in one of our primary neighborhoods is going to be around $1,000,000 that varies depending on where you are and the condition and size of the condo, but let’s say the two-bedroom condo cost $1,000,000 you make about $30,000 in rental income as a short term rental. Note, that’s if you’re lucky enough to get a short-term rental license or be in a short-term rental neighborhood.
If you put 25% down, the mortgage will be roughly $5500 which covers taxes insurance and a modest HOA fee. That varies wildly depending on where you are.
This means you would have to come out of pocket around $3,000 per month to make up that difference between your mortgage payment and your rental income. So when we hear people say I want something that’s going to cash flow, that average scenario shows a negative $3000 per month. Granted $3000 per month is better than what you would pay without renting it. And for some it’s better than driving on I-70, or paying for a weekend in the mountains every weekend to somebody else’s rental. And there are tax benefits.
There are certainly additional perks, but as far as just looking at cash flow the numbers are really hard to pencil out. Granted there are ways to make these numbers work better, such as self-managing instead of using a property manager, or putting more money down, or factoring in your taxes and depreciation as well as your appreciation of the property. There’s a lot of different factors that you can look at based on your goals and your situation, so work with your local real estate professional.
If we hear from potential buyers I want to own a house in the mountains and make a little money unfortunately it’s a little bit harder to do than I think some people realize, so it’s not all doom and gloom if your main goal is cash flow. It might mean you have to get creative, and there are options. There are partial share homes where you can own 1/4 share and use it when you have assigned weeks and not have to deal with renting or any of the property management pieces that come with short-term rentals or long-term rentals. There are ways to do seasonal rentals or long-term rentals where you don’t have the property management fees but you still have those seasons where you can use it. And another option is just looking at neighboring communities like Blue River instead of Breckenridge or looking at Leadville instead of Frisco. So there are more affordable areas that aren’t in those main primary markets for the ski resorts.
That covers the national update, the Denver update, and the Summit County update.
Now I want to leave you with a little taste of something positive in the mountains, so I’m going to give you a couple of shows that are being shown at the Dillon Amphitheater in Dillon CO. The full schedule is here: https://www.dillonamp.com/summer-concerts
If you have not been there I highly recommend it. It’s a beautiful venue, and I think in Colorado it’s second to Red Rocks, which is really hard to beat. Dillon has a grassy area as well as some concrete benches and it overlooks the lake, so sunsets are beautiful. You have views of Peak One and Buffalo Mountain, and it’s really a magical setting as you watch the sunset.
There are some amazing shows coming up!
That is all for Mountain Real Estate. This is Candice De signing off