Will Summit County Colorado homes depreciate this year?
How does the national economy affect our Summit County real estate market?
Today I attended a session with the chief economist for the National Association of Realtors, Dr Lawrence Yun. I found it very interesting to hear his take on the economy and how it translates to homes in Summit County, Colorado.
What I took away from his presentation was that real estate is local, and what has affected home sales so negatively is the sub prime mortage mess. Areas that had high incidences of sub prime mortgages (more than 100% financing, stated income, adjustable rate mortgages, and other similar programs) are now the areas with a lot of foreclosures. Where foreclosures are not as common, the markets are still stable or appreciating. The worst areas are Miami, Phoenix and Las Vegas, where a combination of subprime loans and speculation caused rapid appreciation, and just as rapid depreciation. However, Dr Yun seems to think that the prices still could increase 10-50%, even there, over the next 5 years.
Denver was one of three cities (Seattle and Dallas being the other two) that he thinks have the best chances of appreciation of 25-40% over the next five years, primarily because of job growth and the lack of a real estate bubble in the last few years. Denver was hurt with subprime mortgages, primarily because there were no licensing requirements of mortgage brokers at that time, and many unqualified and perhaps unscrupulous, people jumped into it thinking it was easy money. Since about 2/3 of our Buyers live in Denver and the Front Range, the economy there directly affects us, but usually later in the cycle, and not as badly.
Real estate in Summit County is just now feeling some fallout from the national economy.
Home prices are leveling off and not appreciating at the same rate they did 2005 to 2007. Our market was getting a bit overheated, and the last thing we need is the bubble that hurt Miami so badly! In my opinion, 2008 will be a good time for Buyers to find the Summit County home or condo they want. However, not all Sellers get it yet, and many are not ready to price realistically for the market. If inventory levels increase and time on the market extends, they will eventually get the message, and will either lower their prices or take the property off the market until it improves again. Vacation home owners are often not as motivated as primary home owners who have been transferred or have already bought another home. Their attitude is often that they don’t need to sell, but will if they can get their price. It is not a very helpful attitude sometimes, but it is completely understandable (by everyone except the Buyers!).
Watch for my next few posts as I write more about the information Dr Yun shared with us and also the other tidbits I have gathered about the real estate markets in other resort areas as I attend the Rocky Mountain Resort Alliance meeting in Park City, Utah. Perhaps you should subscribe!
June 27th, 2008 at 5:24 pm
It looks like the slowdown is creeping up there now after a delay. Do you agree?
I have to think a large portion of the condos are owned by regular middle class and upper middle class folks that still need rental income and price appreciation. Their first homes have probably seen some equity loss and I’m sure equity loss and the added cost of a second home may play a role. Do you expect a flood of the market of condos?
I’m also wondering if ski vacations will take a hit this year. “Staycation” seems to be a big buzzword and high gas prices and a lackluster economy don’t do much for skiier visits. Maybe these folks can wait it out, but it will be interesting for sure.
June 30th, 2008 at 8:17 pm
Hi Tom, it does seem that we are slowing somewhat. For the county as a whole, we are down around 38% from a year ago in the number of transactions. I am counseling Sellers to not expect to sell for more than similar homes sold for last fall, unlike the 10% or so that they would price above the last sale a year or two ago. Our inventory levels are moving up, although they are not yet at “serious” levels. I don’t expect a flood of condos, but I do expect more to come on the market, which may soften it further still, until Buyers feel comfortable again about spending the money. I have been in this county for 15 years, and I have yet to see property values go down for any length of time. They may plateau, and it is possible they will drop in some areas for a year or so, but my guess is that they will continue to go up. This is a beautiful place to have fun on weekends, and to retire to, and we will still see people wanting to do just that.
As far as vacation rentals go, I own a condo at Copper and I rent it myself. I am still getting lots of inquiries for rentals. The county has been busy this summer, and I suspect that people from the front range are coming here rather than going out of state. Good snow will bring them here, and they will stay away when we don’t have any. As you say, it will be interesting! I think the next month will tell us what the trend will be for the rest of the year.