WHY YOU SHOULD BUY NOW

In 2008 and 2009 I was working with one of the best clients I have had in my real estate career. In the summer of 2008 we looked at a large number of residences on acreage with water features and were not able to find the right property. We looked at many listings but most seemed over-priced, or at least they were not what we defined as “good buys”. At the time the real estate market in Southwest Colorado was depressed, in the early stages of the great recession. Still, because we were looking for premium residences with premium features, most Sellers were quite proud of their properties and hopeful that with the high level of buyer traffic during the summer months, if they held out, they would get their price.

At the end of the summer we decided the best approach would be to wait things out. In February we resumed our search. We found many Sellers with greater motivation and a good number willing to look at offers substantially below their listing prices. After ten days of looking we found the right combination of properties and were able to successfully negotiate good prices on each of the three properties he purchased.

Bob is the most financially successful individual I have had the privilege of working with. He started with nothing and built a company which he eventually took public and subsequently sold, generating significant wealth for himself and his shareholders. Because of his strong management and financial research skills, I knew I would learn much working with him, which I did. Bob accurately gauged his purchasing power in the “off-season” would be much greater and the competition among Buyers much lower. I have shared my “Bob Story” with many of my Buyers, suggesting that if they were serious about obtaining a really good value, they should not put off the buying decision until spring or summer. February and March are great months to buy real estate in the mountains.

According to the National Association of Realtors, January and February home prices are 8.45% lower than July and August, two of the most popular homebuying months. The NAR Chief Economist does not expect this spread to remain as great going forward, but still, the savings can be substantial.

Another reason to buy now is that mortgage interest rates are expected to rise further during 2017, possibly by as much as a half a percent. On a loan of $300,000, a half point rise in rates would increase the monthly payment by $88, over 30 years that amounts to an additional $31,680.

Yes, here in the mountains of Southwest Colorado a lot of Sellers will take their homes off the market for the winter, which would make the available inventory look more scarce than it really is. I can research which properties that fit your criteria were taken off the market and whether those Sellers are open to having you look at their home ahead of putting it back in the MLS. You would be surprised at how much further your money goes when buying real estate ahead of the strong selling season.

CONDO PRICES LEAD THE MARKET IN 2016

Market Still Improving Overall.

Looking at the broadest measurement, the market during 2016 was ahead of 2015. Total real estate sales recorded through our local MLS system showed an increase year over year of 8.2% in the number of properties sold. The Total Dollar Volume of $148,515,994 was up just over 6% above 2015.

Single Family Homes

The total sales of single family homes sales ($114,867,448) was up over 16% and the total number of homes sold was up 13% over 2015. So, while the aggregate numbers for single family home sales are quite positive, there was very little increase in the average selling price per square foot. For 2015, homes sold for an average of $164.40, while the average for 2016 was $166, an increase of less than 1%. But, in the years between 2012 and 2015 we saw considerably more value appreciation–in 2012 the Median Price was $ 217,000 and the average selling price per square foot was $120.76 an increase of 37.5% over the last four years, or an average of 9.4% per year. Newly constructed homes sold for an average of $178 during 2016, a slight increase above the average for the prior year.

Condos and Townhomes:

Condo and townhome sales showed real strength during 2016 with volume was up over 25% from 2015, and the total number of units sold up nearly 16%. What is more impressive is the increase in the average selling price per square foot, $138 versus $114, an increase of 21% for the year. In 2012, the average selling price per square foot for condos and townhomes was $91 indicating an increase of 53% or an average of 13% per year. This category of our real estate market has out-performed the single family detached sales by quite a margin. Will this continue to be the case going forward? Possibly.

While the strongest price category for single family homes was $200,000-$300,000, there was plenty of demand for housing priced under $200,000 but a very limited and dwindling supply. A number of those Buyers opted to acquire condos and townhomes as they found themselves priced out of the market for single family detached homes.  So, strong demand for housing under $200,000 moved up the average condo selling price per square foot. We would expect this to continue until the price of existing homes more closely approaches the cost of new construction.

2017 will be an interesting year as the community continues to explore potential solutions to our workforce housing needs and the supply of entry level priced housing continues to shrink. The Town of Pagosa Springs Planning Department is revising its Comprehensive Plan, which will hopefully address the extremely high impact fees levied for new development. We are hopeful the Town Council will not approve the proposed tax-payer funded $7 million 5th Street Bridge Project while there are so many other worthwhile infrastructure improvement needs. We could see a decision on this by January 3rd.

We may see a boost in demand for vacation homes if the federal income tax cuts Trump has proposed go into effect providing more household income and higher consumer confidence—two key factors that fuel demand for second homes and tourism spending. The other factor that could come into play is the price of oil. If the economy in the oil industry improves, Pagosa can expect to see a return of more visitors from West Texas which have been a significant element in the second home market in Pagosa Springs over the last thirty years.

Buyer Trends Going Forward:

What are we seeing in terms of trends in second homes? Buyers are looking for less square footage, more energy efficiency, lower maintenance burdens, more storage space, smart-home technologies, lots of natural light and well-appointed kitchens and bath areas.

For more specifics on any part of our local and regional real estate market, give me a call. Also, if you would like more information on what you can do to make your home more appealing to achieve a higher selling price in a shorter period of time, call or email me: Mike Heraty, Managing Broker- Pagosa Source Real Estate Advisors: email: MikeHeraty@frontier.net  Phone: 970 264-7000.

*Single family homes= detached, site-built residences, excludes multi-family, condos, townhomes, modular and manufactured homes.

Ever heard of Charles C. Parker? If not, please bear with me for a moment.

 

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At the December 5 presentations of the economic impact and traffic studies relating to the proposed $7 million South 5th Street Bridge, Pagosa Springs Mayor Volger assured the crowd there would be more public input ahead of any decisions by the Town Council. He went on to say that during the next 90 days they would be researching answers to the questions and concerns raised by the study and by the public.

Having attended that presentation, I was a surprised to read in last week’s Pagosa Springs SUN that a decision on moving forward with building the 5th Street Bridge might appear on the Town Council agenda for its first 2017 meeting, set for Tuesday, January 3. If my math is correct, that “decision time” would be 33 days, a little short of the 90 days the Mayor promised publicly on December 5.

I had planned to take a considerable amount of time, after the New Year, to carefully review and analyze the traffic study made by LSC Transportation Consultants and the economic impact study prepared by Economic and Planning Systems (EPS) of Denver, as presented by managing principal Andrew Knutson. With the newly announced potential decision deadline moved up to the first Town Council Meeting of 2017, I thought it best to get to work and offer another perspective to the community and our elected officials.
I won’t spend time commenting on the traffic study, except to point out that based on my 22 years of local real estate development and marketing experience, I believe the traffic study was based on some very optimistic commercial and residential development scenarios.

Instead, I will focus on the EPS economic impact study. I want to compliment Andrew Knutson for the very professional presentation he made to the community on December 5. I know that given the local historical economic data, projecting the impact of the proposed 27-acre ‘Springs Village’ development — and constructing a positive case to justify a taxpayer-funded $7 million bridge — presented a monumental challenge.

Early on during his presentation, Mt. Knutsen indicated the Springs Partners’ development plan for the property was not the type of plan EPS would recommend. He was against including a large commercial and retail elements in the project, feeling most of the focus should be on residential homes plus a high quality, national brand hotel with a spa. I think many of us in the audience agreed that such an approach could make more sense, given the abundance of empty commercial space and undeveloped commercial pads available within the Town. Thus far, the new Wal Mart has not attracted a single other national retailer to the Aspen Village development within the Town of Pagosa Springs. There are more than 20 pads ready for new buildings in that commercial development alone.

Looking at the numbers displayed, which I challenged openly during the presentation, I again have to seriously question several of the basic assumptions EPS depended on to derive the financial projections they presented.

First, though our community does not presently have available accurate and timely occupancy figures for all our lodging businesses, average year-round room occupancy ranges from 49%-54% are more realistic. However, in the EPS study, Mr. Knutsen projected an occupancy rate of 78%. Amazing!

We must wonder how would the average hotel occupancy rate be increased by 24%-29% based merely on one new 100-room hotel being built on the 27-acres owned by the Springs Partners. How, exactly, would Pagosa attract that many more visitors?

Looking further, EPS projected an Average Daily Rate (ADT) for the new hotel at $266 per night. An Average Daily Rate of $266 would put us above Santa Fe, and Durango! (You can check Travelocity.com for room rates at the Santa Fe Hilton Historic Plaza, El Dorado Hotel and Spa and Hotel Santa Fe, The Hacienda and Spa). What additional amenities and attractions would be required to achieve the projections presented by EPS?

When I suggested to Mr. Knutsen during his presentation that the Average Occupancy Rate and Average Daily Room Rate figures were overly (and grossly) optimistic, he agreed the figures needed to be reviewed more carefully. So, where did EPS get these figures? From the Springs Partners? Should more time have been spent on explaining how EPS sees these optimistic targets being reached?

The Town Council is expected to make an informed decision on whether to move forward on building the proposed $7 million South 5th Street Bridge — and using taxpayer-funded financing to pay for it. (This ignores an analysis of all the other financial needs within our community.) How can the Town Council make good decisions when they are not provided with realistic and verifiable economic information, but instead are provided with economic studies based on very unrealistic assumptions? If the assumptions are suspect, does it not follow the resulting projections are highly suspect?

What happens to the projected economic impact when the Average Occupancy Level is reduced to 50% and the Average Daily Rate is reduced to $225 or $200? In my opinion, few if any national hotel chains would consider signing a licensing agreement for their brand in a community with these lower rates. Given the cost of construction, debt service, licensing fees, hotel operating expenses and marketing budgets, it is highly unlikely a community with an overall occupancy rate of less than 65% would be an attractive market for a new upper tier national hotel property.

Perhaps my research is flawed, but I don’t think so. Perhaps Springs Partners already has a bona fide national hotel chain ready to build a hotel and spa the minute the Town Council commits to going in debt for $7 million. If you believe that, I have a bridge to sell you!

By the way, George C. Parker was a 20th century con artist who allegedly sold the Brooklyn Bridge to naïve investors… multiple times.

JANAURY 3, 2017 UPDATE: It looks as though the 5th Street Bridge Fiasco will get the THUMBS DOWN VOTE at tonight’s Town Council Meeting —Perhaps we can finally get on to more important Town matters!

 

SEA CHANGE COMING TO SOUTHWEST COLORADO

the_bridge_to_nowhere_by_urcanA sea change is underway in the leadership of our county and town. Two of the sitting members of the Board of County Commissioners are likely to be gone after the November election. Both Commissioner Lucero and Wadley voted in favor of building a new Justice Center along county owned property on Hot Springs Blvd. at the special meeting on September 19th. The preliminary cost estimates for a facility at that location are reported to be $28 million. Michael Whiting was the only County Commissioner to raise a concern about cost and how the local tax payers could be expected to vote in favor of such a huge expense. What economic reality were Commissioners Lucero and Wadley operating from? With the deteriorating county roads, future needs of the schools and many other financial priorities it is hard to understand the vote that took place. I expect the new Board of County Commissioners will be more responsive to the taxpayers and develop more creative and sensible solutions to the need for improved facilities for the county.

In the last forty five days, three new Town Council Members have been appointed. Matt deGraaf, Rebecca Anderson and Nicole DeMarco each bring a new and refreshing perspective to Town Council Meetings and governance. They take their positions seriously; they study the agenda packets, they ask intelligent questions and they look at the issues from more than one perspective.

The Town Council has many issues and tasks ahead of it. One of the topics sure to resurface soon is the Mayor’s plan to build a $7 million bridge to the Dawson and Mees undeveloped 27 acre parcel. This  controversial proposal has been put on the back burner while the Town waits for completion of the Economic Impact Study it ordered. I am hopeful the newly seated members of the Town Council will take a very careful and critical review of the report.

I have continually monitored real estate activity in Southwest Colorado, including the average and median selling prices of homes and condominiums, and the rate of sales. I believe it is unlikely a reputable outside consulting firm will find our current market conditions will justify a large scale residential and commercial development, one that would require selling price ranges above $300 per square foot. It is equally doubtful to expect a national hotel chain to build a new hotel project while our present hotel occupancy rates remain below 40%. Mees and Dawson have not prepared a market feasibility study, an absorption rate projection or a construction cost estimate for their “development”, I doubt an outside consultant will able to find economic justification for a taxpayer investment of $7 million for a bridge to their land. How the Mayor and his friends Mees and Dawson could possibly spin things differently remains to be seen. With three news voices and votes on the Town Council, we all hope sensible, rational decisions and direction will prevail.

IMPROVEMENTS IN ENERGY SECTOR MAY IMPACT SOUTHWEST COLORADO

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MAJOR NATURAL GAS PIPELINE PROJECTS- TEXAS- MEXICO

Recently we closed the sale of a property south of Pagosa Springs, which we had listed for sale at $1.6 million. So far this year, the sales activity above $1 million has been limited and our analysis clearly indicates the depressed energy sector is at least partially to blame. Going back over a ten year period, more than half the purchasers of $1 million+ properties have been from Texas. A very large percentage of those purchasers have been connected to the oil and gas industry. The price of oil began its descent in July of 2014 when it was above $100 per barrel to today where it currently trades in a range $40-$50 per barrel. With the downturn, oil rig counts have dropped, and layoffs and capital spending cuts among large and mid-size oil firms have been widespread as companies make adjustments to ride out the downturn. The ripple effect of these changes began to be felt here in Southwest Colorado a year ago–more luxury properties were put up for sale and fewer Texas purchasers were actively shopping. To date we have not seen any drastic price cuts or panic selling, but luxury properties are certainly taking longer to sell and there is a higher level of negotiating taking place. With all this negative economic news, what is there to be optimistic about?

Back to the sale that we just closed. The purchaser owns a company engaged in construction of natural gas pipelines. Recently several huge gas pipeline projects were announced, including a line supplying Texas gas to Mexico’s factories in Monterey and other industrial centers. His company will be involved in the construction of the huge natural gas pipelines. Because the price of natural gas is low, it makes sense for many large energy users to convert away from coal generated electricity to natural gas— we are seeing this across the U.S. as coal burning power plants are converting on a large scale. For some companies in the natural gas industry, new opportunities are opening up, even while the price of oil remains impaired. We may see more improvements in this corner of the energy sector in the months ahead and we are hopeful we will see a greater number of Texas second home buyers will be returning to Southwest Colorado.

In the meantime, prospective purchasers have plenty of luxury second homes to choose from, both in Pagosa Springs and the Durango area. Many may be acquired for a significant discount to replacement cost. Interestingly in spite of the abundance of $ 1 million+ homes available for sale, there are several custom homes under construction well above the million dollar level. For some folks, saving a substantial amount of money by buying an existing home is not a motivator. They choose to design and build exactly what they want, because they can.

SUMMER REAL ESTATE RESULTS ARE A MIXED BAG

mixed-bag-web-370x229It has been an interesting summer for the real estate world in Pagosa Springs. Overall sales activity is up slightly as measured against the prior 12 months. 2016 is a bit ahead of 2015 for the total number of properties sold with the total dollar volume of closed sales up nearly 5% above the prior year. For all property types (building lots, acreage, commercial, ranch, single family, condos, etc.) the average selling price was down 2.5% over the prior year. These numbers summarize the broad performance of all components of real estate sales within Archuleta County.

Homes sales activity is the measure that typically attracts the most attention. For my analysis, I track the sales activity of single family detached homes as a market benchmark. This excludes condos, townhomes, duplexes, modular and manufactured homes. (I look at condos, townhomes, duplexes, manufactured homes separately.)

The number of homes sold is up over 10%. There have been 151 homes sold so far this year versus 137 for the same period in 2015. Total closed sales dollar volume is up 10% above 2015 at $50,235,841. The average selling price of $332,687 is nearly unchanged from 2015 while the Median Selling Price of $297,500 is up 6.4% above last year. 75 of the sold homes were under $300,000. For most that follow the local market, these figures are probably not surprising, but they should not be considered the only important indicators of what is happening within the local housing market. True, there are more spec homes under construction and most are selling quickly, but, there is a narrow price band of robust market activity that may distort the reality of the market as a whole.

When you cross into the $500,000+ price ranges the level of supply significantly outpaces demand as shown below. What are the factors that are impacting this imbalance? First there have been changes in the buying preferences of both primary and second home buyers over the last several years. More buyers are choosing smaller homes and lowering their financial investment for vacation and primary residences. We also see this change from the next wave of housing consumers. Unlike many Baby Boomers that are now aging out of the housing market, younger buyers in second home markets are not choosing the larger, more expensive homes their parents chose. This is a change we are seeing across many of the second home and resort markets across the country. Second, the market in Southwest Colorado has been impacted energy prices. Pagosa Springs has always benefitted from our visitors and second home buyers from Texas and other nearby energy states. An increasing number of households with a significant portion of wealth and income tied to oil and gas are choosing to postpone plans for a second home or cabin in the mountains of southwest Colorado. When oil recovers they will return, but until then we can expect to carry a higher level of unsold home inventory, especially in the upper middle and high-end of the price ranges. Third, I suggest there are some Buyers that are holding off their purchase plans until the outcome of the November elections are known. This is a hard factor to quantify, but I can attest to the fact that a fair number of upper-end Buyers I have communicated with this summer have decided to wait until next year so that they can first assess the impact of the elections on their tax burden and discretionary income. How much change we will see after November is anyone’s guess.

For specifics on a particular price range or real estate category, email me at: MikeHeraty@frontier.net or give me a call at my office: 970 264-7000.

Average Annual Number Homes Sold All Price Ranges (based on last 5 Years): 271

Listing Inventories:

$200,000-$300,000 – 67 Active Listings =        10 month supply

$300,000-$500,000 – 90 Active Listings =       16 month supply

$500,000-$750,000 – 53 Active Listings =       29 month supply

$750,000-$1,000,000 – 35 Active Listings =    76 month supply

$1,000,000 + – 49 Active Listings =                 106 month supply

THE TEXAS EFFECT

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In one of my earlier articles I discussed the potential impact of low oil prices on our real estate market here in Southwest Colorado. You can read that article here lower down on this site. Subsequent to those discussions I did an analysis of the residential closings for 2015 to look specifically at where the upper-end Buyers in Pagosa Springs, Colorado came from last year. I define upper-end as those sales that closed at $500,000 and above. Generally this will include custom single family homes within the Pagosa Lakes Area, including Timber Ridge, homes on small acreage within planned ranch developments such as Echo Canyon Ranch and Hidden Valley Ranch as well as large acreage ranch properties that included at least one residence.

For all of 2015 there were 48 upper-end closings, totaling $40,926,825. I could have chosen to only look at sales above $1,000,000 or started with a lower bracket, but historically, this is how I have defined the upper-end of the market in all of my past research. Within this group, 13 of the 48 purchases were made by Colorado residents totaling $8,676,600, representing 21% of the total, with an average purchase price of $667,431.

Buyers from California purchased only 3 upper-end residences for a total of $1,755,500, with an average purchase price of $585,167. Our friends to the south in New Mexico purchased a total of 3 homes for $1,805,000, an average of $601,667 per home. Buyers from California and New Mexico each accounted for 4% of the total sales volume of $40.9 million. During 2015 we did not have any upper-end Buyers from our other neighbor to the south, Arizona.

Let’s look at the volume of upper-end residential Buyers that came from Texas last year. There were 22, purchasing a total of $19,145,500 in residential properties, accounting for 47% of the total, with an average purchase price of $870,250. These are significant figures to consider, especially in light of the current downturn in the energy field.

Will Texans continue to visit Southwest Colorado and invest in our real estate? During the summer months, the daytime temperatures in August in Lubbock and Houston run from 91-95 degrees with humidity of 74%-90%. Unless there are some radical climate changes near term, the mountains of Southwest Colorado will remain an attractive place to visit and invest. If we continue to improve our area and remain friendly to the many folks that help to make paydays possible in a tourism-based economy, we should survive. If we forget how important our visitors from Texas are to our local economy, more could decide to bypass Pagosa Springs and drive an extra hour to Durango. Please, don’t forget to say “Welcome, glad you’re here” to those friends with the white and black license plates.

For assistance of any kind related to Colorado real estate, you can reach me at 970 264-7000 or email me at: MikeHeraty@frontier.net

2015 Real Estate Summary Pagosa Springs

2015 YEAR END MLS REPORT latest-happy-new-year-2016-photos

As 2015 ended, market data* confirms the real estate recovery is continuing in southwest Colorado. For the year, Total Closed Sales of all real estate categories showed an increase of 4.6% in dollar volume over 2014, totaling just under $142 million for the year. In terms of the Total Number of Closed Transactions, 2015 showed an increase of 17.5% over the prior year. This quick summary indicates more properties are moving and more dollars are changing hands in the local market.

SINGLE FAMILY HOMES

Figures for the single family home market showed an increase of 10.1% from 2014, with a total of $100,431,191 in Closed Sales of 287 homes. This compared to Total Closed Sales of $86,742,931 and 272 homes for 2014. Homes took less time to sell in 2015 than 2014, showing stronger demand within the local market. The Median Selling Price for single family detached homes also increased during 2015 to $288,000, an increase of 7.7% over 2014.

CONDOS AND TOWNHOMES

Closed Sales for condos and townhomes during 2015 were up nearly 27% over the prior year with $11.6 million in volume for 71 units. The Median Price for Condos and Townhomes during 2015 remained unchanged from 2014. The increase in condo and townhome volume is in part due to the low level of inventory in lower price ranges. During 2015 there was a shortage of homes priced under $200,000 while demand was still strong. Some of these Buyers moved into the condo and townhome market to acquire a home while interest rates remain low. The combined sales of single family detached homes and condos and townhomes accounted for 83% of the entire real estate closed sales volume for the year.

LAND

Land sales also improved during 2015, recording Total Closed Volume of $19.3 million as compared to $18.3 million for 2014, an increase of 6%, with an increase of 33.5% in the number of closings; 311 versus 233 during 2015. The Median Selling Price dropped only slightly over the prior year. Builders reported increased volume for 2015 and initial signs look encouraging for 2016 from what we are hearing from architects and planners.

MORTGAGE RATES AND THE YEAR AHEAD

Cheap money continues to be available for qualified borrowers. During 2015, the average interest rate for 30 year FNMA mortgages was at 3.97%, up only slightly from the average rate during 2014 of 3.93%–still very low on a historical basis. Forecasts for 2016 range from 3.8%-4.4%, according to FNMA and long term bond rate forecasts. This slight trend upward may increase demand slightly as first time homebuyers rush to acquire ahead of the rise and is expected to have only a minor effect on overall housing demand during 2016. We expect the market to continue to improve in 2016, though not across all sectors.  There are several loam programs for first time homebuyers and others looking to acquire homes with less than 20% cash down payments. Buyers can apply for down payment assistance which includes down payment contributions that do not require repayment as well as special interest rates and other terms, depending on the Buyers qualifications. You can contact our office for more details and access this link for more specifics: http://www.chfainfo.com/homeownership/Pages/down-payment-assistance.aspx

In the Pagosa Springs area, there remains an over-supply of housing inventory within some price ranges and a shortage of homes in the entry level price range- $175,000-$250,000. If you would like more details on any segment of the local or regional real estate market, contact Mike Heraty at MikeHeraty@frontier.net.

*Market data provided by CREN, local MLS stats and proprietary company property records database, all deemed reliable, however, if specific data is an important criteria for a read decision, figures should be independently verified.

 

Is the Price of Oil Affecting the Economy of Pagosa Springs?

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Recently I was part of a discussion group that was looking at the present and future impact of reduced oil prices on the economy of Southwest Colorado.  In June of 2014, oil was priced at around $113 per barrel. Average oil production costs in the U.S. are $36 per barrel. (By contrast, Saudi Arabia can pump a barrel of oil for $10 on average.)Today oil sits at slightly over $38, a decline of 66% from the summer of 2014. Drilling rig counts are way down from one year ago. Many large, multi-national oilfield service companies have laid off thousands of workers, a number of mid-sized oil producers have filed bankruptcy and the roaring housing market in the Houston area has slowed down considerably. From what we analyzed of the futures markets, most forecasters are projecting oil to be under $65 for the next two to three years. Will there be more layoffs? Will the weak energy sector negatively impact other industries? Will we see fewer visitors to Southwest Colorado from Texas, Oklahoma and Louisiana in the years ahead? Good questions to ponder when you consider how important those areas have been in the tourism economy of Southwest Colorado.

According to a 2014 study by Longwoods International, Colorado residents were the top vacationers in their own state, followed by California, Texas, Illinois, Florida and New York. Typically the Vail Valley, Summit County and Aspen areas see a large number of visitors from Illinois, Florida and New York while visitors from Arizona and New Mexico are more prevalent in the southwest region of the state. The number of Californians visiting this part of the state has declined since the end of the recession in 2009. From our informal surveys, after our own residents, Texas represents the largest percentage of visitors to the Pagosa Springs area. We are one of the closer mountain resort areas for those Texans that drive to their vacation spots. Snow conditions in the Ruidoso area have been pretty marginal over the last ten years, the Angel Fire Ski Area and Taos Ski Areas have suffered from poor snow in recent years and more Texans have opted to travel a little further to Wolf Creek and the Pagosa Springs area. During summer months and peak winter periods you can see the influx of Texans by looking at the license plates in the City Market parking lots and along Pagosa Street downtown. You can see the same thing during the fall hunting season.

I can tell you that the ongoing glut of supply and downward price pressure has certainly reduced the number of qualified ranch buyers looking at one of the finer recreational ranches we are involved in. (Photo Above). We toured the ranch with a buyer from Texas that came close to signing a contract but the continuing weakness in the oil industry caused him to retreat to the sidelines. That was the end of last summer and prices have declined further since them.

Next Article-How many properties did Texans purchase in our area last year?

 

MILLENNIALS AND HOME OWNERSHIP

“That would be MikeHeraty@frontier.net”

The percentage of Americans that own their homes is declining slightly. Some housing economists are predicting the percentage of homeowners will decline from the current level of 64.4% to 55% within a few years. Others are not as pessimistic, but the majority of analysts believe a big factor in the equation is the homeownership choices of Generation X and Millennials. Though many within this group still believe in the value of home ownership, some lack the down payment and credit scores needed to become homeowners. Some site student loan debt and the hangover effects of the earlier housing recession.

Others see different trends in the data. Millennials tend to be more mobile in terms of relocating for job opportunities- relocating from Denver to Seattle for example, and therefore less interested early on in their careers in anchoring into an area as a homeowner. By renting they are more easily able to take advantage of better job opportunities.

Still another reason given for the decline in new homeowners is misinformation. Some Millennials believe they need a cash down payment of 20%. This is not true. In fact, there are lending programs that permit down payments as low as 3%. This is information that those of us in the Realtor and banking community need to do a better job of communicating. While it is true that higher credit scores are required than was the case in the last decade, there are still a number of good viable loan programs that enable younger people to qualify with little cash down.

So long as the cost of renting in markets does not drift significantly below the month cost of owning, there is little to fear this trend will noticeable impact the near term value of homes. If however, renting became much cheaper than owning, home values would begin to be decline, all other things being equal. Given the cost of new construction today, it is doubtful we are likely to see a huge supply of cheap rental housing flood the market creating a wide margin between the cost of renting versus owning.

Here in Southwest Colorado, local members of the Community Development Corporation and other interested stakeholders are working hard to find ways to attract more Millennials to the area. Housing affordability is not an issue in Pagosa as compared to other mountain communities such as Vail, Aspen and Telluride. Entry level homes can be acquired for $200,000-$250,000 with condos and townhomes available from $100,000.

For information on real estate and related topics in Southwest Colorado, give me a call at 970 264-7000, or email me at: MikeHeraty@frontier.net.

Thanks for reading-Mike