SOME SECOND HOME MARKETS SLOWING DOWN
Mike Heraty, License Partner-Engel & Völkers Pagosa Springs
The recent reduction in the Federal Funds Rate, helped lower 30-year mortgage rates down to the 6.0%-6.25% range. Though above the Covid-triggered rates of 2.5%-3%, the new rates on an historical basis, are reasonable. It may take some time, but if rates stay at or around this level, consumers will accept them and that should free up more inventory.
On a national level some second home markets have cooled down during the past year, due to the high rates and shifting buyer habits. There have been more all-cash purchases, but there have been fewer investment buyers in the second home market, causing prices to soften in some markets. Rental rates have stagnated, or in some instances, declined. This may be due in part to the trend away from remote work when larger companies are calling all employees back to the office. The vacation rental market in some areas became oversupplied from 2021-2023 and that factor also affected prices.
REAL ESTATE IS LOCAL
What about the market in Pagosa Springs? The Median Selling Price for single family detached homes in Archuleta County sits at $665,000, compared to $600,000 one year earlier, an increase of 11% year over year. So, the Pagosa market is bucking national trends. Why is this? Two big factors. First, limited inventory- we do not have production builders in our market, adding supply. Building costs are still high, there is a shortage of skilled construction workers and the time to complete a new home is significantly longer than in metro markets. Second, demand is still strong, despite higher prices and interest rates. Comparatively speaking, homes here are an excellent value in comparison to other mountain second home markets, and home prices in Pagosa are about 15% below Durango. Second home Buyers that have been priced out of Vail, Summit County and other mountain resort areas are finding their way to Pagosa Springs, where their money goes much further.
WHAT LIES AHEAD?
On the national level, economists at Goldman Sachs are predicting home appreciation levels of 4.4% for 2025. Expect mortgage rates to trend a little lower, but we also expect demand to continue to grow as the Pagosa area becomes more discovered. Meeting with a highly qualified, seasoned area real estate professional, who consistently studies the market is the most valuable first investment you can make in any real estate transaction. To discuss your circumstances and real estate goals, give me a call for a free consultation. I can be reached at 970 946-6030 or email me at Mike@PagosaRealEstate.com.
