COVID has kept most of us home more than we like, except for the best introverts. Recently, Kristen and I got serious cabin fever and had to escape our condo. Steamboat Springs, realistically, is in the middle of nowhere. Located in the northwest corner of …
The photo above was taken in early Winter. Today the ground is covered in at least a foot of snow everywhere. The weather was great through Christmas break, with a couple feet of new snow falling. This gave Steamboat the chance to open new terrain, …
As I’ve often said, Denver trends are about 6 months ahead of Steamboat’s. When I found information on the rental market in Denver changing, I had to follow up.
Today I ran into an article from the Denver Post about Denver rents going down. This is the second article they published like this in a month. The first one was citing the Pandemic as the leading cause. The second article spoke more about overall trends and that Denver is seeing reductions greater than comparable cities. Year over year, rents are down 5.2% in September.
Rents went down in the metro area and in the burbs.
As far as I can tell, rents in Steamboat are holding. There were some landlords in the early stages of the Pandemic that jumped at lowering there rents, and changing into long term rentals, that got renters quickly. After a few months, rents were back at pre-Pandemic levels and folks were filling them up.
Today, at the beginning of October, it is difficult to find anything to rent, long or short term. Values are also holding. As a big change I rarely see in Steamboat, there were offers for rent to own homes.
When I hear Denver rental rates are going down, I have to ask, what does this mean for Steamboat?
My thoughts and observations are:
– current indications point to rents maintaining values through Winter
– current interest rates make it easier to buy a home rather than pay rent, which is commonly higher than the mortgage
– purchasing/moving due to the Pandemic seems to have subsided for the meantime
– a number of apartments are coming on the market in 2021, just less than 200. These are all meant for the workforce and lower income folks. And this item, I expect, will have a large affect on the value of rents.
– many purchasers over the Summer do not intend on renting their new homes
– commercial property is becoming more available as months go by, and landlords are consistently getting low-ball offers for their spaces
It is hard to say what will happen in Spring. Normally I would say that with the number of good jobs available here that housing will continue to go up in cost/value. And Denver has many new and well-paying jobs. Seeing Denver and other areas with rents decreasing, I wouldn’t be surprised to see this trend move to rural areas as well.
Steamboat has been dry, sunny, and full of Autumn color now for a weeks. It’s been wonderful to have Fall breezes and blue skies for a long time. Yes, we had some weather – like the windstorm that took out hundreds of trees on the mountainside and the few inches of snow we had. This weekend might be more snow, with the upper mountain areas seeing 10 inches or more. But you’re reading this for the data, so let’s get to it.
The market is slowing down right now, more so due to seasonal patterns more than anything else. This time of year we generally see a slowing through Winter and energy picks up again in Spring.
I have been monitoring the expected overall market activity in the nation. The third quarter was kick butt as our communities worked to recover from the Spring shutdowns as well as other changes in our lives and living. The fourth quarter isn’t expected to be much of anything, with growth being about 10% of what we just experienced.
What about real estate? Great question, and one I ask almost daily, and definitely whenever I come across another data point.
Value Increase: For the Summer, depending on the type of property being purchased, values in Steamboat rose 10-17%. Some of these purchases were persons moving here. Some of them were persons wanting a place to escape to. And some were buying because money was cheap and they could diversify money into a growing destination area.
Foreclosures: I’ve read many opinions on what real estate will do over the next while. One that I found interesting because I saw the same trend. Over the past several years, foreclosures have been few and competition for the opportunities strong. With the trend in renters not being able to pay landlords, and some homeowners who cannot recover from lost income, foreclosures are imminent. This is most likely going to look like a ‘regular’ or ‘normal’ rate rather than the trends we have just seen. For Steamboat, I don’t expect much of this. Owners here are commonly wealthy and smart. This will reduce our rate of foreclosed properties.
Still Moving Out: To me, any conversation of the City moving to the Country isn’t very valuable. I agree that downtown metro areas will continue to see an exodus. To equate that to Steamboat growth doesn’t make sense to me. Most of this movement is to the suburbs. Movement to destination areas like Steamboat or Summit County will continue, just at what rate is the money question.
National Slow Down: Yep, it’s going to happen. Right now, some pundits consider our pre-COVID pace will occur in Summer 2021. I think it is premature to make any kind of determination about that. Many factors ranging from the decisions of government leadership, growth of illness shutting down sections of the economy and states, supply chains maintaining health, and general mood of local and national communities are volatile to price into any projection beyond three months.
Market Pick Up: I’ve for a couple of weeks now have been thinking the stock markets have priced themselves for a Democratic sweep nationally. This will change many things from stimulus packages to handling of the virus. Even with the tech shakeup just beginning (and this shakeup has been coming now for at least three years), most industries will still produce steadily.
I’m most curious about how homebuilding stocks and supplies will fare. It appears that this industry is very positive. But still, I’d like to find the answer to ‘how many houses do we need before we have too many?’ There are replacement houses that need built. There are towns where jobs are booming and need housing. And there are destination areas that are seeing small growth from location neutral businesses. In Steamboat, there is a housing unit for every resident in this town. Yes, this is typical in a resort town, and is still a little fascinating.
Really Long Term: Steamboat Resort has plans to continue expanding. A new gondola to take persons to the top of Sunshine Lift, Pony area expansion, as well as making beginner skiing more accessible are indicators of the Steamboat Resort’s bullish outlook. For housing, developers who own lots in Steamboat Springs are not moving them quickly and are not in a hurry for anything. The City of Steamboat Springs’ leaders have difficulty negotiating with big developments. And expanding the city areas is slow going at best. These factors will continue to put upward pressure on the values of homes in the city limits.
Opportunity Now: Where would I put my money? Most segments of this market look like they will grow and the properties purchased/held performs per strong investment strategies. Of course, the commercial is soft when it comes to retail and hospitality type properties. These values will eventually grow once new renters with strength return. Where I think the best values are now are properties that outside of the city limits. It’s my perception that bedroom communities nearby are seeing a renaissance which is not being seen by many because so much attention is being given to Steamboat.
History Repeating: I’m a contrarian by nature, sometimes kicking my own butt for being more conservative than necessary. From many whom I’ve learned the most, they believed history to repeat itself. (Of course, I’m still waiting for the value of bonds in the 1980’s to come back!) What I have noticed is continuing conversation about war with China over the South China Sea (and most recently about invading Taiwan). And the lack of stimulus monies being distributed by the government. And comparing news headlines from 1918-1920 to those of today. Too many similarities from 100 years ago to today for me to increase my debt without good cause or use more discretionary income.
History Repeating for Real Estate: Though times were just as awkward this time in the last century, and the stock market was uncertain, even during the Great Depression values on homes increased. Here is a graph from the Federal Reserve Board of Dallas from a 2014 report titled No Price Like Home: Global House Prices from 1870 – 2012:
Success Is Inevitable: America rocks. Though we have our differences, we know how to survive and maintain being leaders internationally. I’m confident in America and our long term economic prospects.
Is September almost over? The first half of the year seemed to drag along and now it’s three months to Christmas. Wow. Steamboat has been very busy all Summer. Many tourists came through town. Given the amount of RV’s that went through town as well …
Steamboat is seeing the end of the Summer approaching quickly. We have had a rush of visitors over the past few weekends, which makes me think school is about to start. We have a bunch of smoke from a large fire near Glenwood Springs, and some monsoon-like weather in the afternoons. Overall, it’s interesting weather during interesting times.
And interesting times it is! The real estate market in Steamboat is the strongest I’ve seen it and parallels 2006-2007. There are definitely more buyers than sellers right now. With the pandemic ongoing, those who have a place in Steamboat do not really want to move or let it go. There are reasons to hold property in this market, mostly valuation is going up and there isn’t a replacement property to purchase that would be a move-up home.
Some experiences I have had over the past month:
– a duplex side sold for about $500 a square foot when comps less than a year old indicate it is worth about $400 a square foot. The prior side of the duplex took a year to sell. This unit took about a week.
– I helped a baker find a kitchen to move in to. This was very difficult, even with restaurants struggling over the Summer. Three have opened in the past three months. And then a second customer wants something similar. Even with the bad news of hospitality businesses across the nation, Steamboat has folks who think business will grow.
– I listed a manufactured home on a rented lot. Within 5 days I had 4 offers.
Real estate is very active now. Here’s a snapshot of the last month, from Melissa Gibson at Land Title here in Steamboat Springs:
And here is a small screenshot of my MLS database. These numbers are a three day count have been consistent for more than a month:
When people ask me about what the market is doing, where it is going, and timing, I inhale deeply and ask more of what they are looking for. These three pieces each are a conundrum.
What is the market doing: Higher end properties are selling more often. Lower end properties (those $500,000 and under) do sell, but more slowly. This observation is reversed from what I saw over the Winter.
Where is the market going: With inventory running out, prices will trend upwards. It seems like persons are not concerned as much about overvaluation as they are about missing out. And missing out could mean anything from having a haven to move to from metro areas to not actualizing their Steamboat Springs retirement plan. With interest rates so low, it has opened up opportunity to buy.
Timing: This is very difficult to me. Timing changes easily from government stimulus to fearful headlines in newspapers, and the election is a non-starter. Real estate doesn’t commonly have quick market movements. Since March, when COVID caused Colorado to shut down, the market has swung uncharacteristically. Is this the top of the market? Should I wait to buy? I really don’t know. More government stimulus will likely keep trends we’ve seen over the past months continue. Trends the government, and some economists, are surprised by is the recent slow down in consumer spending and the increase in savings of households.
I have followed information on Colorado COVID forecasts. As Winter approaches, and we spend more time indoors, the growth of cases increases steadily through October and November. If other states see similar patterns, the actions the government takes will help us understand further what the market will do in the short term. For the long term, the results of mortgage and rent forbearance are my bet for what will be the most interesting real estate trends news.
Well, it’s official. Officially crazy, I mean. This is a very busy time for real estate brokers in Steamboat Springs. Not all brokers are busy, but most are. If a broker had business going into the Spring shutdown, they are busy now. In my …