Steamboat Market Report November 2021

Late Autumn in the Flattops.

Steamboat Resort started making snow today!  That’s a sign of imminent good days coming.  The upper runs have been snow-covered for a couple of weeks, but the lower valley temperatures didn’t get cold enough to make snow consistently until this week.  Arapahoe Basin is open and I hope to make it there in the next week or so.

It’s been a little while since I wrote a market report.  Today, I ran into an article that spoke about the pat answer I give when people ask about when the market is going to change.  Often, persons are asking about when they will be able to buy a house or land at a discount.  That day isn’t coming except for individual properties that happen to be honey holes.  As a whole, the market is going to remain the same for a while.

When someone asks when the market is going to change, I reply that there are four factors that I believe will make the price of real estate lower:

  1. War- historically, war causes prices to go down.
  2. Increase in housing supply- when supply meets or exceeds demand.
  3. Long term job losses-  without jobs, and well paying jobs, there are no buyers.
  4. When interest rates rise.

In headlines and articles I’ve been reading, long-term job losses are being talked about.  When housing costs rise above a reasonable living value, people do not buy and often move to places that are more affordable.  This includes rents as well.  In Steamboat Springs, I have often seen families move out of town because rents are too high.  These families chose between a lower rent town nearby or moving away altogether.

But this isn’t affecting our market that much.  Zillow, Fannie Mae, and others have all predicted large increases in home values for 2022.  If you’ve been reading these blog articles for a while, you may remember me saying that the market would slow down this fall.  And it has.  I loosely mentioned that more slowing will happen when interest rates rise.  Now having met their goal, the Federal Reserve has slowed down their bond-buying program and is about to raise interest rates in the near term.

What fascinated me by this article was the perspective of the Mortgage Bankers Association.  They see the market continuing to be strong until interest rates rising start to kick in.  They think there will be 4 quarter-point raises in the next year, starting at the end of 2021, plus more in 2023.  Most of us have purchased a home and understand what a quarter-point rise can do to purchase power.

So, in the end, there will be fewer buyers in the market.  Someone who could afford a home at 3% cannot afford it at 3.25%, let alone more.  The Mortgage Bankers Association thinks home prices will end down by the end of 2022.  Of course, I agree with them.  This will affect everyone, except those who can afford 4% interest or more.

And having lived through times of 8-10% interest, I’m not intimidated.  

Going back to job losses- with the push of employees asking for better wages and working conditions, this rise in interest rates may not affect the price of homes initially because more wages can mean more buying power.  Over 2022 and definitely 2023, prices are going to adjust some, but nothing like 2008.  That was a once-in-a-lifetime event.

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