It’s the end of the year. I know it is because I’m snowboarding regularly now and I am still stuffed with turkey and gravy!
It has taken a while, and we are now seeing changes that have started in the markets in Spring. Many changes are to come.
It’s hard to understand going from a hot national job market to hearing about layoffs, especially in tech industries. In Steamboat, we don’t have a bunch of tech jobs. But we do have a lot of jobs and the labor pool is still in short supply.
Much of the labor shortage locally is being blamed on a lack of housing. I believe this is true, even after the increase in wages the area has seen. Rents are still higher than what a regular worker can afford and these people are finding rooms to rent and also finding places to live in the Steamboat bedroom communities.
Today I had a great conversation with a broker I respect regarding some of these issues. Disregarding employment statistics, it’s hard to get the math to work for a family of four being able to afford a $3500 payment, whether it’s rent or mortgage. So, let’s consider that the pundits are right and a 15% drop in home values is coming over the next year or so. And also, wages don’t go down as well as interest rates stop where they are now. A $400,000 home for a working-class family with 100% financing would have a payment of around $3200 a month, including PITI. Homes in the Steamboat area at $400,000 are still difficult to find.
And what of the values in the Steamboat area? What do I think is going to occur? (I get these questions quite a bit on different real estate products.) I think that we are going to see a continued slowing in property purchasing. Some values will hold well, like improved land. Some will be stressed, like the higher valued properties where you could possibly buy the house cheaper than you could build it. There will be buyers, and it will be a buyers’ market. A 15% drop in Steamboat values would be strange to me. It seems to be more realistic for 5-10% with a stable market to follow.
When this will occur is speculative, and I’m unwilling to give a short time frame after botching the timing of interest rate increases.
As the housing bear market gets going, the construction trades will start to feel the pinch. Those who have had trouble getting their projects built will find that contractors start calling back, and general contractors start paying more attention to dropped balls. As of right now, I don’t know anyone who does have their fingers crossed that construction material prices will adjust during this time.
Recently, Steamboat passed a 9% tax on short-term rentals. I don’t expect this to have an impact on those visiting. Possibly there will be a 3% reduction in stays, but I doubt it. The real reduction in stays will come from loss of discretionary family monies. In the next few years, I am assuming folks are going to be watching how they spend on vacations more than in the past, there will be a reduction in stays from this. (I’m actually looking to see if this change in business is blamed on the tax over larger economic trends.)