What is a Silver Tsunami? And will it flood Pagosa Springs, Colorado? More on that in a second, but first let’s remind ourselves why we choose to call this gorgeous area home…
Alright, alright, alright. Welcome to 2024. Weird to say that.
For those that are new to this channel, this is your opportunity to gain a financial edge with real estate here in SW Colorado. We’re gonna go over what happened in 2023 but spend the majority of our time thinking about what could happen in 2024.
So let’s jump right into it.
As we’ve been saying all year long, the name of the game is supply and demand. We stated earlier this year that it would be tough to surpass 600 new listings for 2023, which is something that’s never happened before in the history of our digital records on the MLS. And lo and behold, we were right. We ended the year with only 564 new listings. Down 11% from last year, down 37% from our record in 2019 and down 11% from our previous low in 2012. When we were in the midst of coming out of the Great Recession.
Sales on the other hand held up better when compared to historical trends. We ended up with 380 residential units sold. 16% below last year. But still higher than 2010 through 2014 and nearly equal with 2015.
So it’s clear that demand has held up better than supply. Which is why prices have remained rather stable throughout 2023.
If you look at our Price Per Square Foot, we’re still near record highs. And if you dwindle it down to our most reliable data set, 3/2/2’s under 2000 square feet in PLPOA, we’re only down 3.5% from our peak in June 2022.
Overall, our rolling three month Median Price stands at $585k, up 5% from a year ago. Our average price stands at $683k, up 6% from a year ago. But days on market continues to grow as we try to churn through outdated inventory that’s priced a little too high.
So overall, let’s put it this way. Low inventory allowed us to trend back towards record highs. But right now, we’re basically in a stand off until something gives…
And what could that be?
Now it’s no secret that Pagosa Springs is both a Tourism Community and a Retirement Community. And we’ve covered in the past the massive impact the tourism economy has on our local economy.
But so far we haven’t covered much about the retirement community.
The other day I came across some interesting data that directly relates to our retirees. And it has a phrase associated with it.
The Silver Tsunami.
Currently 10,000 people a day are turning 65. By 2030, the entire baby boomer generation will be over 65. Which will encompass 21% of the total US population.
Now here’s the kicker.
Even though baby boomers make up only 21% of the population, Americans over 55 own 54% of homes nationwide. Basically, their real estate wealth is over three times that of millennials. And eventually that wealth will be sold and passed down to the next generation.
Now one analyst has predicted that this silver tsunami will cause house prices to fall.
Meredith Whitney estimates 51% of individuals aged 50 and above will downsize into smaller residences. Which could result in over 30 million units coming onto the market. And there might not be enough younger buyers to sustain the housing market. Especially when it comes to larger homes.
But what if you’re located in a town that’s seeing an influx of retirees moving to the area?
The Sun Belt often dominates these kind of areas. But one town recently made a surprising move into the Top 5. Billings, Montana. Because not every baby boomer out there wants to spend the rest of their life indoors avoiding triple digit heat and humidity.
So the question is…will this Silver Tsunami reach Pagosa Springs? Will even more Texans decide to escape 110 degree temps for the incredible climate of the San Juans? And will it help sustain our current prices or further increase them?
Overall, I think Pagosa will continue to attract retirees. Especially from Texas. And many folks I speak with are jumping ahead of the curve. Buying their retirement home now since they realize prices may be out of reach once they do tell their bosses they’re off to better pastures.
Speaking of Texans, this area is home to a lot…and I mean a lot…of vacation homes. From much of the data I downloaded and analyzed, less than half of homeowners live here full-time. Of those second home owners, about 18% or so are from Texas. Which means probably about 40% of all home owners here (full timers, part timers, investors) come from the land where everything is bigger.
So where will the second home market head in 2024 after an incredible run during the pandemic, where everyone sought to get the hell out of suburbs and cities and into nature, where life is simply better!
Well mortgage rate locks for second homes are now 47% below their pre-pandemic levels. So the second home market has practically dried up for the time being. And I don’t see that changing until interest rates fall lower.
So where are rates headed in 2024?
Most experts are saying rates will drop to the low to mid 6’s. All of this depends on whether inflation comes under control. If it does, then I wouldn’t be surprised to see mortgage rates drop into the 5’s again. And if it does, look out. There’s a lot of buyers on the sidelines waiting for this to happen.
I ran across a recent survey which stated that it wasn’t affordability that made buyers go to the sidelines in their home search. It was Mortgage Rates.
And I think the same goes for sellers. Sellers don’t want to give up their low rates. They feel stuck. But as with anything in life, shit happens.
Divorces. Layoffs. Graduations. Retirements.
And once rates do drop back into the 5’s, people can fathom giving up those low rates and making the move.
But I want to go back to affordability here.
There’s many of you out there who believe you can’t afford to move here. Or that it’s more expensive here.
If you haven’t already, check out our video that busts this myth.
But to go further into this…if you own a home that you bought before 2020, then you have enough equity in that home to sell it and buy a place here in Pagosa…and live here even on a teachers salary.
Take a look at this.
A beginner teacher here makes a little over $50k. So if you and your partner have at least $140k worth of equity in your current home…and rates are in the low 5’s…you and your partner could afford to buy the median home here in Pagosa and teach. Which means you have your summers off to go play in the mountains.
Think about that. You could get away from the crowded suburbs and live a better and more fulfilling life here in the mountains.
And it’s not just teachers that could afford to do this. There’s painters, plumbers and other contractors here charging over $100 an hour. I’m even hearing stories of waiters and bartenders making over $60k at certain locations. If you have a skill that’s in demand, you can make it work here.
It boils down to this…If there’s a will, there’s a way.
And lower interest rates open up that door for others to make that move.
So it’s not so much about prices. It’s about interest rates. That’s what really determines if a home is affordable or not.
If you are thinking about buying or selling, hit us up. We’d love to chat with you about how you can achieve your goals so you can move onto the next stage of your life. And if you’re thinking about selling this summer, contact us today. We’ll come out during the winter at no charge to grab pics and video of your property in the winter to use in addition to what we’ll capture during the spring or summer. Because buyers want to know what it’s like in the winter. Quality in marketing matters.
We continually try to go above and beyond in the service we give to our clients. We think of ourselves as more than just realtors. We’re a marketing company servicing the real estate industry.
Alright, if you have any questions, hit us up. We’d love to share a beer with you and talk about the magic of Pagosa Springs, Colorado.
Cheers!
