Do you ever have this feeling that something bad is happening…but then when you sit down and actually analyze going on, well, it’s actually good?
That’s kind of how this current real estate market feels. We’ll get into it, but first, let’s enjoy the beauty of summer in Pagosa Springs.
This place is truly amazing. It reminds me of the last episode of Ted Lasso. Where’s he’s giving his final halftime speech with AFC Richmond.
Many of us here are from places outside of Pagosa Springs. And while there’s no place like home…there’s really no place like Pagosa Springs either.
Ted Lasso…I’m gonna miss ya!
Alright, let’s jump into these feelings. For what seems like years now, various YouTubers and Media outlets have been calling for a real estate market crash. But as each quarter has passed, the market has remained remarkably resilient.
If you remember my last video, I mentioned that prices might rise this summer if supply doesn’t substantially increase. Q1 was down 45% compared to the three year average before Covid hit.
So how did Q2 turn out? Did that trend continue?
Now May and June are historically the two months out of the year where most of our listings come on the market. So we knew there would be a big increase.
But April started off shaky, down 46% possibly due to snow hanging around longer than previous years. May and June were slightly below last year. But when compared to pre-covid years, were down 17% and 12%.
If you look at our totals year to date, we’re still significantly lower compared to previous years. Not by a little but by a lot. So supply remains a problem.
But what about demand? Our buying season doesn’t really begin until July. The second half of the year typically has 35% more sales than the first half. So chances are demand would be down as well. Ands that’s what happened.
In 2023, April, May and June were all down compared to Pre-Covid levels. And year-to-date, we’re down 32%.
So if you compare both supply and demand to our Pre-Covid years, they’re both down about the same amount. Which makes this market feel more neutral than it really is. Because we do have a sense of what’s about to happen in July. And that’s because of deals that are already under contract.
We’re near historical highs for the month of June when it comes to pending contracts. And most of those pending contracts will close during the month of July. The question is just how many and at what price. But I think it’s a safe to say that July 2023 will probably rank as the 2nd highest month ever for sold units. Which will help push that pendulum back towards a sellers market.
But what does this mean for prices? This is probably what you care most about.
Well it means prices continue to stabilize or even rise. If you remember, Summer 2022 was the peak of our market and prices started to decline. But that trend line was reversed this past fall and everything in the winter pointed towards prices rising again.
Take a look at Price Per Square Foot. As of this past month, Pagosa Springs is down only 2% from our peak last summer. And if you look at only the Pagosa lakes area, where most of our transactions occur, the rolling three month median price for all properties is up 8% compared to a year ago.
But the story doesn’t end there. Remember the old saying that Pagosa Springs is about six months to a year behind Durango?
Well Durango is hot! Their three month rolling median price is at a record high. Their average price for a home is now sitting at a 3 month average of $1.2M. An incredible increase of 23% compared to last summer.
So it’s clear that the market is rising again, not crashing despite what the fear mongers have been saying for years now.
But remember those feelings I mentioned earlier? It’s still important to listen to them.
Let’s zoom in on the Pagosa Lakes area. So far in 2023, there’s been 71 sales of single family homes in PLPOA. Of those homes, 61% were priced below $600,000. If you look at pending sales, 63% are below 600,000.
But look at active inventory. This is where the story changes.
There’s 82 active listings in the PLPOA area. But only 32% are priced below $600,000. Very different from what the recent sales and pending contracts are telling us.
So what does this mean? Two ideas.
First, I think it means there’s a serious affordability issue going on here, even in a second home market where 65% of buyers are all cash.
When interest rates were around 3%, a couple making $150,000 a year could afford a $850,000 home with only $50,000 down. That’s the power of our incredibly low property tax rates here in Colorado. But once interest rates jumped to 7%, this same couple can no longer afford a home above $600,000. So these rates are causing budgets to be slashed.
Second, I think it tells us that some of properties are over priced. I’m not the only realtor out there wondering what some of these sellers are thinking. And eventually, the prices on these over priced properties will drop.
One of my favorite examples is a property that was listed at $2.3M last summer. It finally sold in February for $1.2M. A drop of over a million dollars.
And that’s where Team M-Squared comes in. If you’re a buyer, we protect you from overpaying for a property. And if you’re a seller, we don’t give you an unrealistic price just to get a listing. We’re honest with you from the start. And with the media we create to use for advertising, we’re able to generate more exposure for your listing than anyone else here in Pagosa Springs. The proof is in the numbers. Let’s talk about it. Contact us directly at the number on the screen. Or if you call Sherpa Real Estate, make sure you ask for Team M-Squared.
So where do we go from here. Well, I’m not exactly sure as I can see it go either way.
Since 68% of PLPOA properties are priced above $600 thousand, when they close it will cause the median price to rise here in Pagosa Springs. And I think sellers are reluctant to drop prices much further. There’s enough equity in these homes along with very low mortgage payments. So even though buyers are dealing with an affordability issue, sellers can afford to remain patient and wait for their price. In this case, prices rise.
On the other hand, recent property tax valuations have many vacant land owners thinking about putting their property on the market since vacant land is taxed at about 4 times the residential property tax rate. So I can see the market flooded in the near future with land listings. How that affects the residential market remains to be seen. But it could cause supply to overtake demand and that could trickle into the residential housing market. And in this case, prices decline.
If I had to guess, I think we still rise and stabilize. Eventually, prices will come down a little bit. The question is when it does drop, will it be enough to make a dent in the increases we’ve seen as of lately. I’m not so sure it will. Either way, we’re slowly going back to a normalized market where price swings are in the low single digits rather than double digits. But when interest rates drop back into the 5’s…look out! I think the market takes off again due to pent up demand.
You know what’s not dropping…the temps in Texas.
[Heat Wave Clip]
Since Pagosa Springs is one of the closest Colorado tourist destinations to Texas, more and more like minded individuals will leave the heat and seek out the cooler weather and the better lifestyle here in Colorado.
On top of that, the Springs Resort broke ground on their new expansion. If they’re willing to invest almost nine figures, that should tell you something about their confidence in this town and our tourism industry. So I totally believe in the future Pagosa Springs. And when it comes to real estate, always think long term.
Alright. Thanks for watching. If you need any guidance on real estate or even what trails are worth hiking here, hit me up. No matter the question, we find joy in helping others life the life they want.