Was this winter in Pagosa Springs a U-Haul Winter? What even is a U-Haul winter? It’s a saying here in Pagosa that could have a huge impact on our local real estate market. But before dive into it, let’s look forward to what Pagosa is about to transform into in just a couple months.
The powder skiing at Wolf Creek are what introduced me to Pagosa. But it’s the summers that made me fall in love with this place.
Alright. This is the Q1 2023 Recap. Where Team M-Squared attempts to decipher what the hell is happening in our real estate market. These are truly interesting times and the direction of our markets could go either way. If you look across the nation, some markets are up and others are down. Which shows how hyper local real estate can be.
While there’s a lot fear out there around inflation, surprise OPEC oil cuts, a potential recession, the ongoing war in Ukraine and of course, trying to land Taylor Swift tickets…
[Taylor Swift Video Clip]
The name of the game is still supply and demand. And locally, we have two factors that could impact that. Short Term Rentals and U-Haul Winters. So let’s examine both and how they will alter our markets.
Back in September 2022, Archuleta County put a short term rental moratorium in place. No new STR’s were allowed for six months. In March, that moratorium expired and the Commissioners voted unanimously to not extend it for one year and see how the free market plays out now that we’re past the Covid market that sent the crowded cities into the mountains.
So let’s go back in time and see how STR’s impacted our market.
According to a recent study done on STR’s by the Town of Pagosa Springs and AirDNA, most of the STR’s in Archuleta Country were added between 2015 and 2019. By the end of 2019, we reached nearly a thousand STR’s. So we’re going to compare this time period with other markets. And just for fun, I’m also throwing in my previous town, the cement capital of Texas.
If we look at the Median Price from 2015 through now, we can see that Pagosa Springs is no different than the market in general. In fact, it slightly underperformed most metro areas. Midlothian actually blew away Pagosa.
But let’s take a look at what happened specifically with Covid, which caused city dwellers to retreat to mountain towns. As expected, Pagosa’s median price outpaced these other areas, but only slightly more than Midlothian.
Now let’s see what happened from 2015 through 2019 to get an idea if the prevalence of STR’s impacted our market more than these others. Well, as you can see, Pagosa Springs vastly underperformed these other markets. In fact, the median price of these metro areas grew at nearly double the pace of Pagosa’s. And look at Midlothian! It kicked everyone’s ass. Now guess how many STR’s Midlothian has.
22. That’s it.
If STR’s increase valuations, then Pagosa would’ve outperformed these other markets, right? But they fell far short.
Markets increase because of supply and demand. And STR’s don’t increase demand like one would think. What did increase demand is Covid and record low interest rates. Those were the real drivers of market valuations.
Which leads to our next issue. Will a U-Haul Winter increase supply and decrease demand…which would cause prices to fall. Which leads to a question for buyers, should you wait to buy until late summer if that’s the case?
First, a U-Haul winter is a term locals use that refers to new residents who get overwhelmed from a big snow year and put their house on the market to move to a warmer climate.
[Family Guy Video Clip]
According to our friends over at PagosaWeather.org, the snow water equivalent for the Upper San Juan this year is 172% above the median peak. Which basically means we had a huge winter this year.
The last time Pagosa experienced a winter like this was in 2019. And 2019, new listings were down for the first three months of the year. Probably because of all the snow. Once the snow thawed, new listings took off in May and June and lead to a record year for new listings and supply. Usually, we average just under 700 new listings a year. But 2019 managed to reach almost 800.
The question now is will the same thing happen in 2023. Because new listings are down the first three months of this year. Not by a little, but by a lot!
Historically, we average about 132 new listings through March. Currently, we’re at 72. Which is 37% below this time of year for 2019. In fact, the previous low here was in 2013 with 106 new listings. We’re 32% under that.
To put that in perspective, we’re on pace this year for only 386 new listings. If we follow 2019’s trend line, we’ll end up with 486 new listings. Which is still 141 less than our previous low of 627 in 2012. We’ve always crossed 600 new listings for a calendar year. But this year, that’s in jeopardy.
And that’s what’s so concerning here. I don’t think a U-Haul winter will have much of an impact. I’d be hard pressed to see a flood of listings in the summer beyond what’s normal. And that’s because of the high interest rates we’re seeing this year.
Why would you want to trade in an interest rate under 3% for one above 7%? Some experts describe it as being a prisoner in your own house.
But Pagosa is a bit different than the rest of our nation. About 65% of deals here are cash. Much higher than the average for the nation. So interest rates don’t have as much of an impact here. So it’s still possible a U-haul Winter could come into play and lead us to record listings this summer. But even in 2019, prices continued to rise despite the increased supply.
So let’s look at where demand sits currently. For Q1 2023, we’re sitting at 51 sold units at this point in the year. From 2015 through 2019 during this time, we averaged 70 sold units. So we’re down 27% from the pre-covid years.
What this tells us is demand is holding up better than supply is. Which means that prices will likely rise over the summer if supply doesn’t substantially increase.
Alright, I think you have enough data by now to decide if it’s a good time for you to buy or sell. Every situation is different. Everyone has different circumstances. So we’d love to the opportunity to talk about it with you further.
We may tell you to wait or not even buy at all. I’m absolutely proud of the fact that Team M-Squared doesn’t exaggerate value just to get your listing. Or pressure you into buying something so we can get a commission check.
We’re honest with you every step of the way. The relationship we form doesn’t end at the closing table. We value who you are as an individual and what you bring to this community. So reach out to us if you need any help with buying or selling real estate here in Pagosa Springs.
Alright, enough data for now! The sun’s out, temps are approaching the 60’s and I need to go enjoy the great outdoors here in Southwest Colorado. Till next time, cheers Pagosa!