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!
2022 Market Recap
Man…I don’t even know how to start this off this time around. This is a different market.
Every January I love to watch these little year in review videos. One of my favorites is by Vox Media. Being the video nerd I am, I geek out on well done pieces like this. And as I watched it this year, I was reminded of how sheltered we are here in Pagosa Springs from the chaos of the world. From the chaos of crowded cities and surburbia.
The mountains here in SW Colorado have become this escape from that chaos. It’s a place of refuge, peace and fulfillment. The beauty here slows things down and helps us reflect on what’s really important in life.
So before we get into the chaos of the real estate market, let’s escape a for a moment.
This is why we live here! I know many of you agree and want to know more about buying a place here in Southwest Colorado. So let’s jump into it.
I do need to say from the start that we are a very different market than the major cities and suburbs.
We don’t have many first time home buyers. Only 40% or so of our homeowners actually live here full time. And a lot of our deals are cash instead of loans. Add in our small data set and it’s difficult indeed to get an accurate picture of what’s going on. Because as I watch what’s happening, I’m having a hard time believing these numbers myself.
If you remember my last report in early October, I mentioned that come December, we’d start to see the effects of 7% interest rates on the market. And here’s what happened.
The number of buyers dried up. Which is why we only had 17 closings in December. A drop of 53% compared to last year. And a drop of 58% compared to the previous five year average. In fact, it’s never been this low for the month of December.
Usually when buyer demand starts to dry up, sellers start to lower their prices. And they are. From our peak in May of 2022, sellers are now receiving only 95.5% of their list price. Currently, 67% of active listed homes under a million dollars in PLPOA have reduced their prices.
But that doesn’t necessarily mean that values are falling. It could be that sellers simply overpriced their homes. Which many did. So let’s take a look at the median price over the course of 2022.
In February, we hit a record low for active inventory. Which caused the median price for a home here to peak at 720,000 in May. It was here where the market started to drastically change. Mortgage rates rose at their fastest pace ever. Nearly doubling in just a few months.
As a result, the median price dropped from 720 thousand to 557 thousand in just five months. A decrease of 23%. But then something interesting happened in September. Many of us expected the market to continue to drop. But instead, the median price began to rise. And in December 2022, we landed at a median price of $680k. Only 6% lower than our peak in May. And 6% higher than December 2021.
So how do we explain that? At a time where interest rates caused mortgage payments to increase over a $1,000 a month for a median priced home here. Shouldn’t the median price be dropping since this effectively forces buyers to seek out lower priced properties? Certainly a lower volume of homes play a part.
But let’s see if Price Per Square Foot shows the same pattern.
Our most reliable data set we have is 3/2/2 Single Family Homes under 2,000 Square Feet in the PLPOA area.
In January, we started out at a PSF of 345. We reached a peak in April at 389. It quickly dropped to 306 in September. And then reached 354 in November, which had 7 closings for this category whereas in December, we had zero closings, which should tell you something…
My initial thought was that new builds caused the recent rise in PSF since they typically finish up in the fall. But only two of those seven closings in November were built in 2022. And if we take those out, the average PSF drops to 349. Still showing an increase over September.
So what gives? Two theories…
First thought, New Listings.
New listings reached a record low in 2022. In fact, during the month of December, there were only 8 new house listings. We’ve never been in the single digits over the past twelve years for single family residences. So let’s dig in further.
For 2022, we had 458 New Home Listings. Down 4% from our previous low in 2012. And over the past three years as a whole, new listings are down 8% compared to the five year average before covid started.
So if you’re a buyer and you’re waiting for prices to come down, it’s crucial to see new listings make up that 8% drop. That means an average of about 605 new listings a year for the next three years. Or 694 New Listings in just one year. If the market is flooded with that many listings, then prices will really start to drop.
But I have a hard time seeing that happen. Keep in mind that home owners are hesitant to give up those super low mortgage rates. And most of our homes here have no mortgage at all. Which influences their need or desire to sell.
So let’s move on to my second thought…Condition of the Home. I’ve stated this before but decided to pull some data on it.
The newer the home, the better the condition it tends to be in. The big problem here in Pagosa is that there are too many homes that are outdated.
During the first three quarters of 2022, recent builds in PLPOA under a Million made up only 14% of all sales. But during Q4, they made up 19% of all sales.
There’s currently 38 active listings and 13 listings Under Contract in this category. The homes under contract have a 15 year gap compared to active listings and have a 11% higher PSF.
Now that buyer demand has slowed down, this allows buyers to be more meticulous about what they want. And they’re choosing updated homes that allow them to move in and not have to spend time at the hardware store. Which helps bump up that median price.
So…the big question is where do we go from here in 2023. I’ve heard some pretty good arguments from both sides. Those that think the market will crash in 2023. And those that think the market will rise in 2023.
My gut is telling me that prices will head lower even though the data is telling us we’re on the rise again. There’s too much current inventory on the market that is outdated. And it’s going to take some price reductions to get those to the closing table. So for buyers, the key is to be patient. The problem though is that there’s many investors waiting on the sidelines. And once prices get close…they will pounce on it. In fact, over Christmas Break we had a buyer lose out in a bidding war to two other offers over a home that sat on the market for five months and finally came down to a more realistic price. I honestly couldn’t believe it…
So I think there’s a definite floor to this market. And what could help sustain prices in our market is our local government. Let me explain…
There was a big article from Bigger Pockets the other day titled, Air-b-n-bust, the Fall of Short Term Rentals. And in this article they claim that the supply of STR’s this past year increased enough to offset the rise in bookings. Which means more competition. Which means lower occupancy rates. Which means lower nightly rates. Which means less profits. Which leads to losses. Which will eventually cause a bust, with many owners having to sell their STR. Which increases the supply of homes for sale. Which overall lowers the price of these homes in a buyers market.
What’s interesting to me about this is that our local governments have already stepped in and prevented this potential AirBnB bust form happening. The Town of Pagosa capped their density limits over a year ago at 10%. No more new STR’s in Town. And Archuleta County currently has a moratorium in place since September. No more new STR’s…
Let me ask this…Is it a coincidence that prices started to rise again once they did this? I don’t think so…it’s too soon to tell. But this Spring, new STR regulations will be put before our Commissioners. And it’s my suspicion that two of them, Warren Brown and Ronnie Maez, will end up voting to enact similar density limits as the Town.
So instead of allowing the free market to play out and letting investors fail, our local officials will solidify current STR investments. Which not only increases occupancy rates and profits for current STR’s, but it also reduces housing inventory for sale. Which helps increase housing prices. One only has to look at what happened in Durango in 2014. They basically banned future STR’s with their low density cap. It strengthened their real estate market and Durango continues to be about $200 grand more than the median home here in Pagosa Springs.
With all that said, STR’s do only make up a small percentage of our overall housing market. Somewhere around 10% to 13% depending on who ask. So if a big enough recession hits in 2013, which many are forecasting, then our market will not be immune to that. It will affect our housing market.
But I’m also one that tends to think if everyone is looking one way, you might want to personally look the other way.
So overall, here’s how I would sum it up for buyers and sellers. Updated homes should have no problem selling at a fair price in this market. Especially those with views or on water. Outdated homes need to start reducing their prices to sell in this market. Not just or two percent. But ten or more percent.
But there is a floor here. Due to the housing shortage and builders pulling back, one the market corrects itself and interest rates fall back into the low 5’s, this market could reverse and act like a sling shot, rising very, very quickly. But that’s nearly impossible to time right. Could be this summer. Could be a year or two from now. No one really knows.
Alright, I want to end on this. I know I brought up the chaos of our world at the beginning. But I also want to bring up the good. And another video I like to watch every year is Google’s Year in Search. And it showed so many people, like you and me, quitting their jobs and pursuing their dreams.
I know there’s many of you sitting at home watching this market recap, dreaming of making the move here. And I want to encourage you that you can make it happen. You can quit. You can retire. You can make the move to the mountains.
It was scary as hell to quit my job in Texas back in 2021 and move my family of four to Pagosa and begin the journey of working for myself. But you know what? I didn’t die. I didn’t fall into poverty. I didn’t have to move back to Texas. And I can say without a doubt, it was the right decision to escape the chaos of suburbia and sitting in rush hour traffic every day.
So just do it. If you’re motivated enough, you will find a way to make it happen.
If you need somebody to talk to about it, I’m here for you…even if you don’t need a realtor. When it comes down to it, I’m passionate about helping others make the same changes that I did. Because experiences and location matter more than materialism.
With that said, I need to go experience the powder of Wolf Creek.
Till next time…Cheers!
Q3 2022 Market Recap
My oh my oh my oh my!
The real estate market is about to get really interesting. I think that’s the best way to put it without resorting to click bait, which I absolutely cannot stand.
So pay close attention here in the next 10 minutes, because this update could save you quite a bit of money.
But before we get into it, let’s take a quick second and calm our souls as we as we remind ourselves why we live in or desire to be in beautiful Colorado.
Alright, let's get into it.
If you remember my last report, I mentioned that I think the median price of a home and condo here in Pagosa Springs would end up in the mid 400’s. And guess what, well…it went lower than that. And there’s a reason why.
The median price for all properties here in Pagosa Springs is $400,000 as of September 2022. A drop of 24% year over year. And that’s because of Condo’s and mobile homes, which are still playing an oversized role here. In September 2022, only 66% of sold properties were homes. A drop of 22% compared to a year. And since condo’s are priced lower than homes, that drags down the median price. If we look at only homes, the median price this past month settled at 512,000, a drop of 12% from a year ago. But that doesn’t necessarily indicate the whole market is dropping that much year over year.
So I decided to narrow down our data to the most reliable data set that we have - 3 Bed, 2 Bath, 2 Car Garage homes under 2,000 square feet in the Pagosa Lakes Area. And the Price Per Square Foot for this category was down only 0.3% year over year. But month-to-month…it was down 18%.
And that is concerning because it’s our biggest monthly drop since April 2010 when there’s at least three homes sold in the current and prior month for this category.
One thing is clear…this market is declining fast and buyers are choosing less expensive properties. And the reason for this is interest rates.
And to understand where our market is headed, you have to look closely at what the Federal Reserve is doing.
By raising interest rates, the feds are fighting inflation and as a result have sent the dollar to a 20 year high.
As part of this inflation fight, Fed Chair Jerome Powell has made it clear that the housing market needs a correction to make houses affordable again.
One of the data points the Fed uses also pertains to jobs. And the job market is still red hot here in America. And as employers keep hiring and raises keep getting handed out, inflation is likely to remain high. Which means the Feds will keep raising interest rates.
And this past Friday, guess what happened. Another robust jobs report in which unemployment dropped to 3.5% and another 263,000 jobs were added.
In fact, one chief economist put it this way…
“If I had just woken up from a really long nap and seen these numbers, I would conclude that we still have one of the strongest job markets that we’ve ever enjoyed.”
And I bring this up because it points to one thing…the Feds will keep aggressively raising interest rates. Which means mortgage rates will continue to rise.
In the span of one year, we’ve gone from 3% to now 7%. That’s incredible.
To put that into perspective, here’s how that impacts monthly payments on a home here in Pagosa Springs. In May of 2021, we peaked at a median price of 720 thousand for a house. At a 3% interest rate, that home would have a mortgage of roughly 2,700 minus taxes and fees. But now with a 7% mortgage rate…you’re looking at payment of 4,300 - an increase of 1,600 a month due to the interest rate alone!
To put it another way, in order to afford a 2,700 a month mortgage, your budget would go from 720 thousand to about 450 thousand. A drop of nearly 270 thousand dollars.
And that’s exactly the reason why the median price for a home in Pagosa ended up at 512 thousand for September. But here’s the kicker…we’re not seeing the effect of 7% interest rates yet. Those homes that closed in September had rates of 5.5% to 6%.
Which means we’re going to see prices continue to fall. In just four months, we’ve eliminated all gains from late 2021 into 2022. Again, just astonishing.
But this is something that we saw coming. I brought this up during our last market report. Once interest rates started to rise rapidly in April and May, we knew a correction was coming. Now, we don’t think a crash is going to happen.
But I do think we’re in for some more pain on the seller side. And because of this, Team M-Squared informed our sellers that they need to drop their prices now instead of later. Because what could happen…is if these sellers wait too long to drop their price, they will end up trying to catch a falling knife and as a result, end up losing more money than if they had priced their property correctly in the first place.
There’s currently 162 active listings on the market and 85% of those have been on longer than 30 days when only six months ago, most properties were already under contract by 30 days. And the longer these homes sit, chances are they are going to have to drastically reduce their price in order to get sold.
This goes to show the importance of pricing your property for a falling market rather than the one we had just six months ago. This is something Team M-Squared specializes in.
We dig into the data and we’re going to be honest with you on what we think your house is worth rather than puff you up with an unrealistic price. Our goal is best represent your financial interests rather than our own pocketbooks. And we’ve saved our clients thousands of dollars these past few months by giving them real values and urging them to drop prices when necessary to avoid losing more in the end. We’ve even advised some of our clients to take their house off the market and wait a couple years for the market to rebound.
But with that said, people will always need to buy or sell no matter what the market conditions are.
For sellers, there’s still certain situations where demand is still strong. Such as properties that have river front on the San Juan River. Properties that are updated and have killer views of the surrounding mountains.
For buyers, there’s going to be incredible opportunities coming up, especially if you’re willing to put in a little sweat equity.
Where is the Market Headed?
But that still leaves us with a question. Where is the market headed…because no one wants to sell at the bottom and no one wants to buy at the top. And while it is impossible to truly know where the market is going, we can look at a few clues to make an educated guess.
One indicator we look at is properties currently under contract. We’re currently down 19% from a year ago. With Condo’s down 42%. So we could be moving back towards more of a typical market where Homes make up around 75% of transactions. Which will help prop up that median price for all properties.
What’s keeping the sky from completely falling out though is inventory. It’s starting to drop again after increasing over the past four months. In September there were only 33 new listings. A drop of 23% compared to a year ago. In fact, we have to go back to 2013 to see new listings this low for September. And if you account for all of Q3, July through September, we stand at 161 new listings. It been 10 years since it’s been that low and we’ve had a considerable amount of new construction since then.
What we’re seeing here is that sellers don’t need to sell. There is an incredible amount of equity in homes right now. And vacation rental owners are going to make even more money with the STR moratorium in effect in which the government has effectively eliminated future competition for the time being.
So why sell? There’s a lot of money to be made here.
Overall, I think prices will continue to decline until the fed’s stop raising interest rates. And until that happens, it’s really anyone’s guess how low we could go. Early data for October shows another monthly drop in prices. And then once December hits, we should start to see the effects of 7% interest rates in our sold data.
But really, this is anyone’s guess where we’re headed.
The Truth of Living in Pagosa Springs
All I know is the reality of living here in the San Juans. The biking, the skiing, the hiking, the views, the lifestyle.
It truly beats the hell out of living anywhere else here in America. It’s a more satisfying and beautiful life than living in the crowded city or the suburbs where everyone is inside glued to a damn screen instead of nature.
And the anxiety, the depression, the anger, the frustration of living like that will cause more and more individuals to move to the mountains and live the lifestyle they’ve always dreamed about. It’s why this place is such a mecca for retirees who have the freedom to move anywhere.
And yes, home prices right now will affect the ability for some to move out here. But there’s a lot of folks on the sidelines ready to pounce once prices align with their budgets. The future here in Pagosa is bright…and I fully believe it. Sometimes, we just gotta go through these fluctuations.
But please remember this, when it comes to housing, you always buy for the long term rather than the short term. And a decade from now, prices will be much higher.
The best thing you can do is to continue to pay close attention to This is Pagosa and Team M-Squared and the market reports we put out. Sign up for our newsletter. Subscribe to our YouTube and Instagram where we not only focus on real estate, but create quality content on the amazing things you can do in this area.
And whatever your question may be, please email me. Even if it doesn’t have anything to do with real estate. In fact, I just had a lady email yesterday and ask for guidance on camping spots near Piedra Hot Springs. I love answering these kinds of questions! Because I love this area. And I hope that shows from the content we create.
I can’t thank you enough for watching and participating in this journey with me. As always, Hop Raise! And you may be confused by that term. But that phrase is explained in the Riff Raff Brewing Company video that we did. So be sure to check that out! Cheers Pagosa.
Q2 2022 Market Recap
Q1 2022 Market Recap
Seriously?!? The average price for a house in Pagosa Springs broke a million dollars. A MILLION DOLLARS! Remember back in September when I said it would happen by 2027?
[ Napoleon Dynamite Movie Clip where he says “Idiot" ]
But actually maybe not. Because when it comes to data any one sale can skew the whole set. And that’s exactly what happened this time around with 1000 Piney Place.
Which sold for a mere 6.75M. Take that sale out of the equation and the average is now 861 thousand.
Which is still an increase of 33% from a year ago.
And if you think about it…it’s pretty amazing considering all the threats to this market we are experiencing right now…freaking Putin, Gas Prices, Inflation and Interest Rates. But it doesn’t seem to matter. Because the fundamentals of this market are still rock solid. And what it boils down to is this…people want to live and vacation here in Colorado. So let’s be reminded of why that is.
Alright…that kind of footage always soothes my soul. Which…by the way - have you seen my favorites shots from 2021? Be sure to check that out.
Today, I’m drinking a Teton Range Juicy IPA. And welcome to our First Quarter Market Report of 2022. This is where we update you on what’s happening with the real estate market here in Pagosa Springs.
For those of you looking to buy or sell, pay close attention because a lot of the info I’m about to give out matters. But I also understand there’s quite a few of you that just want a quick highlight of what’s going on. And if that’s you, feel free to skip ahead to here…
Alright. Let’s dig in.
2022 started off with inventory so low, it was nerve racking at times. In December of 2021, there were only 16 new listings in Pagosa. Down 54% from a year ago.
In January, only 32 new listings, down 9%. And February, 22 listings. Down an astonishing 65%.
So I was very curious how March would turn out - which is usually the time of year sellers start to put their homes on the market. Because if this trend continues, it justifies another year of 35…45…or maybe even 50% plus price gains like what Durango is seeing right now. More on that in a second.
For so much of the past two years, we’ve seen New Listings in the red compared to a year ago. But in March there was a pleasant rebound. 67 New Listings for Pagosa Springs. 34% more than a year ago. But even with the increased inventory, everything quickly went under contract. And overall, active listings were down 74% from a year ago. And it’s causing more buyers to jump into land which has nearly doubled in price in some areas.
It’s brutal time for buyers right now. No question. Every home that comes on the market, as long as it’s priced right and it’s in decent condition…is getting multiple offers. And it’s caused the median price of a home rose to 675 thousand this past month. A gain of 36% from a year ago. And that’s the important number to focus on. Median Price since average can fluctuate widely depending on 6.75 Million dollar sales.
Now where we go from here is still uncertain. You can see from prior years that there is a rebound in new listings this time of year. And May and June are the biggest months of the year. Typically we see over a 100 Listings in May alone.
But starting in 2017, that number fell to the mid 90’s. It quickly rebounded in 2019. But then the pandemic hit and it returned to the low 90’s. And the overall trend in inventory has been down ever since compared to previous years.
How to Increase Inventory
In order for pricing to stop rising 36 percent a year, we need a few things to occur.
One…a lot more construction. And I mean a lot more. And two…more sellers willing to put their home on the market. It’s absolutely key to get new listings into the 120’s this summer. 2014 had the most ever at 146 New listings. If that can happen this summer, then just maybe prices will start to even out a bit.
But don’t count on that.
Remember, we have a town council that just put the kabosh on future short term rentals within town limits. Which lowers the incentive for current STR owners to sell now that all their future competition has been effectively eliminated. And rumor has it Archuleta County may attempt to enact the same policies in May. More on that in a future video…
But one only has to look to our west to see what could happen to Pagosa Springs. And the market is even crazier over there.
The Market in Durango
Record low inventory has caused the median price of a home in the city limits of Durango to surpass a million dollars for the first time in it’s history. Just one year ago, the median price of a home was 656 thousand in March of 2021. That’s a 53% gain in one year.
[ Inconceivable Clip from "The Princess Bride" ]
And that’s not even the average price of a home. The average price is nearly $300 thousand higher than that. A gain of 65% compared to a year ago.
Vacation / Short Term Rentals
What comes to mind is those who thought short term rentals were the cause of our price increases. But that turned out to be absolutely wrong. Durango put in a very low density cap for STR’s in 2014. And yet, here we are. With Durango outpacing our price gains even though they haven’t allowed new STR’s for years now.
The truth is that STR’s don’t have nearly the effect on pricing that opponents claim they do. In fact, researchers have found that a 1% increase in Airbnb listings only results in a 0.026% increase in prices. Now it may be a little more in mountain towns, but overall it’s pretty minimal when you look at the cold hard data. People want to live and own here regardless of whether they can rent out their place short term. And Durango is a perfect example that proves this.
Now there’s a saying that Pagosa is only 6 months to a year behind Durango in terms of flow. If Durango has more listings, so will Pagosa over the next year. But maybe this also applies to prices. Take a look at this chart. In March 2021, Durango’s median price for a home is almost exactly where Pagosa Springs stands today.
So what do you think is going to happen a year from now? Could Pagosa Springs legitimately have an average price of a Million Dollars?
We’ll have to wait and see. I’m of the opinion that as the nation goes, so will Pagosa Springs. If the housing market cools off, so will Pagosa. And there are signs that the Feds are seeing that may cool off this market.
But this is absolutely important here…cooling off doesn’t mean a crash. It just means a return to normal. Gone are the double digit prices gains. And back are single digit gains without the bidding wars. And the reason the market won’t crash is because the fundamentals of the lending industry are still very solid. This is nothing like 2008.
Overall, I do think we will return to a normal market with a healthy 4% to 7% gain in 2023. But for 2022, we’re still looking at double digit gains. How high that goes all depends on how many folks decide to put their homes on the market.
Looking to Sell?
And if you are thinking about selling…I know a guy!
Or actually a team. With Team M-Squared, you get two agents working for you instead of just one. We actively invest our own money into marketing your property through unique marketing methods that work so well that we guarantee you more exposure than anyone else. And we have the data to back it up.
Alright, let’s quickly recap where we’re at in this crazy market.
For March 2022…
Our current median price in Pagosa Springs for all properties - which excludes land - is 604 thousand, 37% higher than a year ago. For houses, its 673 thousand, 21% higher. Our average growth per year for the past three years has been about 20% a year for houses.
The rolling three month average price for a home is 837 thousand, 33% higher than a year ago.
New Listings are up 34% at 67.
Active listings are slightly starting to bounce back at 67. But still 74% lower than a year ago.
Sold properties were down 30% at only 43…again, due to low inventory.
And months supply of housing sits at 1.5. Down 66% from a year ago. But up nearly 50% from February, which was our record low at 0.9.
There are signs of sellers over pricing their properties as sellers are now only getting 98.4% of their list price. From May 2021 till September 2021, they were getting 100%. So we’ll see if that occurs again this summer.
And in general, it’s only taking 5 showings to reach a contract. Which pretty much occurs all in two days with multiple bids.
As always, it’s been a pleasure guiding you through this tricky market. Don’t hesitate to schedule a meeting to see how we can help you get top dollar for your property. If this is your first experience with This is Pagosa, be sure to check out some of our more fun videos…here and here.
As always…Cheers Pagosa!
Q4 2021 Market Recap
Did prices really increase this much in downtown Pagosa due to the STR ban? First, let's be reminded of why Pagosa Springs is so amazing.
Hello Pagosa Springs! And welcome to our real estate report for 2021! I’m drinking a Neon Rainbows IPA from the Ommegang OMG Series. I thought that was appropriate since some of the numbers I’m about to share will indeed make you go Oh My God.
So here we are…in the year 2022! Can you believe it? It’s hard to believe we’ve been in the midst of a pandemic for almost two years now. And regardless of your views on Covid, one thing for sure is it’s dramatic impact on our real estate market and economy. It ushered in the future and there is no going back.
Remote work is here to stay. And those that can work remotely have an incredible amount of purchasing power. It estimated 37% of jobs can be performed remotely full time and they account for 46% of all US wages. And these high income earners are choosing quality of life characteristics and second homes, which means outdoor opportunities rather than being crammed in a city. Which puts pressure on housing prices in more desirable states like Colorado.
And can you blame anyone for wanting to move to Colorado? This really is the best state in America to live. The mountains, the active lifestyle. the climate, the people, the low property taxes. It really is absolutely amazing here.
So what does that mean for the real estate market here in Pagosa Springs. Well, you already know the answer to that question. But let’s dig deeper into it and see if we can get a glimpse of where the market is headed. And that includes taking a look at the differences between Downtown Pagosa and Uptown Pagosa. Because there’s a fascinating experiment going on right now with downtown putting the stop to more STR’s while Uptown still allows them to come in. The question is what kind of impact will that have on our housing prices…if you’ve watched my videos before, you know my theory.
Banning STR’s makes current STR’s more valuable. If you own a STR in this situation, you are less likely to sell because future competition is now eliminated. Which means you’ll make more money through your STR. And the result is reduced inventory during a time in which demand is outstripping supply. Which will further cause prices to increase.
And we have our first set of data in that we can actually look at to either confirm or deny this.
Before we jump into the data, I just want to take a quick moment to say thank you for watching my content. And when it comes to listing your property, we strive here to go above and beyond in our analysis and marketing. Our goal is to make this process as easy as possible so you can focus on the next chapter of your life. From in depth property reports to cinematic videos that dramatically increase your exposure and views on Zillow and Realtor.com, we can confidently say that we can get you the best price the market will allow. If you have any questions, don’t hesitate to call or message me. I’d love to help you out. Or just have a beer with you.
December Real Estate Numbers
Alright, let’s jump into the December data. Up front, we need to be careful with this. December is always a historically low inventory month. And it’s understandable because most folks don’t want to sell their home or condo during the holiday months. But regardless of this, this market shows no sign of slowing down.
In December 2021, the average price for all properties in Pagosa Springs was 815 thousand dollars. If you look at just homes, it’s 891 thousand. Which is remarkable. If you remember from my last video in September 2021, I mentioned that in five to seven years the average price of a home in Pagosa will be over a million dollars with 7% average growth per year. Well, since that video, the average price has jumped 34% in just three months. Which is absolutely ridiculous. At this pace, the average price will be over a million in a year or two.
But we need to hold onto our hats here and remember that these numbers may not tell the whole picture because during low inventory months, the numbers can be skewed quite a bit. So the first thing we need to do is look at the rolling three month average of our average price. This takes into account the data from the previous two months and averages all three months together to prevent any outliers from dramatically affecting the numbers.
So the average rolling three month price for December is 781 thousand. 17% higher than September and 31% higher for the entire year. And this sounds more realistic. But an even better measurement for our market pricing is Median Price. Which goes even further in leveling out that data by using the middle price point in a data set rather than the average of the whole. And the median, rolling three month price for homes in Pagosa in December was 628 thousand. That’s still 9% higher than three month median for September and 27% higher for the year.
One thing is clear here. This market is actually picking up steam, not slowing down. Based on the latest data set, the market in Q4 averaged a 3% gain per month for October through December compared to the 2.25% gain per month for January through September.
And there’s one reason for this. Real Estate Inventory.
In December of 2021, there was an all-time low of 53 homes available for sale in Pagosa Springs. It’s astonishing. Now it’s usually low this time of year, but I wanted to compare this year to previous years.
In 2017 through 2019, the same trend occurs. More homes available in September than December. But these years had considerably more inventory than 2020 and 2021. But even 2020 had 240 homes available. That’s 352% more than December 2021. And look at the reductions from September to December throughout these past five years. It’s usually about a 10% reduction in inventory or so. But 2020 saw a reduction of 46%.
It’s the covid effect. Many of us thought it wasn’t possible to go even lower, but 2021 proved the opposite. There was an incredible 50% reduction in inventory that occurred from September to December. Absolutely unbelievable. Surely it can’t go lower.
I mean, take a look at what has happened since 2010. If there’s any one picture that tells this story, it’s this chart right here. You can see inventory started to trend up in 2012. And then Covid hits in early 2020. And supply get gobbled up. In 2021, supply starts to rebound in the spring but that’s also when there was talk of the county banning STR’s. It came up during the April Board Commissioners meeting. Look what happened that April. Another free fall in inventory. And it’s never recovered.
And this is exactly why pricing continues to pick up steam. Eventually, inventory will rebound. This can’t occur forever. But once inventory increases, that doesn’t mean pricing will decrease. There’s still enough folks on the sidelines waiting to jump in which will sustain our price increases. The lesson here…like I said back in October, buy now. You would’ve saved yourself quite a bit of cash had you done so.
Uptown vs Downtown Real Estate
Alright. So let’s take a look at Uptown vs Downtown. There’s one thing I want to point out, which relates to the chart at the very beginning of the video. The problem with comparing downtown to uptown is the uneven data sets. The Uptown area is way bigger than Downtown. Within PLPOA, there’s over 6000 residential lots with 4 thousand 807 of those having been built on. It’s 79% built out.
Which leads to another point that we will explore in a future video. Pagosa is surrounded by millions of acres of National Forest. There’s only so much land to build on with many bigger parcels that could be developed belonging to conservation trusts. So what will happen to the market once PLPOA is built out? We’re only 20% away from that happening. Just another reason why I don’t see the market here in Pagosa Springs going down anytime soon. This isn’t a bubble, so long as there isn’t a major worldwide recession. And as evidenced by our supply chain constraints, the demand for growth is there.
But back to the comparison of Uptown to Downtown real estate. When we talk about Downtown, we are talking about this area as defined by the MLS. And uptown as the Pagosa Lakes area, again as defined by the MLS.
Because of how much bigger Pagosa Lakes is compared to Downtown, in order to truly compare these markets, we need more data. So we’re going mostly to look at the rolling 12 month averages. Which pretty much means adding up all the data from the past year and comparing these two markets by these annual totals. If we don’t do this, it creates outliers which can skew the data.
For example, take a look at Sold Units for December 2021. Pagosa Lakes had 18 whereas Downtown had only 4. Which creates problems like the following.
The average price for homes in December 2021 in Pagosa Lakes was 631 thousand. While in Downtown it was 2.18 Million. That’s an increase of 8% since September for Pagosa Lakes and 275% in Downtown.
It makes it seem as if the STR ban downtown made the market skyrocket. And it definitely played a part in the price increase. But it’s not the whole picture. With only four sales downtown, one sale skewed the entire data set. And that was 482 Rumbaugh at $5.5 Million. So we need to take a look at the Median Price instead of average price.
In December, the median rolling three month price for Pagosa Lakes was 602 thousand and for downtown, 560 thousand. Which is surprising to me because in my heart, I know that downtown is more pricey than uptown. But that wasn’t always the case. Downtown has had a long history of needing to be fixed up. Most retirees preferred the nicer homes being built in Uptown. But it wasn’t until recent years where that has started to change. And we’re starting to see a much needed renovation come to downtown, spurred in large part thanks to Covid. Because of that, you can see in the data how much faster downtown is growing than Uptown. In December, the Median Price grew 18% where as Pagosa Lakes only grew at 3%.
What’s more telling though is price per square foot since some months more smaller or bigger homes are sold than previous months. And there’s more smaller homes in the downtown area. And smaller homes bring with them a higher PSF than larger homes on a similarly sized lot. In December PSF grew 80% since September for the downtown area whereas it grew only 9% for Pagosa Lakes. I fully believe the STR ban has played a part in that.
Annual Real Estate Numbers
Ok, let’s take a look the annual real estate numbers for Pagosa, Pagosa Lakes and Downtown and review what happened in 2021.
For 2021, Pagosa had 691 new residential listings. Now this doesn’t include land listings. Of those 691 listings, 404 were in Pagosa Lakes with only 33 downtown.
But the trend is clear. New Listings were trending up this past decade. Increased construction helps with that. But once covid hit, it started to change. And the trend line was broken. Had the trend line held, there would have been about 100 more listings than we currently have right now. Now I’m sure the question is in your mind about the trend line for the Downtown area. Especially with my STR ban theory. Less people will be likely to sell, right? But with such a low data set, I’m not sure you can make a clear cut conclusion at just three months. We need more data. But overall, the trend is the same for Pagosa as a whole. And listings are down 15% the past couple of years.
Onto sold data. Of these new listings, 600 sold in Pagosa, with 361 in Pagosa Lakes and 30 Downtown. That means a 60% market share in Pagosa Lakes with only a 5% market share in Downtown. Throughout the years, this has stayed rather consistent.
Of these new listings, about 87% sold during 2021. Which is incredible compared to previous years. It’s usually around 50% to 70% since during an average market it takes up to six months for a property to sell. Pagosa Lakes has always historically sold a little better than Pagosa as a whole. And downtown has fluctuated quite a bit, again due to low numbers as a whole that can create outliers.
For 2021, the average price for Pagosa was 593 thousand, for Pagosa Lakes, 471 thousand and for downtown, 602 thousand. Remember, this is averaging out the whole year. We are considerably higher at the current moment given how fast the market is appreciating. If you look at the past decade, you can see how Downtown continues to fluctuate. Overall, we have seen considerable growth since 2015 with our market almost doubling in value and most of that gain has occured in the past two years.
Our Median Price is of course lower than our average price with Pagosa at 484 thousand, Pagosa Lakes at 435 thousand and Downtown at 450 thousand. Downtown continues to fluctuate due to a low data set. But what’s interesting is that some years, the median vs average price is the same for downtown. Whereas for Pagosa as a whole, the average is consistently higher than the median. Usually about a 75 thousand dollar difference.
So that’s where we stand for 2021. The big takeaway here is that Downtown values are growing fast. The big question is how much of a role will the STR ban will play in future appreciation. I eagerly await an entire years worth of data to explore this.
Another is question is what would happen should Archuleta County follow suit and ban future STR’s. I think there’s enough evidence this is already occurring in the downtown area, so I do think it will create considerable pressure on our already low inventory and help send prices through the roof in the Pagosa Lakes area as well. It all goes back to supply and demand.
I know many folks think we are in a bubble here. But here’s three more points to be aware of that I think help support the idea the market will continue to go up. First, we are currently experiencing significant inflation due to global supply constraints and the safest place to park your money in such situations is real estate. Second, nearly every expert out there is predicting the US market as a whole will continue to increase. And third, Pagosa is about to experience record exposure thanks to a HGTV show to premier in April.
Which, by the way, did you see the Building Roots preview that aired over Thanksgiving break? I may be biased here, but as someone who has spent quite a bit of time in the video production world, I have to say it sure beats any of the other Fixer Upper spin offs that are on HGTV. A job well done Ben, Christi and crew! I can’t wait to see more episodes.
Alright, I bet you’re tired of all this data and I hope there’s not any data fatigue going on. But if you have any questions about buying or selling real estate here in Pagosa Springs, don’t hesitate to reach out! I’m here to help in any way that I can. I hope everyone out there has a fun and prosperous 2022. Cheers Pagosa!