Q1 2024 RE Recap

The big story to start out 2024…real estate prices continue to climb to record highs. But….but…well, before I get into these butts, let’s remember why we are all drawn to this magical area.

Ah, Pagosa Springs in the spring. The snow has melted. The temps have warmed up. And life is completely chill as various businesses take their seasonal breaks.

But not for us real estate agents…things are picking up. So let’s take a look at how this year started off. It’s the Q1 recap for 2024. Let’s go.

Three takeaways…

1. Price Per Square Foot. It continues to climb. We hit record highs in February and then topped it in March. If we go off the three month rolling average, we’re now sitting at $355 for all residential properties. 19% higher than where we were a year ago. And 4% higher than our previous peak in July 2022.

2. Inventory is climbing. But this one is a bit deceiving. Right now, new listings are up 51% when compared to a year ago. But there’s more to the story than this. Typically, if listings don’t sell in the fall, sellers will often take the property off the market for the winter and re-list in March and April. In March 2023, approximately 17% of new listings were listed at some point during the previous six months. But this year, that number jumped up to 38%. What this means is that we’re basically flat when compared to a year ago when it comes to new inventory that wasn’t previously listed. So inventory remains a problem.

3. Demand remains flat. So far this year, 53 properties have crossed the closing table, up slightly at 4% when compared to a year ago. But still down about 24% from the five year pre-covid average. Now remember that the first three months are always the slowest when compared to the rest of the year. Our buying season doesn’t really begin until summer. But I will say this…it feels like demand is starting to pick up. We’re definitely starting to receive more calls and inquiries about buying real estate than we did at this point last year.

Alright, so what does this all mean for the market going forward. And this is where it gets tricky. Because we’re talking about crystal ball stuff. But two things to pay attention to…

One…There’s a lot of expectations out there that the Fed’s will cut interest rates three times in 2024. In fact, back in January, the market was pricing in a 75% chance that cuts would begin in March. Well, it didn’t happen. Recent inflation data in March saw an increase of 3.5% from a year ago. Well ahead still of the Fed’s target of 2%. So now the market is pricing in a 56% chance that the Fed’s will cut their rates in June. But just like how March didn’t pan out the way traders thought, I’m beginning to think June won’t either. And now I’m not expecting any significant rate cutes until 2025.

Two…There’s this little lawsuit settlement that happened last month. There were a class action lawsuit brought by sellers of homes claiming that the National Association of Realtors conspired to inflate real estate agent commissions by enforcing cooperating compensation to buyers agents.

Which ironically, the lawyers of this lawsuit are taking home a cut of up to 40%. Think about that…Lawsuits over realtor commissions of around on average only 4% to 6%. But yet these guys are collecting 40%? I should’ve been a lawyer.

Anyways, as a result of this lawsuit, two big changes are taking place in our industry. The first being that buyers agent commissions will no longer be allowed to be displayed on the MLS - which is the tool where agents display their listings to other agents and in turn, websites like Zillow display these listings to the public. And second, NAR agreed to require MLS participants working with buyers to enter into written representation agreements with their buyers before the buyer tours a home.

Now these changes don’t mean that sellers will no longer offer compensation to buyers agents. It just means it can’t be displayed on the MLS. So for the most part, I don’t think anything will really change all that much. But it could start a trend where some buyers forgo representation and choose to go directly to the listing agent.

Now I don’t recommend this. Buyers agents advocate and protect you from being taken advantage of by the seller. And this area is very different than cookie cutter suburbs where every sixth house is exactly the same. In Pagosa Springs, everything is custom. There’s water rights. Wells. Easement obstacles. Tap fees. Certificate of Occupancy issues. All kinds of issues that you typically don’t see in big developments in Texas. So it’s important to have proper representation.

But that won’t stop some buyers from going on their own. Which means for sellers that marketing matters now more than ever. You can’t just rely on the MLS anymore. You have to advertise in order to get in front of as many buyers as possible. And this is what Team M-Squared specializes in.

Instead of only using the MLS, we create quality content to market your home through various social media and advertising channels. We then target buyers interested in moving to Pagosa Springs, Colorado. This is our way of ensuring you receive more exposure than your competition.

The real estate industry is changing. But we’ve always been ahead of the game. We’re innovators. We’re leaders. And we’ll guide you through this complicated process.

Ok…so overall, what does this all mean for the values of homes in Pagosa Springs. I think for the rest of the year, prices continue to remain stable. Both buyers and sellers have become accustomed to these higher interest rates. And they’re more comfortable jumping into the market now that they realize that rates will never go back down into the 3’s. Because at some point, you just have to make your move. You can’t wait forever to make a change in your life that you desperately want. And come summer time when Texas is 110 degrees every single day, people will want to retire or make the move to beautiful and comfortable Colorado. And while affordability is relative, there’s not a better deal in Colorado near a ski area than what Pagosa Springs has to offer.

So both supply and demand will slightly increase throughout the year. And then as we approach the election in September, activity will quiet down. Going into 2025, activity will pick up again. And if interest rates do start to fall, look out. Prices could start to march up again.

So there you have it…what to expect as we head into the summer. If you have any interest in buying or selling real estate, hit us up. We’d love to have a beer with you and chat about this amazing area we get to live and play in. Till next time…cheers!

10 Reasons Not to Move to Pagosa

Let me just say it. Pagosa and Southwest Colorado is not for everyone. There are some challenges of living here that you may not be used to in places like Texas, Arizona and California. So I’ve complied a list of 10 Reasons Not to Move to Pagosa Springs.

Hey there, my name is Matt Martin. I’m a local realtor. If you ever been curious what it’s really like to live or buy a vacation home in this area, you’ve come to the right place. Not only do we produce quality videos on the fun and beauty of this area, it’s also my goal to provide value by giving out honest guidance that helps you determine if the mountain lifestyle here in Southwest Colorado is the right fit for you.

If this list actually sounds appealing to you, then you’re probably gonna fall in love with this place.

Alright…Let’s go.

#10 Remoteness

Pagosa Springs is pretty much it’s own world. It’s surrounded by millions of acres of national forest. And it’s neighbor to the north, Hinsdale County, is the most remote county in the entire lower 48.

The closest mid sized town is Durango, which is over an hour to the west. It does have it’s own airport. But if you need to access a major airport, it’s either a 5 hour drive to Denver. Or a three and a half hour drive to Albuquerque.

We actually prefer Albuquerque because of how much easier it is to get through security compared to Denver. Plus, you don’t have to go over the pass…which when major snow storms hit the area, the pass often shuts down. Which delays travel and shipments of supplies and goods.

So if you need quick and easy access to the modern conveniences of life, it can be a little more challenging here in Pagosa. On the positive side though, it keeps the crowds away. There’s no traffic jams. There’s little pollution. And there’s little noise other than the occasional barking dog.

#9 Shopping and Restaurants

Because Pagosa is so remote, your shopping choices are limited. Our Walmart is one of the smaller ones out there. And there’s only two other grocery stores here, City Market and Natural Grocers.

But if you’re looking for something like Target, the nearest one is two hours away in Farmington, New Mexico.

Which means you’ll have to rely a little more on Amazon Prime. 

For those coming from more populated areas, you’re probably used to next day delivery or even same day. But here in Pagosa, it takes usually four to seven days to deliver your packages.

As far as restaurants go, there are some great ones here making some delicious food. But choices are limited. Which means visiting the same ones on a regular basis. And there’s not much fast food food here. Just McDonalds, Subway and Sonic.

But I view this as a positive. Avoiding fast food leads to a healthier lifestyle. You’ll feel better, look better. And save more money.

Which is also true when it comes to shopping here.

Before hitting that “buy now” button on Amazon, maybe you’ll think twice if you really need that item. And with the lack of major retailers here, you’ll end up supporting more small businesses, who are your neighbors and your friends. Which is a great thing!

#8 Small Town

Now I think there’s always something to do in Pagosa. The skiing, the biking, the hiking, camping, kayaking, tubing…this place is an outdoor paradise. But if the outdoors aren’t your thing, you’re probably gonna get a little bored here.

Pagosa is a small town and there’s just not a lot to do here if it doesn’t involve the outdoors.

Now that’s starting to change. We now have axe throwing, a movie theater, and other businesses trying to fill this void. But we definitely lack the options that the suburbs and cities have.

And the night life…well, there’s not much of it. Downtown can look like a ghost town sometimes after 8pm.

But chances are, this is why you are interested in this area. You desire the peace and quiet of a small town where you can see the stars at night.

#7 Pagoslow

It’s a different pace of life here. It’s much slower compared to where you’re likely coming from. Which leads to the nickname Pago-slow.

There’s challenges of living in a more remote area. Which means it can take longer to find a repair guy or to get supplies in stock. Restaurants aren’t open every day of the week. Lines are longer certain times of the year. And it takes some time for government agencies to respond to any questions or permit requests.

Over time though you get used to this slower lifestyle. The stress of the hustle and bustle of the city doesn’t belong here. And you find that having to wait a little bit longer to get things done isn’t so bad after all.

But I can’t lie either. Sometimes it can be frustrating when we’re so used to these instant gratification from these devices called our phones.

I know a lot of this is simply first world problems. But you do need to be more prepared for this slower pace of life and how that can alter your schedule and expectations.

#6 Cell Service

Speaking of slow…that’s the case also with our cell service in this area. With our topography and vast expanse of land, you’re not always gonna have the best signal.

Driving up to Wolf Creek or even out to Durango, you’re a signal for half the drive.

Now if you’re staying within the Downtown or Pagosa Lakes area, you will a decent connection. But you also to be aware that during busier times, the networks can get overloaded and the data transfer rates can slow.

Internet as a whole can be challenging in some spots. But it’s honestly no longer an issue now that star-link is available. And Pagosa is actively working on providing fiber to downtown and uptown, which should be available to everyone over the next couple of years.

I do want to add this…we didn’t move here to stare at a screen. We’re here to live a life outside in the mountains. And not being dependent on that phone or computer helps you live that life you really want to live.

#5 Potholes and Gravel Roads

We have a lot of potholes here. And some are gigantic. This is due to the nature of living in a winter environment. Potholes tend to develop mostly in the winter with the freezing and thawing of roads.

The problem though is how long it can take to get potholes repaired here. Colorado is home to the third lowest property taxes in the nation. And the overall taxation here is lower than states like Texas. Which is a huge benefit…right?

But that also means lower revenue for our town and county infrastructure. Combine that with our small population but large amount of land mass, it can be very hard to keep our infrastructure up to date. There’s not enough gravel pits in the area.

Now this is quite the controversy here depending on your views and politics. But here’s how I look at this issue.

Yes, we have large potholes and gravel roads. But I’m also saving quite a bit of money in property and sales taxes compared to Texas. And I have off-road vehicles for a reason. I just wish it wasn’t to get into the grocery store parking lot. But this all does come down to values. And I can put up with the pot holes and gravel roads to stare at this kind of beauty every day.

Which leads to our next point.

#4 Mudseason

During March, April and May (and even February this year due to warmer than usual temps) all that snow we received over winter melts. It creates ponds and streams all over town and in our backyards. It turns our dirt and gravel roads into muddy messes. And all that mud collects on our cars and ends up in our garages.

Mud season is my least favorite time of year. It’s a great time to go on vacation. But it’s also a break from our tourist seasons. Town is quieter. There’s not as many people here. The lines at restaurants are no more. And it’s the start of rafting season along with the excitement of the upcoming summer. Which also happens to be peak season for reason number three.

#3 Tourism

Pagosa is a tourism town. Tourism is what provides the economy here along with many of the jobs and businesses in Pagosa Springs.

But with that tourism comes people. The population of town can double during peak weeks. Traffic increases. The shelves at our grocery stores empty out. Wait times at restaurants become longer. Powder days get tracked out faster. And Pagosa no longer seems like such a small town.

So there’s this love / hate relationship with tourism here among the locals. Some despise it. Others see it for what it is…an economic benefit that allows many of us to live this mountain lifestyle. But I’d say the silent majority here don’t even give tourism a second thought. They know the tricks on how to navigate it and still find there’s more than plenty of room for everyone to enjoy the peace and quiet of these mountains.

Honestly, where you live will determine how much tourism you see. Downtown is definitely busier than uptown. But if you don’t go downtown, you’ll hardly even notice the amount of tourism. Most neighborhoods remain quiet. Which leads us to…

#2 Vacation Home Community 

Less than 50% of homes here are occupied full-time by their owners. This means the other half are either second homes, long term rentals or short term rentals.

Now less than 10% homes here are rented out as STR’s. But they have generated some controversy here.

Opponents of STR’s will say they contribute to a loss of community. That occupants tend to be louder, they leave lights on and leave trash out that attracts bears and other animals.

Others will say that STR’s are really no different than long term rentals or full time owners. People are people. But STR’s tend to be better kept than LTR’s and contribute more money to our local economy.

Now here’s my own experience. STR’s on average are occupied 36% of the time. So they sit empty most of the year. I’ve yet to have a single problem arise with any of the STR’s near me or their renters. Everyone has been respectful. So I’ve never had a problem with one.

But when it comes to community though, due to the number of second home owners here, I think you’re more likely to find your community through clubs, organizations or other entities that share the same interests or beliefs that you do. Rather than your own neighborhood.

And finally, our number one reason why you may not want to move to Pagosa.

#1 Winter

People fall in love with Pagosa because of our amazing summers. They buy a house in the summer, enjoy our incredible transition to fall. And then here comes winter. They’re not quite prepared for it.

Downtown Pagosa receives on average about 67 inches of snow a year. Uptown receives even more, closer to 100 inches. And with all that snow comes quite a bit of work. Especially if you have to shovel your driveway and porches. And just when you think you’re done, the plows will come by your house and push all that snow from the road onto your driveway. Causing you to say a few curse words and then bust out the shovel once again.

Make no mistake! Winter is work!

But with that work comes some amazing opportunities to play in our outdoors. The amazing powder days at Wolf Creek can’t be beat. Then there’s cross country skiing, sledding, snowshoeing, snowmobiling and more. But if you don’t enjoy playing in the snow, it can be hard to get through a winter here.

Honestly though,  it’s not as cold here as you would think. Pagosa has over 300 days of sunshine a year. And so long as the suns out on a winter day, it can actually be quite pleasant. There’s been days in January where I’m walking around without a coat because of how warm the sun feels. But once the sun goes down, it does get really cold. Often down into the single digits with occasional times below zero. All the more reason to cozy up next to the fire on a cold winters night.

So there you have it. My top ten reasons to not move here. For some of you, this inspires you even more to make the move. For others, maybe it means just living here in the summer. Either way, let me know in the comments if I got it right, if I got it wrong or if I missed anything.

If you’re looking to move to this area, please reach out. We’d love to help you find the perfect home for you.

And as always, if you have any question what-so-ever about Pagosa or this area, we’d love to help you out. We’re proud to be a quality and useful resource even beyond the world of real estate. So reach out to us and we’ll get back to you as soon as possible. Until next time, cheers!

2023 Market Recap

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.

2023 Results

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.

Silver Tsunami

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.

Second Home Market

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?

Interest Rates

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.

Buying or Selling?

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!

Is Pagosa More Expensive?

The results will surprise you.

There's this myth out there that living in a mountain town is more expensive than the cities or suburbs. Why is that? Maybe it's because most people think of Telluride or Aspen when dreaming of the mountains. But there's plenty of other incredible mountain towns that offer an affordable cost of living. And Pagosa Springs happens to be one of them.

In this video we analyze the difference in cost between Pagosa Springs and mainly Midlothian, TX, your average suburb in the Dallas-Ft Worth area. We cover the following topics:

Groceries
Housing
Taxes
Insurance
Utilities
Restaurants & Entertainment

Spoiler alert...in many of these categories, Pagosa Springs is less expensive. To find out why, watch the video!

If you have any interest in living a more fulfilling and adventurous lifestyle in the mountains of Colorado, hit us up! We'd love to help you find the perfect home so you can live the life you've always wanted!

The Results Will Surprise You!

I’ve struggled with the theme of this recap. It’s such an interesting time where on one hand it feels like the market could crash. But on the other, it could keep rising. Now I can’t say for sure what will happen. But I did make some guesses early this year on where the market is headed. And now that Q3 is in the books, it’s time to find out if those guesses are still on track or not.

But first, let’s take a glimpse of the magical transformation thats occurring around Pagosa Springs right now.

Earlier this year, I mentioned that the name of the game is supply and demand. But to me, supply matters more than demand. Because no matter what the current economic conditions are, people will always need a place to live, a place to move to.

So I like to pay careful attention to the amount of new listings coming onto the market. And at the beginning of 2023, new listings were significantly down compared to not only the covid years, but also the pre-covid years. It was so shocking that I mentioned I’d be hard pressed to see new listings surpass 600 this year.

Q3 New Listings

Well, now that we’re through Q3, it’s time to see how that prediction is holding up.

Like Q2, Q3 definitely made up some ground. But still under the average pace of the last decade.

For Q3, new listings were still down about 8% from the prior three years. To date, we’re at 496 new listings, 23% below our usual pre-covid pace. Usually, we’re already over 600 new listings by this point of the year. But since Q4 historically averages about 100 new listings, I don’t think there’s much of a chance we’ll cross that 600 new listing barrier this year.

And this is the exact reason why the market has not crashed. 75% of America is locked into interest rates lower than 5%. So they’re hesitant to put their home on the market and move into something new. In fact, even the amount of time a homeowner stays put is increasing compared to prior years.

Demand vs Supply

But what about demand? Could that demand be even worse than our current supply situation?

While the number of sold listings was down 18% for Q3 compared to the Covid averages, it’s actually up 3% when compared to the five year period before Covid. So it was actually a good quarter for sales when compared to a normal, pre-covid market. And this is the reason why our real estate market hasn’t crashed. Because demand is holding up much better than supply.

Now last spring, I was of the opinion that this year is shaping up to be just like last year. The market rises in the spring. Peaks in early summer. Cools off in the fall. Only to rise again after Thanksgiving. But take a look at this chart.

This chart shows the price per square foot growth from the beginning of each year. If we take out the crazy Covid years, you’ll see we’re right in line with the three years prior to Covid. So instead of this year looking like last year, it’s starting to look like a pre-covid market. So I’m shifting my expectations of price declines this fall to the market remaining relatively flat.

Now there still is quite a bit of inventory just sitting there. And some of it is indeed overpriced. But sellers are receiving a higher percentage of their asking price than they were a year ago.

More importantly if you look at historical trends, we typically start to get quite a bit of cancellations this time of year. Especially during the covid years. Sellers are sitting on record amounts of home equity. So it’s no risk to them to price their property high. And if they can’t get it, they can always cancel. And I expect this trend to continue. Which will help keep our prices stable.

So overall, I’m slightly positive on market conditions right now. And that surprised me as the data came in. I thought the market would gradually increase this summer. And it did. But it actually surpassed my expectations.

But the last thing I want to be is that realtor that tells you “now is a great time to buy” no matter what conditions are. At Team M-Squared, we’re always gonna be honest with you. We don’t hand out unrealistic valuations just to get your listing. And we won’t you force you into a home that’s overpriced just to get a commission check. We’ve told certain clients to take their homes off the market till valuations start rising again. Our focus is on what’s best for you. Not what’s best for us.

New York City STR Ban

So I like to pay careful attention to contrarian viewpoints. I want to be challenged in hopes to reveal any weak spots in my thought process so I can better inform our clients. But one of those contrarian viewpoints is that the AirBnB bust will cause a market collapse, flooding the market with new listings.

And since we live in a tourist town, short term rentals matter. So let’s take a look at the data. Because we now have a perfect example to pay attention to.

New York City proposed a law in November 2022 that essentially bans all STR’s unless the host lives in the home and is there during the duration of the visit. This law was supposed to go into effect in March 2023. But due to lawsuits, it wasn’t enforced until Sept 5th. STR owners have now had about a year to prepare for this. 

Now I think most folks would’ve thought that many of these STR owners would put their house or condo up for sale given that their income stream was essentially taken away from them. But take a look at this chart.

I grabbed the annual change in the amount of new listings and compared New York City to the rest of America’s metro areas. And as you can see, NYC actually had a decent amount of growth at the beginning of 2022, outpacing other metro areas. But by the time they announced the new STR law, new listings plunged below the metro average. Once the law was supposed to go into effect, NYC followed the exact same path as the rest of America. And once the law actually went into effect last month, NYC dipped slightly below the metro average.

So far, there’s hardly been an impact to the housing market because of this law. No it’s still early. This could change. But when you really think about it, these numbers make sense because the number of active STR units compared to overall housing units are too low to make a large impact.

Pagosa Springs STR Market

But what about Pagosa. After all, we are a tourism town that in large part depends on a healthy STR industry for our local economy.

According to AirDNA, there’s a little over 1,000 available STR’s here in Pagosa Springs that are currently available to rent. There’s actually more STR’s than that. But they aren’t taking reservations. They block out their calendar and only rent to their friends or family, etc…

But out of those thousand active rentals or so, only 34% are considered full time STR’s. Meaning they’re available to rent for more than 270 days a year. Most STR’s here are basically future retirement homes or long time family vacation homes meant to be passed down from generation to generation.

But out of these full time rentals, they make up only about 2.6% of our total Housing Units here in Archuleta County. Again, too small to make a meaningful impact to our market.

And here’s the thing anyways…attitudes on STR’s are changing among local governments who imposed caps and restrictions during the pandemic. Check out what’s happening in Telluride with the battle for affordable housing.

Telluride STR Market

Local council woman Adrienne Christy, who supported the original cap on STR’s in 2021, recently said in an emotional and tearful exchange that, “The only way we are going to solve this problem is to build affordable housing and in order to do that we need to make money. I don’t feel I need to soapbox anymore. I am not in favor of a cap. I’m ready to make some money — more money — and put it in our affordable housing fund from licenses and fees.”

And you know what…she’s exactly right. As proven so far by New York City, banning STR’s will not cause a flood of new listings to come on market and cause valuations to crash in hopes of making housing affordable again.

And with sales tax receipts starting to take a dip, I think you’ll see more cities and counties reverse their course and embrace the STR model rather than try to depress their income sources.

Think about it. Here in Pagosa Springs, the average STR is only occupied for about half the year. But the average spend in our local economy from the average STR is nearly double that of the median full-time household here. And that’s not including the payments to STR owners. That’s purely what’s spent towards our local businesses.

Where else can you find that kind of a deal…half the impact on infrastructure yet twice the impact on our local businesses. Local governments would be foolish to restrict this. So I think there’s a real chance that the town of Pagosa Springs will come to their senses and rescind their restrictions on the most impactful sector in our local economy.

Alright, time to bring this to an end. There’s certainly some concerns from the contrarians that give me pause. Home affordability is incredibly low. Credit card debt is at a record high. Property taxes are putting a strain on homeowners. But so far, the market has remained strong despite all these indicators. Unless there’s a big event or recession that causes home owners to give up their cheap mortgage rates, I just don’t see the market significantly crashing. But who knows. These are unprecedented times and absolutely anything can happen. If you think I’m wrong, let me know in the comments below. I always value a well reasoned viewpoint. With that said, it’s time to go enjoy these beautiful autumn days here in the mountains.

Cheers!

2023 Q2 Market Recap

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?

[Feelings Song]

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.

Cheers!

2023 Q1 Market Recap

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.

Median Price

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.

Interest Rates

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.

Monthly Payments

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.

Real Prices

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