Impending Doom and Gloom in the Real Estate Market?

by Anthony Sole

The start to summer is here and inventory is on the rise. We have seen 137 new listings and counting in just the last 2 weeks as sellers prepare for a busy selling season. What is the tone of the market looking forward? Well it is tough to say definitively because we have seen so many factors influencing the market.

For one we just came out of a prolonged mud season with snow as recently as 3 weeks ago. This slow down in the county certainly attributes to the fact that we have seen a slow down in showings as well as some price decreases in numbers we have not seen in recent years.

Secondly, the interest rates simultaneously rose causing all those seeking a loan to slow down their purchasing. Couple this with the fact that practically everything is on the rise: Gas, Food, Materials, etc.

Third we saw the GDP dip in the first quarter meaning if it happens again then we will technically be in a recessionary period.

Now you may be thinking: Well all of this points to market downturn and you would be right. The question is by how much? Answer: Not very much

I anticipate, along with other professionals in our market, that we will see a dip of maybe 3-5% in the next year or 2 and that is a very liberal estimate. Why? Well Summit County is a "want to have" not a "need to have" market. Meaning that even in a recession investors are still likely to acquire assets like real estate as it is, historically, the best hedge against inflation. The demand for property still exceeds the amount of inventory that we have available in the county and it will stay that way for a while.

An additional factor that no one anticipated was the rental restrictions coming from the Town of Breckenridge as well as Summit County, who just announced a 9 month moratorium on short term rental license applications. What does this mean going forward. Property owners who have rental licenses are going to be apprehensive to give up their assets due to rental income. Now you may think that this would affect the market negatively, however we have seen just the opposite. It seems to be that a new wealthier crowd is making its way into Summit County. A crowd that doesn't seem to mind the rental restrictions. They would rather live in a quiet neighborhood and can afford to leave their property vacant for 51 weeks out of the year. The price of real estate here is much more attractive than Vail or Aspen which adds to the value of owning property in Summit County.

Investors are losing in the stock market right now and will assuresly liquidate their 2nd and 3rd homes to cover from losses which will likely cause inventory to increase going forward. This spike in inventory as well as interest rate hikes (fed increasing fund rate by 75 basis points), GDP falling, rises in the price of gas, food and other commodities we are sure to see a slow down in the real estate market.

This does not mean we shift into a buyer's market. I think sellers settle into a 5% dip, at most, and properties sit on the market for 2-4 weeks instead of 2-4 hours. This still indicates a strong seller's market and will stay that way for years to come.

Buyer's are wary of interest rates affecting their purchase power claiming that they "cannot afford it." The truth is that they can and will adjust to these rates as it becomes the new "normal." There has been so much money floating around from pandemic printing by the fed that people have gotten so used to being able to buy luxuries on a daily basis. Now those same buyers will learn to adjust their spending to save for needs and as the reactionary period of all this inflation comes to an end investors will go back to buying real estate.

I DO NOT have a crystal ball, but see this market as a new benchmark in Summit County moving forward as continue to gentrify and grow with the "work from home, corporate America" crowd. Expect inventory to stay low and demand to be high. Summit County is no longer a secret and we are sure to see those changes moving forward.

Impending Doom and Gloom in the Real Estate Market?

by Anthony Sole

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