Real estate in Colorado ski towns and resort communities throughout the country has been off the charts  (do you know which CO resort I took this pic at?). The data is staggering in three months from June through August, the median home price in Aspen for a single-family home doubled, with the average sales price north of 7 million.  What does this mean for the future of prices?  What does this mean for buyers, sellers, and realtors?

What is in the data?

It is not just anecdotal that the Colorado mountain towns are popular.  Inventory is at record lows with Summit county (Breckenridge, Keystone, Copper Mountain) at historic lows dropping 41% from June to August.  At the same time sales volumes are hitting record highs, with Aspen up 336% in September and Steamboat up 108%.  The huge surge in demand has driven prices through the roof with Aspen doubling  the median home price rising from 2.5m in June to 5.1m in August.  Below is data on some of the key ski towns in Colorado.

Will resort prices tumble when the world returns to normalcy?

The huge run up in prices leads to the million-dollar question, what happens when “normalcy” returns to the world with a vaccine or other treatments for the Coronavirus? Will prices in the mountain communities plummet back to reality?  Is this the new reality?  There are three factors which will help us answer these questions

1. Inventory/ future inventory: The numbers are clear, that inventory is at rock bottom levels. Unfortunately looking at present inventory doesn’t necessarily tell us what the future holds.  The number that will impact future inventory substantially are present sales. In every ski town in Colorado the absorption of homes (closed sales) is unprecedented with Aspen up 336% in September vs. last year.  According to the National Association of Realtors, on average people stay in a house between 8-13 years.  This means a huge portion of homes that were purchased in 2020 will not be available for sale for another 8-13 years!  This will substantially reduce future available inventory.  Many years of sales (I’ve heard estimates of 3-5 years of sales from various realtors in ski towns) have taken place in 2020.  This is a large number of houses that are “locked” up from future sales for a considerable period of time
2. Land absorption: At the same time that inventory is at historic lows, many have turned to vacant land or scrape and builds to get into the ski town. This will create a number of custom builds that will tie up homebuilders for years.  I’ve seen waiting lists of 3+ years to start on a house.  With so many contractors and subs tied up on high end custom builds, there is little availability for spec building.
3. Impossible to add much inventory:
   • Nowhere to build: With prices rising so quickly, there are little if any available tracts for any large scale developments to add meaningful inventory.
   • Costs: as home costs rise with demand, highly skilled workers are in even higher demand and prices for skilled labor is also increasing. This makes it almost impossible to provide cost effective construction.
   • Regulations Many of the ski towns are on the leading edge of building practices mandating high energy efficient homes.  The increased regulations add substantially costs to building, for example air sealing is so tight that makeup heat recovery ventilation systems need to be installed adding costs.

Where do we head from here on Colorado ski real estate prices?

Based on the three factors above: inventory, land absorption, and the lack of ability to add meaningful supply price declines are highly unlikely. There might be a little upside left as the pandemic roars on, but somewhere near a step.  I use the word step as opposed to a peak as long term there will be further price appreciation and the market will take a breather and then likely head a bit higher.

What does this mean for buyers, sellers, and realtors

1. Buyers: The frenzied pace should at least slow a bit, but it is going to be challenging now, and in the future, to get into many of these markets. Deals will be nonexistent and supply will remain severely constrained.
2. Sellers: There is a frenzy in the market with basically no inventory so sellers have the upper hand. We are at a step so if you want/need the money, now is as good of time as ever unless you are willing to wait many years for further appreciation.
3. Realtors: Now is about the best it is going to get for many years.  Transaction volume will slow considerably late next year as there will be little to any inventory and the world returns to more normalcy. The inventory constraints will likely get worse as so many houses sold this year twill be off the market for a while.  Furthermore, substantial demand was pulled forward into 2020 further crimping future purchases.

Summary

I have never seen Colorado ski real estate appreciate this quickly and absorb so much inventory in such a short period of time.  3-5 years of sales occurred in one year which is unprecedented.  The byproduct of the frenzied real estate market is that inventory is at historic lows and will likely remain that way for years as so many properties were sold this year that will keep them off the market for 8-13 years.  This will further reduce future availability in each of these markets.  Fortunately for buyers, price increases should begin to moderate as the world returns to a more normal environment with a vaccine or treatments for coronavirus.  Over the next year or so we should reach a “step” in the market, but long-term prices will likely continue higher as inventory continues to remain constrained.

Additional Reading

https://www.nar.realtor/blogs/economists-outlook/how-long-do-homeowners-stay-in-their-homes

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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine,  The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.

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