January 2010 Newsletter
Regarding the Real Estate Market in Pagosa Springs – which would you like first, the good news or the bad? Being an optimist, I’ll start with the positives. Let’s talk about the glass half full.
We are having a big sale, similar to Black Friday after Thanksgiving. Prices are marked down and there are big deals to be had. I saw several screaming deals happen in 2009, and we will see many more – at least over the next six months. If you are an investor, there is money to be made. If you are a first time home buyer, the government is giving money away to the tune of $8,000 on your next tax return. In my opinion, the housing market will show better returns than the stock market or your neighborhood bank in the near future. If you’re looking for a place to park some money, let me know! Of course, you still have to be careful and very selective because parts of the market are still in decline.
I am providing many of my customers a current spreadsheet on all the bank repos. It shows a lot of detailed information which can be very helpful when shopping for property. I usually update this sheet twice a week. To view the spreadsheet, visit ISellPagosa.com/repos.pdf If you’d like to get this on a regular basis, e-mail me and let me know. One thing to keep in mind is that even though bank repos represent only about a quarter of the sales, the repos are driving the market. Most of the other 75% of sales are priced like bank repos. There are a lot of motivated sellers ready to move on and take advantage of a good deal some place else.
Now for the glass half empty. I’ve just finished my end-of-year stats for 2009. Overall real estate activity is down 80% from the peak in 2005. It is important to keep in mind that 2005 was an abnormal year. National Recreational Properties came into town and bought nearly all the vacant lots, then spent a great deal of money marketing them and reselling them at inflated prices. Likewise, 2009 is probably an abnormal year on the other side of the spectrum. The national real estate crash and ensuing recession have affected our local market, and this year’s statistics are as dismal as I have seen in quite some time.
As sales numbers have fallen, so have prices. Median sale price is down 10% from the peak. Median price per median square foot is down 20% from the peak. Keep in mind that these numbers are influenced by the type of property which sells in a given year. If we sell a lot of mansions one year and a lot of trailers the next, both metrics will go down, even if values remain the same. It would be better to measure the change in value of individual properties from year to year, but this is nearly impossible because each property doesn’t sell every year!
It is my best estimate that actual values have fallen about 25% to 30% for most homes in Pagosa. My estimate is probably skewed toward listing prices rather than sales prices, because listing prices are what I see all day, every day.
The part of the market doing the best is single family homes, especially the lower price ranges. Sales under $300,000 represent 66% of all sales. This is where the action is, and this sector will lead the way out of our Real Estate recession.
Building is almost a non-issue. Why build when you can buy for 25% to 50% less than construction cost? Building permits for new homes have dropped from 230 in ’06 to 39 in ’09.
Regarding our local economy – everyone I talk to is being fairly conservative with their spending habits. Sales tax revenues are down. I think we mirror most of the rest of the country. Ski conditions at Wolf Creek were great for the holiday season. Skier numbers were good, but it wasn’t a banner year. Overall, the holiday season was positive, and we were helped by the timing of Christmas and New Years, which created consecutive three-day weekends.
So what’s next? Your guess is as good as mine. I think it will be another year before we see much of an upturn. However, I think we are close to the bottom. I expect to do more deals this year than last, but I expect far fewer dollars per deal. Consumer confidence is the key to any big upswing, and if you wait until confidence returns, you will have missed your best buying opportunity.