Reversing the previous month’s results September Summit County real estate sales showed some signs of life in dollar terms but decline in transaction volume. Dollar sales totaled $174.2 million up 5 percent from the year ago period and an impressive 25% from July. While the magnitude of the sequential gain was unusually strong, the direction wasn’t as September is typically the strongest month for real estate closings. Transaction volume in September was up modestly a modest 5 percent from August but with 297 transactions, showed a 1 percent decline from the 2015 period. Year to date, both transaction volume and dollar volume are down 1 percent at 1,752 transactions $951.5 million.
The dichotomy between transaction volume and dollar sales in the month appears to be most attributable to mix. Sales below $400,000 were only 30 percent of the total transactions versus 46 percent for the prior seven months and 47 percent for all of last year. That segment of the market is seeing strong demand but low inventories have restricted sales in recent months. Conversely, virtually all price points up to $1.5 million were running ahead of the prior years contribution with particular strength in the $1-1.5 million range. Nevertheless, the average sales price for a single family home dipped from $935,883 in August to $922,641 in September. Even with the sequential decline that number was 8 percent of the average for all of 2015. Multi-family housing faired better with the average sales price rising 3 percent to $400,798, primarily because of the lack of very low end sales. That increase put the number just above the 2015 full year level.
Inventories, peaked in August but were 23% below the prior year peak. They declined 20 percent in September and are now 30 percent below the year ago level overall with single family inventory down 16 percent and multi– family off 39 percent.
Summit County real estate transaction volume in August posted a 6 percent gain over a year ago but dollar volume failed to keep pace. In the month there were 282 sales versus 267 a year ago and 215 in July of 2016. Dollar volume at $139.2 million was up from July but was off 2 percent from the year ago level. August marks the 6th month this year and 5th in a row with negative year over year dollar comparisons. Year to date, both dollar and transaction volume are in the red. The former down 3 percent and the later off 1 percent.
The $200,000-300,000 price range remains the hot spot in the market accounting for 53 sales and 23.2 percent of all residential transactions. In 2015 this price range accounted for 19 percent of sales.
Single family average selling prices which ticked up in July to $941,735 slipped back to the $935,883 in August but that still was 9.5 percent ahead of a year ago. Multi-family ASPs increased $700 from July to $387,566 but stand below the year ago $393,593 figure. We attribute that decline to the high volume at the very low end of the market rather than a softening in prices.
Inventories saw a seasonal expansion in late spring and earlier summer but only reached 80% of the levels of a year ago. The last two months have seen inventories back on the decline. The low inventories are particularly acute in the Frisco market and in the lower end properties which are often selling within days of listing at ever increasing prices.
July showed mixed results for real estate sales in Summit County. Transaction volume was up 6 percent versus a year ago with 215 sales but dollar volume declined by 11 percent to $104.6 million. Both figures showed modest declines from June.
Those results were consistent with the national trend according to the RE/MAX National Housing Report for July. Nationally, in a survey of 53 markets, 49 showed June to July declines averaging 13.1 percent. Year to date home sales are down 8.8 percent while unit sales in Summit County are down 3%.
The lower end of the market was quite active. Sales in the month below $400,000 accounted for 53.4 percent of all residential sales versus 46.9 percent in all of 2015. The average price per square foot in this segment is up over 20 percent from July of 2015 and the average days on market have been cut in half to 27 days. Many of these properties are getting multiple offers and selling in less than a week.
At the higher end the $1-1.5 million range was pretty active with 16 transactions representing 9.1 percent of all sales or nearly twice its 2015 share. The mid-tier price points and very high end were both below their historical levels.
The average single family home price in the county rose to $941,735, up 1 percent from June and 9 percent from a year ago.
Multi-family ASPs fell about 1 percent both year over year and month to month. That is reflective of the mix shift with more low end sales rather than an actual deterioration in prices.
While inventories have shown seasonal improvement, the gains were quite modest in July with multi-family units actually falling. Overall, inventories are down 23 percent from a year ago. Higher prices and lower inventories are the key contributors to the lower year over year volume.
Summit County real estate took a major tumbled in June when compared with the year ago month. Dollar volume declined 13 percent to $113 million and transaction volume was off 16% with 220 sales. However, things aren’t as bad as those numbers may imply as the year ago period was a blockbuster month having registered gains of 86 percent and 69 percent in dollars and transactions respectively. Even with the decline from 2015, the 2016 figures showed a 62 percent gain in dollars and 42 percent increase in transactions over the 2014 levels.
The average year to date selling price for a single family home in the county held fairly steady versus May at just short of $937,000. That mark is up 8.4 percent from a year ago and up 9.4 percent from the year end figure. Multi-family properties had an average selling price of $393,575 down about 1 percent from May of this year and off about 2 percent from the 2015 year end number.
While there were a couple of sales above $3 million, the $1-3 million range was a little soft. In June, that range represented 7 percent of transaction volume versus 8.3 percent in the prior 5 months and 9.2 percent all of last year. Conversely the share of the $700,000-$1 million range was ran a couple of points ahead of last year as did the $200,000 to $300,000 range.
I have had a number of people ask me about the apparent slowdown in the higher end of the Summit County market. It would appear there are several factors contributed to the lull.
Oil and gas prices would be first on my list of causes. The dramatic drop in prices over the last several has had a significant negative impact on petroleum related investment, employment and income. Oil and gas has been a major industry for Colorado, from which half our buyers hail as well as Texas one of our largest sources of non-Colorado buyers.
A second factor is home prices. While the lower end of the market is up modestly, higher end home prices have moved up dramatically. As an example, the Highlands is the largest concentration of high end homes in the county. In 2011, the average price per square foot of a Highlands sale was $287. In 2015 that number had risen 38 percent to $397. That increase was nearly twice that of homes priced under $1 million.
A third factor is the sluggish economy. So far we are experiencing the slowest economic recovery since the great depression with 11 straight years of sub 3 percent growth for the first time ever. With the last two quarter averaging 1.2% it’s a good bet that 2016 will be sub 3 percent as well.
On top of all this we have a Presidential election with neither candidate generating overwhelming support, even within their own party.
May continued the pattern of seasonal improvement in Summit County real estate sales but the year over year comparisons were less than spectacular for the third month in a row. Total volume rose to 197 transactions up from 155 in April. The May 2016 number, however, was 4% below the level of a year ago.
Dollar volume also rose nicely month over month from $89 million in April to $114.9 million in May. Again, however, May 2016 was down from the year earlier month, declining by about 1%.
With three months in a row of lackluster year-over-year comparisons, the year to date numbers also are showing little progress. Total dollar volume is up 3% to $420.5 million while transactions are essentially flat at 738 vs 740 at this point last year.
While recent sales growth has been tepid, new listings have exploded. As a result, inventories are up sharply. This is especially true for single family homes. Across the county 49 single family homes went under contract. Over the same 30 days, there were 121 new listings. As a result the inventory of single family homes is up better than 20%.
So far this year, the average selling prices for single family homes has been up quite substantially. Year to date, that number stands at $934,437. That is up 8% from a year ago and 9% from the full year 2015 figure. With the rising inventories and sluggish sales growth, that number is likely to drift lower in the coming months if sales activity doesn’t improve.
Multi-family pricing hasn’t kept up with the gains seen in the single family market. In fact, so far this year the average price for a multi-family property was $397,071 versus $399,499 at this point last year and a similar number for all of 2015.
Year to date the mix of sales has skewed a little upward. Lower priced properties – under $400,000 – are running behind the level of a year ago while properties over $1 million are somewhat ahead. This year there have been 4 sales over $3 million totaling $18 million versus 6 totaling $20 million all of last year.
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As is normally the case, sales activities have seen small but steady increases from the typical low point in January. April transaction volume stepped up to 155 sales from 136 in March, an increase of 14%. The year over year increase was a far more modest 1%. Dollar volume in April rose to 89.0 million versus $86.3 million in the prior month. That dollar volume, however, was down from the $92.4 million of a year ago. Helped by the very strong February results, year to date transactions are up 1% to 541 while dollar sales have increased 5% to $305.6 million. While these are solid numbers, something is going to have to change if we are going to match the overall gains of last year when unit volume rose 18% and dollar volume was up 28%.
One statistic that has shown strong growth so far this year is the average selling price for single family homes. That figure was $855,925 for all of last year. So far this year, the number stands at $951,609. Pricing at the high end of the market appears to be particularly strong.
Multi-family housing has not seen the same kind of gains. For all of 2015, the average selling price of a multi-family property was $399,232. So far this year, the number stands at $394,000.
So far this year, the buyer profile has skewed a little more towards the local buyer with 31% of buyers coming from Summit County. Front range buyers represented 37% and out of state were 33% including 1% international. For all of 2015, local buyers were 25% of all sales.
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February is typically a seasonally slow month. In six of the last 8 years, February has averaged a 20.2% decline from the prior month. This year generated the third exception to that trend in the last 9 years with both transaction and dollar volume showing gains, albeit modest ones.
Transaction volume this February at 126 sales was two deals ahead of January but up 18.9% from February of the prior year. Dollar volume for the month reached $67 million, up modestly from $63.2 million in January but up 33% from a year ago. The solid YOY February gains offset a weaker January leading to year-to-dates gains of 11% and 7% in dollar and transaction volume respectively.
The average selling price (ASP) for a single family home so far this year stands at $848,954. That is modestly below the $855,925 for all of 2015 but about 4% ahead of the level a year ago. The multi-family ASP at $402,989 is up about $4,000 from all of last year but down $6,000 from a year ago. It is quite interesting that, with the tight inventories we are still experiencing, prices in general haven’t felt more upward pressure.
Mix wise, there were no particularly strong or weak areas when compared to last year or the prior month. Year to date under $500,000 was 59.3% of the sales versus 59.9% a year ago and sales over $1 million were 9.1% versus 9.4% in 2015
Santa Claus was kind to the Summit County Real Estate market in December bringing the strongest sales gains of the year. Transaction volume in the month rose 48% to 276 sales. While that wasn’t the highest level for any month in the year (September had 301), it was the highest December since at least 2007. Dollar volume rose an even more spectacular 57% to $141.4 million and was the highest December in at least 9 years. This strong finish was particularly notable after the paltry results posted in November.
With the strong finish, full year numbers were quite impressive. Transaction volume was up 18% to 2,537 sales. Dollar sales increased 30% to $1.37 billion.
New construction was a notable contributor to the gains for both the month and the year. For December, new home (single and multi-family) sales nearly doubled from 14 units and $14 million to 27 sales and $26 million. For the full year, units were up 43% and dollar volume rose 57%.
Average selling prices (ASPs) also showed strong gains for the year. The single family ASP for the full year closed at $855,925 up 9% from the prior year. The Multi-family ASP rose 11.6% to $399,232 while land rose 17.1% to $372,794. Sales mix in the month skewed a little more toward the lower end with the closing of a number of workforce/deed restricted units in Frisco.
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As the temperatures have cooled so has activity in Summit County real estate. November sales had the poorest year over year performance of any month in 2015. Dollar volume rose a modest 5% to $109.9 million. While in absolute terms that dollar volume did beat the volumes recorded in each of the first four months, this was the first month in the year where the increase from a year ago fell into the single digits.
Transaction volume faired even worse actually declining 5% to 205 sales. That was the first negative comparison since August of 2014.
For the year to date, the numbers are still impressive. Transaction volume is up 15% to 2,261 sales while dollar volume is 27% higher than this time a year ago at $1.23 billion.
As the dichotomy in the sales numbers suggest (dollars up, transactions down), demand in the month shifted toward the higher end of the market. Properties below $500,000 saw their share of sales drop 5 percentage points to 55.9% of sales while sales in the $700,000 – $800,000 range increased their share by 4.6 percentage points to 10.1%and sales of $1-2 million increased by nearly two points to 9.5 percent.
Pricing within property types did not change materially during the month. Year-to-date the average selling price (ASP) for a single family home was $859,565 up about $2,000 from October and 9.5% ahead of the figure for all of 2014. Multi-family ASPs were just over $400,000 up 11.9% for last year. The average lot sale so far this year is $365,844 up 14.8%
Inventories have been steadily tightening in 2015 and as we enter the ski season and units are taken off the market to be rented, the issue has only gotten worse.
As of December 30, there were only 141 condos listed for sale in the county compared with 988 sales so far this year. That equates to only 1.7 months of inventory. The numbers for townhomes are even tighter with 30 active listings against 291 sales. That is about 1.2 months of inventory. Generally, the break point between a buyer’s and seller’s market is about 6 months of inventory. Clearly we are in a seller’s market for multi-family properties. Single family homes are less likely to be taken off the market for rentals so the situation is not quite as bad for them. Nevertheless, there are only 168 single family listings representing about 4 months of sales.
I’m often asked, “is buying a rental property in the mountains a good investment”. If one is expected to generate a positive cash flow from a fully mortgaged property, the answer is likely no. As a rule of thumb, investors need to put down 50-60% equity to be cash flow positive on a property that will be marketed and managed by a third party. If you are going to do your own marketing and management, that number might be closer to 25-30% down. In general smaller properties, say a slopeside studio condo, will provide higher returns than larger properties like a 3 bedroom townhome or large single family house. Of course this analysis doesn’t include the tax benefits of renting (assuming limited owner use) and the potential for price appreciation. If you purchase the right property, manage it well , exploit the tax advantages and have a favorable market, owning a rental property can be a good investment.
If you are thinking of buying an investment property, I have a proprietary model that can estimate your potential returns. I would be happy to put together an investment analysis for your property of interest and refer you to a number of property management companies that can estimate your rental potential (if no history exists) and describe their management services.