Q2 real estate market trends report

288 Travis Road Wolcott Abartlett
288 Travis Road | Located at 288 Travis Road in Wolcott, this expansive, 5 bed/8 bath 7,213 sq. ft. custom-built mountain home includes high-end amenities and finishes. Offering breathtaking views and privacy on a10-acre gated flat lot at the end of a cul-de-sac, the home is newly listed for $5M.

As we embark on the second half of the year, there is both statistical and anecdotal evidence we are beginning to see some signs of a historic “normal” market.

While the headlines will reflect on the strength of Q1 and Q2 compared to a year ago – the Eagle County market is up approximately 75 percent in closed sales from the first half of 2020 and has doubled in dollar volume – we are seeing an increase in inventory coming to market.

This is one factor that can help the market achieve more balance between buyers and sellers. The summer months have also proven to attract more buyers and current demand remains very strong, in both showing activity and open house attendance.

950 Red Sandstone Vail Bhhs Adam Bartlett
950 Red Sandstone Road #38 | Offering easy access to Lionshead Village, the newly remodeled, 4 bed/3 bath 2,498 sq. ft. fully furnished end unit townhome in Vail sold for $2.05M in July 2020

There are a few factors pointing to some potential subtle shifts:

For the first time in at least 14 years, inventory levels in June–September 2020 were flat or declined versus our historic upswing in inventory during the critical late spring to summer months. To start our summer season, we are beginning to see the pace of new listings exceed the rate they are being contracted for – building our inventory and bringing the market back into its more historical pattern.

Pending sales are lower than they were a year ago at this time and have steadily declined since late April – this is normally a time when they are flat or pending sales are beginning to increase – peaking around mid-August. As inventory builds, so too will the pending sales given the strong buyer demand.

The dynamics of our market are unique, and the following market summaries offer more specifics for luxury/resort and Down Valley buyers and sellers.

387 Castlepeak Eagle Bhhs Reneeoleson
387 Castle Peak Road | This 1.5-acre oasis includes a garden courtyard, panoramic mountain views, vaulted ceilings and open floor plan. Located at 387 Castle Peak Road in Eagle, the 5 bed/4 bath 5,000 sq. ft home sold for $1.1M in November 2020.

Luxury/Resort Market

Comprised of Vail, Beaver Creek, Arrowhead, Singletree, and Cordillera, Berkshire Hathaway HomeServices Colorado Properties’ broker Adam Bartlett offers the following insights for buyers and sellers.

Buyers

While there are encouraging signs that the buyer frenzy of the past year is experiencing a slight slowdown, buyers still need to come prepared with a solid offer. They should also be mindful when thinking about making offers that are below market value and/or including too many contingencies. It is still a sellers’ market and homes that are priced correctly are still moving quickly.

Another important consideration on pricing is the location; both for single-family/duplexes and condos. Homes and units in more desirable locations and with views are typically going to be priced higher. If you’re willing to be flexible, you can typically garner a lower price. But also make sure you are getting what you are paying for, including location either geographically or in a building, particularly if a price is higher than expected or what the market is showing as fair value.

Sellers

Buyers are savvy due to access to Zillow and other online platforms that show fair market value for homes and sellers need to be market sensitive on pricing. The big appreciation jumps we have seen over the past year are showing some slow down as buyers start to settle into post-COVID “normal.” This includes asking themselves if they really need a new or additional home, how much time they will be working remotely, and how much they are willing to spend/invest for a property.

We are also seeing a trend with buyers now trying to engage overpriced sellers and make an offer. In the past, if a home was priced too high, buyers wouldn’t even make an offer. Sellers who are serious about selling need to make sure they are in line with the current market and working with an experienced broker can help them price and get the best offer for their home.

16 Pearch Street Eagle Renee Oleson
16 Pearch Street | Located in the heart of Eagle Ranch at 16 Pearch Street, this 3 bed/3 bath 1,740 sq. ft. end unit townhome lives larger than its size, including a functional open floor plan. Recently sold for $652,000.

Down Valley

Comprised of three communities, including Eagle, Eagle Ranch and Gypsum, Eagle County’s “Down Valley” offers more affordable price points for the size of the home along with a temperate four-season climate, adding to its appeal for buyers. Renee Oleson, broker associate for Berkshire Hathaway HomeServices Colorado Properties, offers insights into the Down Valley market.

Sellers

It is a great time to sell and capitalize on the market increases and growing interest in the Down Valley. The area is not an inside secret anymore and many out-of-town buyers view the homes and area as undervalued relative to other communities closer to the resort areas. With high buyer demand and low inventory levels, many buyers are making offers above list price with little to no contingencies. With many buyers now able to work remotely and coming from more congested urban and suburban areas, a 30-minute drive to world-class ski resorts, more moderate four-season climate, and having a regional airport within 10 minutes, brings added value to their offers.

Sellers should still list their property based on fair market value, which will attract a larger pool of buyers that can potentially lead to multiple offers. Sellers should be prepared to close quickly or negotiate closing terms if they do not have another home to move into. This is where working with an experienced broker can really help – from pricing to helping find a replacement home while also handling the negotiation and closing details.

Buyers

As homeowners hear about their neighbors selling their homes at all-time highs with multiple offers, they are getting more motivated to capitalize on market price increases. This upswing in inventory helps balance the market that has been saturated by eager buyers. The hold back from many sellers has historically been a fear of not finding a replacement home. With an anticipated uptick in inventory that seems to be taking place, sellers concerns are likely to wane and help bring more inventory to buyers. Many homes are still getting sold before they hit the MLS so working with a knowledgeable broker who has the established contacts and relationships to know when homes are coming to market puts the buyer – and a seller looking to buy — in a more strategic position to get an offer accepted. Buyers should come prepared with pre-approvals and flexible options, including having to make more than one offer before theirs is accepted.

For additional market trends and information, including Berkshire Hathaway HomeServices Colorado Properties offices, brokers and listings, visit www.bhhscoloradoproperties.com or call 970-329-2482.

Michael Slevin is the President of Berkshire Hathaway HomeServices Colorado Properties.

2021 Colorado real estate market predictions

Happy New Year! It is time for my annual Colorado real estate predictions. How did I do last year? I did really well, especially with the uncertainty of the virus (see below)!

2021 is shaping up to be pretty exciting from a real estate perspective.

The main economic drivers in 2021 will be the rollout of the vaccine, the-work-from-home and now the-back-to-the-office phenoms, the shift to online shopping, and the flight to suburbia. What does this mean for Colorado real estate in 2021? Who will the winners and losers be?

How did I do with my 2020 Colorado Real Estate Predictions?

For my 2020 predictions I stated: “2020 will be challenging the first half of the year and begin recovering the second half of the year. How quickly the recovery takes hold is the million-dollar question, but Colorado will remain desirable for relocations of businesses which will continue to drive the economy.”

Fortunately, the Coronavirus should be a short-term shock that most can recover from relatively quickly. Real Estate in general in Colorado’s front range and resort markets should hold up okay in 2020 remaining flat with no huge downside risk except for office and retail on the commercial side. “With all the current uncertainty, now is the time to sit back and relax and wait out the storm until June.”

My predictions were spot on as Colorado continued to outperform the nation throughout 2020 becoming turbo charged in June. Although I didn’t predict how turbo charged the market would become especially in the resort communities with some markets like Aspen where the median home price doubled.

What is in store for Colorado Real estate in 2021?

What is in store for Colorado Real Estate in 2021? Colorado is a unique real estate market that overall has outperformed the nation due to strong demand from employers and relocation. These trends should continue into 2021 albeit at a slower pace.

To get started on the predictions, it is important to separate Residential trends from Commercial trends since each could be impacted very differently in 2021.

Colorado 2021 Residential Real Estate Predictions

First, on the residential side there are really three major markets in Colorado: the front range (Denver front range corridor), the mountain community/resorts (Steamboat, Aspen, Vail, Telluride, Vail, Breckenridge, etc..), and other areas (Fairplay, Granby, Delta, eastern plains, etc…). Each of these areas will perform radically different in the coming year. I know the groupings are large, but each group will be an indication for what is likely to transpire in each submarket.

Front Range Residential: In the front range houses below around 500k in the metro area should continue to be in high demand. This is due to the lack of supply (many builders are focusing on higher price point properties) at this price point and continued net migration. In 2021 you will see a shift back closer to Denver as opposed to the exurbs as the work from home movement subsides. The front range should see modest appreciation in 21 as Denver becomes a hub for smaller regional offices.

Mountains/Resorts: The resort markets had historic years in 2020, with some markets almost doubling. First, there is a huge desire to live in many mountain communities from individuals that are location neutral (aka can work from anywhere and are choosing a lifestyle). Along with net migration into the mountains, inventory is at historic lows with extremely high building costs making it virtually impossible to add meaningful supply. The high building costs are due to lack of buildable land and labor costs in these areas. Along with high cost of building in resort areas, the inventory is also being further constrained as more homes are used for nightly rentals (returns are significantly higher than for traditional monthly rentals). This is a huge issue in most mountain communities and will continue into 2021 and beyond.

The mountain resort areas will have good returns in 2021 with historically low inventory levels continuing. I don’t think it is possible to have another 2020 with returns in the mountains. We should see 10-20% increases in the resort communities (which is still amazing) as opposed to 40% percent. As the pandemic wanes the resort markets will remain in demand, just not as high as last year.

Other Areas: The more rural areas saw huge upside in 2020 with the flight out of metro areas. I think this trend will reverse in 2021 as people migrate back into more metro markets as the pandemic wanes.

Colorado 2021 Commercial Real Estate Predictions

On the commercial side, things are a bit more interesting. There is currently a rush to quality income properties as fear of a market peak and other assets looking less desirable.

On the commercial side, I am going to focus on four categories: Multifamily, Industrial, Retail, and office.

Multifamily: I think multifamily is somewhere near a peak. Many properties have traded on insanely low cap rates (3% or less) that do not make sense with stagnating rents. With the continued supply, the high-end apartments will not be able to continue the strong rent growths. People are note paying premium rents to be closer to the office as the office is now remote. You are already seeing high end properties provide more incentives to entice residents. As the vaccine rolls out you will see more demand return for the in-town properties, but tenants should still retain the upper hand on pricing. I think we will be about flat on multifamily as properties are already trading near historically low cap rates.

Industrial: I thought 2020 would have seen a correction in the industrial sector due to the cannabis industry. As prices for cannabis have fallen it is no longer profitable in most cases to grow inside metro areas; there is a huge shift to outdoor/greenhouses which should unleash a ton of low-end C/D space. See a more in depth discussion: Pot declines over 30%, what does this mean for real estate?. High end space A/B with tall ceilings will continue to be in high demand and will continue to remain strong and appreciate as Denver’s prominence as a regional “Hub” continues. I see industrial and light industrial as the brightest spot in commercial real estate in the Colorado Front Range in 2021.

Retail: The trend towards online shopping continues and big box retailers will continue to feel the pain. The Coronavirus has only exasperated this trend. Look for this only to accelerate the rest of the year as many retail spaces goes dark. In 2021 I see the trend of redeveloping some of the older retail sites continuing and even accelerating throughout the metro area as available building sites continue to diminish. Class A retail in great areas will do okay (think Cherry Creek or Main street in Steamboat Springs, Breckenridge, etc…)

Office: The trend continues to have more remote workers and smaller offices with less common areas. This will ultimately decrease demand. The Coronavirus will accelerate this trend with office remaining weak as more workers move to remote locations. Older properties will be difficult to lease while newer class A/B properties will likely have lower rents due to decrease in demand. Office will be difficult into the future as the workforce is altered from the recent pandemic and companies shed thousands of square feet of space in the metro area.

Colorado is unique and will react differently than other markets

What does this all mean? Colorado has several unique markets that likely will react differently than other markets. Overall Colorado’s economy will take a shock like the rest of the country in the first quarter of the year as the virus spikes and the vaccine rollout begins, but should come back quickly and outperform national trends. It is important to note that there are several wildcards that could drastically alter these predictions such as how quickly the pandemic is contained and how quickly consumer sentiment comes back which can be extremely fickle.

Fortunately, the Coronavirus should be a short-term shock that most can recover from relatively quickly. Real Estate in general in Colorado’s front range and resort markets should do well in 2021 with no huge downside risk except for office and retail on the commercial side. It is important to note that we will not have a 2020 repeat in Colorado as the pace of increases in 2021 will not match the torrid pace of last year.

What do you think will happen to Colorado real estate in 2021?

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Glen Weinberg is the 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 the Colorado Real Estate Journal, ColoradoBiz magazine, The Denver Post, Bloomberg, Businessweek, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications. Fairview is the recognized leader in Colorado Hard Money and Colorado private lending focusing on residential investment properties and commercial properties both in Denver and throughout the state. We are the Colorado experts having closed thousands of loans throughout the state.