Mike Heraty’s Mid-Year Real Estate Report
We are half way through the current year and a third of the way into the summer, here in Southwest Colorado. The first quarter real estate market data showed significant improvements over the same period of 2016. The figures tallied and analyzed for the first half of 2017 are even more impressive. Total residential closed sales volume hit $75,449,000, an increase of 70% over the $44,465,000 recorded for the same period in the prior year. The total number of homes sold hit 221 for the first six months of this year, as compared to 163 units closed during the first half of 2016, an increase of 36%. We have been very busy from January forward this year, which is unusual.
Single Family Stick-Built Detached Homes:
With the increase in sales activity, prices have also moved up. The “Stick-Built” single family detached homes, the average home sold for $183 per square foot during the first half of the year. For the same period in the prior year, the average home sold for $157 per square foot, showing an increase in value of 16%. The Median Selling Price for this type of home hit $325,000, an 11% rise over the first half of 2016.
Condos and Townhomes:
The total sales volume for condos and townhomes for the first half of this year was $7,410,000, an increase of 113% over the prior year’s first half volume. The total number of units sold was up 105%, while interestingly, the average selling price per square foot increased barely 1% at $130, versus $128 per square foot a year earlier.
Several forces are driving prices and buying activity. First, within certain price brackets there is a very limited supply of existing homes and new home construction has not been able to satisfy demand. Costs for new home construction have risen as land costs, wages, building materials and soft costs have all increased. The average selling price per square foot for homes built in the last two years has averaged $195, as compared to $178 a year earlier, representing an increase of 9.5%.
Second, mortgage rates have remained relatively low and government backed loan program qualifying guidelines have eased, though only slightly. Low interest rates, an improving national economy and friendly stock market returns have all worked to improve consumer confidence–an essential ingredient in resort housing market performance.
Third, prices in many other mountain markets have put property ownership out of reach for some buyers and they have found the Pagosa Springs area to offer a better value, with exceptional outdoor recreational resources in a friendly and safe small-town environment. This pressure has also fueled price appreciation.
Where are the best values in the current market? Existing upper-end homes ($500,000 and higher) can be purchased today at a significant discount to the cost of new construction. If you are looking for a home in the $200,000-$300,000 price range, you have little bargaining power.
There is limited inventory and many qualified buyers. If you want to know what areas are likely to perform the best in the next 1-5 years, drop me an email or contact me at Pagosa Source Real Estate Advisors.