REAL ESTATE: The Riley Report

Hello From Pagosa Country!

Fall is in the air! Wolf Creek Ski Area received its first snow of the season this past weekend. The trees are becoming more colorful every day. Now is the time to take that drive over the mountains to enjoy nature’s handiwork. It’s gorgeous out there!

We will also start to see a lot more orange in the woods very soon. The first of four rifle seasons for deer and elk starts October 15. Hunters will start trickling into town over the next week or so to gather supplies and set up their camps throughout the National Forest. This annual pilgrimage is a tradition for many families with hopes of bagging that trophy as well as filling their freezers with lots of healthy meat. This is also an opportunity for the local merchants to fill their coffers with lots of the green stuff. I used to be a hunter, but my body parts aren’t as limber as they used to be. Now, I just enjoy shooting these magnificent creatures with my camera.

Now for the latest real estate news. The market continues to soften. Overall sales are down 33% from a year ago. Home sales are down 24%, condo sales are down 4%, and vacant land sales are down 43%. Inventory is up across the board. Home inventory is up 50%, condo inventory is up 325%, and vacant land inventory is up 28%. One category with a big change is homes priced between $300,000 and $400,000, where sales are down 57% from last year. Another big change is small vacant lots under 1/2-acre, which are down 59%. Finally, pending sales are down sharply from last year. We have 92 sales in the hopper today compared to 204 a year ago. This means a continued slowdown in the marketplace.

Make sure to check out the latest stats, here.

One of the biggest issues in the market right now is rising interest rates. A typical 3-bed / 2-bath / 2-car garage home on a quarter-acre will cost about $600,000 today. If you put 20% down, you’ll have a mortgage of $480,000. Today’s mortgage rate is 6.7% compared to 3% at the beginning of the year. The cost of owning this home just went up by $1,050 a month. If you were buying the same home as a vacation home or investment rental, the rate would be 7.5% with at least 2.0 discount points.

We are expecting rates will continue to rise as the Fed raises rates to control inflation. Therefore, if you’re planning on purchasing a home with a mortgage, you should probably lock in your rates now.

There is some good news for buyers – there are a lot more properties to choose from today, and prices are starting to come down. One strategy to help with higher mortgage rates is to negotiate with the seller to pay down the rate on your mortgage with discount points instead of a price reduction, or a combination of both. This strategy can pay dividends in the future.

Traditionally, buyers during this time of year have found that sellers can be more motivated. Many sellers do not want to hold their property through a Colorado winter. My crystal ball is pretty foggy right now trying to predict the market in the next year. There are too many moving parts – the Fed, rising interest rates, inflation, the war in Ukraine, a possible recession, and the mid-term elections. But my glass is half full, and I’m hoping for a soft landing.

So long for now. Get out and enjoy this beautiful time of year!