On Saturday October 7, 2023 I received an email from a Pagosa Springs realtor titled “Will The Market Crash?”
The thumbnail takeaway read, “And what about the AirBnB Bust” to entice the receiver to open, and further read.
The text and the video commented that “contrarian, well-reasoned viewpoints” were requested for consideration.
The general rational provided by Matt is that because supply (Q4’23 New Listings) is down 28%, and demand (Q3’23 Sold) is down 10%, then home prices should not crash.
I agree that is is difficult to predict whether the real estate market will crash, or if home prices in Pagosa Springs will keep rising.
I believe that it is more important for local residents to have today an affordable place to live, than it is for out of town investors to have an STR as a possible place in the future to move to. I do not agree that tourists contributing $56,000 per STR of economic impact trumps the needs of full-time residents that can only contribute $29,000 per Median Household.
I’m not sure that I buy the argument — that because annual new listings are 496, and pre-Covid new listings were usually about 600, then home prices in Archuleta County should not decline. We could, for example, compare ourselves to Austin, Texas.
Today according to Redfine Data Center new “active” listings in Austin, Texas are 11,767, and active listings peaked to 12,527 in October 2022. The median sales price of homes in Austin Texas is now down more than 20% since the market peak.
I agree with the local realtor that 75% of investors may have locked into very low interest rates when buying STR(s). Unfortunately, unprecedented low interest rates together with free stimulus PPP money allowed affluent investors to hoard single family residential homes as “mini hotel” investment property. The real estate market was unnaturally torqued, and now it will take years to unwind artificial gains either through declines in valuation and or inflation in the earning power of homebuyers.
Prices in the real estate market are set “at the margin” meaning that even a small change in demand can significantly impact the value of all homes in a local area. I think the same “at the margin” pricing dynamics may also exist when changes in the supply of homes occurs within a hyper-local real estate marketplace.
I believe that the “at the margin” comparison is not the total number of Archuleta housing units of 13,726 — but that a better comparison would be the amount of shelter available to buy or the amount of shelter available to rent.
For this reason, I disagree with the realtor’s claim that — because only 358 of the existing 1,053 STRs (95% are Entire House, according to AirDNA) are rented out “Full Time” — the 2.6% market share is too small to make a meaningful impact.
Clearly, the ratio of available STRs in Pagosa Springs is very high, compared to available long-term rentals. Some recent numbers.
I believe Archuleta County should have an STR Map available — similar to the one the community of Ouray, Colordo, has made available via Rentalscape — to inform the public on the magnitude of STR proliferation, and to assist the public to collaborate with local government officials on a reasonable STR enforcement policy.
An STR Map would help ensure that the number of illegal STRs is minimized, and help ensure a maximum number of properly licensed STR are tracked by Archuleta County to help fund affordable housing through licenses and fees.
Many cities are now banning STRs, because operators of STR investments have failed for years to self-regulate their properties, to operate in a manner reasonably consistent with Single Family Residential (SFR) zoning.
It is twisted logic for a realtor to argue, that banning STR is inappropriate because banning STRs will not flood the local market with new listings, crash home prices and help create affordable housing.
Hank Lydick took ‘early’ retirement to build a home in Austin, Texas, and a cabin in Pagosa Springs, Colorado.