Happy New Year! Was 2022 a good one for you? Are you optimistic about what this year will bring? I hope you answered “Yes” to both of those questions – particularly the second. It’s interesting how expectations shape our perception of everyday occurrences. If the forecast is for cloudy and cold tomorrow, but then the sun comes out, warming things up nicely, it’ll feel warmer than if we’d expected a sunny day – and vice versa. Same goes for how the local real estate market is perceived; which makes it difficult to give a one word answer to the often asked question: “How’s the market?” It’s all about perspective. It’s natural to compare the recent past to today, or last year to this year, and, in that context, the market has slowed. But that sure doesn’t mean it’s bad.
Once all the numbers are in for 2022, it looks like total real estate sales made through the local MLS will be about 15% less than ‘21. That’s a pretty big decline, right? Maybe not when you put it in context. Looking at just the residential segment of the market (which accounts for about 80% of volume) 2022 was down 8% from 2021. But ‘21 was a record year, up 18% over 2020 – which was a complete blowout – up 35% from 2019! We knew that the feeding frenzy of the Covid rush wasn’t sustainable and the Federal Reserve has made sure of it by doubling interest rates. One could argue that the moderate decline was actually a pretty good result considering the headwind the Fed provided. Another factor contributing to the slow down is the continued escalation of North Fork home values. Last year the median sale price rose an eye-popping $87,000 to $425,000, up 26% (vs. a 14% increase in Delta to $325,000 and a 15% rise in Surface Creek to $352,000). That’s on the heels of a 13% jump in ‘21, after an 18% spike in 2020, all following a respectable 9% bump way back in 2019 when an average North Fork home sold for just $240,000. Understandably, the combination of high prices and higher mortgage rates are having a sobering effect on the pace of sales. The lingering question is how soon, and to what extent, this will cause prices to fall. Is it unreasonable to think that, like the stock market, some of these gains will be retraced? Of course not. Taking some air out of the balloon is a lot different than a “bubble” popping (like what happened in 2009). Support for our market (prices and volume) is less dependent on the local economy than it is on folks moving here with jobs (often online) and retiree’s, bringing cash in hand from the sale of their previous home. As long as that doesn’t completely dry up, we’ll be okay on the demand side of the equation. On the supply-side, we’re stuck in the mud and likely to stay that way for a while.
Nobody wants to see the valley ruined by a building boom, and there’s little risk of that because at present we’re out of vacant lots. Recently Paonia mayor, Mary Bachran, spoke at the local Realtors’ meeting about the town’s water moratorium and prospects of future water tap sales. Language in the citizen-initiated moratorium requires a professional analysis of the town’s water supply before tap sales can resume. To that end, meters will be installed at the spring sites along the base of Mt. Lamborn sometime this year. The engineers are saying that they’ll need two years worth of measurements to develop their report. Meanwhile, the town will be making needed repairs to both water storage tanks with 3 million gallons of combined capacity. That means that it will likely be 2025 before new water taps will be available – assuming the analysis is favorable. How long after that will it take for a would-be developer to come forward with a subdivision proposal, then, to get approval, and put in the infrastructure, and sell lots, to finally construct new homes? Suffice to say, the supply-side isn’t going to be changing any time soon. in Paonia. And Hotchkiss or Crawford? Prospects may be better, but it’s unlikely that someone is going to step forward and put up the big-bucks it’ll take while the word “recession” is being tossed about. So, it seems reasonable to predict that the local real estate market this year will likely be “lower and slower” but still a far cry from “bad”.