Steamboat Springs Chris Paoli, of Colorado Group Realty, told a large gathering at the Sheraton Steamboat Resort this week that although the recovery of the local real estate market is lagging behind that of Colorado’s Front Range, where prices grew by 6.6 percent last year, there are signs of improvement. Declining inventory, homes priced below replacement cost and affordability all are key trends to watch in 2013, he said.
He was speaking during his brokerage’s annual Real Estate Roundup.
“Inventory is down by almost 25 percent,” Paoli said. There were more than 2,100 listings in 2009, only 1,800 in 2011, and just 1,600 today.
About 120 of those current listings represent distressed properties.
Foreclosures were the overriding theme of the 2012 Real Estate Roundup, Paoli observed, but all three relevant metrics are trending down steeply, including notices of election and demand (or NEDs, the beginning of the foreclosure process) to certificates of purchase (denoting a period in the process when homeowners still can redeem their mortgage shortfall) and public trustee sales.
“We monitor foreclosures constantly, and we see a definite drop,” Paoli said. “We’re seeing a definite change in some of the worst-hit neighborhoods.”
He cited two multifamily residential projects that were hard-hit by foreclosures and finally seem to be healing themselves.
“Stagecoach Townhomes were the biggest foreclosure disaster in our market,” Paoli said. “There were nine sales there in 2012, but today there is only one listing currently active.”
Closer to Steamboat’s mountain area, Whistler Village, a large development of very livable, two-bedroom townhomes close to Whistler Park, also was hit hard, Paoli said.
“There are zero on the market right now, and there have been no NEDs in the last 90 days,” Paoli said.
One of the most notable conditions in the Steamboat housing market, Paoli said, is that homes are selling well below replacement cost.
“I would argue that the price of existing homes oscillates around replacement cost over time,” Paoli said. “I would say today this gap is abnormally large.”
He cited the example of a new home on Whitewater Lane on two building lots adjacent to Fish Creek in The Sanctuary.
Conservatively, the two lots represent $350,00 of value, Paoli said. The replacement cost to build the large luxury house, including land, would be $3.5 million, he said. Yet, at the current listing price of $2.7 million, it has been passed over for more than a year.
Paoli thinks that the Steamboat market is at the lowest point on the S curve that describes the cycle of home prices relative to replacement cost and that it's unlikely to go lower.
Finally, Paoli emphasized research that shows it is less expensive to purchase and own a home in Steamboat today than it was in 2004 when low mortgage interest rates, prices for homes and inflation are taken into account.
“When’s the last time we saw these prices in Steamboat?” Paoli asked. “We’re back in 2003 or 2004 in terms of prices.”
Based on the consumer price index, people must spend $120 to purchase what $100 would have purchased in 2004, Paoli said. But lower interest rates and declining home prices have trumped inflation.
He cited the case of a well-kept home in a subdivision just west of Steamboat that sold for $315,000 in 2004 and $296,000 in 2012. Despite inflation, and assuming a 20 percent down payment, today’s low interest rates (Freddie Mac reported 30-year fixed rates as low as 3.53 percent Thursday) mean the monthly payment on the home today would be lower than in 2004. Today’s monthly payment would be as low as $1,073, compared to $1,497 in 2004.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com