Greetings from Crested Butte!
If you’ve been following my newsletters you know that our local real estate market is undergoing a respectable rally. Its been a long time coming since the economic meltdown of 2008. Home and condo prices around the valley are improving and demand for our real estate is now as diversified as its ever been. While demand from our traditional feeder markets of Texas and Oklahoma has waned (likely due to the crash of the oil market) investors are now showing up from new places like Denver, Boulder, the Northeast and the West Coast. This new breed of buyer is pursuing our real estate with an intensity that is driving our market’s recovery. They are younger, financially empowered and their property usage patterns are different from their predecessors – summer use and winter use are equally important.
When buying real estate in stunning communities like Crested Butte, judgment can be clouded by emotions and you might be operating without a complete understanding of the market conditions. With the exception of the Town of Crested Butte where scarcity of land plays a significant role in home values, there is a ton of vacant land inventory all over the valley. There are 255 land listings currently and values are still 40%-50% off their peak from 2006. This equates to a 3.5 year supply of land.
So, here is some friendly advice for saavy real estate investing in a changing market:
1. Consider building a new home. Yes, it means you can’t move in for a year but geez, why pay $750 per SFT for something you could build for $325 per SFT on a comparable parcel? Wouldn’t it be nice to have strong equity in your new home as soon as your done building it?
2. Study the sales comps and days on market (DOM). In resort markets, list prices for comparable properties can be all over the map. Some sellers are seriously trying to sell while the seller next door is parked on the market for 2 years with unrealistic pricing. This confuses everyone and many people (including some realtors) believe list prices drive the market. Ask your realtor to give you ALL of the recent sold and DOM data that exists. Look past the list prices are and dig deeper on true comparable market data. It may feel good when the land next to the house you are buying for $3 million is listed for $500,000 but if the land across the street is selling for $150,000 you might be upside down on your home purchase…for years.
3. Study the expired listings. This information may be most important of all in a changing marketplace. Ask you realtor to tell you about all of the recently expired or cancelled listings near that property you have your eye on. I brokered the sale of a recently expired listing for 60% below the recent sale price of a comparable property because I took the time to dig in on the data. My buyer is elated.
4. Study the homeowner association’s (HOA) rules and regulations and pay special attention to the minutes from recent HOA’s meetings. All of our condos and many of our valley’s homes are located in covenant controlled communities. If you are buying a property that is governed by an HOA and assessments were on the agenda at the last annual meeting, dig deeper. You may be buying a condo that will get hit with a $30,000 capital improvement assessment a month after you become an owner. You and your lender won’t be happy.
5. Read the local paper. The Crested Butte News does a good job of covering our local politics and its available online. One current, very heated topic is the regulation and in some cases a total ban of the business of vacation rental by owner (VRBO). Many 2nd home owners rely heavily on the income that can be derived from renting out their properties when they are not in Crested Butte. If that property you just bought is located in a community that is about to stop VRBO you will lose a crucial method for carrying the cost of that property. Think twice. You might not care about rental income now but when you attempt to sell that property it could wreck your resale value.
Thanks for reading today. For a deeper understanding of our market’s best opportunities contact me anytime.
Benson Sothebys International Realty
401 Elk Avenue
Crested Butte CO 81224
Review my recent significant sales here.