June 23, 2022
Author: Heather Connor, Realtor
The volatile stock market and rising interest rates. Are we heading for a market crash in Crested Butte?
We have to remember that Crested Butte is a unique resort market so it’s best to approach this subject in three segments to help you consider if it’s a good time for you to make moves whether as a buyer or a seller.
Our goal is to share some data and some facts from a bigger picture (national) and specifically in Crested Butte (hyper-local). From there, the missing piece of the puzzle would be your own circumstances or your personal scenario.
National Factors Affecting the Real Estate Market in Crested Butte
On a national scale, you’re probably hearing that the market is not crashing from most agents and most professionals in the industry, and that is due to the fact that lenders have learned their lesson. Lending conditions are now widely different than they were back in 2008. Those who are self-employed like realtors and entrepreneurs might know what I’m talking about. The qualifications are not easily met and lenders are stricter than ever. If we take a look at those obtaining loans, they are now highly qualified–and that’s excellent news.
Secondly, people have a lot of equity in their homes. That, in combination with the lack of supply, would insinuate that people now have options instead of just walking away from the property and that’s something good to consider, as well.
Some may be feeling a little “poor on paper” due to the volatility of the stock market lately. Some clients I’ve spoken to have seen anywhere from a 20% and even as high as a 30% decrease in the valuation of their stock portfolios. While I understand that it’s scary, we also know that the stock market is the way it is and that it’s always going to be, unfortunately, emotionally driven.
We’re not going to get into the factors of stock volatility but because of its poor reflection on paper, I understand that for some of you, it’s going to decrease your comfort level of purchasing a property or may move you to a different price-point, just depending on where you are. For some of you, it is a bummer to see that decrease in the valuation of your portfolio but you’re still charging for it anyway. One of the comments I’ve heard from my clients who are moving forward, and I tend to agree with this, is that they believe in the Crested Butte Real Estate Market and they think it’s a good investment. I have also observed that people are moving away from their lesser performing investments and are choosing to invest in real estate and in areas like Crested Butte where they believe that the valuation over time will only increase.
Let’s not forget that there’s a lot of wealth out there and there’s a lot of cash. At the height of our market, we were seeing at least 50% of our offers come in as all-cash offers. Depending on which statement of the market we’re looking at, we’re seeing about ⅓ of buyers are still doing all-cash offers. In general, a lot of cash is still out there and a lot of people with cash are looking to buy.
Hyper-local Factors in the Crested Butte Real Estate Market
Let’s talk about Crested Butte, hyper-locally. Crested Butte is still at startlingly low amounts of supply, especially in other statements of the market. Just by nature, until that demand for supply is fulfilled, we are going to see an increase in valuation. It’s not going to be an increase in valuation like we have seen in the last few years which is simply not sustainable, not to mention that it’s also unhealthy to increase at that accelerated rate over an extended period of time. This is just a prediction but I believe some of our areas, where we are seeing that backup of demand, will be fulfilled this late summer and even going into the fall depending on how quickly we’re going to see properties being put on the market. As predicted in our last video, we’re seeing a lot of tremendous amount of supply hit the market. We’re not seeing “deals”, but that is great news for buyers who are getting more options.
Now for some buyers, there may be concerns regarding interest rates among other factors. Just think of the creative loan strategies available out there. For example, they’re introducing 40-year-old mortgages, and then there are fixed rate arms where the certain amount is fixed for a certain period of time. Remember that pretty much nobody owns their home for 30 years. The rate of home-ownership, the number of years, very rarely rides up at a full mortgage so there are other options for you to invest in another loan program. You might have heard of this saying before “marry the home and date the rate” which is essentially saying that you can get a 40-year interest rate and you don’t want a 40-year fixed mortgage on your home but what we can do is get that lower monthly payment. If the interest rates go down or you find a better loan package, you can always refinance later.
While buyers will have more options and eventually less competition and a little breathing room, sellers should be prepared. With more inventory, there would be more competition. You need to be prepared to be complete with that handyman punch list and perform staging if you’re a real estate professional. Be prepared to negotiate on contingencies. These are the things that have been unheard of for the last 2 years but be prepared and consider that the new normal is normal in a healthy market–it’s normal to have more inventory; for buyers to have more contingencies to protect them in a purchase of a property; it’s normal to see something on an inspection or appraisal report and to work it out within the parties. It’s going to feel like the party is over for sellers but what we’re doing is we’re eventually moving back to a more balanced market and it’s normal for the parties to have to start negotiating and for there to be a little more evenness in power between the two parties.
Every submarket of Crested Butte is different. If you’re looking to sell or buy in a section that is not what I’m going to talk about right now, set up a time with me and we can go over what that could mean with you.
Let’s focus on Mt. Crested Butte since it’s moving along really well. For example, when I pulled data, I looked at condos under $650,000 up to $1,500,000, and then I looked at Mt. Crested Butte single-family homes at 1.5M and above since that’s the usual range for a single-family home in the area. We might expect this to start to shift a little bit from the past data. Though what we saw in the condos up to the $650,000 price point was that the average close price was 108% of the list price. For condos up to 1.5M, there were three sales we pull off which all sold at the list price which is 100%. You’ll notice a trend here as single-family homes were consistently closing below the list price. Understand that when I share list to sales price ratio, that’s just one data point among many and just taking that data point as a factor of the market holistically doesn’t make sense. For example, we’d also want to look at things like the condition of the home, the size, the price per sq. ft., the amenities, and the location. This is just to see where the most competitive points of the market are. The most competitive part of the market is technically the $500,000 to $800,000 price point but we’re seeing it turn into a lot of multiple offers.
Personal Factors Affecting your Purchase in Crested Butte
The third and final portion is what’s happening to you personally. You are going to find some agents that will just make blanket comments and are going to say “yes now is the right time to sell”, “yes, now is the right time to buy” and there’s a good reason that they’re saying that for some of you. But the truth is, I can’t tell you if it’s the right time for you. I can’t tell you if it’s the right time to buy without having a true one-on-one conversation with you and having a better understanding of your financial health, what your specific circumstances are, and what your dreams and goal are. But I can share some insights for now and we can schedule that one-on-one call and see what’s right for you.
A couple of things I have noticed is that everyone is all going to be in different boats. And what I mean by that is some of you are still working 100% remote and it does not matter where you live. So you’re probably like “I’m going to Crested Butte, I’m going to live here. I love it cause I can go mountain biking after work. I can take a ski break in the winter.” Then, some of you are going back to a hybrid work model where you’re spending part of your time physically at your work location and spending part of your time working remotely. Some of you are renting here and you are looking to move into your next stage of home ownership in the area. We’re all in different scenarios so if you want to know what’s right for you then let’s talk about it. I can share some data but ultimately that’s really your call.
With the shift in the market–and see how I didn’t say crash since we don’t want to ring any alarms–I have noticed that some of you are just really getting stuck and you’re unsure of what the next right move is for you. When you’re stuck while you’re also feeling the pressure to make a decision but you don’t know how to, a lot of times that causes stress, and what I’ve observed has really helped if you are in this scenario. For my clients, we do a 15-minute pre-planning call and it gives a lot of clarity to the situation. We hand over a lot of data specific to you and that helps you become more clear and unstuck. I’d be happy to set up a 15-minute pre-planning call with you so I can help you get on that path to relieve a lot of unnecessary stress that you might be experiencing.
