The Eagle County real estate market continued its remarkable rise in the first two months of this year. This puts even more pressure on potential first-time buyers.
The latest data from the Land Title Guarantee Company shows Eagle County in February set a new record for the value of transactions in a month, with $347.5 million worth of properties changing hands. The largest transaction was the $81.85 million sale of Lake Creek Village apartments in Edwards. Removing this sale from the total results in a volume of other sales of $265.7 million. That’s about $20 million more than January’s sales volume of $246.7 million.
The largest residential sale was the sale of an $11.5 million property in Bachelor Gulch. In total, February 11 sales were $5 million or more.
At the other end of the market, there has been a continued decline in the sale of homes priced at $500,000 or less. In terms of units sold, this market segment was once the biggest piece of this particular pie. But February only saw 12 of those sales, 12% of all sales. The largest new segment, homes priced between $500,000 and $1 million, saw 29 sales.
Matt Fitzgerald, Eagle County Market President for Slifer Smith & Frampton Real Estate, acknowledged the shortage of low-cost homes. Given the cost of construction and supplies, “this is not a situation where the product is going to come in quickly,” Fitzgerald said, adding that there is a housing deficit across the country.
Not just house prices
In Eagle County, Fitzgerald noted that there are for-sale projects and rental projects in the planning stage, but a few years to go before completion.
Other factors are at work beyond the purchase price of homes. Mike Budd, broker at Berkshire Hathaway HomeServices Colorado Properties and a member of the Vail Board of Realtors, said material costs will continue to rise, especially those that use petroleum products. These products make up a large part of home construction, from shingles to some window frames and plumbing supplies. These have all been affected by the increases in oil prices.
Budd said those aren’t the only increases owners are facing this year. Tax assessments will be released this year, and some of the Valley’s price increases will be reflected in those statements.
Colorado property taxes are reassessed every two years. Whoever arrives in May will reflect June 2021 values. Budd noted that if a home’s value has increased since mid-2019, that increase will mean higher tax bills. That does not include potential increases that special districts are asking voters for this year.
Borrow more expensive
These increases will also appear in new mortgages.
Chris Neuswanger, owner of Eagle One Financial, noted that mortgage interest rates have risen since the start of this year. A mortgage that carried a rate in the low 3% range in December is now in the mid-4% range, he said.
That doesn’t sound like a lot, but even that increase can be significant. A $600,000 mortgage in December would be $2,529 a month for principal and interest. A similar loan today at 4.5% would be $3,040 per month for principal and interest only.
That’s a 20% increase in the cost of a mortgage payment, Neuswanger said.
On the other hand, mortgage rates are still very low today compared to past decades. Neuswanger noted that mortgage rates in the 1980s and 1990s were typically 7% or 8%.
Neuswanger has been in the business long enough to see some of the valley’s boom and bust cycles. But this moment in history is different, he said.
The boom of the early 2000s saw many buyers qualify for full price mortgages with very loose standards. Many expensive homes were purchased with the intention of reselling them quickly for a profit.
Today, buyers acquire real estate with the intention of using those homes, Neuswanger said.
Many buyers today offer down payments of at least 20%, Neuswanger added, and almost half of transactions today are cash transactions.
“It’s unlike anything that’s happened before,” he said.
But, Fitzgerald said, the industry at large has yet to feel the impact of the rate increases.
“The biggest impact is inventory,” he said.