What to expect for the rest of 2022 and beyond
The last 24 months has certainly been quite the roller coaster in the Summit County real estate market. From the easing of lockdown in June 2020 to the beginning of 2022, the market was on a remarkable upward trend that saw prices appreciate over 40% in many markets. High demand and low inventory meant many properties benefited from multiple offers and above list closing prices.
The story since the spring of 2022 has been quite different. Macro and micro economic influences have played a major role in reshaping the real estate market. Inflation, interest rates and mid term elections all have their influences. Couple this with the short term rental restrictions that have been either introduced or are in the works, and we have a recipe for downward pressure on what was a red-hot market.
So how is this actually filtering through into the real world? Taking Breckenridge as a current example, it is a tale of where within the city limits the listing is located and buyers cherry picking certain properties. Breckenridge has approved an ordinance which limits the amount of short term rental licenses in various areas or ZONES.
Resort Zone – all properties in this zone are eligible for a license
Zone 1 – 90% of all properties in this zone are eligible for a license
Zone 2 – 50% all properties in this zone are eligible for a license
Zone 3 – 10% all properties in this zone are eligible for a license
As you can see from the following interactive map, the zoning very much determines the real estate market and to a large extent splits the town into the ‘have’ and the ‘have not’. For example, if you currently own a property in Zone 3, and you have a short term rental (STR) license, and you wish to sell your property, the license is vacated when you close on the property. Due to the attrition rate of getting zone 3 from a current license rate of 1267 licenses out of 3893 units to 389 (10%) – it is safe to say that it could be many years before a new license is issued in Zone 3. This has and will definitely have a determining effect on this market, price reductions have not been uncommon (though in relation to the 40% appreciation recently, sellers should still be well positioned).
On the flip side of the coin, properties in the resort zone and Zone 1 will logically be more resistant to the current price pull back. And this opinion is being seen with pricing and activity of late.
This STR restriction roadmap is not exclusive to Breckenridge, it is a feature of Summit County and many other mountain communities as local govt try to wrestle with the challenges of popularity and thriving tourist economies…… nice problems to have maybe?
My opinion for the longer term? Despite the macro economic headwinds we are facing, there is no denying that Colorado, the front range and mountain communities are, and will be, very desirable. Since moving to Colorado in 1994, the population of the state has grown by 62% as a whole with higher percentages in Denver and along the metro front range corridor. The demand for mountain homes will remain, though not at the pace of the past couple of years. Buyers will finally have some negotiating power and benefit from the lack of multiple offers – in short a more normalized market in terms of the buying process. I am a strong believer in the market finding a way to correct itself and if the balloon is squeezed in the middle it will bulge at either end. Will 30+ day rentals that are not subject to the STR license become more prevalent? Will the market become more refined and defined? Time will obviously tell but my hunch is that with demand for mountain homes persisting, the market will find it’s ‘work around’, just like a river finding it’s course… the water still flows.