BANDONI's Real Estate Reality | December 23, 2021
Yes, this was an absolutely remarkable year in real estate. Whatever property you own and wherever it is located, it is worth much more today than it was twelve months ago. What has transpired is a fairly obvious story, but where we are going from here is a bit less obvious. Let’s have a look at the past and present, then speculate a bit about the future. 


INVENTORY FOR SALE | We finish the year with the low supply of properties for sale that took shape in the spring. In May, the inventory volume dropped to about 265 units for sale, and it has fluctuated from 190 – 300 units since. We have been hovering at roughly 190 units since October. New listings have been absorbed at a pace equaling their replacement. For context, from 2016 to 2019, the average volume of inventory throughout the year was around 750-850 units.

UNITS SOLD | Year-over-year, the number of units sold declined nominally. That most certainly would have increased if there were more sellers. ('Twas the previous twelve-month period, 2019 to 2020, which took the massive pandemic bump with a 20% increase in units sold)

APPRECATION | Because the valley has so many micro markets, it is not accurate to blanket the area with one number quantifying the increase. But considering the data from many micro-markets, it is safe to say that overall, property values have increased 20 – 30% in one year’s time.

ABOUT THE NUMBERS | At the end of Q3, the volume of sales was up by 26% but that dropped sharply in Q4 which saw a decline of 44%. To reiterate, this decline is easily attributed to the lack of inventory. It may be worth noting that historically, October has the highest number of closed transactions, so the lack of buying opportunities has made a significant and tough-to-quantify impact. 

The annual dollar volume of sales increased by 14% to $3.063 billion. With the lack of increased unit sales, that is a direct result of increased prices and an increase of sales in the upper price segments of the market. Specifically, there were 40% more sales this year between $3-5MM and 28% more sales above $5MM. You may have noticed Vail Daily headlines touting record-breaking sales which dramatizes market conditions, yet it should not define the market. It is merely part of the story. Sales between $3-5MM represented 11% of all sales and those above $5MM represented 7%. And because I know everybody likes to have a glance at those homes, here's a look at sales above $12MM, CLICK
1: Minturn to Edwards area 2: CVC, Squaw Creek, Edwards' canyons 3: Wolcott to Gypsum 

 Residential only | Excludes rural Eagle County | Source: VBR MLS

DOLLAR VOLUME OF SALES  2020: $2.644 B    YTD 2021: $3.063 B     +14%

units FOR SALE today: 174  this time last year: 451
UNDER CONTRACT today: 192  this time last year: 102


Beyond the valley, non-resort markets and nationwide, the rate of appreciating values has been decelerating over the last three months. It began doing so at the time of year when most markets cool down (AUG/SEP when the kids go back to school). But after a long period of torrid sales and appreciation, it is worth asking if there are other factors involved such as buyer fatigue, obstinance, or an evolving ‘wait & see' sentiment. 

THE INTEREST RATE will likely rise next year but I believe it will not have an immediate adverse impact on local real estate. A bit more than half of mid-valley and up valley properties are purchased without a loan or are nominally leveraged. A higher interest rate is not the typical disincentive for buying luxury real estate. As we know, higher interest rates have other economic impacts on industry and that may be what ultimately causes a curtailing demand for real estate.

SPECULATING | I like to minimize my speculations, especially in writing, but here I go: when interest rates increase, property owners who have been contemplating selling will begin to believe the ‘seller’s market’ condition will soon change. Thus, inventory will increase, and buyers will have more to choose from. If inventory increases only subtlety, appreciating values continue to track. If inventory increases significantly, we will see the transition from the rapid appreciation to decelerating appreciation and then slow growth. I would be surprised to see slow or no growth next year. I think it would require a major economic event. There are too many buyers still hunting for homes. 

IF you are one of those house hunters, I still believe it is safe to buy with the intent to hold for the long term. IF you are a seller and you believe the interest rate hike will have the affect I mention, you will want to begin marketing your property between February 1 and July 15. 
NETWORKING | I am acquainted with hundreds of people across the country, and I sometimes connect people when the light bulb flickers in my head. Today, I have a rare posting of a variety of quests and opportunities. Please pursue if you see fit…
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