Rising prices, interest rates hitting Vail Valley’s real estate market

The Vail Valley real estate market continues to be hamstrung by lack of inventory, rising prices and rising mortgage interest rates.

The latest data from the Vail Board of Realtors show a mixed message of pricing, inventory and days on the market.

July’s median price of single-family and duplex units grew by 3.1% over July 2022. The increase was more pronounced for condos and townhomes, which showed an increase of nearly 25% for the same period.

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That big jump for townhomes and condos is matched by time on the market. That skyrocketed by 220% in July of this year versus July of 2022.

Alex Griffin, who manages the Vail Valley branches of LIV Sotheby’s International Realty, said there’s a likely explanation for that jump. Projects including the Frontgate Avon are just now starting to close purchase agreements, extending the time between listing and closing.

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Still, the days on market figure also took a big jump — 63% — between July of 2022 and July of this year.

Griffin noted that the delays in sales could be partially due to some standoffs between buyers and sellers.

Part of that standoff is due to rising mortgage interest rates. Current rates are hovering around 7.5% — close to the historic average, but a figure that hasn’t been seen in a couple of decades. It wasn’t long ago that 3% mortgage rates were the norm.

Potential sellers currently locked in at 3% are hesitant to move, since they’ll pay more interest on their next home loan.

Affordability has suffered

Increased rates have hit hard, particularly for those buying their first homes or their first move-up units.

Mike Budd of Berkshire Hathaway HomeServices Mountain Properties said while 8% mortgages are the historic norm, the price points today are far higher.

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“When you’re talking about a $750,000 home at 7.5%, that’s a big monthly (payment),” Budd said.

Higher prices have skewed the market and the buyer pool.

Budd noted that the largest portion of monthly transactions were for homes priced at $500,000 or less. That hasn’t been the case for some time, with only a scarce handful of homes in that price range. The largest segment of sales is now in the range between $500,000 and $1 million.

But, Budd added, the average and median prices for homes in the valley are skewed by sales in the upper reaches of the market.

Still a good investment

Sales of $5 million or more — long just a sliver on the pie chart of transactions — now account for between 8% and 10% of all transactions. That boosts both average and median prices.

Griffin had sobering news for potential buyers waiting for for prices to dip, or at least normalize.

Data from a group including Standard & Poors, Case/Shiller, and the U.S. Bureau of Labor Statistics shows that there have been just six years since 1942 when the U.S. average home price has declined. Five of those years were between 2007 and 2011, the Great Recession.

But new home construction nationally has declined 40% from the previous pre-Great Recession highs.

Griffin noted he knows a potential buyer who’s been looking for five years for a home in Singletree. Prices have roughly doubled in that period, and that potential buyer still hasn’t closed a deal.

But Michael Slevin, owner and managing broker of Berkshire Hathaway HomeServices Colorado Properties, noted that inventory overall is greater now than it was a year ago. While overall inventory levels are lower, Slevin said the local market is “behaving in a historically predictable way.”

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Slevin advised potential buyers to have financing lined up so they’re ready to act when the right home is available. Buyers can refinance if rates drop, something Slevin said he expects to see over the next 18 months or so.

“There’s still a healthy market demand out there,” he said.