Vail Daily letter: Finding starter homes
On the heels of the latest news on Vail’s housing plan, now is a good time to roll out facts and perspective on the lower end of the non-deed restricted housing market across Eagle County — the niches in the traditional real estate market where buyers are looking for suitable starter homes and where savvy employers acquire rental properties to house their key employees.
For perspective on the overall market, the total number of residential sales for the 12 months ending Aug. 31 (reflected in the VMLS database) was right around 1,270 transactions, a monthly run rate of 106 sales. Twenty-eight percent of those transactions involved properties valued at $1 million or higher (a run rate of 30 per month); 31 percent ranged from $500,000 to $1 million (a run rate of 33 per month); 41 percent fell below $500,000 (a run rate of 43 per month).
We have to peel back the onion even further to get a handle on the starter home portion of the market. Here is the definition I’ve been using for this series of articles: properties priced up to $425,000 which provide at least two bedrooms and 750 square feet of living space and homeowners association fees no higher than $350 per month.
Since homeowners association fees are counted when lenders calculate allowable debt to income ratios, homeowners association fees greater than $350 per month place those properties out of reach for the majority of starter home purchasers.
During the past 12 months, 371 properties priced below $425,000 have been purchased. However, when you apply the other two measures (size and homeowners association fees), that figure drops to 244 starter home properties. Examples accounting for that drop include the small Westin Riverfront condos, the Metcalf lofts which sport high homeowners association fees and The Villas at Brett Ranch with high homeowners association fees as well.
Examples of subdivisions which make the starter home cut and where availability has been reasonably strong include Two Rivers Village (Gypsum), Sunridge Condos (Avon) and The Reserve (Edwards).
Assuming recent history will repeat itself, more than 700 starter home properties will come to market over the next three years, including resales and new construction. That’s encouraging for the valley’s current renters and workforce, but there are disconnects we are all familiar with.
Renters find it difficult to save for a down payment; many have non-housing debt which undermines the size of the loan they can qualify for. And many of the starter homes are located downvalley, which conflicts with the younger generation’s clear preference for the lifestyle associated with Edwards, Avon, Eagle-Vail and Vail. Finally, many of these properties are being absorbed by vacation home buyers and income property investors chasing high rental income.
Let me end this update on a positive note based on my recent experience with several young professionals who were determined to crack the code and transition from renters to property owners. Here’s the track they followed:
• Improved work positions and salaries.
• Paid down their debts to nearly nothing.
• Asked their parents for help with the down payment.
• Were prequalified by one of our savvy mortgage professionals.
• Evaluated 20 or more active listings which made sense financially before making an offer.
• Successfully purchased their first homes — condos — in mid-valley locations.
• Are now poised to attract a renter of the second bedroom; that rent income is extremely helpful in navigating through the early phases of homeownership.
Kent Petersmeyer works with buyers and sellers day-to-day as managing broker for The Cascade Team Colorado based in Edwards. He can be reached at firstname.lastname@example.org and 970-456-8203.