Short-term rentals, inflation and rising interest rates all had an impact on Summit County’s real estate market in the first quarter of 2022
When real estate agents are gauging how strong Summit County’s market will perform that year, they typically won’t base their predictions on the first quarter of the year. Many agents point to the all of the properties that are still being used by owners for the ski season as reason for why there aren’t as many transactions this quarter compared to other quarters.
In the summer months and fall months — the busy seasons for many agents — there could be a few hundred transactions within a 30-day timespan. But Land Title Guarantee Co.’s reports for January, February and March show a lot fewer than that. In January, the county racked up 124 transactions, in February there were 107 transactions and in March, there were 165 transactions.
January’s sales for this year were up 28% compared to 2021, but February’s sales were down 10% compared to last year and March’s sales were down 17%.
This isn’t concerning to Richard Wallace, a broker and partner at Breckenridge Associates Real Estate.
“Looking at Land Title’s numbers, it lines up with what we’re seeing in our office which is that the number of properties that sold in Summit County is down by 31% over first quarter of 2021, so that’s significant. What’s interesting is that even though the number of properties that have sold is down 31%, the rise in prices have meant that the total dollar volume is only down by 3%,” Wallace said.
Wallace and other agents — including Ray Brueggemeier, a broker and owner of Cornerstone Real Estate, and Anne Skinner, owner of The Skinner Team — said that this kind of momentum in appreciation is expected to slow. Short-term rental regulations are kicking into gear, interest rates are rising and inflation is making buyers’ wallets a bit thinner than usual. All of these factors are playing out in Summit County’s real estate market in a myriad of ways.
For example, Skinner said short-term rental regulations, particularly the county’s 135-day cap for its Type 2 licenses, don’t affect all buyers in the same way.
“For us, it was a pretty mixed bag to be honest,” Skinner said. “I would say when it comes to short-term rentals, we certainly had some buyers that said, ‘If I can’t do what I’m planning to do, then this just isn’t going to be the market for me to buy in, and it makes more sense for me to just come out and rent when I want to rent.’ We definitely had a handful of those people.”
Simultaneously, Skinner said there were other buyers not as concerned by new regulations.
“On the other hand, we also had a good number of people that really were looking for second homes that they just wanted to rent on occasion, and for Summit County the 135-day cap really didn’t bother those particular people,” Skinner said. “So we sort of had a mixed bag there. I can’t say that it totally trended in one direction over another.”
Skinner said that some of her clients who wanted to invest in the market through short-term rentals saw that revenue dwindle and that those types of clients dried up.
Wallace predicted that these regulations could have a totally new effect on the market in regards to who is purchasing the majority of the county’s housing stock.
“I think we’re starting to see a change in Summit County and Breckenridge to a different type of buyer, and this could end up pushing us into a situation where the only type of buyer that can buy here is somebody who has cash or is going to get a loan but the loan they can absorb without any offset in rental income,” Wallace said.
As for inflation, all three agents said that it’s likely this will edge out local buyers even more. Usually, local buyers make up less than 30% of all transactions each month. This was the case for January, a month when buyers made up 20% of all transactions. In February, 24% of transactions were from locals, and in March that dropped just a bit to 23%.
Rising interest rates don’t help local buyers either. Again, all three agents agreed that rising costs will edge out locals hoping to purchase a home in Summit County.
“I would say half of the people who thought about borrowing money may not,” Brueggemeier said. “Their buying power has just gone down so far that they can’t buy what they want any longer.”
Wallace pointed out that in January and February the number of closings that were cash transactions hovered around 26%. In March, that jumped to 44%.
“I think the biggest thing first and foremost is absolutely inflation does not affect everybody equally,” Skinner said. “The people who are potentially lower income, things like that, inflation hits them much more substantially than it does people in a different price bracket.”
As for what’s to come the rest of the year, Skinner, Wallace and Brueggemeier all said they expect the market to gradually cool off. Already, there aren’t as many offers on a single property as there used to be and prices seem to be slowly stabilizing too.
“I think it’s going to be a cooler year and maybe a slower year and potentially less sales, but I think it’s still going to be positive in terms of appreciation and just not nearly what we’ve had in the past — so low, single-digit appreciation,” Brueggemeier said. “We’ll see.”