US real estate

Short-term rentals, inflation and rising interest rates all impacted the Summit County real estate market in the first quarter of 2022

This six-bedroom, six-bathroom luxury home in Breckenridge is one of many properties managed by Summit Luxury Estates. Summit County real estate agents say short-term rental regulations, inflation and rising interest rates impacted the local market in the first quarter of 2022.
Adam Parker/Summit Luxury Estates

When real estate agents evaluate the performance of the Summit County market that year, they generally do not base their forecasts on the first quarter of the year. Many agents point to all the properties that are still being used by owners for the ski season as the reason there aren’t as many transactions this quarter compared to other quarters.

During the summer and fall months – busy seasons for many agents – there could be a few hundred transactions within a 30 day period. But reports from Land Title Guarantee Co. for January, February and March show much less than that. In Januarythe county recorded 124 transactions, in February there were 107 transactions and in Marchthere were 165 transactions.

January sales for this year were up 28% from 2021, but February sales were down 10% from last year and March sales were down 17%.

That’s not a concern for Richard Wallace, broker and partner at Breckenridge Associates Real Estate.

“Looking at the numbers from Land Title, that’s consistent with what we’re seeing in our office that the number of properties sold in Summit County is down 31% from the first quarter of 2021, so that’s significant. What’s interesting is that even though the number of properties sold is down 31%, the price increase means the total dollar volume is only down 3%,” Wallace said.

Wallace and other agents – including Ray Brueggemeier, broker and owner of Cornerstone Real Estate, and Anne Skinner, owner of The Skinner Team – said that kind of momentum in appreciation is likely to slow. Regulation of short-term rentals is accelerating, interest rates are rising, and inflation is making buyers’ wallets a little thinner than usual. All of these factors play into the Summit County real estate market in a myriad of ways.

Year-to-date, Summit County real estate transactions are down 31% for the first quarter. Local real estate agents say it’s no surprise as the first quarter of the year is usually slow while the summer and fall months are busier.
Jenna deJong/Summit Daily News

For example, Skinner said short-term rental regulations, specifically the county’s 135-day cap for its Type 2 licenses, don’t affect all buyers equally.

“For us, it was a pretty mixed bag to be honest,” Skinner said. “I would say when it comes to short-term rentals, we’ve definitely had buyers who have said, ‘If I can’t do what I’m planning to do, then that’s just not going to be the market for me. . buy, and it makes more sense for me to go out and rent when I want to rent. We definitely had a handful of these people.

At the same time, Skinner said there were other buyers less affected by the new regulations.

“On the other hand, we also had a good number of people who were really looking for second homes that they just wanted to rent occasionally, and for Summit County, the 135-day cap really didn’t bother those people. in particular,” Skinner mentioned. “So we kind of had a mixed bag there. I can’t say that it totally evolved in one direction rather than another.

Skinner said some of his clients who wanted to invest in the market through short-term rentals have seen their income decline and those types of clients have dried up.

Wallace predicted that these regulations could have an entirely new effect on the market in terms of who buys the majority of the county’s housing stock.

“I think we’re starting to see a shift in Summit and Breckenridge County towards a different type of buyer, and that could end up pushing us into a situation where the only type of buyer who can buy here is someone who has money or is going to get a loan, but the loan they can absorb without any offset in rental income,” Wallace said.

As for inflation, the three agents said it’s likely to crowd out local buyers even more. Typically, local buyers account for less than 30% of all transactions each month. This was the case in January, a month when buyers accounted for 20% of all transactions. In February, 24% of transactions came from locals, and in March, that percentage dropped slightly to 23%.

Rising interest rates aren’t helping local buyers either. Again, the three agents agreed that rising costs will crowd out residents hoping to buy a home in Summit County.

“I would say half the people who have thought about borrowing money can’t,” Brueggemeier said. “Their purchasing power has gone down so much that they can no longer buy what they want.”

Wallace pointed out that in January and February, the number of closes that were cash transactions hovered around 26%. In March, that figure rose to 44%.

“I think the most important thing is, first and foremost, that inflation doesn’t affect everyone the same way,” Skinner said. “People who have potentially lower incomes, things like that, inflation hits them much more substantially than 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 cool gradually. Already, there are not as many offers on a single property as before and prices also seem to be slowly stabilizing.

“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 have. had in the past—so low, single—appreciation numbers,” Brueggemeier said. “We’ll see.”