Whether you’re a buyer or seller, one of the more important aspects of the market you’ll want to be keenly aware is inventory. But this is not simply knowing how many properties with your criteria are listed, but more telling is how quickly those properties are consumed (absorbed) by the market, over time.
For example, it may seem like having 250 condominiums listed for sale between $250,000 and $500,000 is high, and only 20 condominiums listed for sale between $1 million to $2 million is low, but if the market absorbs (buys) 500 homes in the $250k to $500k range a year, and only 5 are bought in that $1m to $2m price range a year, it takes (on average) 6 months to sell lesser expensive condos (250/500 x 12 months) than the 20 condos at 5 per year, where it would take 48 months to sell (20/5 x 12 months).
If you’re in the buying mode, the more properties that are on the market within your price range, the more options you have available, as excess supply typically brings lower prices. Buyers will want to know how quickly properties are getting snatched up and how aggressive they’ll need to be in making an offer from both a timing and pricing standpoint. In the example given above, if you’re shopping for a $400,000 condo, you may want to make an offer sooner rather than later when you find the right one, whereas if you are looking in the $1m+ range you may be a little more patient.
If you’re selling, the fewer properties on the market means less competition, and a higher price may be demanded. When you receive an offer, if you’re in an active price range and an offer comes in at a price not to your liking, you may want to counter or wait for a better offer; while if you’re positioned in a less active segment, getting any reasonable offer may be something to consider.
In the first quarter (QI) of 2009, the Steamboat Springs real estate market hit a two-plus decade low in demand, where the Steamboat Springs Multiple Listing Service (MLS) posted a mere 62 transactions. From the supply side, the MLS posted an all-time record high of 2,385 listings in QII of 2010. Now, with six years of slow and steady recovery, supply and demand have created different opportunities on both sides of the table.
To see where these inventory opportunities exist, we’ll take a look at the Months of Inventory in various price ranges within Steamboat Springs and the ever-popular South Valley, for the three residential categories of Single Family Homes, Townhomes and Condominiums, as well as vacant Land. Furthermore, I thought it would be interesting to see where the market was for the record-breaking year of 2007, when it hit bottom for activity in 2009, bottom for value in 2013 and currently 2016, which is actually May 22, 2015 to May 21, 2016 (the most recent 12 month period).
Single Family Homes
Not surprising, the $250,000 to $500,000 price range, was very tight with 36 sales over the last year. There are currently two listings, giving a one month supply. The most active price range is between $500k to $1m, where 97 transactions occurred and only 44 listings exist. The most interesting find with this exercise is that in 2007 a total of 178 single family homes were purchased, and over the past twelve months 173 have been recorded…only five short of the market high.
In 2009, 12 townhomes in the $3m to $4m range were on the market and only one sold, representing a twelve year supply. Those have been slowly absorbed where now a 12 month supply exists. Again, the lower the price point the lower the time it takes to sell.
116 condos have been purchased over the past year under $250k. With only 23 listed, a mere two month supply exists. 128 have been purchased between $250k and $500k, but 116 are now listed (seven month supply). More listings will need to be added in these two price ranges to feed demand. Notice how the Months of Inventory in the most expensive categories have all declined, particularly between $1.5m and $2.0m, where five sales and nine listings in 2016 have created a six month supply.
Although no new land developments have entered the market in quite some time, there still appears to be plenty of inventory for buyers. 2007 saw 129 sales, but in two quick years that dropped to 13. Interest in land has been picking up, however with 55 sales in the past 12 months.
Across all property types, buyers for introductory-priced properties need to act quickly. Along these same lines, should the market continue to improve, sellers should be able to increase for introductory properties. The other end of the pricing spectrum is totally different, where plenty of inventory in the luxury market exists. Sellers with high-end properties should look to competitively price their property to shorten that timeframe, and attract buyers with value. The market has certainly changed since 2009 and 2013, and, in some aspects, looking more like 2007. For the best outcome, buyers and sellers need to know the market and in particular, how the market absorbs their property for a reasonable expectation.
Douglas N. Labor, ABR, ABRM, CEBA, CRS, e-PRO, RRP, is the General Manager of Steamboat Sotheby’s downtown office and a 30+ year real estate veteran. He enjoys educating his clients on the market to help them be successful in their real estate ventures. He can be reached at 970.846.0661 and his website is BuySteamboat.com.