There are some numbers that deserve our attention in the CAR report! Summer, is typically the most active season for real estate in the Roaring Fork Valley, and it’s throwing gasoline on the embers of a market that’s been hot for too long. Buyer exhaustion is real, yet more keeps being asked from them.

Main takeaways:

The inventory is now at 5 months worth of supply. Don’t let it fool you, read the analysis below!
There were only 70 sales over the last months in our MLS. That’s LOW
The median sales price is up 16,.3%, yet the average sales price is down 34%… Duh? Well, that’s what having such low inventory and sales volume will do to stats. Non representative sales (very low or very high) have a big impact on averages. In this context the median sales price says more of the story.
The median sales price in Basalt went up 490% year over year! Lucky Basalt homeowners :) Like I said, with such low inventory and sales volume, you can’t take the numbers at a superficial level or you will jump to false conclusions!

As highlighted in my latest blog, this market once seems like it can run out of steam at any minute. Yet if you look at it closely, you’ll realize that inventory is incredibly below what’s needed to reposition prices at an affordable level. The driving force behind high prices is still the ultra-low inventory. And on that front there are absolutely no signs on that changing anytime soon.

That being said, buyers seem to be getting close to the end of the road in general (at least at some price points). They are not jumping on new listings anymore. Despite the ultra-low inventory, the months of supply (how many months will it take to absorb the current active listings at today’s absorption rate) is now 5 months. It was under 2 during the COVID years. That means that despite the fact that the number of listings is so low, it would still take 5 months for buyers to absorb them all. A balanced market is considered to have 6 months worth of inventory. This shows one more time that we can’t jump to conclusions when it comes to market trends that are based on such a low sales volume. Who in their right mind would call this a balanced market? Yet if you only look at the months of supply, it might look like one.

Is inventory the main driver of the market, or is it the FED? Or even something more political…

Low inventory, buyers losing steam, high prices and high interest rates… The reason why this market feels cornered in an affordability crisis is coming from long term trends that are pretty reliable. But policy decisions also play a big role.

Long term trends:

Our area is VERY attractive. People want to live here.
We have a minimal supply of housing. We are surrounded by public land and unbuildable land. We can’t increase the supply of homes like they would in other parts of the country.
There is a large amount of wealth in the valley. Aspen’s wealth and reputation iradiates all the way to Parachute.
High cost of construction: With limited access to both labor and material, as well as having to compete with high paying luxury projects in Aspen, building will remain expensive across the valley.
A lot of homeowners are comfortably sitting on massive equity and low mortgage rates locked in for 30 years, and there are no reasons to sell for them, which will keep inventory low.

But the FED is the bogeyman in this whole story. They are determined to slow down the economy using monetary tightening and higher interest rates. The latest inflation report showed inflation numbers being really close to the FED’s 2% target (they came in at 3% last month). Is this the end of the tightening in sight? What if it is?

First, let’s not get too excited. The FED sees the resilience of the labor market and will not jump to lower rates unless they see a reason for it. If the economy seems to stop creating inflation at today’s rates, they will just keep them there for a while. They will lower them when they estimate that the economy needs stimulation. There are several possible debt crises looming, with incredibly high levels of debt in the private and the public sector. But so far every aspect of the economy has shown incredible resiliency in front of the interest ramping up at the fastest pace in history. Maybe the presidential election will make some politician want to stimulate an already hot economy? 2024 is around the corner…

One way or the other, you can’t bet your money on politics or what the FED will do next month. The long term trend I listed above are the fundamentals of our market, and they are the basics of the ultimate winning strategy in real estate: What’s important is time IN the market, and not TIMING the market. Buy and wait, don’t wait to buy. Our real estate is incredibly attractive. Few places in the world provide residents with the quality of life and the level of opportunity we have here in the Roaring Fork Valley. If cash flow might be minimal right now, it will come back when rates will go down, and they will one day. On a primary residence, if you can afford your payments today it will only get better n the long run. Play the game for the long haul, it always wins in real estate!