The 16th annual real estate forecast highlighted the problems facing local housing authorities and city planning agendas.
Supply is disproportionate to demand, affordable housing is lacking and a combination of regulatory and economic inhibitors are compressing inventory.
With transactions up compared with 2014, local market experts at The Wells Group’s recent presentation said the 2015 year in real estate was strong yet still depressed and short on construction.
Four subdivisions are leading the way in 2016 development. Continued growth is expected for Edgemont Highlands, Three Springs – which is bursting with commercial properties – Spring Creek and Twin Buttes, which is expected to be on the market by the third or fourth quarter.
In-town residential and commercial properties remain in high demand, but sales dropped last year because of diminishing inventory.
“We felt there would be an increase in sales of developed lots, but because of two to three years of reduction in inventory, the options for housing is new build,” said John Wells, co-founder of The Wells Group.
In January 2015, there was 4.3 months’ supply of single-family homes and 5.5 months’ supply of condominiums. Less than a year later, in December 2015, the county had 2.8 months’ supply for single-family homes and three months’ supply for condos.
Household growth is also outpacing construction. Between 2010 and 2014, housing units were increasing by about 0.77 percent each year, compared to 1.97 percent yearly household growth in the same time period.
“Supply met demand until the recession, and we really haven’t recovered,” appraiser and real estate consultant Bob Allen said.
Housing experts estimate 560 units are needed annually to meet demand and, meanwhile, rental rates are going up as vacancy goes down.
Fort Lewis College students account for a substantial portion of local renters. College housing authorities predict 1,300 to 1,900 students live off campus, occupying between 12 and 17 percent of Durango’s 3,650 rental units.
“Will some of these renters become buyers?” Wells said. “In our business, we believe if a renter is paying a certain amount and realizes it’s the same as if they had a mortgage, (they will), but the unfortunate part is that because of increased rental rates, how many will leave La Plata County for Montezuma or Archuleta?”
In 2015, the La Plata County Regional Housing Alliance made a substantial move toward a goal of creating 100 new affordable rental units by 2020 with the opening of Lumien Apartments off 32nd Street.
Condominium construction remains a missing component of the housing equation because of construction defects laws, which the city is planning to address this year.
Real estate may be as out-of-reach for buyers as it is for renters. In rural La Plata County, single-family home median prices have been stable around $360,000. In-town, single-family homes have shot up from about $390,000 to $435,000 from 2014 to 2015.
But according to market experts, the number of $200,000 to $400,000 homes on the market, which were the most sought in 2015, would have to triple to meet the demand for that price range.
Last year, there were 1,324 residential sales in La Plata County, which was close to the 1,355 real estate agents and market experts predicted. This year, they anticipate a 5 percent increase to 1,390 sales for 2016.
The Aug. 5 Gold King Mine spill also likely took a toll in the fourth quarter, which saw a 42.7 percent decline in home sales under $500,000 in October compared with the same month in 2014.
“I think Gold King had a big impact,” Allen said. “It’s the only reason we can point at for that significant decline in October. It was too coincidental.”
As reported at last year’s forecast, agricultural land sales remain sluggish, reflecting the difficulty for farmers to buy quality, irrigated land in La Plata County.
Transactions were also flat in the Purgatory resort area, which Heather Erb of Durango Mountain Realty said was likely because of a combination of wariness of the economy and the oil and gas downturn – which means fewer buyers are coming out of Houston.
“We are getting a lot of activity with potential purchasers, but there is a tentativeness about making the decision,” Erb said. “Some were nervous about the economy, some were affected by the oil and gas prices, and some wanted to visit Purgatory one more time before making the decision.”
Sales from December 2014 to mid-March 2015 were for more high-end and mid-range homes. This past winter, most sales in the resort area were fractional – fully furnished units in the $80,000 to $100,000 range – which Erb said are attractive to first-time buyers, because they’re easy to rent out.
Bayfield was an outlier: Total sales went up as the city added supply. Forest Lakes subdivision, which had the most foreclosures during the Great Recession, saw an increase in sales and a 13 percent uptick in median home price.
On the upside, tourism is thriving, as reflected in city sales tax, which increased by 5.6 percent from 2014 to 2015, and lodgers tax, which saw a 7.4 percent increase.
Ridership on the Durango-Silverton Narrow Gauge Railroad also went up by 90 percent.
“That translates into a strong real estate market, because those visitors get connected,” Wells said, because many second-home buyers start as tourists.
Outside markets continue to permeate housing in La Plata County; about 6 percent are coming from Texas, which is down from about 8 percent in 2014. Arizona buyers rose above 3 percent last year. New Mexico and California markets were stable, though New Mexico buyers are expected to decline because of the oil and gas industry’s downturn.