Summit County’s real estate market was robust before the pandemic hit, but lately, the market has skyrocketed. With the current climate of potential buyers outbidding one another — and even offering much more than asking price — some people are wondering: Is this another housing bubble, like the one that burst during the last recession?

The brokers at Nelson Walley Real Estate in Silverthorne say it’s the complete opposite, and here’s why:

Housing supply is extremely limited

Supply and demand drives price, and for the last few years, there haven’t been many properties for sale.

Real estate supply is measured in what’s called “month’s supply of inventory.” It’s based on the number of homes currently listed, compared to the number of buyers in the market. A normal months’ supply is about 6 months. Anything above six months means it’s a buyers’ market and indicates that prices will soften; anything below six means a sellers’ market, where prices normally increase, said Debbie Nelson, broker and owner of Nelson Walley.

In Summit County, January 2021’s inventory of properties (not including land or commercial space) had less than a one month supply (0.9 months). And, homes under $1.5 million had only a half a month supply.

“Housing supply is at a historic low,” Nelson said. “Remember, if supply is low and demand is high, prices naturally increase.”

Housing demand is real

During the last recession, a number of factors led to the housing bubble.

“Much of that was driven by the mortgage industry, where mortgage money was made available to just about anyone,” commented Ned Walley, Nelson’s business partner. 

The Mortgage Credit Availability Index, published by the Mortgage Bankers Association, puts the recession housing climate and our current real estate climate in perspective. The higher the index, the easier it is to obtain a mortgage, and vice versa.

Prior to the recession, the index stood just below 400. In 2006, the index hit an all-time high of over 868, and just about anyone could get a mortgage. Currently, the index is 122.5, well below even the pre-recession market.

“Today’s demand is very real,” Walley said. “Millennials are marrying and having children and therefore purchasing homes. COVID is causing a true urban exodus, which we are experiencing in Summit County. And Summit County is the perfect place — close to the city, yet out of the city. And, we have historically low mortgage rates while still maintaining strict borrowing guidelines — just ask anyone trying to get a mortgage loan.”

Households have plenty of equity

According to Nelson Walley Real Estate, Americans pulled out $824 billion in equity from 2005 through 2007.

“That left many homeowners with little or no equity in their homes at a critical time,” according to Walley.

When real estate values dropped, some homeowners were upside down: they owned more than the value of their property, and many defaulted, leading to a huge number of foreclosures.

“Today, the banks and the American people have shown they learned a valuable lesson from the housing crisis a little over a decade ago. Cash-out refinance volume over the last three years was less than a third of what it was compared to the three years leading up to the crash,” states Nelson.

When to buy

So, the question is: When should I buy? Realtors at Nelson Walley say the time is now.

Tyler Nelson specializes in working with first time homebuyers, and he understands their concerns first-hand. In 2017, he bought a two-bedroom condo at Silver Queen East in Wildernest, just as the market was strongly gaining after an approximately eight-year recession drop. At the time, he paid the highest anyone ever had for a two-bedroom Silver Queen East condo.

His big question, “Is this smart?” was answered pretty quickly: The average residential price housing index in Summit County was $587,866 in 2009. After dropping to an average of $492,621 in 2013, it steadily climbed to $686,314 in 2017. In 2020, the average was $903,385. His condo value has increased by about 25%, he said.

“The number one thing I would tell a first time home buyer is don’t wait,” he said. “I know it is a scary step, but you will see the long term benefit sooner than you think.”

“There’s always this fear — do I jump in,” Debbie Nelson said. “But you have to just bite the bullet and get started paying equity instead of paying someone’s mortgage.”

Some buyers are sitting on the sidelines, waiting for a downturn: “They seem to approach purchasing a home as if they are day trading, waiting for those drops to buy at the low point,” Tyler Nelson said. “Unfortunately, with how we see this market going, buyers with this mindset will miss out.”

With more people moving closer to nature and working from home, as well as the booming trend in millennial home buying, demand for mountain living is high. Add Summit County’s proximity to Denver and its low housing inventory, and it seems to be a perfect storm.

“There is a (buying) frenzy, but it is most definitely not a bubble,” said Ned Walley, a broker at Nelson Walley. “It’s a permanent, seismic shift. People are living where they play.”