Ask a Broker: How long will the real estate boom last?

Question: Sale prices are continuing to rise and seem to just keep going up. How long can this possibly last?

Answer: With limited standing inventory, every broker in town is seeking new listings. If you own a home, you have likely been contacted by one or more brokers trying to gauge your interest in selling your home. The message that we’re sending is “our market may never be this strong again, and you should consider capitalizing on it.”

There is no way of knowing exactly how long these home prices will continue to rise. All we really know is buyers and brokers alike continue to search for mountain getaways while pickings grow increasingly slim. Is the Vail Valley immune to a correction similar to what happened in 2008? So far, it appears as though outside influences and erratic market fluctuations don’t have much effect on our housing market. Home prices just keep increasing despite external factors.

What’s happening outside of our beautiful valley that could affect pricing? Here are just a few classic indicators that traditionally have affected and disrupted the economy and our real estate market.

Interest rate hikes

In an effort to fight inflation, the Federal Reserve raised its key short-term interest rate from near zero by a quarter percentage point in March. The central bank also pushed it up another half point, its largest bump in 22 years. The Fed further raised rates by half a percentage point on May 4, the second of seven hikes forecast for this year and the sharpest since 2000. These rate increases will drive rates higher on everything from credit cards to mortgages.

Inflation continues to escalate at an alarming rate as evidenced by the price of WTI crude oil which topped $103.72/barrel on May 3. Inflation has hit its highest point in 40 years.

International Affairs

Russia’s invasion of Ukraine? Not great for investor confidence, illustrated by several recent spikes in the volatility index.

Cashing out at the top of the market is an attractive idea, especially if you have other motivating factors like family, health issues, or simply want a lifestyle change. If this resonates, now is the time to start the process to list your home and be ready to make your move. Recent sales data indicates homes will continue to sell quickly.

The mountainous geography of our valley naturally limits expansion. Throughout the Vail Valley, land is finite, with 85% protected from development as part of the White River National Forest. Could it be that the traditional indicators of market disruption might have an inverse effect and deliver even more demand to our valley?

No matter what happens in 2022, cash buyers will continue to be attracted to the adventurous yet easy living, low crime rates, good schools, and a vibrantly connected and supportive community. While cash in the bank yields progressively lower returns, investing in real estate offers an opportunity for increased value over time. Better yet, you get to live in it while it appreciates.