The adage “History doesn’t repeat itself, but it often rhymes,” often attributed to Mark Twain, seems fitting as it reflects the current state of the regional housing market over the past several years. Following the Federal Reserve’s aggressive interest rate hikes in 2022-23 to address double-digit inflation, many economists predicted a significant drop in real estate prices. While home prices have slowed compared to their previous meteoric rise, they have not experienced any notable decline across the United States.
This raises the question: will the housing market suffer a downturn similar to the 2008 housing crisis or the end of the tech-stock boom in 2001? While each real estate cycle exhibits unique characteristics, the ups and downs are rarely predictable, which supports the truth in Twain’s saying.
For the local real estate market, while the boom years of 2020-2022 are over, the primary shift has been a decrease in sales volume rather than a drop in prices. Though the number of transactions is still above the 2009 low of just 188 real estate deals in Custer County, 2024 did mark a noticeable slowdown from the all-time peak of 698 transactions in 2021.
However, prices have largely remained stable at or near the 2021 highs, allowing real estate agents and home builders to maintain busy and profitable operations. Many agents have commented that, although bidding wars have subsided with the rise of interest rates, homes priced at market value are still attracting buyers.
The Wet Mountain Valley region has a distinct advantage in the current climate. Many buyers here are retirees, individuals building their dream homes, or those seeking a seasonal retreat from urban areas. As a result, mortgages are often not the primary means of purchasing homes in this region. The prevalence of cash deals diminishes the impact of higher lending rates, making it easier for both buyers and sellers to continue transactions despite the market slowdown.
Additionally, real estate in the Wet Mountain Valley region remains comparatively affordable compared to neighboring areas like Salida, where property prices are nearly double. This makes the Wet Mountain Valley an attractive alternative for those seeking affordable real estate without the urban draw of river rafting or skiing.
Despite the slowdown in sales, builders and contractors in the area report continued demand for services. Wait times for experienced tradespeople in the Valley extend several years, indicating a strong housing market overall. Silver Cliff, in particular, has experienced significant growth, with new homes and duplexes being completed as the town lifts its moratorium on development, thanks to improvements to the Round Mountain Water wastewater treatment facility.
However, the region faces challenges that could weigh on the housing market in the long term, particularly in the area of homeowners insurance. According to the Rocky Mountain Insurance Association, premiums have surged by nearly 58% since 2019, driven by rising risks from wildfires, hail damage, and other natural disasters. In some cases, insurance companies are refusing to renew policies due to the escalating values of homes at risk of being destroyed.
To address this, Colorado is introducing a new homeowners insurance program called the Fair Access to Insurance Requirements (Fair Plan) in 2025. This product is designed to provide coverage for homes that cannot secure insurance elsewhere, but it comes at a steep cost, with premiums expected to be three times the industry average.
As real estate prices remain resilient in many regions, these evolving dynamics—especially rising insurance costs—serve as important considerations for both buyers and sellers navigating this increasingly complex housing market.
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