It is the market and nothing but the market...so what do we do? Durango Colorado real estate market is a buyers market!

One of my favorite college professors, Dr. Tom Eckenrode, started a semester class with "why study history?". The best reason given was to help us understand and perhaps predict the future when circumstances are similar. This relates to our current real estate market. How quickly we forget. When the market is bustling, it seems like it will never stop, and when the market is slow, it seems like it will never pick up. History shows us differently. Let's look back at the last major downturn in the Durango Colorado real estate market. The market bottomed in 1989 when the average price of a Durango (In Town) single family residence sold for $81,385, an 8.6% drop from 1988. The very next year the average price increased to $97,902, a 20.3% increase! In the five years following 1989, the average price increased to $145,211, a gain of $63,826, which was a 78.5 % increase in value. At the end of 2007, the average value of a Durango residence was $448,649, a whopping 451 % increase since 1989.

Durango Colorado has benefited from a spectacular growth cycle in the last 20 years, as it has been "discovered", and the benefits for living here have been publicized. The combination of a historic mining supply town, a Victorian heritage, the Animas River, the two million acres of national forest, the skiing, biking, hiking, fishing, hunting, art, music, restaurants, and a real community have propelled growth. At the same time, let's not lose sight of what history is teaching us. The need and desire for housing will continue to increase in our community, in the State of Colorado, in our nation, and in the world, as population increases. The cost of building new homes will depend on the cost of materials, labor, the cost of government regulation, and the supply and demand of land. Today, we have an over abundance of homes on the market, which is causing a short term deflation in the cost of homes, while the cost of materials in the world is skyrocketing. What do you think is happening to the cost of steel, lumber, oil (forgive me for bringing that up!), and concrete in the world market as China and India are emerging as major consumers? Do you think the cost of these materials, labor and governmental regulation will be lesser or greater in five years?

History gives us the answer. There is an underlying inflation cost that continues to rise over periods of time. Sometimes, it is quite evident, and other times it is nearly obscure, like in the real estate market right now. If you have lived a full life time, this is not news to you, as you have seen the cost of goods and services increase over your entire life. If you are young and reading this post, ask your parents what the cost of a bottle of Coca-Cola was when they were growing up. Better yet, let me give you one to ponder. The average cost of a home in the United States was $9,075 in 1952! At the end of 2007, the average cost of a home in the United States was $218,900, a 6% annualized increase in value. I contend that we are seeing an underlying value increase in materials and labor right now, and yet we do not see it in the current price of real estate.

If you agree, what do you do? Do you anticipate the future and make decisions based on history or do you wait until we have a number of years of spectacular growth, and wished that you had been part of it?

The author, Don Ricedorff, is a licensed real estate broker with The Wells Group in Durango Colorado. If you would like to reach him, please call don at 970-375-7014, visit him on the web at http://www.durangorealproperty.com/, or e-mail at don@frontier.net.