Depending on the Colorado ski town, cash transactions make up between 30-75% of all closed transactions.  With this many cash transactions, what do rising interest rates mean for sales in the various ski towns.  Will there be a slow down  in ski real estate like we are seeing in other markets throughout the country?

Why would cash transactions be impacted by rising interest rates?

It seems counterintuitive to think that interest rates would impact cash transactions, but they do.  Most “cash” transactions use some form of leverage.  For example if someone were buying a home in Steamboat or Aspen, in order to close quickly they likely would pull money of a  line of credit (unsecured, secured by stocks, secured by another house).   This is typically short term and then they would put longer term financing in place.  With interest rates around 3% less than 6 months ago, this strategy worked great especially with interest rates as low as they were.

Rising interest rates change the cash equation

With rising interest rates even cash buyers are impacted. As mentioned above the overwhelming majority use some sort of leverage.  As interest rates have risen so rapidly and are expected to continue everyone is impacted even the person buying a 3 million second home in “cash”.

Rising interest rates are a “symptom” of the economy

Although rising interest rates are driving considerable behavior changes, they are not the only variable at play.  For high-net-worth borrowers, we have also seen substantial losses in the stock market and an uptick in talk about a recession.  Although interest rates are a large driver, I would be remiss to say that they are the only driver slowing down high-end ski real estate.  General economic conditions including a reset in the stock market along with recession talk are also large contributors to the slow down in real estate prices.

What do rising interest rates mean for Colorado ski real estate sales and prices?

As interest rates continue to rise, even Colorado ski towns with a substantial number of cash transactions will be impacted.  In Aspen, June signed contracts for single-family homes plummeted 71.4% year over year, with new listings rising 33.3% in the same period. Signed contracts for condos dropped 80% compared to last June.


I see most mountain towns values coming in flat to a 5-10% decline over the next 6 months or so. Remember this is after multiple years of 30% plus gains in many of these markets.  As we are seeing in Aspen and various ski towns, there is definitely a change in the air and one of the prime culprits is higher borrowing costs.  The higher rates will even impact the most expensive markets in the country like Aspen that has one of the highest percentage of cash transactions.  On the flip side, the good news for basically every mountain town is that there is not much new inventory coming on the market which should limit the downside risk

Additional Reading/Resources

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Written by Glen Weinberg, Owner Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors MagazineThe Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.

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