The Mountain Market

BY ALEX MILLER

THE REAL ESTATE BUBBLE REMAINS UN-POPPED IN COLORADO’S MOUNTAIN RESORT AREAS.

This year’s home industry woes have rippled across the country, causing many a buyer to either postpone a decision or put it off indefinitely. Last summer’s meltdown in the sub-prime mortgage market—loans made to people with less-than-stellar credit—had a chilling eff ect on lenders, realtors and buyers. Home foreclosures hit record levels in many states.

Oft en overlooked, however, was the state of the resort markets, many of which not only weathered the storm, but also posted record numbers. By the end of August 2007, transactions in Vail’s Eagle County had surpassed $2 billion—a record—and the county was on track for another banner year.

According to Trevor Th eelke, who watches such numbers for Land Title in Eagle, CO, transactions for the period were down 5% over last year, but the dollar volume was up about 20%. “Th ere are a lot of transactions of homes in the over-$5 million price range,” Th eelke says. To be precise, there were 33 of them in the first eight months of the year and 100 in the over-$3 million range.

In places like Vail, Aspen and Breckenridge, the reason for the strong real estate market in the face of a shaky national scene is actually quite simple: Baby boomers are still driving demand for vacation and second homes, and there aren’t enough to meet this demand in some places.

Donna Caynoski, a broker with high-end Sonnenalp Real Estate in Vail, says her agency has been busier than ever, with many agents breaking sales records. “Inventory is low, which is why we’re continuing to get the prices we’re getting,” she says. “We also have something that a lot of other places can’t off er, which is the quality of life in Vail.”

Over the pass in Summit County— home to Breckenridge, Copper Mountain and Keystone resorts—Chris Eby with Buyers Resource in Frisco agrees. “Most resorts seem to be something of an anomaly compared to national trends,” says Eby, who only represents buyers. “Summit County is a mature resort area that’s marching toward build-out. Unlike urban areas, where you have pressure to increase inventory and so you just buy the next farm over and develop it, we’re surrounded by Forest Service land.”

In other words, there’s not much room to grow, so existing real estate continues to escalate in value. In some areas, Eby points out, redevelopment is already in full swing as new money comes in to knock down older buildings and put newer (and usually bigger) ones in their place. Th is is happening on the residential level in Frisco a great deal, and on a much larger scale in Vail. (Last summer, you could count five or six full-size cranes at work in Vail at any given time.)

But that’s not to say those in the real estate industry in Colorado don’t worry that the national trend could aff ect them as well. Arch Wright has been in the mortgage business in the mountain resort area for 14 years, and he says he’d never seen anything like the panic that went through the market last August. It was the whole sub-prime lending story, which, according to Wright, had consequences for “anyone and everyone” looking for a loan. “For a couple of weeks it was chaotic,” says Wright, whose company, Wright Mortgage, is based in Avon, CO. “Today, a lot has settled down.”

While it’s true that a good portion of the second homes purchased in resort areas are paid for with good, old-fashioned cash, Wright says there are still a lot of mortgages being written for properties into the millions. And while the sub-prime situation has nicked into some of the traditional products he sells—like the 30-year fixed mortgage—Wright says people with the money to put a 20% down payment on a $10 million home in Beaver Creek aren’t going to be aff ected by that. “All of the ‘A-paper’ mortgages I do now—products for people with 20% to put down and good credit—have pretty much come back to where they were before the crunch,” he says.

Peering ahead into 2008, the sense is that, barring any cataclysmic events (a huge forest fire, say), the resort real estate industry should chug along as usual no matter what happens on the national scene.

Wright believes mortgages should continue to correct themselves back to where they were, although he concedes the sub-prime market is “trashed” for now—and it continues to impact higher-end mortgages. “Th ere’s been a lot of fear that’s not warranted for the type of client we see in Vail,” he says. “People need to realize it’s not a problem.”

Eby says buyers can look at the winter months as a time when there are less people out looking, meaning there are less competing bids. It’s a good idea to take your time and do your homework because, in a hot market, there are sellers who put their homes up at prices that really are over the top. “Some people will go fishing, and if they find someone to take a nibble and hook them, great,” he says. “But a well-informed buyer will know better, so it had better be a well-priced property.”

Despite the high prices, mountain real estate can still be a great investment. As Eby says, “We tell our clients it’s painful to get into the market, but once you’re in, the rewards are pretty good.”

TIPS FOR BUYING INTO THE MOUNTAIN MARKET

The resort markets are teeming with real estate agents. It pays to find an agent who really knows the area and can spot deals both good and bad.

Know who your agent is representing. Is it just you, the buyer, or the seller as well?w

In the latter months of the year, there aren’t as many buyers in the market, so there may be some room to negotiate. But don’t expect too much: The mountain market is hot all year long.

If you’re financing, don’t accept what one bank tells you. Find a mortgage broker who can shop around for you and find the best rate.

Look outside the core areas. If you don’t need “ski-in/skiout” access, a home within 20 to 30 minutes of the ski area is going to cost a lot less than that slope-side unit.