Can the early ’80s hit Vail again?
When I moved to Vail in 1979, the valley was bustling with construction from Vail down to that new resort called Beaver Creek. In spite of clear evidence that the national economy was poised for problems, we were serenely confident that because there was nothing quite like Vail anywhere, we would sail far above the storm.
New projects like Simba Run, 770 Potato Patch and the Peregrine (now The Seasons at Avon) were beehives of activity. The Charter at Beaver Creek boasted the largest slate roof of any residential building in the country, and duplexes sprouted like weeds in Eagle-Vail. As a community, we subscribed to the theory of “build it and they will come.”
By 1981, we had built it and nobody came. Interest rates, unemployment and inflation were all in, or heading toward, double-digit levels. In addition, the winter of 1980-1981 was one of the driest on record.
By the fall of 1981 real estate sales were flat and properties were sitting unsold that would have been fought over just a year before. We did have good snow in the winter of 1981-82 ” in fact, at Christmas in 1981 Vail Mountain was closed for half a day because of too much snow ” but skier numbers were flat at best.
By the spring of 1982 things were getting bad, and many developers of major projects simply had to walk away and turned their properties over to the banks.
For several years many large buildings in the valley were ghostly and empty. In Simba Run the swimming pool was filled and heated and clean, the model units were furnished and the front desk awaited the arrival of the first guests, but the building was closed.
I recall walking through what is now the Seasons Building in Avon and noting even the beds were made up, although the exterior was unfinished and a tall chain link fence surrounded the property. The Charter at Beaver Creek was a silent sleeping giant with lights on and guests in only one wing. Miles of hallways were unfinished. Property values dropped by 50 percent or more. Until about 1986 it was as if much of the valley was simply in year ’round hibernation.
Could we see a repeat of the early 1980’s? Other parts of the nation already are there and it will take a few years for those areas to recover. Personally, I do not see that happening here. We may not be at the bottom of the economic slide yet, but we are a far different economy and community that we were 25 years ago.
In the late 1970’s and into 1981 there were economic forces at work that were far more destructive than anything out there now. The biggest culprit was inflation. The Fed went to extreme lengths to choke off growth to stem inflation, which was briefly over 12 percent. The prime rate was as high as 18 percent. This was necessary, as history is littered with failed governments and economies that ignored inflation.
Choking off growth pushed the unemployment rate to its highest levels since the Great Depression and this also choked off tourism and second home ownership. Mortgage rates got to 18 percent (and those people with 9 percent sub-prime loans are complaining!).
While many will justifiably argue the bailout and other actions by the Fed should have started long ago it does appear that except for minor scrapes and bruises Vail and the State of Colorado have escaped the worst of the damage.
While our real estate markets here are under stress, we are not likely to see close to the devastation we witnessed in the 1980’s. The threat of inflation appears to be vanishing and the Fed is making enormous efforts to promote growth, the exact opposite of 1981 when the Fed was putting a death grip on the economy to slow growth.
I feel that in time the Fed’s actions will work, but eventually the money put into the banking system will have to funnel down to promote economic growth to increase jobs and ensure that our guests still have some play money to come up here and buy real estate, eat out and shop ’til they drop.
Chris Neuswanger is a loan originator at Macro Financial Group in Avon and welcomes mortgage related inquiries from readers. He can be reached at 970-748-0342.