Don Cohen: Looks like a long winter for Vail Valley
Vail, CO, Colorado
There’s no doubt that Eagle County is experiencing a contraction of jobs. It’s no surprise that the first to feel the effects are the real estate and construction sector. Next to recreation and hospitality, real estate and construction are our largest economic drivers.
At the end of August, I was having breakfast with one of the executives of a local development company. The company was planning to announce significant layoffs, which would be the first time in the its history. In August, this kind of news not only wasn’t expected, it was a jaw-dropping surprise. Four months later, news like this barely rates a shrug.
My business career started in the mid-’70s, and over the past three decades of owning and building companies, I’ve experienced my fair share of economic swings, but this one’s clearly different. In 1980, the county’s population was 13,000. Today, it’s 50,000. The majority of people who now live in Eagle County weren’t here in the early ’80s and have no memory of when the bottom fell out of Vail’s real estate market.
Construction slowed, home prices dropped, and it took more than six years to see demand in housing and prices move back up to their post-crash levels.
Longtime realtors remember these lean times. However, it was a much smaller market then, and there were a lot fewer licensed Realtors in the game. This was before the dot-com boom and bust, the surge in upper- income household wealth, pre-boomer retirement and a national trend of increasing second-home ownership. Vail Resorts was still a local, privately owned company, and about the most creative a home loan got was that you could pick the date of your monthly payment. The economy of 2008 is a lot different from the economy of 1988.
What makes Eagle County different from both a state and national perspective is that it has two distinct types of economies.
The first is the essential economy. That’s the one that encircles our governments, schools, medical and basic consumer needs such as groceries and maintenance services.
The second is the nonessential economy. That’s the recreation and real estate economy that is designed to efficiently capture discretionary dollars for travel, recreation and second-home ownership. The nonessential wraps around the essential and both require each other to function. So, as the nonessential economy contracts, its constriction can be felt, in unintended ways, by the essential economy.
Given the national uncertainty and the changeover to a new administration and Congress in January, we are ensured an uncertain climate for several more months. One way or the other, I think we’ll have a much better view of the economic landscape by late March.
Regional economists call this forecast environment “challenging” and indeed it is. Locally, we’re going to be keeping our eye on several things: 1. Good snow. That can go a long way in mitigating a bad retail economy. 2. Resort real estate sales. Even a minimal level of activity would demonstrate that there’s a market that continues despite economic uncertainty. 3. School enrollment. If class numbers decrease after January, it would be an indication of pullback in the essential economy. 4. Demand for affordable work-force housing. Though the volume of transactions is down, activity is still occurring, and this is another good essential economic indicator.
It’s going to be a long winter, let’s just hope it comes with plenty of snow.
Don Cohen is the Executive Director of the Economic Council of Eagle County. The council’s Web site is http://www.economiccouncil.biz