High Country real estate trends buck norm
High Country Business Review
Some Front Range real estate investors are abandoning their search in the Denver metro area and moving into the mountains. Last week, Dillon-based real estate broker Dan Burnett of Summit Resort Group had three such clients walk into his office.
With a depressed market in Denver, more investors are looking to buy property in Summit County, Burnett said. Out of 284 metro markets nationally, Denver is ranked 210 in terms of year-over-year appreciation, said Eric Thompson, managing broker of Slifer, Smith and Frampton in Summit County. However, Denver’s market is showing signs of becoming healthier, Thompson said.
Although Denver investors are coming to him, Burnett actually thinks it’s a good time to buy in the Denver metro area, where prices are soft, as opposed to Summit County, where prices continue to rise and the number of properties on the market isn’t quite as high as usual, he said.
Thompson said he normally sees between 25 and 40 established lake view units for sale in Dillon during the summer; right before 4th of July, there were 10, with an additional 10 in a new development in the middle of town, as opposed to closer to Dillon Reservoir. Last spring, there were more real estate agents than properties for sale, he said, though this summer that shifted a bit. Still, Burnett normally has 20 listings, and he currently has six.
“People are saying, ‘My real estate is going up in value. Why would I want to sell it now?'” Burnett said.
In addition to established homes, there aren’t any new developments of significant size that have standing inventory, which is a sign of a healthy market, Thompson said.
“Overall, we continue to see good, strong steady growth,” he said. “What gives me comfort is the market isn’t exploding ” if it were higher than average it can go down (significantly).”
In May, the dollar volume of real estate transactions increased by 16 percent, compared to May 2006. The number of transactions rose 5 percent. Single-family gross residential price averaged $774,049; multifamily homes averaged $396,525 and vacant land averaged $419,377 in May. Thirty percent of real estate closings were cash transactions, according to Land Title Guarantee Company.
Indicators that resort properties will continue to see steady growth include the low supply of land near ski areas, ski resorts’ growth in skier visits, increasing lodging numbers and resort owners continuing to make capital improvements, Thompson said.
Meanwhile, most real estate markets nationwide continue to slow, though most did not enter negative territory in the first quarter. Nationwide, prices increased 0.5 percent compared with the fourth quarter, and 4.3 percent from the first quarter of 2006, according to the Office of Federal Housing Enterprise Oversight.
In the Vail Valley, real estate appreciated at 20 percent or more a year and now is appreciating at an average rate of 5 percent, said Josh Lautenberg, of Sonnenalp Real Estate in the Vail Village. Overall, Summit County experienced an average of 15 percent appreciation in 2006 ” that’s 11 percent ahead of 2005 dollar volume with 2 percent fewer transactions, according to Summit Real Estate: The Simson/Nenninger Team.
High Country resort regions live in a protective bubble, so the Front Range market doesn’t reflect the mountain market. Thompson likes to describe it as an island surrounded by a national forest and ocean ” Summit County, as well as Vail Village, has reached build-out. Both offer world-class skiing, golf and other recreation. Both are close to airports, have hospitals and are vacation destinations for Baby Boomers.
“We just have great fundamentals working for us,” Thompson said.
Summit County, in particular, jumps out as a good value, compared to other renowned ski resorts nationwide, he said. For example, a single family home in Summit is hundreds of thousands of dollars less than in Vail.
However, this is the first time that Summit County’s market has not suffered when Denver’s has, Burnett said.
“The rules have changed because we’re not as connected,” Burnett said.
For one thing, like Vail, Summit County has become more of a repository of national money. Whereas a decade ago, three-quarters of second homeowners in Summit County may have been from the Front Range, now it’s more like 20 percent, Burnett said. Thus, it’s not a fully Front Range-driven economy.
Second, Summit County is at build out, Burnett said. He doesn’t think ranches north of Silverthorne will convert to small lots because of the red tape involved in subdividing into anything smaller than 20 acres. Most lots cost $300,000 or more.
“What made Summit County valuable before has become more profound now,” Burnett said, adding that the skiing and other recreation opportunities ” not to mention the new hospital ” make Summit County the ultimate place to live.
However, Burnett has a theory that when the Denver market recovers, Summit County real estate will take a bit of a hit because Denver investors will take their money back to the Front Range.
If that’s true, it doesn’t seem to be affecting the rate of new developments, or their sales now. Crystal Peak Lodge on Peak 7 in Breckenridge has sold all but one of its 46 ski-in, ski-out condos since they went on the market in December. Prices range from $800,000 to $2 million.
In Vail, 72 condos at Solaris sold out within eight months, all priced between $8 million and $12 million. At the base of the VistaBahn, nine of 13 townhomes in Vail Resorts’ new “Front Door” project sold in one day ” for $9.6 million to $16 million each. The remainder sold in three weeks, Lautenberg said.
Meanwhile, builders are scrambling for employees. Lautenberg said his builder friends are so busy that they’re scheduling jobs months out, as condos and multiplexes are keeping them occupied. He’s seeing lots that sat vacant for the 10 or 12 years under the same owner now being built on.
“We’re having a lot of trouble getting people to keep up with the work load,” said David Koons, president of Summit Builders’ Association. “Our tradesman resource is definitely stretched. Every summer, it’s stretched, but this summer, it’s even more so.”
Anyone who’s picked up a local newspaper knows that affordable housing is a misnomer in the mountains. As a result, “bedroom communities,” or those that house workers who commute to their jobs at or near the resorts, have begun to boom.
In Summit County, Alma and Fairplay tend to be the choices for locals working in Breckenridge or Frisco. Some Copper Mountain employees commute from Leadville.
In the Vail Valley, Avon used to be the refuge, but now that it has skyrocketed in value, many people are selling, for example, their three bedroom condos for $600,000 and using the money to buy a new four-bedroom home in Eagle Ranch for $685,000, Lautenberg said. Though it’s 25 miles downvalley and basically a lateral move pricewise, people want more house for the money, he said.
Many locals fear selling their homes because they don’t have enough equity to buy something else in the county, he said, which could be another reason there are fewer properties on the market.
No one can predict the future, but brokers such as Lautenberg and Burnett have been around long enough to have a feel for market trends. Lautenberg predicts that the market will normalize, after its big increase a couple years ago. Within two to five years, he sees an average of 5 percent appreciation a year, which is the rate it appreciated before the huge jump.