Mountain of foreclosures in Colorado resort communities
The Denver Post
Harry Cessna admits he has struggled to make payments on the modular home he bought in Gypsum in 1989 with his soon-to-be wife.
He was late a couple of times as he helped his wife fight cancer for two years, a battle she lost in 2007. Without her salary, Cessna, a house painter, could barely make payments on the acre-lot home bought for $55,000. He used his G.I. Bill money as a down payment.
Now, painting jobs in the Vail Valley have dried up along with the rest of the construction industry. He has filed for bankruptcy. Last month, the bank foreclosed on his home.
While foreclosure sales have been on the downturn along the Front Range, mountain communities are experiencing increases often of triple-digit percentages as homeowners from the wealthy on down lose their properties.
“I sat here – happy and content in my little home – and watched all these big boys play with money, and I saw how greedy everyone got, selling and going bigger and selling and going bigger. Now I’m getting punished along with the rest of them,” said Cessna, 52, who has a teenage son.
One of those “big boys” is John, a former top-producing loan officer for Bank of America who owes $1.2 million on his 5,000-square-foot home in Edwards and is in foreclosure.
“I’m the first, and there are probably another few hundred behind me,” said John, who at 41 worked as a vice president for two regional banks in the Vail Valley and as recently as two years ago earned $600,000 annually making loans. He asked that his last name not be used for fear of damaging his banking career.
“Everyone was getting greedy, and everyone was living like kings, and everyone was making money thinking it was never going to end. Now everyone is getting scorched. Everyone,” he said.
In 2007, his home was worth $1.8 million, $1 million more than he paid four years earlier.
He tapped that equity and bought two investment homes. Those, too, he will lose to foreclosure, he said.
Today, John is not making any money. He’s packing his stuff, joining a mass exodus of formerly flush locals fleeing the valley.
“There’s no more work up here. It’s not about to end, and it’s never going to come back like it was,” he said.
What has become known as the “Roaring Aughts” in Colorado’s resort communities was a time like no other. Retiring baby boomers drove up home prices, spending millions on 30-year-old condos with a view.
The construction trade boomed with an appetite for newer, bigger homes. Working-class locals stepped up from apartments to condos to single-family homes in a matter of years, tapping escalating values.
“We were drinking too much of the Kool-Aid. I had a couple more sips than I should have had, that’s for sure,” said Aspen-area loan consultant Drew Sakson, 51, who last year lost five of his investment and commercial properties and is fighting to stay in his longtime home.
The fight has cost him 30 years of savings.
With his income nearly zero, Sakson qualifies for employee housing, but he can’t sell his condo in the depressed market. He’s late on his payments.
“I had the ability to pay when this thing hit,” Sakson said. “I thought I could ride it out. . . . I never knew it was going to get this bad.”
For years, mountain brokers touted endless appreciation that bested the stock market. When properties appreciated at rates of 10 percent or more a year, “all you needed for a loan was a pulse,” Sakson said.
Already this year in Pitkin County, there have been 25 foreclosures, compared with six this time last year – then a record. Grand County has logged 48 foreclosure filings through mid-March, close to the annual total of 2007.
Back in 2007, a resort homeowner in financial trouble could easily sell for at least what was owed. Today, resort counties are weathering 50 percent or greater declines in real estate sales from the high times of 2006.
“Demand for real estate has just dried up,” said Ryan McMaken, an economist and director of community relations for the Colorado Division of Housing.
At first, 40 percent to 50 percent of foreclosure filings were second homes and timeshares. Two years later, it’s mostly locals, with less than 30 percent of properties in foreclosure coming from timeshares and second homes, McMaken said.
“Now what is driving this is employment and wage reductions,” McMaken said. “People who were making, say, $250,000, and now they’re down to $50,000 and they can’t hang on.”
Resort communities traditionally are the last to feel hard times and the first to exit a downturn. That may not be true this time.
Bob New, a Vail-area broker who specializes in distressed properties, said projections show foreclosures this year will climb another 50 percent over 2009 numbers. Recovery is going to lag the rest of the nation, said New, citing fewer buyers and plummeting values.
“When it comes back, I doubt that confidence you saw a few years ago will be so smug,” he said.