What will trigger Vail’s economic recovery?
VAIL VALLEY, Colorado – There are still more questions than answers about the Vail Valley economy. But what are people looking for signs of a turnaround looking for?There are some glimmers that the valley’s economy may be on its way back, albeit slowly. But the valley’s recovery will depend on factors from consumer confidence to the availability of money.
In the wake of the national financial meltdown last year, lending is tighter than it’s been in a generation, at least. Money has to flow again for the valley’s two hardest-hit industries, real estate and construction, to stage a real comeback.Jimmy Brenner remembers when the Vail Valley’s real estate market began its rocket ride in the late 1980s. Brenner, the owner of Blue Sky Mortgage in Vail, may have been the first person in the valley approached by a financial company that was looking to buy mortgages, with an eye toward packaging those loans as investments. That was 1988.While the practice of turning mortgages into investment vehicles has been widely blamed as one of the main culprits in last year’s collapse of the international financial system, it was also crucial in fueling the Vail Valley’s nearly 20-year real estate boom.The problem, Brenner said, is that demand for those mortgage-backed investments grew so fast that mortgage lenders came under increasing pressure to write more and more home loans that could then be re-sold on the “secondary market.”Since last year’s crash, lending standards have tightened up again to levels not seen since the 1980s. That’s put a serious crimp in the flow of money, especially for those who need loans to buy high-end property.”Today there are no vehicles for re-selling mortgages,” Brenner said. “There’s far more demand for loans than there is capital to support it.”The rebound, Brenner said, may be slow in coming. He’s working now on a project in which mortgages would be bundled and sold to foreign investors. But it may be a couple of years before even that small step starts to get money moving through the upper end of the market.Michele Evans is looking at the money markets, too. “That’s the single-biggest thing I’m looking at right now,” said Evans, one of the partners in Evans Chaffee Construction of Avon. “We’re wondering when commercial loans are going to start going through.” Evans said some banks are at least starting to consider making loans again, but until that happens, money’s going to be tight.The lack of private money means people aren’t able to take advantage of real opportunity in the construction business, Evans’ husband and partner Chris Evans said. At the moment, most of the construction work being bid is coming from either homeowners associations or local and regional governments. “And that’s still a very limited market,” he said.
While the Evanses and Brenner believe it’s going to take at least a few years for the financial markets to start pushing money through the system again, Led Gardner is seeing some positive signs in the market.Gardner, a broker with Slifer, Smith & Frampton, has sold high-end real estate in the valley for more than 20 years, and has lived in the valley full-time for more than a decade. He said his clients were just like everyone else a year ago, and pulled back on their non-essential spending.Starting about in July, though, Gardner’s clients started looking again. And, he said, traffic to the Slifer, Smith & Frampton Web site has set records the last couple of months.”I think a portion of the uncertainty is gone,” Gardner said. “People have lost wealth, but they still have plenty.” That, he said, has led to more interest, and, in fact, more sales contracts.The Vail Board of Realtors reported recently that there were more sales contracts signed in June, July and August than there had been in the six months prior.Besides people settling into a new financial reality, Gardner said the local real estate market has a few things going for it that can’t be matched in places like Miami or Las Vegas.”People are on line, and still dreaming about this place,” Gardner said. “As soon as they feel good about things, they’ll be back.”
Steve Rosenthal, owner of Colorado Footwear in Vail and Beaver Creek is cautious about potential recovery, too.”We have to have people working,” Rosenthal said. “As long as job loss continues, it’s going to affect us.” Rosenthal believes the national economy is a long way from a turnaround, mainly because of employment. People aren’t going to take vacations unless they’re working, or, more accurately, working in the kinds of high-paying jobs that allowed them to take mountain vacations.But, Rosenthal said, the business owners who have adjusted to the current economy have a chance to come out the other side.Looking around the construction industry, Michele Evans said it looks like it’s going to take years before the construction and real estate market comes back to the levels seen in 2005, the high-water year for transactions in the valley.But Gardner is in the optimism business. He sees better days coming.”I was talking to a developer friend of mine the other day,” Gardner said. “He told me, ‘I’ve been through seven of these (slumps). We have the beauty of this place, the ski mountains and the desire to be here. We’ll be OK.'”Business Editor Scott N. Miller can be reached at 970-748-2930 or firstname.lastname@example.org.