When I speak to interested Crested Butte real estate buyers about our market the dialog always leads to a discussion about national economics and the potential impact of the nation’s current real estate market fiasco on Crested Butte. I blogged recently that Crested Butte and other Colorado mountain towns are "insulated" from national and even regional economic conditions. Folks love to point to Denver and the rest of the Colorado Front Range’s real estate woes. News of high foreclosure rates, home sales dropping to 15 year lows and new housing starts plummeting cause everyone to take notice and some assume that its only a matter of time until places like Aspen, Vail, Telluride and Crested Butte will somehow become "affordable" again because of these issues.
However, Colorado is a two-faced real estate beast. While the metropolitan real estate markets around Denver, Boulder and Colorado Springs languish, rising prices and unreal transaction volumes are par for the course in the mountain towns. If you are thinking of investing in Crested Butte or another ski resort town in Colorado, read the great article from NEW WEST Magazine’s Davide Frey below.
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REAL ESTATE VERSUS UNREAL ESTATE
In Colorado, Real Estate Occupies Two Different Universes
By David Frey, 8-31-07
Take this recent headline in Denver’s Rocky Mountain News: “New-home sales down a third.” The same day, 200 miles away in Aspen, the Aspen Times ran this headline: “Downtown property listed for $39 million.” (And part of that was just a parking lot.)
While Colorado’s Front Range real estate market, sweeping across metropolitan areas stretching from Fort Collins to Colorado Springs, has been sputtering, mountain real estate continues to soar, as if all the talk of a bursting real estate bubble were science fiction. Like mountain real estate in much of the West, prices are riding what seems like a nonstop updraft. Buyers are snatching up mansions and townhouses, condos and lofts, ranches and fractional vacation getaways, sometimes sight unseen, sometimes before they’re even built.
If it seems like the two markets aren’t part of the same state, let alone the same universe, maybe they’re not.
“The demand (for mountain real estate) comes from the class of buyer who just isn’t affected by other aspects of the economy,” says William R. Travis, an associate professor of geography at the University of Colorado and author of the recent book “New Geographies of the American West,” maps the land use changes affecting the New West.
“It’s just a whole different class of money,” he says.
These are buyers who don’t need mortgages, and when the stock market tumbles, they’re still on their feet. In fact, Travis says, they’re often looking for other places to stash their cash, so when the stock market takes a dive, rather than driving down demand for mountain getaways, it seems to have the opposite effect.
After Sept. 11, Travis says, “most people remember that we had an economic slowdown. Mountain real estate didn’t. It just depends what you keep your eye on. Those whose bread is buttered by mountain real estate love to put out the big sales. The large-value, the multi-million-dollar homes. And that didn’t slow in Colorado or elsewhere. New records were set in’01, ’02, ’03, ’04 and ’05 in Aspen, Vail and elsewhere.”
Last year, a home outside Carbondale set a state record for the priciest sale ever – $47 million for Crystal Island Ranch. Uphill in Aspen, Saudi Price Bandar’s palace sits on the market for $135 million.
Mountain real estate has become the market of the titans, driven by moneyed classes that don’t blink when prices soar. It’s not just the resorts, where the not-so-funny joke is that the billionaires are driving out the millionaires. Skyrocketing prices are putting the squeeze on downvalley towns. Once worker bee havens, these towns are seeing townhouses sell – in days – with half-a-million-dollar price tags. Single-family homes for sale can average over $1 million.
The Front Range is part of the economy most mortals are familiar with. Sales there have taken took a tumble thanks, first, to a post-9/11 economic slump, the Rocky reports. Jobs shrank, but developers didn’t stop building. Then came the sub-prime mortgage crisis, and as woes in the mortgage industry continue, it becomes harder and harder for buyers to get loans, while foreclosures mount.
“Certainly, at least for the short term, it is going to be more difficult for anybody to get a loan,” Colorado economist Tucker Hart Adams tells the Rocky.
So while Front Range homes see their price tags drop thanks in part to sub-prime home loans, buyers of mountain real estate are handing over cash for multi-millionaire-dollar spreads.
Will the boom ever bust? Maybe, Travis says. Maybe when the buyers are all dead. Or at least too old to want a palace in the mountains. Retiring baby-boomers are driving this real estate rush in the mountains, and when they’re done buying real estate, the generation doesn’t seem to have the numbers to follow suit.
So fast-forward 20 years and the market may trail off. In the meantime, Travis says, “I would still invest.”
Others are less optimistic. Courtney White, an opinion writer for Headwaters News, joins the chorus of skeptics who believe rising energy costs will spell doom for the mountain resort boom. It’s an idea gaining currency among peak oil adherents who worry the days of cheap oil are dwindling and with them, the boom economy fueled by cheap travel and cheaper imports.
“Think about the two-hour one-way daily commute into Los Angeles for work, or the costs associated in reaching that second home in the woods, or just driving to the grocery store,” he writes. “And it’s not just about driving – fossil fuel permeates nearly every aspect of suburban development and maintenance. When costs rise, we may reconsider our behavior. We may have to.”
Travis doesn’t buy it. “I think people will find ways to accomplish their land-use goals,” he says.
Time will tell. In the meantime, the result is a state divided by mountains in more ways than one. The market of Colorado’s flat lands remains grounded in the real world. The market of the mountains is sky-high, linked to a global economy of jet-setters who can park their Gulfstreams at their mountain castles for a week without glancing at the credit card bill when they get home. And their credit card accounts don’t seem to be getting maxed out anytime soon.