Ski area housing market slides nearly 40 percent

Date: Dec. 15th, 2008

By Joanne Kelley, Rocky Mountain News
Published December 12, 2008 at 10:05 p.m.

The once booming real estate market in Colorado's resort areas has taken a hit along with the rest of the economy, with sales dropping by an average of almost 40 percent in counties that include some of the state's toniest slopeside villages.

The slide has been tempered by the ability of the wealthiest second-home owners to hold onto their properties for the time being. On the flip side, many real estate brokers can't remember a market with so few buyers. And even those still shopping can't always get loans to close their deals.

"One could call it the perfect storm," said Byron Koste, director of the real estate center at the University of Colorado. "It's going to take a number of things to correct themselves before there is a return to normalcy - if there ever will be."

A recent building boom fueled sales gains year after year, with records set repeatedly in popular ski towns such as Steamboat Springs, Vail and Aspen.

Frenzied buying at new high-end developments in Steamboat, for instance, boosted Routt County volume to a record $1.6 billion in 2007. But sales activity there for 2008 has dropped by more than half. By the end of October, the total dollar value of transactions stood at $647 million vs. almost $1.4 billion at the same time a year ago.

"We were up a lot more than most counties last year," said Jon Wade, owner of Colorado Group Realty in downtown Steamboat. "Now we just have people being cautious. But we're still seeing a lot of 'smart money' people buy - people who know Steamboat well."

In the ultra-luxury markets, such as the villages at the base of the Beaver Creek and Vail ski areas, brokers say home prices have yet to reflect falling demand.

"Eagle County is not immune, but you can't lump it all together," said Scott Bandoni of Prudential Colorado Properties in Beaver Creek Village. "The person who owns the $3 million condo (next to the ski lifts) is far more affluent than someone with a $2 million property in a nearby town."

Because they can afford to wait, few appear inclined to go dumping their second, third, or fourth homes to the highest bidder, Bandoni said.

CU's Koste agreed that "if you have the best location and the best product you have the best price protection." But he predicted prices will eventually need to come down if people want to sell.

"It's only a matter of time," he said.

Lackluster sales can be linked in part to the difficulty buyers face in locating attractive mortgage deals.

One home in Aspen on Independence Pass has seen its listing price drop from $25 million to $14.5 million.

The 11,500-square-foot home on 5 acres is owned by Alan Potamkin. He and his brother, Robert, head a national chain of car dealerships.

One buyer in Denver, who didn't want to be identified, said he and his wife both have jobs and strong credit histories. But their plan to buy a condo in Summit County fell apart a week before their closing date because the lender balked when it discovered they were purchasing a unit in a development that allows owners to rent to vacationing visitors.

Once the couple discovered they could get a loan somewhere else on far less favorable terms, they tried offering a lower price for the condo. When the seller balked, they decided to put off their purchase until conditions change for the better.

The couple's mortgage broker, who has been in the business 25 years, said the demise of the deal would have been unthinkable until recently.

"It is shocking . . . this was a 20 percent down deal with excellent credit," said Mo Robinson, vice president at Kensington Mortgage in Greenwood Village.

Robinson said the investor backing the loan found evidence that another owner of a unit in the building had listed it for vacation rentals. While the practice has become commonplace, potential lenders have been flagging those deals out of concern that renters can lower values because they tend not to be as conscientious as owners.

"At the last minute they pulled the plug because we've got one homeowner in the complex who has seasonal rentals," Robinson said. "They are so leery now."

Those who have been selling mountain real estate said the issue has played a big role in the drop in transactions this year.

Summit County activity fell about 30 percent through Oct. 31 compared with the same period last year to $947 million.

"Financing is an issue, I've never seen it like this before," said Joanne Hanson, who leads a team of brokers at Coldwell Banker Colorado Rockies in Frisco. "They got way too lax now they're swinging way too much the other way."