Worst winter in 60 years costs Colorado ski towns $154 million & Real Estate?

Colorado Real Estate values

colorado ski town property investments

Vail Resorts announced “steep declines in spending and visitation at its network of North American ski resorts.”  Colorado ski country reported visitation down 13%.  This decline in visitation will hit the ski industries bottom line.  The bigger story is what does this mean for ski real estate?

According to a Bloomberg report, “Without a doubt, the snow conditions greatly influence a buyer’s perception of the market,” Another realtor noted: “Twenty-five percent of the properties I’ve sold this year have been to people who were making a decision based on their vacation.”

Many areas in Colorado are hovering at historic low snowpack conditions in the Southern Resorts like Telluride are about 30% of normal with limited terrain open.  Currently, there is not a major resort in Colorado with all their terrain open.  This has not occurred in 30 years.

It’s not hard to put the numbers together if visitation is down 13%, the pool of prospective buyers just declined considerably.  Unfortunately, it is a lagged effect.  So, the implications will likely not be felt until the following season.  This will not tank mountain sales, but will reduce the pace of the market in the following season.

The effects will not be universal across the resort towns.  For example, areas like Aspen and Telluride probably will have little impact.  These buyers are focusing on the “lifestyle” of the high-end markets.  Resorts like Breckenridge, WinterPark, Keystone, etc.. will be much more prone to an impact from a terrible season.

Along with the terrible snow conditions, second homes could face further headwinds from the new tax plan since the mortgage interest is capped (reduced from 1 million to 750k) and tax deductions are capped at 10k.  Someone who is buying a 500k condo in Breckenridge likely already owns a property worth considerably more, so they max out their deductions on their primary residence.

Rise in interest rates.   The 10-year treasury has begun moving upward quite aggressively which correlates to higher interest rates.  In the ultra-high-end markets most of the purchases are for cash.  In the more “affordable” markets (Breckenridge, Keystone, Durango, Crested Butte, WinterPark, Steamboat, etc…) financing is utilized.  As rates rise, there are less available buyers since the increase in rates can price them out of their budget/the market.

What does this all mean?  I would guess the reduction of visitors will “slow” many mountain markets in the coming season.  This reduction of visitation coupled with the tax plan and rising interest rates will have an impact on pricing in many mountain communities throughout Colorado.

What should you do?  I see many ski town markets “pace” slowing.  This will give the buyer a little more time to find the perfect fit at the right price.  I don’t foresee a major correction at least for the next 18 months so the values are still going to be hard to come by.

Resources/Additional Reading

  1. https://www.vaildaily.com/news/vail-town-council-discusses-potential-solutions-for-diversifying-winter-tourism-economy/
  2. http://theknow.denverpost.com/2017/12/19/lack-of-snow-ski-revenue/170514/
  3. https://www.thedenverchannel.com/news/mountains/lack-of-snow-prompts-creativity-and-movement-for-seasonal-employees
  4. https://www.denverpost.com/2018/01/12/vail-resorts-lack-of-snow/
  5. https://www.bloomberg.com/news/articles/2017-10-25/last-year-s-great-ski-season-led-to-big-home-sales-in-u-s-west
  6. https://www.outsideonline.com/2272801/literally-wests-worst-winter-60-years

 

 

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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.

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