The amount spent on real estate in six of Colorado’s resort-anchored counties doubled from 2019 to 2021. Average prices in Eagle, Grand, Pitkin, Routt, Summit, and San Miguel in 2021 were up 57% from 2019. Where does Colorado ski real estate go from here? Have we reached a peak?
What was in the recent ski town real estate data?
By any measure, the sales numbers in Colorado ski towns are breathtaking. Take for example, Summit County, home to Breckenridge, Keystone, Copper, Frisco, etc… the median home price has skyrocketed 41% in one year from $1.6m to $2.2m. This is huge growth is not limited to just single family homes, condos/townhomes are up a staggering 30% with the average sales price almost $800k.
This growth has been repeated in ski towns throughout Colorado including Telluride, Vail, Aspen, Steamboat, Crested Butte, etc… on every property type from raw land, condos, townhomes, single family, etc…
Why have Colorado real estate ski prices jumped so much?
There are five primary factors that have driven Colorado ski real estate through the roof.
- Flight to safety: When the pandemic began, there was a physical flight to less dense areas that still had the amenities of larger markets. Colorado ski towns were one of the top picks throughout the country.
- Conglomeration/hot area: As more people discovered places like Steamboat or Crested Butte, this attracted even more to these areas. I’ll term this the herding effect where people wanted to be in the “hot area” surrounded by similar people. You saw this pre covid in places like Aspen, but after Covid, almost every Colorado ski town got in on this trend.
- Remote work: Remote work enabled people to trade a city lifestyle for a ski lifestyle while keeping their existing jobs and pay. For example, someone who lived in NY could move to Steamboat and live comparably with the same salary they were making.
- Nightly rental rates: As more people could work remotely, even if they couldn’t buy in Steamboat or Vail, they would take longer vacations and work remotely. For example they might rent a place in Steamboat for 2 weeks and work from there. This in turn has driven up rates along with utilization. Owners are cashing in with the higher rates along with more stays/less vacancy. This in turn has further fueled price increases as the returns on a property have increased from the increased income.
- Limited supply: Pre covid there was limited supply as every ski town is basically land locked due to topography, national forests, lack of water, and zoning. As demand has risen due to the four items above there is no way to meaningfully increase supply which has led to even further price increases. Furthermore build costs in any mountain town are extremely high which even further limits supply.
What factors will determine where Colorado ski prices go from here?
- Back to office trends: as Covid continues to recede more companies will call employees back to the office, full remote work will be the exception not the norm which should reduce some of the current demand
- Opportunity costs/tradeoffs: As everything continues to reopen there will be tradeoffs; for example instead of Aspen, buyer might look at the Swiss Alps, the same will happen with vacation destinations as international resort areas open back up.
- Prices: Prices are very high now, doubling in the last two years. The prices are a deterrent for many future buyers, as they continue higher, the available pool of prospective buyers will continue to dwindle
- Inflation/hedges: As inflation continues to rise, Colorado ski real estate is seen as a hedge against inflation. Whenever there is inflation there is a demand for hard assets from Gold to ski real estate as the alternatives like bonds or stocks look less desirable.
- General Economic conditions: As the stock market corrects due to rising interest rates and consumer sentiment declines, these changes will be felt throughout the real estate market including the ski towns albeit a bit differently.
What do the 5 factors above mean for ski real estate in the short term and long term?
There will be both short term and long-term impacts on ski real estate depending on where the economy goes, inflation, interest rates, etc…
Short term: I think Colorado ski real estate will remain healthy through the summer as there is still considerable pent-up demand and limited supply. I don’t see a rerun of 20-40% appreciation this year in most markets. I suspect as the fed raises rates and the economy cools in the second half of the year that Colorado ski real estate will also slow. I don’t foresee any drop in prices, merely a substantial slowdown in appreciation.
Long term: There will be considerable slowing of the ski markets and the 20-40% appreciation will end. As the economy slows, inflation continues, and alternatives abound this will impact Colorado ski real estate. I see appreciation for the next several years basically flat. I don’t see much downside risk as there is no available inventory, most properties are bought with cash, and there will still be a desire to live/play in the various ski towns and also hedge against inflation with hard assets.
Summary
Although ski real estate will slow considerably it will likely still outperform other real estate markets due to the high build costs, low inventory, and high percentage of properties bought in cash. Unfortunately although Colorado ski real estate will outperform other markets, this needs to be taken in context. There will be a real estate correction in the coming years as many markets will reset with 10-20% declines. Ski real estate will likely do better than the national average by basically staying flat or if the economy gets really bad due to inflation, recession, etc.. will lose less.
Additional Reading/Resources
- Doubling of real estate sales triggers Colorado high country housing crisis (coloradosun.com)
- Summit County (showingtime.com)
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Written by Glen Weinberg, Owner 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 Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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