Colorado ski real estate doubles, will there be a drop on the other side? 5 factors that will shape the future
The amount spent on real estate in six of Colorado’s resort-anchored counties doubled from 2019 to…
I’m constantly amazed at Colorado ski real estate. Many markets are up almost 40% in the last two years alone with sales continuing to exceed. On the other hand, Denver and the front range real estate markets are starting to feel a pronounced slow down. What does this mean for Colorado mountain real estate? What is one key metric telling us?
The Denver Metro Association of Realtors monthly publishes a market trends report with statistics and commentary on the Denver Metro Market. The past several years the reports have basically been a nonevent with inventory remaining low and prices skyrocketing. September has been an eye opener as the first month with a substantial change in the market. Here are some highlights from Septembers Denver real estate report:
Historically, when Denver slowed most of the ski resorts also showed a pronounced slowdown. Covid, for some reason, has changed this cycle as insatiable demand from buyers across the country and world have continued gobbling up Colorado ski real estate. On top of the demand remaining elevated, supply of new real estate has been nonexistent. This same trend is happening in resort areas from Idaho to Montana and everywhere in between. Although in the short term, the correlation between Denver and various ski towns is not as strong as before, it will
Since the historical correlation between Denver and Colorado ski real estate is not as strong as it once was, there is another metric that will be important to watch, future bookings. Essentially the future bookings tell us what the occupancy will be for the upcoming season. The higher the occupancy/future bookings, the more prospective buyers.
In Crested Butte and Steamboat as soon as each resort joined a major pass product (Epic and Ikon) real estate took off in each resort. The biggest driver of the increase in real estate was the increase in people from various markets that “discovered” Steamboat or Crested Butte as they utilized their pass. It is a numbers game as more people lead to more prospects and demand for real estate. Furthermore, with huge jumps in bookings rental rates also increase which encourages more purchases of investment properties as the cash flow increases.
Bookings for the 21/22 season are off the charts, here are some highlights (Vail Daily)
With scheduled visitation off the charts for most ski resorts in Colorado, the number of available buyers will also increase substantially. Although I don’t think that Colorado ski towns will appreciate as rapidly as before, the spike in bookings indicate that there could be a little more upside left
Although the real estate party in the mountains looks to continue in the short term, there are some warning signs that will ultimately cause a slowdown.
I think there could be a little more upside in the mountains based on large increases in bookings, but there are some storm clouds 1) stock market correction 2) trade offs for other international locations and transitions back to old pre covid habits 3) new legislation taxing nightly rentals at commercial rates (circulating now in the state legislature) 4) spike in interest rates. I don’t see a crash in mountain real estate, but if we have a huge stock market correction along with spiking interest rates Summit and other Colorado ski resorts will not be immune.
Mark Twain famously said that history does not repeat, but rhymes. In 2008 there was little to no overbuilding in the mountains which caused the huge issues throughout the country, but even Aspen took a hit as the general economy tanked. Real estate does not go up forever, just like the economy there are cycles, the million-dollar question is when will the next cycle begin and how low of a trough will we experience in the mountains.
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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 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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