Be careful in one Colorado ski town: which one has higher risk during the next recession

One ski town has been on my top list of investments for multiple years.  I highlighted this resort as one of the “best buys” in Colorado real estate. The new owners have invested over 40 million and real estate values have soared.  Unfortunately, this same resort is now making me a bit nervous (and should make you nervous) for two reasons.  Which Colorado ski resort is a “high risk” investment and why should you be more cautious there?

Why was Winter Park resort originally on my best investment list?

Winterpark was acquired by Alterra along with Steamboat, Snowmass, Mammoth and a number of other mountains.  Alterra has put over 40 million into WinterPark focusing on badly needed upgrades as the resorts prior owners did not invest as much in the resort.  This has led to a surge of activity in Winterpark driving up prices.  Before the acquisition, Winterpark was one of the least expensive mountains to buy a property in Colorado.  Allot has changed since the acquisition with prices soaring and construction spending taking off.

Why is this resort at higher risk during the next recession?

Since Winterpark was acquired, real estate values have shot up and construction activity has been off the charts in and around the resort with thousands of new properties now coming online.  With the recent runup in prices and increased building, Winterpark is now making me a little nervous

• Supply: WinterPark is unique in that there is ample supply of buildable lots throughout the grand valley.  I can’t think of any other ski town in Colorado with the available supply that Winterpark has.  As a result, over two thousand units are in the pipe around Winterpark.  In all of 2018 there were 1700 sales in the entire grand county.  As several thousand units come online this will require years to work through all the inventory.  At the same time supply is booming, ski town markets are starting to soften throughout the state.  This large increase in inventory will “flood” the market and ultimately drive down prices.   For comparison, Steamboat might have a hundred or so new construction properties come on in a year.
• Location of buyers: Along with supply, the location of buyers puts WinterPark at great risk than other mountain communities.  83% of WinterParks sales were to Colorado residents (either local or front range) compared to 75% for Breckenridge, 62% for Steamboat, and 62% for Vail (source Land Title market reports).  Local purchasers are much more prone to pullback when conditions change.  For example when the Denver front range market slows (as it is now), front range residents will be much less likely to purchase a second home in the mountains.  Ski towns that have less dependency on a single market should fare better as local real estate markets throughout the country react differently decreasing the risk.  With 83% of all transactions local/front range in WinterPark this is the highest concentration of any ski town in Colorado.

The sky is not falling in Colorado ski resort real estate.  Although long term investing in Colorado ski real estate will continue to be a sound long term investment, Winter Park is at higher risk than other ski towns during the next recession due to the enormous increase in supply and the front range buyers that are driving the market.