Tuesday, February 12, 2008

"How is 'the market' doing!?"

I am often asked, "How is 'the market' doing!?" with the questioner wondering whether they should be ready for a barrage of complaints to stream out of my mouth. However, I always respond: "Great!" -- and I'm being honest. The media has represented, in very broad strokes, a nationwide real estate market crisis. Luckily, it has not applied to us.

How is it that Summit County and other ski resort real estate markets like Vail and Steamboat, have remained virtually immune from the real estate problems facing most of the rest of the country? I have a few theories:

First, almost 70% of home owners in Summit County are second homeowners. Second (or subsequent) homeowners' purchases of real estate are discretionary, which means that they normally have the financial resources to complete the sale. We have not seen the volume of sub-prime loans that other communities have experienced given the demographics of our buyers. Therefore, we have very few foreclosures compared to areas where sub-prime loans were more prevalent.

Second, land is at a minimum. In most ski resort communities, the terrain is heavily forested with steep mountain pitches. What is buildable is often already built out or owned by government agencies like the Forest Service. Further, mountain planning commissions are very careful as to what is allowed to be built. So, developers cannot come into mountain communities, buy up land, and build numerous huge condo developments, as happened in Florida, for example. During the housing boom, development units were purchased heavily by speculators who wanted to "flip" the units when the project was complete. After the real estate market slowed, there were not enough buyers to absorb the speculators' purchases. Consequently, developments have stopped and speculators purchased units for more money than they are worth today.

Finally, our inventory is low compared to the number of units available in Summit County. From a simple supply and demand approach, we have more than enough buyers who want a piece of paradise to consume the available properties for sale.

So, in closing, if you are thinking of buying a first or second home in Summit County, don't be afraid of "the market." But, also don't expect to get a bargain because of "the market."

Amy Nakos, JD, CLHMS
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