“We simply attempt to be fearful when others are greedy…
and to be greedy only when others are fearful.”
This famous maxim from investor Warren Buffett is as applicable to today’s real estate market as it has been for many years.. when was the last time that you saw “Vail on Sale”? For most of us, it’s been over twenty years… if ever! Yet those of us in the business have consistently been surprised to see the unprecedented values that buyers are realizing over the past few months, with overall prices down in the range of 20% - 30% when compared with 18 – 24 months ago.
The most recent sales numbers are hot off the press, and are reflective of the above. Year-to-date sales dollar volume is currently off 62% from 2008, with $633 million in sales. Transaction volume is doing a bit better, down approximately 46%. Though our average residential sales price currently stands at $1.145 million, over 40% of this year’s deals have been for under $500,000, and 70% have been under $1 million. Vail Village, Beaver Creek and Arrowhead are leading the way this year, each with appx $66 million in sales. Cordillera is following closely behind, with year-to-date sales of approximately $56 million.
Yet the Vail Valley luxury market is showing signs of life… and in a notable way! A $22 million listing in Beaver Creek was placed under contract in October, followed by the $11.25 million closing of a beautiful spec home in Bachelor Gulch. Add in the $15.5 million sale of a Mountain Star estate last summer, and you’ve got three of the largest residential transactions in the history of the Vail Valley, remarkable given the current economic environment. Deals such as these will go far in bolstering the confidence of our overall market… and encouraging those who are currently “sitting on the fence” to make a move now so as to take advantage of the rare window of opportunity which currently exists.
“Only when the tide goes out do you discover who's been swimming naked.”
Yet another famous Buffett saying, and another that can be readily applied to today’s market. For the past 5 - 7 years, the aggressive growth in our market has enabled many a spec developer to “swim naked” while profiting the whole time. Yet given the current conditions, many of these same players have been caught with their trunks down… or missing altogether. Whether the developer of a large, multi-unit project in Vail... or a one-off, single family luxury residence in Cordillera or Red Sky Ranch... the game changed quickly a year ago. Speaking from personal experience, owners of many of these properties have dropped prices significantly, and are experiencing sleepless nights waiting for a sale. As a result, great opportunity currently exists for buyers of speculative property throughout the Vail Valley.
What does this mean to you?
As a prospective buyer, you can consider the “tide” of Vail Valley real estate as out as it has been in many years… resulting in the availability of many a significant “deal”. If you are currently positioned to acquire real estate, particularly a spec property, this is perhaps the best time to make a move as we’ve seen since the early ‘80’s. There is a rich inventory of very attractive properties from which to choose throughout the Vail Valley. Prices are down considerably over years past. And current seller psychology is such that, in many cases, buyers have the opportunity to realize a fantastic value.
Selling your property?
If selling your property, know that aggressively pricing your residence ahead of the market, and ahead of your competitors, will be one of the main keys to your success. Buyers are understandably looking to strike an aggressive deal, and if they don’t perceive one is available, they’ll just move on to the next property. If you are fortunate to attract a buyer, be prepared for them to take a very strong approach to negotiations… as they realize that market conditions currently lean heavily in their favor. If you receive an offer, work it as hard as you can, all-the-while keeping in mind that you hold the final “yes/no” decision.
If you can make the deal work, by all means do so. If you hit a point where you just won’t be happy at the closing table, then kindly tell your buyer “no” and hold out for the next one… knowing that it might be awhile for the next buyer is sitting across the desk from you. As painful as it may be, it’s that kind of world at the moment. And keep in mind the strong run-up in value you have received over the past five years, as well as the fact that the tables will eventually turn back in your favor.
What's coming up the road?
While we undoubtedly still have challenges ahead, factors such a robust stock market, slowly steadying employment and continued low interest rates are weaving themselves together in such a way as to help us turn the corner. The sales activity over the summer and fall months has provided us with a "baseline" for establishing values and pricing, something we did not have coming out of the past ski season. When combined with record-setting visits to our company website (
http://www.vailrealestate.com/), and solid showing activity over the past two months, we are entering the new ski season with guarded optimism. And while values may continue to dip slightly in the near term, over the long term they remain solid.
Does this mean we're at the bottom? Whether Wall Street or Bridge Street, no one can accurately predict exactly where the bottom is, nor when things will turn around. But most of the signs suggest we're either at the bottom or quite close. The combination of attractive prices, willing sellers and low interest rates is almost unprecedented. This is a time unlike any other in recent history of the Vail Valley. And this is one of those "windows of opportunity" that, for thos who buy now, will be looked back upon with great fondness.
Fortunately, three things never change… no matter the economy
We don’t need Warren Buffett to state the obvious in this regard… in spite of the current conditions, we all need to keep in mind the three things that will ensure an eventual return to a more balanced market… the beauty of this wonderful place we are blessed to call “home” (even if only part time!)… the world class ski mountains in our back yard… and the desire of so many to share in this amazing lifestyle. As I sit watching the snow fall outside my window, I feel very confident in saying that we will all be fine over the long term… that property values will rebound nicely… and that there remain many memories for you to create with family and friends in your Colorado home! I look forward to being a part of those, and to the opportunity to be of service to you and your family.
In closing...
Thank you again for your interest in my market update. For additional details, I encourage you to visit the following link...
Once there, click "full page" found in the upper left corner of the page, and then click on the right side of the publication to flip the pages. I hope you enjoy!
Please call or email with any questions or comments you might have, or simply to discuss the latest snow conditions… I’ll look forward to seeing you up here in the mountains very soon!
With my warmest personal regards,
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