Vail Valley Luxury Real Estate Market Update
Monday, July 7, 2008
Vail Valley real estate market catching its breath
While Vail Valley real estate continues to produce impressive numbers, as might be expected, we are beginning to feel the impact of the many economic uncertainties which currently abound.
What’s happening in the market?
May year-to-date reports reflected a drop of 30% in sales dollar volume and 47% in the number of transactions in Eagle County. May was the second slowest month since 1996, and my gut feeling is that June was equally lethargic.
Particularly hard hit is the low-to-mid range of our market, which is largely dependent upon the ability to finance a sale. This will likely remain the case until the mortgage industry regains its legs, consumer confidence rises, and other uncertainties begin to clear the air.
The luxury niche of our market, in contrast, continues to do very well. Much less dependent upon financing, sales of residential properties listed at $2 million and greater continue at a strong pace. Even taking into account the numerous closings at new projects such as Arrabelle, Forest Place, and others, sales in this niche remain well ahead of any year prior to 2007.
Comparison of Residential Transactions
Listed $2 milllion and above Year-to-Date July 5
2008 - 116 sales 2007 - 145 sales 2006 - 101 sales 2005 - 77 sales 2004 - 63 sales 2003 - 38 sales
How does the Vail Valley compare?
Of further interest, our market stacks up very well when compared with others throughout the intermountain west. A report compiled by the Rocky Mountain Resort Alliance showed that, at the end of the first quarter, the Vail Valley was over $200 million ahead of Park City/Deer Valley, our nearest competitor, and significantly above others such as Aspen and Telluride. This is yet another tribute to all that the Vail Valley has to offer its owners and guests.
What does the future hold?
Most of the tenured real estate brokers, owners and investors I deal with see this as but a temporary pause in our market. If history holds true, which I fully expect, we will be off to the races again within 12 - 18 months, and perhaps sooner. If the next surge is like the one of the past five years, we can expect to see another rush of buyers and rapidly escalating prices once we turn the corner.
What does this mean to me?
Within this environment stands an opportunity to buy which has not existed for several years. Buyers with a historical perspective of the Vail Valley have witnessed our ability to ride through challenging times, and many of these astute individuals recognize that the lulls between hot streaks are a very strategic time to acquire property. In particular, many developers of speculative properties, whether single family homes on the golf course or new condominium projects in town, are hungry to negotiate deals. Those buyers who step up to the plate now will be thankful they did.
What's the bottom line?
All of this is to say that, in spite of the uncertainties in the financial markets, run-up in oil prices, and mortgage market corrections, luxury resort real estate in the Vail Valley still represents a very sound acquisition. Beaver Creek and Bachelor Gulch are essentially built-out, and prime new projects in Vail will follow suit. Once they are gone, they’re gone. I encourage you to take advantage of this pause in our market, and if you see a property which meets your family's dreams and wishes, to move forward with its acquisition. Doing so will create irreplaceable memories for your family over the years, and if history holds true, you will be very pleased when it comes time to sell!
Friday, March 21, 2008
What's really happening in our market?
More and more frequently, I am hearing owners, buyers, sellers and Realtors (who frankly should know better!) make comments such as “in a market like this…” or “it’s just not the same…” or whatever… often stated with a look of fear in their eyes. To which my only response is “What do you mean?”
Fact… our year-to-date numbers are down from 2007. Fact… what most people forget is how quickly we came out of the gates in 2007, and how strong sales were over the first few months of the year. Thus, comparing year-to-year sales numbers is a bit off base. If you take a more prudent, long-term look at our market, going back more than just twelve months, you will note that we are not that far off the mark from historical trends. This is true not only in the Vail Valley, but also in Aspen and many other luxury resort markets. This is especially true of the high-end, luxury niche of our market.
What folks also forget is that, given all the uncertainties out there with the economy, Wall Street, petroleum prices, lenders, etc., it is amazing that we are proving to be as resilient as we are! This should come as no surprise, however. Looking back over the past twenty years, we have successfully ridden through several “storms” that many pundits had predicted would derail our real estate market. Whether “Black Monday” in 1987… the Iraqi invasion of Kuwait in 1990… the Asian financial crises in 1997… the tech market meltdown in 2000… the September 11 attacks… the ongoing rash of accounting/corporate scandals… or the outbreak of the second Iraq war, each of these events could have reasonably been expected to have a negative impact on Vail Valley real estate. Yet the overall trend in our market for the past twenty years has been one of strong activity and growth.
The bottom line is that THIS IS PERHAPS THE BEST TIME IN THE PAST FIVE YEARS TO BUY! Historically, these pauses in our market present buyers with excellent inventory, more negotiable sellers who are anxious to make a deal, and less competition from other buyers who might be after the same property. These periods of calm, typically lasting a year or two, are also invariably followed by periods of strong run-ups in sales, and prices.
Personally, I am finding that Sellers are becoming more nervous about all of the uncertainty, and are not nearly as bullish when negotiating pricing and the terms of a deal. This represents a dramatic shift from the seller’s market we have experienced to a neutral, or even a buyer’s market for the first time in years. Astute buyers with experience in the Vail Valley know that this is the time to buy!
Thursday, February 7, 2008
2007 Market Summary Year in Review
Vail Valley Market Remains Solid!
With year-end numbers hot-off-the-press, the Vail Valley real estate market has established a new, all-time record of over $2.96 billion in sales. This number represents a 7% jump over 2006, and is more than $160 million greater than our previous record, established in 2005. This solid growth is backed up by an equally solid inventory of available properties and new developments from which to choose, thus laying the foundation for continued strength in our market.
Many would say that our sales success “bucks the trends” so widely touted in national magazines, newspapers and on-line, most of which claim a disastrous real estate market. Yet the facts are that many luxury and resort markets across the country remain quite healthy. A recent Newsweek article titled “What Housing Crisis?” stated that sales of homes costing $5 million and more were up 31% in the first quarter of 2007. According to luxury broker Prudential Douglas Elliman of New York, sales of Manhattan apartments costing $10 million and more tripled in 2007… hardly reflective of a flagging market.
Regionally, this trend also holds true throughout the intermountain west, as well as here in the Vail Valley. Routt County (Steamboat) sales jumped 42% in 2007, and Summit County (Copper Mountain, Breckenridge and Keystone) broke even with the strong prior year. And while Pitkin County (Aspen) sales were off 5%, Aspen’s rapidly-growing “down valley” markets in Garfield County showed a 17% jump. Whether in New York, Beverly Hills, Vail or Aspen, luxury markets attract a clientele that is not overly impacted by interest rate swings, stock market volatility, etc. In fact, many astute individuals see high-end resort areas such as the Vail Valley as a “safe haven” in which to place a portion of their funds.
High-end niche leading the way
The high-end niche of our market continues to lead the way, demonstrated by strong sales gains across the board. Sales of properties listed at $1 million and above grew by 17% in 2007. More notably, sales between $3 - 5 million are up almost 41% over two years ago… properties listed between $5 - $10 million are up 133%... and sales of properties listed at $10 million and up have grown by 100% over 2005. Given the continued strong showing activity in this luxury niche, as well as the new product coming on-line over the next 24 – 36 months, I expect this trend to continue well into the future.
New developments selling very well
New developments up and down the Vail Valley continue to sell very well, and at prices that are unprecedented in our market. Many are already sold out, and others are experiencing strong and balanced sales, with sell-outs predicted over the coming year. This success is leading to many more projects in the development stage, and what started out as Vail’s so-called “Billion Dollar Renaissance” will end up being a multi-billion re-creation of Vail and Lionshead. Prices for new property in Vail Village most generally range from $2,000 - $3,000/sf, and new properties in Lionshead now command $1,700 - $2,000/sf and more. The market has proven receptive to these prices, given the quality, services and perfect locations offered by many of these developments.
2007 was also a record year for construction
Vail’s 2007 construction activity has once again surpassed any previous year, according to Town of Vail records. Vail’s Community Development Department issued over $496 million in permit valuations, which are based on construction values. This number represents an approximate 40% increase over Vail’s previous record of $355 million, set in the prior year. Of particular note, 2007 marks the fifth consecutive year for record construction activity.
What’s behind this growth?
The activity in our market, as well as in premiere resorts and luxury markets throughout the country, is being fueled by many diverse factors. Collectively, they add up to create strong demand for first-tier, high-end real estate… whether located in Manhattan, San Francisco, Palm Beach or Vail.
First and foremost, there is a large and growing pool of wealth, both old and new, circulating the globe. According to Merrill Lynch’s World Wealth report published in June, 2007, the number of “ultra-high net worth” individuals… those with $30 million or more… increased by more than 11% over the prior year. Also, it states that there are approximately 9.5 million millionaires worldwide, a jump of over 8% from the previous year’s report.
Another key factor in this growth is purely demographics-driven. Members of the Baby Boomer Generation, many of whom have created significant personal wealth, are now coming into their peak years for acquiring second and third homes. As we continue to mature, this trend will continue well into the future. Supplementing the personal success of this generation is the largest transfer of wealth ever recorded from one generation to another, which has already started taking place and will continue for many years to come.
In spite of its recent ups-and-downs, the stock market has created significant wealth over the past few years. The tech market is rebounding nicely, and the continued success of companies such as Google, Apple and other trendsetters in the tech industry are adding new luster to this sector, attracting additional investment, innovation and success. Bonuses on Wall Street continue to be strong, and many high net worth individuals are now taking their profits from stock sales and allocating a portion of the money to more tangible assets such as luxury real estate.
Speaking of technology, many innovations over the past ten years have empowered corporate executives and successful entrepreneurs to be able to effectively conduct business from remote locations such as Vail and Beaver Creek. The end result is that they are now able to spend several months in the mountains, versus only a couple of weeks as in years past, thus making it much easier to justify acquiring resort property. As such, technology has opened up a new pool of potential buyers for Vail Valley real estate, many of whom are taking full advantage of this opportunity.
Lastly, the growing international economy is creating significant new wealth in areas such as India, Russia and others. An article in the February 6, 2008 Denver Post highlighted the influx of wealthy families from Russia, just the latest in a long line of international travelers attracted to the Vail Valley. The current, highly-favorable exchange rate also has an impact, making Vail Valley real estate seem a relative bargain to foreign buyers. I expect this to become even more significant in years to come.
In summary, unprecedented levels of personal, world-wide wealth is now chasing what is a very limited product, i.e., high-quality resort real estate, with predictable impacts on both inventory and prices.
What’s to come?
I look at the current economic uncertainties as having a nominal impact on the high end of our market. Looking back over the past twenty years, we have successfully ridden through storms that many pundits had predicted would derail our real estate market. Black Monday in 1987… the Iraqi invasion of Kuwait in 1990… the Asian financial crises in 1997… the tech market meltdown in 2000, the September 11 attacks… the outbreak of accounting/corporate scandals in 2002… and the outbreak of the second Iraq war. Each of these could have realistically been expected to have a hugely negative impact on Vail Valley real estate. Yet the overall trend in our market has been one of strong activity and growth. I expect the same will occur this time around, even given the current economic environment.
One interesting comparison to consider is as follows… in 1987, Eagle County tallied appx $251 million in sales and 1,326 transactions, which was considered a big year. In 2007, we accomplished $2.96 billion in sales, and almost 2,800 transactions! It will be fascinating to see where our future takes us.
In summary, Beaver Creek and Bachelor Gulch are essentially built-out, and Vail will soon follow suit upon completion of the multi-billion “renaissance” currently taking place. When combined with the growing world-wide demand for premium resort properties, our future remains very bright. While past results do not guarantee future success, I can say that all the pieces are in place to help ensure that we will enjoy many, many years of strong market activity.
Monday, January 14, 2008
Market off to a fast start!
The sale of multi-million properties in Vail, Beaver Creek, Bachelor Gulch and Arrowhead continues to set the pace for our market as we roll into the New Year, dispelling the concerns some buyers have expressed about the staying power of Vail Valley real estate in the face of many economic uncertainties.
Eight notable ski properties have been placed under contract since January 1, ranging from Vail to Arrowhead. With our current momentum, I expect several more to sell over the remainder of the ski season.
Vail - Northwoods Townhome F6 - Listed at $5,750,000 / $1,300 square foot Vail - Four Seasons Condominiums #940 - Listed at $7,150,000 / $2,506 square foot Beaver Creek - 86 Village Walk - Listed at $6,650,000 / $1,513 square foot Beaver Creek - McCoy Peak Lodge #401 - Listed at $4,395,000 / $1,345 square foot Beaver Creek - 201 Borders Road - Listed at $9,995,000 / $1,102 square foot Bachelor Gulch - Horizon Pass Lodge #306 - Listed at $4,539,000 / $1,159 square foot Arrowhead - 434 Cresta - Listed at $4,095,000 / $1,000 square foot Arrowhead - 1939 Cresta - Listed at $4,695,000 / $872 square foot
What does this mean to you?
I would again encourage you to discount the negativity that is so pervasive in the national headlines when considering property in the Vail Valley. The old maxim "Real estate is a LOCAL business" has never been more applicable than in today's world.
Our market, as well as most resort markets throughout the Intermountain West, remains solid and active. All indications are that they will remain so well into the future. We have weathered many storms over the years, and most long term owners would tell you that they are most pleased with the performance of their investment in Vail real estate... to say nothing of the wonderful memories they have created with their families over the years. Priceless!
Monday, December 31, 2007
Holiday season winds up the year in style!
The holiday season is proving to be as active as any in recent memory, winding up a truly terrific year in Vail Valley real estate. Though final numbers won't be in until late January, the possibility remains good that we will establish a new, all-time sales record in 2007.
Many who are not familiar with the intricacies of our market find this trend hard to digest, given the negative headlines pertaining to real estate around the country. Yet luxury resort markets throughout the country continue to show solid activity, if not growth, and remain as desireable locations in which to acquire property. This is particularly true in resorts such as Vail, Beaver Creek and Bachelor Gulch, where supply is quite limited and demand continues to be as solid as ever.
Several noteable properties have either closed or been placed under contract since the beginning of December. Some highlights are as follows:
Vail - 2405 Elliot Road - otherwise known as The Savory Inn - listed at $4,950,000 - Under Contract Vail - Arrabelle #617 - Condo listed at $4,999,000 / $2,093 square foot Vail - Arrabelle #555 - Condo listed at $6,950,000 / $1,788 square foot Vail - 315 Forest Road - Duplex sold for $8,150,000 / $2,189 square foot Vail - 325 Forest Road - Duplex sold for $9,350,000 / $1,764 square foot Vail - 330 Beaver Dam Circle - Duplex sold for $6,700,000 / $1,964 square foot Vail - One Willow Bridge Road #307 - Condo sold for $5,300,000 / $2,865 square foot Vail - One Willow Bridge Road #402 - Condo sold for $6,127,000 / $2,200 square foot Vail - 798 West Forest Road - Duplex sold for $4,000,000 / $1,105 square foot Vail - 796 West Forest Road - Duplex sold for $8,967,500 / $1,628 square foot Vail - 618 Forest Place - Single family sold for $15,000,000 / $1,314 square foot Beaver Creek - 210 Elk Track Rd - Single family sold for $8,400,000 / $1,024 square foot Beaver Creek - 569 Holden Road - Single family listed at $5,250,000 - Under Contract Bachelor Gulch - Ritz Carlton Penthouse #1005 - Listed at $6,195,000 - Under Contract Bachelor Gulch - 89 Hummingbird Lane - Listed at $6,500,000 - Under Contract
A strong indicator of the confidence astute buyers have in our market is reflected in four of the above sales. A single buyer acquired both sides of the duplex at 315 and 325 Forest Road, representing a total investment of $17,500,000. Likewise, a single buyer acquired both sides of 796 and 798 West Forest Road, totaling $12,967,500. In both cases, the buyers saw the value of controlling both sides of a property in a location that will never be duplicated, in a resort where values are showing solid appreciation.
Likewise, the buyer of 618 Forest Place, one of but four gorgeous new single family homes situated directly on the Lionshead skiway, recognized the irreplaceable nature of this perfect location and beautiful home. It would be an understatement to say that $15 million represents a good value for a home with these attibutes in the Vail market.
All of this is to say that, in spite of the negative headlines selling newspapers around the country, and the challenging times that many markets are in fact facing, luxury resort real estate in the Vail Valley still represents a sound acquisition. If you see a property here which meets your family's dreams and wishes, I would encourage you to move forward with its purchase. Doing so will create irreplaceable memories for your family over the years, and if history holds true, you will also smile at the closing table when it comes time to sell!
Tuesday, December 11, 2007
Market remains strong in the Vail Valley October sales numbers continue to reflect a very strong and balanced real estate market in the Vail Valley. Sales dollar volume at the end of October was 15% over 2006, which in itself tallied over $2.7 billion in sales. Led by the high-end niche of the market, and with very strong showing activity through the early season, I expect us to establish a new record by year's end. Our sales trends fly in the face of everything one reads in the national headlines, yet tend to hold true throughout the intermountain west, as well as in luxury markets such as Beverly Hills, Newport Beach and Palm Beach. Each of these high-end markets attract a clientele that is not overly impacted by interest rate fluctuations, stock market volatility, etc. In fact, many astute individuals view luxury resort areas such as the Vail Valley as a “safe haven” in which to place a portion of their funds. The activity in our market continues to be fueled in large part by demographics. The Baby Boomer Generation is now coming into its peak years for acquiring second and third homes, and this trend will continue well into the future. Further fueling our growth is the largest transfer of wealth ever recorded from one generation to another, which has already started taking place and will continue for many years to come. In spite of its recent ups-and-downs, the stock market has created significant wealth over the past few years, and many high net worth individuals are now taking their profits and shifting money into areas such as luxury real estate. The tech market is also rebounding nicely, and is creating a new wave of substantial wealth. Google’s recent stock price of over $700/share, up 34% since mid-September, is but one recent example. And lastly, the growing international economy is creating significant new wealth in areas such as India. When combined with the current state of the weak dollar, luxury property has become even more attractive to foreign buyers. Overall, I look at the current uncertainties as having a nominal impact on the high end of our market. Looking back over the past twenty years, we have successfully ridden through storms that many pundits had predicted would derail our real estate market. “Black Monday” in 1987… the Iraqi invasion of Kuwait in 1990… the Asian financial crises in 1997… the tech market meltdown in 2000… the September 11 attacks… the rash of accounting/corporate scandals in 2002… and the outbreak of the second Iraq war… each of these events could have reasonably been expected to have a negative impact on Vail Valley real estate. Yet the overall trend in our market has been one of strong activity and growth. One interesting comparison to consider is as follows… in 1987, Eagle County tallied approximately $251 million in real estate sales and 1,326 transactions, which was considered a big year. In 2006, we accomplished $2.75 billion in sales, and over 3,100 transactions! In summary, Beaver Creek and Bachelor Gulch are essentially built-out, and Vail will soon follow suit upon completion of our $2 billion “renaissance” currently taking place. When combined with the growing demand for premium resort properties, our future remains very bright. While past results do not guarantee future success, I can say that all the pieces are in place to help ensure that we will enjoy many, many years of strong market activity. New Project Summary Vail Village and Lionshead
New projects in Vail continue to experience strong demand. This will likely increase as develoments such as Arrabelle at Vail Square, One Willow Bridge Road and the Vail Plaza open during the ski season. Experience shows that once buyers can "touch and feel" the real estate, their interest is peaked. The following is a brief synopsis of sales activity at the new projects in Vail and Lionshead.
Arrabelle at Vail Square / (Lionshead)
· 68 units went under contract in 2005 at an average list price of $1,107/sf
· 5 flips are currently under contract at an average list price of $1,633/sf
· 14 units are currently on the market at an average list price of $1,886/sf
One Willow Bridge Road / Vail Village
· 10 whole ownership units were originally offered at appx $2,000/sf
· 8 are currently under contract at list prices from $2,000 - $2,835/sf
· 1 unit just closed at $2,424/sf
· 1 unit is currently on the market at $2,916/sf
The Willows / Vail Village
· 8 units offered
· 7 units are currently under contract at list prices averaging $2,395/sf
· 1 unit is currently on the market at $2,698/sf
Manor Vail / Golden Peak – Vail Village
· 17 units offered
· 8 units are currently under contract at list prices averaging $2,524/sf
· 9 units are currently on the market at an average list price of $2,465/sf
Lodge at Vail Chalets / Vail Village
· 13 units offered
· All are currently under contract at prices averaging appx $2,500/sf and running up to appx $3,000/sf
Four Seasons / Vail Village
· 16 units offered
· 8 units are currently under contract · 8 units are currently on the market at an average list price of approximately $2,500/sf
Monday, November 5, 2007
3rd Quarter Market Analysis Vail Valley market continues its solid pace
With 3rd Quarter numbers hot-off-the-press, the Vail Valley real estate market continues to build toward a very solid year. Sales dollar volume is currently up 18% over 2006, which in itself totaled over $2.7 billion. The high end niche of our market continues to show strong gains. As a quick example, sales of properties listed between $1 - $3 million are up almost 20% over two years ago… properties listed between $3 - $5 million are up 62%... properties listed between $5 - $10 million are up 90%... and sales of properties listed at $10 million and greater are up 31% over 2005. With current showing activity strong, I expect this trend to continue through year’s end.
Ignore the headlines
Our sales trends fly in the face of everything one reads in the national headlines, yet tend to hold true throughout the intermountain west, and in luxury markets such as Beverly Hills, Newport Beach and Palm Beach. Each of these markets, as well as many others around the world, attract a clientele that is not overly impacted by interest rate swings, stock market volatility, etc. In fact, many astute individuals see high end resort areas such as the Vail Valley as a “safe haven” in which to place a portion of their funds.
What's driving this activity?
The continued sales activity in our market is being fueled in large part by demographics. The Baby Boomer Generation is now coming into its peak years for acquiring second and third homes, and this trend will continue well into the future. Further fueling our growth is the largest transfer of wealth ever recorded from one generation to another, which has already started taking place and will continue for many years to come. In spite of its recent ups-and-downs, the stock market has created significant wealth over the past few years, and many high net worth individuals are now taking their profits and shifting money into areas such as luxury real estate. The tech market is also rebounding nicely, and is creating a new wave of substantial wealth. Google’s recent stock price of over $700/share, up 34% since mid-September, is but one recent example (I wish that I had bought when they went public!). And lastly, the growing international economy is creating significant wealth in countries such as India and others, many of which we would not have expected just a few years short ago. Again, this wealth is attracted to luxury markets such as Vail.
What are the numbers?
$1 million – plus sales
2005 - 363 2006 - 404 2007 - 475
$1 - $3 million sales
2005 - 290 2006 - 297 2007 - 347
$3 - $5 million sales
2005 - 50 2006 - 74 2007 - 81
$5 - $10 million sales
2005 - 21 2006 - 30 2007 - 40
$10 million – plus sales
2005 - 3 2006 - 3 2007 - 7
What does the future hold?
I look at the current uncertainties as having a nominal impact on the high end of our market. Looking back over the past twenty years, we have successfully ridden through storms that many pundits have predicted would derail our real estate market. Black Monday in 1987… the Iraqi invasion of Kuwait in 1990… the Asian financial crises in 1997… the tech market meltdown in 2000, the September 11 attacks… the outbreak of accounting/corporate scandals in 2002… and the outbreak of the second Iraq war… Each of these could have realistically been expected to have a negative impact on Vail Valley real estate. Yet the overall trend in our market has been one of strong activity and growth.
One interesting comparison to consider is as follows… in 1987, Eagle County tallied appx $251 million in real estate sales and 1,326 transactions, which was considered a big year. In 2006, we accomplished $2.75 billion in sales, and over 3,100 transactions!
In summary, Beaver Creek and Bachelor Gulch are essentially built-out, and Vail will soon follow suit upon completion of the $2 billion “renaissance” currently taking place. When combined with the growing demand for premium resort properties, our future remains very bright. While past results do not guarantee future success, I can say that all the pieces are in place to help ensure that we will enjoy many, many years of strong market activity.
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