Telluride Real Estate In the News

25-Year Real Estate Report Sheds Light on Long-Term Trends
by Karen James
Published: September 1, 2010

After a Rocky Few Years, 2010 Figures Indicate a Rebound

Few would deny that the local real estate market was dealt a devastating blow as the nation’s recession-era economic woes translated to stagnant sales in Telluride, Mountain Village and throughout the rest of San Miguel County during the second half of 2008 and throughout 2009.

At a certain point, it seemed like things couldn’t get worse. The numbers on the county’s foreclosure rolls peaked at an all-time high, as people found themselves stuck with mortgage payments they could no longer afford, and with precious few buyers to bail them out.

Concurrently, Telluride and Mountain Village, both heavily dependent on fees associated with real estate sales and development, had to hack away at their budgets, cutting millions of dollars in layoffs, service cuts and postponed capital improvements.

Where real estate was concerned, late 2008 and 2009 seemed to portend the end of the world.

At least that’s how the period looked when viewed in isolation.

But take a long-range view of the local market, like the one illustrated in real-estate analyst Judi Kiernan’s latest report entitled “A 25-Year Market Analysis of Real Estate in the Telluride Region 1985-2009” published by her company Telluride Consulting, and the situation appears decidedly less grim.

“The national economic downturn, major fluctuations in the stock market, and uncertainty in the world economy have most certainly impacted real estate activity in Telluride,” Kiernan wrote in her report. “However, these external factors seem to have less of an effect on the Telluride market, over a shorter duration, than in other resort economies. The overall picture has generally been one of brisk sales activity and rising dollar values.”

For example, although 2009 saw the number of sales throughout all of San Miguel County hit a 25-year low, in terms of dollar volume, those sales still easily outpaced sales in the first 14 years of the1985-2009 report period.

Take condominium sales within Telluride. Sure, the 25 sales in that category during 2009 were a record low, but with an average cost just shy of $923,000 per condo, those condos that did sell cost more on average than any others sold in the town during the 25 years Kiernan has been tracking the market.

Outpacing every year between 1985 and 2004 for dollar volume, the 11 single-family homes that sold in Telluride last year cost an average of slightly over $1.7 million each. Or looked at in a slightly different way, 1995 was the last time just 11 single-family homes sold within the town boundaries. Except that back then, they cost an average of about $736,000 each – very nearly $1 million less per home than they did last year.

And while 2007 saw nearly $757 million in sales throughout the county, setting the highest dollar volume in history, the average price of a Mountain Village condominium in 2009 cost about $25,000 more than it did in 2007.

Additionally, 16 single-family homes in Mountain Village averaging 4,500 square feet each sold for an average price of $2.8 million in 2009. The number represents a sharp decline from the average cost of $4.1 million per home there in 2008, but it also represents a substantially smaller property than the average 5,700-square foot homes of the previous year.

It takes going back to 2000 to find home sales averaging a similar size to those sold in 2009, at which time they averaged $2.55 million each.

“These were smaller homes, so they’re going to sell for less than bigger ones,” said Kiernan.

“I’m just not seeing a real decline in the average price when you take into account the average size,” she continued.

While the historical data compiled in the report will be interesting to someone researching the local market, year by year, category by category – perhaps a developer trying to persuade a bank that investment in the region is not as risky a venture as the anomalies of the past few years might suggest – Kiernan said, even more interesting are the future trends it signals.

“The cycle is changing; we’ve come through and we’re going out the other side,” she explained.

The 161 sales totaling $194.3 million that sold throughout the county in the first half of 2010 far exceeded the same period during 2009, when just 111 properties sold for $102.8 million.

Those numbers do not include lender purchases of homes in foreclosure; they do, however, include the subsequent sales of those homes to capable buyers.

Although the most recent numbers fall just short of the first half of 2008, when hindsight tells us the region was finally coming down from its heady 2004-2007 real estate boom and 181 properties sold for a combined total of $202.1 million, it is somewhat reassuring to note that the average 2010 price of $1.2 million per sale outpaced the average 2008 price per sale of $1.17 million.

“We’re almost back up to where we were in 2008, and that’s a really positive sign,” said Kiernan.

Despite last year’s dismal real estate performance and the seemingly never-ending recession, “I think our market is actually pretty solid,” she said.

“Even in the worst of times [properties here] show resilience and increases,” she said.

“It’s still a very desirable place to be and own, they’re not making any more of it and that’s never going to change, and it still has that appeal to people who can afford to be here,” she continued.

“Telluride is a wonderful place for a long-term investment and it always will be, because there’s nothing else like it.”

In Village, A Pleasant Early 2010 for Real Estate. Larger deals with cash-only buyers fuel market past expectations
By Matthew Beaudin, Editor
Published: Friday, March 12, 2010 12:07 AM CST

It would be perhaps too optimistic to say the real estate market is headed back toward its halcyon days, but in Mountain Village it’s performing better than anticipated.

According to The Telluride Mountain Village Owners Association, the collector of real estate transfer fees in Mountain Village, the Village has churned out about $1 million in collections this year so far. At this time last year, TMVOA had collected a lean $310,000, according to TMVOA’s Accounting Manager Brianne Hovey.

"The buyers are definitely back," said Matthew Hintermeister, a broker at Peaks Real Estate Sotheby’s International Realty. "I think this year, people feel a lot better than they did this time last year. … And they’re making offers."

Since Dec. 1, 2009, seven non deed-restricted houses have sold in the Village, with a median price of $2.85 million. One home sold for $10.1 million, a million off its initial asking a price.

A bulk of the transactions have come in cash. "It’s because, especially with these higher number properties, you used to be able to get loans… and that whole market, it’s gone," Hintermeister said.

Cash in the market, he added, is "nothing new."

Vacant land and condos have been moving, too: Some condos have sold for more than $3 million and a piece of ski-in, ski-out land went for nearly $2 million.

"In general, they’re going for those incredible values." Hintermeister said.

The super-homeowner association’s budget is at $5.35 million this year, down from $8.5 million in 2009. Those cuts came largely across the TMVOA budget sheet: events, grants and guest services all suffered.

In its largest years, 2005 and 2007, TMVOA collected $10.7 million and $10.2 million in Real Estate Transfer Assessments, respectively.

In 2009, TMVOA budgeted for $4 million RETA collections and took in $3.4 million. The 2010 expectations are humbled even from those reduced numbers, at $2.5 million.

In the Town of Telluride, those numbers have improved, too. The town collected $266,000 in Real Estate Transfer Taxes in January, a 110 percent increase from January 2009. It’s the fourth month in a row RETT has improved over the previous year’s showing.

Those numbers are, of course, off from the boom years, such as 2007. (That year, the town collected nearly $5 million in real estate transfer taxes alone. In 2009, in comparison, the town collected $1.5 million in RETT).

Treasury Unveils Comprehensive Bank Rescue, New Start

RISMedia - rismedia.com
February 11, 2009

Treasury Secretary Timothy Geithner unveiled an ambitious and comprehensive plan Tuesday to revive the struggling banking sector, thaw the credit markets, spark more lending to consumers and reverse a nationwide housing slump.

Geithner took the wraps off the Obama administration’s bank rescue plan an hour before the Senate was to begin voting on an $827 billion economic stimulus plan. President Barack Obama is counting on both efforts to reverse course in what economists call the worst economic downturn since the Great Depression.

Speaking in the Treasury Department’s ornate Cash Room, Geithner said that federal bank regulators would be empowered to conduct “stress tests” on banks to determine their financial health. These tests could lead to moves to close banks before their problems worsen and compound the economic slowdown.

“Instead of catalyzing recovery, the financial system is working against recovery,” he said. “And at the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it. It is essential for every American to understand that the battle for economic recovery must be fought on two fronts. We have to both jump-start job creation and private investment, and we must get credit flowing again to businesses and families.”

Geithner acknowledged that there’ll be another round of capital injections into ailing banks. The Bush administration injected almost $300 billion into 319 financial institutions, but the piecemeal effort has been heavily criticized for a lack of transparency and scant accounting of how the money was used.

The new Treasury plan imposes far greater reporting requirements for new capital injections and tougher limits on executive compensation.

The plan also has an expanded role for the Federal Reserve. The nation’s central bank will aggressively buy up new issuances of complex securities whose underlying collateral is pools of car loans, student loans, credit card debt and even motorcycle loans.

Over the past two decades, lending expanded greatly as loans were pooled together and sold into a secondary market to investors in a process called securitization. The market for these asset-backed securities has gone dormant as investors have little appetite for risk. Enter the Fed, which will supplant the role of the private sector and will step in as the buyer of last resort to spark consumer lending.

The Obama administration also is preparing a comprehensive effort to help halt foreclosures nationwide, which rose 81 percent last year. At least $50 billion will be set aside to help modify distressed mortgages and prevent foreclosures, in the belief that more foreclosures lower home prices and add to the glut of homes that are on the market.

Geithner also outlined a public-private partnership to corral off distressed mortgages and other bad assets that are stuck on banks’ balance sheets. The details of this effort are still being finalized, but the idea is to have the private sector, not taxpayers, purchase these assets, with some government sharing of potential losses or rewards.

The cost of the “bad bank” will be $500 billion to $1 trillion, with the government providing limited funds and loan guarantees to encourage private-sector participation.

After unveiling the plan, Geithner is expected to be grilled by lawmakers on Capitol Hill. Federal Reserve Chairman Ben Bernanke also will testify before Congress on Tuesday afternoon in a day full of economics and intrigue.
Adding to a sense of urgency over righting the economy, General Motors announced Tuesday that it’s cutting 14 percent of its salaried work force _ 10,000 jobs _ amid a plunge in car sales and as part of a congressional mandate to revamp the company in exchange for government bailout money.

RISMedia - rismedia.com
December 18, 2008

By cutting its benchmark lending rate to historic lows Tuesday and promising to combat the U.S. recession head-on and aggressively, the Federal Reserve served notice that more unconventional actions probably are ahead as it fights to reverse the nation’s economic woes.

The Fed pushed its federal funds rate from an already low 1% to a target range of 0 to 0.25%. This marks the lowest point ever for this target rate, which banks charge each other for overnight loans. The funds rate serves as a benchmark for a wide range of loans in the U.S. economy.
The Fed’s rate cut was larger than expected, and highly unusual, as the Fed usually targets a specific rate instead of a range. The move highlighted the Fed’s determination to act aggressively along with the reality that the U.S. recession is deepening rapidly.

Evidence of that came from the Commerce Department, which reported that housing starts fell 19% in November and 47% on a year-over-year basis. New residential construction has fallen to levels not seen in almost half a century.

On top of grim retail sales, mounting job losses and sagging exports, the U.S. economy is struggling on many fronts.
In theory, the Fed’s action should reduce the cost of borrowing for consumers and businesses, since the prime rate-what banks charge their best customers-moves in tandem with the federal funds rate.

The prime rate typically influences rates for car loans, student loans, credit cards and other debt. With Tuesday’s cut, the prime rate is expected to fall to 3.0 to 3.25% from 4%.

However, despite the attractive rates, banks aren’t lending to most consumers and businesses. Weak financial institutions continue to hoard cash and build their balance sheets, with little appetite for risk in new loans. That’s worsening the economic downturn, especially since it hurts consumers, who drive almost two-thirds of U.S. economic activity.

In a statement, the rate-setting Federal Open Market Committee said: “The outlook for economic activity has weakened further … the Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.”

The vow to deploy “all available tools” sparked a rally on Wall Street. The Dow Jones industrial average shot up 359.61 points to close at 8924.14, while the S&P 500 finished up 44.61 points to 913.18 and the Nasdaq added 81.55 points to end the day at 1589.89.

A senior Fed official, briefing reporters late Thursday on the condition of anonymity in order to speak freely, said that a rate range was chosen because the real federal funds rate-what banks actually charge-has been well below the Fed’s target in recent months.

The Fed’s statement said that “weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”
The Fed has little room left to maneuver on interest-rate policy now and will use other tools.

“They are saying that they have unlimited arrows. As the central bank of the United States, it is the only entity that can write checks on itself without limit, and that’s a very powerful weapon the Fed has against the downturn,” said Marvin Goodfriend, a former research director at the Federal Reserve Bank of Richmond who’s now an economics professor at Carnegie Mellon University in Pittsburgh. “It won’t work immediately, but if it is used aggressively, it will work.”

Chief among those other tools is to keep lending aggressively; the Fed’s balance sheet already has gone from about $800 billion to $2.2 trillion as it pulls out all the stops to confront the worst financial crisis since the Great Depression.

Fed Chairman Ben Bernanke next can scale up existing Fed lending facilities or create new ones, Goodfriend said. The Fed statement said that the central bank was weighing the possibility of purchasing long-term Treasury bonds, which would drive down their yield and make other investments such as corporate and municipal bonds more attractive.

“The Fed did it before in the 1940s and it could do it again,” said Vincent Reinhart, a former chief economist of the Fed’s rate-setting body who’s now a scholar at the American Enterprise Institute, a conservative policy institute in Washington.

The Fed’s statement also said that it will extend credit to households and small businesses early next year. Other experts think that the Fed will increase its purchases of troubled assets to unclog credit markets.

“The Fed’s next step is to ramp up its purchases of various financial securities to bring down borrowing costs to households and businesses,” said Mark Zandi, the chief economist for forecaster Moody’s Economy.com in West Chester, Pa.

The Fed already has become the buyer of last resort for financial products that aren’t moving in today’s frozen credit markets. It’s bypassed banks and is purchasing short-term promissory notes issued by big U.S. corporations, called commercial paper. It’s also announced plans to buy pooled car loans, student loans and credit card debt, collectively called asset-backed securities.

In another creative step to boost the housing market, the central bank also has been purchasing pooled mortgages-called mortgage-backed securities-and debt issued by Fannie Mae and Freddie Mac, the mortgage finance giants that the government seized in September. The senior Fed official said that efforts to purchase mortgages backed by Fannie Mae and Freddie Mac were being ramped up.

The Fed will take additional aggressive steps along those lines in the weeks and months ahead, Zandi predicted. “They will soon be buying long-term Treasury bonds and will then branch out to high-grade corporate bonds, private-label mortgage securities, asset-backed securities and, if conditions get particularly bad, corporate equity,” he said. “The Fed has the ability to purchase just about anything, and they will do so if they think it will help unfreeze credit markets.”

President-elect Barack Obama noted Tuesday during a Chicago news conference that the Fed has cut interest rates almost as low as possible. That makes it “critical that the other branches of government step up” and work to stimulate the economy as well, Obama said, underscoring his determination to push a massive stimulus program next month upon taking office.

“Look, we are going through the toughest time economically since the Great Depression, and it’s going to be tough,” Obama said. He reiterated that his program will save or create 2.5 million jobs and will work to spur an early rebound and long-term investments in a stronger economic foundation.
The Fed’s statement didn’t mention aid to Detroit’s Big Three automakers, but Treasury Secretary Henry Paulson did in an interview on CNBC. He said that the Treasury was studying how best to provide the Big Three with a bridge loan that would sustain them in the short term and help them restructure toward long-term viability.

“We want to do it right,” Paulson said, adding that no one wants to see the consequences of a Big Three failure in the current economic circumstances. Up to 3 million jobs could hang in the balance, analysts say.

The Fed got a bit of good news Tuesday before its announcement, when the Bureau of Labor Statistics reported that inflation fell in November. The BLS said that consumer prices fell 1.7%, the second straight month with a record decline in inflation.
On a year-over-year basis, consumer inflation rose 1.1% from November 2007 to last month.

RISMedia - rismedia.com
October 27, 2008

A Wall Street Alternative: 5 Timely Reasons to Invest in Vacation Property

The stock market is down, and if you’re like most people, your level of investing confidence has dropped as well. Yes, only those with nerves of steel feel good about playing the market right now. And if you’re not one of those hearty souls, you’re at a bit of a loss as to what to do with your nest egg. Christine Karpinski has a suggestion: Instead of pouring your money into Wall Street, why not consider Ocean Boulevard or Mountainside Drive?

“A vacation home can be a remarkably good investment right now,” says Karpinski, director of Owner Community for HomeAway.com (an online vacation home rental marketplace) and author of How to Rent Vacation Properties by Owner, 2nd Edition: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment (Kinney Pollack Press, 2007, ISBN: 0-9748249-9-2, $26.00).

“Stock market woes have always pushed people to look for alternate investments, and real estate is a consistent stronghold,” she says. “Yes, home values are down right now but they have always rebounded. I wouldn’t recommend buying a second home with the expectation of flipping it for a quick buck, but if you hang onto it for a while-and better still, turn it into a vacation rental property-you’ll make a nice profit.”

Not incidentally, in many areas of the country, rental demand exceeds supply. The sunshine state (Florida) is a prime example. Buy a vacation home in a market like Cape Coral, Daytona, Destin, Fort Lauderdale, Indian Rocks Beach, Kissimmee, Madeira Beach, Orlando, Panama City Beach, Sanibel Island, West Palm Beach, or Windsor Hills, says Karpinski, and you can’t lose. Even if you prefer to buy elsewhere, if you adhere to proven marketing tactics, you should be able to attract enough guests to make the purchase worth your while.

So what makes buying a vacation home so attractive right now? Karpinski explains:

There are plenty of great deals to be had. Thanks to the aftermath of the real estate bubble, home prices are down right now across the board. That means in many vacation markets, you can pick up a beach condo or a mountain cabin at a decent price. And that means that if you’ve been kicking yourself for not buying a vacation home back before prices escalated beyond all reason, you’ve got a reprieve-Karpinski says that in some markets homes are back to 2000 prices.

“Housing bubble or no housing bubble, you’re not going to get bargain basement prices on, say, a cottage right on the ocean-but if you’re willing to buy a few rows back, you’ll likely find that prices have fallen substantially,” notes Karpinski. “Because houses aren’t flying off the shelf, there’s less pressure on you to make a quick decision. You can afford to take your time, do your research, and refine your plan.”

Interest rates are attractive right now. Recently, the Federal Reserve cut interest rates by half a percentage point in an effort to shore up America’s faltering economy. And rates have been reasonably low for awhile, following earlier rate cuts toward the beginning of the year. That’s good news for anyone (anyone with good credit, that is) who’s in the market for a mortgage.

“Add the lower interest rates to the lower housing prices, and it’s clear that now is the time to buy,” says Karpinski. “Of course, for the sake of our nation’s economy, we want the real estate market to pick up, but from an individual buyer’s perspective, the combination of lots of houses for sale, low prices, and falling interest rates is hard to beat.”

If you’re worried about investing in a sluggish real estate market, relax. Recent reports indicate housing is on the rebound. Last week the National Association of Realtors® reported that, “The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in August, jumped 7.4%…and is 8.8 percent higher than August 2007.”

Other encouraging points made in the NAR article:

- Pending home sales are up strongly in vacation home-heavy areas like Arizona and Florida.
- The PHSI jumped 18.4% in August. It’s now 37.8% above what it was a year ago.
- Home prices are projected to increase 2 to 3% next year.

According to Lawrence Yun, NAR chief economist: “Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie,” he said. “August shows some unleashing of pent-up demand before the credit crisis accelerated in September.”

“If you’re anxious about your ROI, these statistics should put your mind at ease,” notes Karpinski. “But always remember to think of real estate as a long-term investment. It doesn’t really matter whether the market starts picking up steam right away. Your home will appreciate slowly over the years, and that’s all that really matters.”

You can use your rental income to offset your mortgage. (And then some!) Karpinski is a huge proponent of renting by owner (rather than using a property management company). Rent it out only seventeen weeks out of the year and your new vacation home could pay for itself. When your monthly mortgage payment is less than or equal to one peak week rental, twelve weeks of rental will cover your mortgage payments for the entire year. Other costs, including bills for your phone, power, cable, and association dues, may be paid out of your earnings from approximately five off-week rentals.

“Most owners tell me that their average weekly rate is around $1,500 to $1,600 and that their property is rented out twenty weeks or more per year,” says Karpinski. “Do the math and you’ll see that that comes out to around $30,000 or more in rental revenue each year. And here’s something interesting: While most people admit that the cost savings is the primary reason they rent by owner, they often add that the sense of control it gives them is equally important. They feel they can take better care of their property than anyone else and like to know who is renting their homes.”

It’s never been easier to market rental properties. Websites like HomeAway.com have made it easy and inexpensive for homeowners to list their properties. Plus, says Karpinski, as more and more people realize the benefits of staying in vacation homes rather than hotels, the pool of potential guests grows by leaps and bounds.

“There are lots of markets for renting vacation homes besides the usual leisure traveler,” notes Karpinski. “Business travelers are one example. If you’re a homeowner, you can approach local businesses and invite them to have clients and associates stay at your vacation home instead of at a hotel. Just make sure your house is properly equipped and you might find yourself with a self-replenishing stream of guests.”

If you’re rushing out the door to head to the bank right now, Karpinski doesn’t blame you. (She owns several vacation homes herself and knows what a fantastic investment they can be.) But she does want you to temper your enthusiasm with a word or two of caution.

“It’s not as easy to get a mortgage as it once was,” she warns. “But if you have strong credit, you can find a lender who’ll work with you. Also, don’t rush into a decision. You may be thinking, ‘Well, if I do this before the end of the year, I can get a nice tax write-off.’ That’s true. But it’s more important to take your time, make sure the property is right for you, and make sure the rent-by-owner lifestyle is right for you. It’s not for everyone-but if you know what you’re getting into, you may well decide it’s the best financial decision you could make.”

5 Reasons Why the Vacation Home Rental Market Is Holding Strong…Even in our Weak Economy

1. It’s easy for consumers to find information on vacation homes. By visiting respectable websites travelers can quickly find the vacation home that’s right for them. HomeAway’s network of vacation rentals includes over 300,000 properties all over the world, making it possible for almost anyone to find one within a two- to three-hour driving distance from their home.

2. Vacation homes tend to be less expensive than hotel rooms. This is especially true if you’re traveling with extended family or a group of friends. HomeAway recently contrasted a three-bedroom vacation rental private condo in Orlando with a popular three-star hotel and found that the condo was cheaper by more than $1,700! “That’s a big difference, and in a tenuous economy it seems even bigger,” notes Karpinski.

3. When airfare gets expensive, people start taking road trips instead. Even with gas prices relatively high, it’s still far cheaper to drive a couple hundred miles to your mountain cabin than to fly to some lavish vacation destination. “Even with the bad economy, people need to take vacations,” says Karpinski. “In fact, psychologically, they may need to get away more than ever. A fairly inexpensive stay in a nearby vacation home is the perfect solution.”

4. The weak dollar makes U.S. tourist destinations attractive to European travelers, whose currency is still strong. “On my recent trip to Hawaii, I noticed a lot of German tourists,” notes Karpinski. “And when I speak to many of the vacation homeowners I work with, they confirm that they’ve encountered a surprisingly high number of European travelers lately.”

5. Business travelers still need a place to stay. When corporations must meet with business associates-who increasingly hail from overseas-they need good lodging solutions. Enter the vacation home. “More and more executives are putting their guests up in vacation homes instead of cramped, impersonal hotel rooms,” notes Karpinski. “It’s a far more comfortable option; plus many companies work out deals with homeowners whereby they can get ‘volume discounts.’ It’s a win/win for all parties involved.”