Real estate sales in resort towns on pace to top record

By John Rebchook, Rocky Mountain News
November 6, 2004

Mountain real estate is hot again.

Buyers already have paid more for real estate from Aspen to Vail to Crested Butte in the first nine months of the year than they did in all of 2003. And sales are ready to set a new bar, surpassing 2000.

Through the third quarter, buyers paid $4.74 billion for real estate in eight mountain counties, slightly more than the $4.62 billion paid in 2003. And 2003 was the second-best year on record.

This year's sales likely will best the all-time high of the stock market boom of 2000, when an estimated $5.1 billion in real estate sold.

To get a snapshot of the market, go no farther than Vail.

"Vail real estate is off the charts," said Beverly Trout, a broker with Vail-Lionshead Real Estate. "It's just incredible. I've been here for 32 years and have been selling real estate for over 20 years, and I've never seen a boom like this before. And with Vail Resorts moving forward on its $1 billion redevelopment of Lionshead, it's only going to get better."

And it's not just Vail.

Almost every mountain area is experiencing unprecedented sales activity and dollar volume.

Some examples:

• A home on three-quarters of an acre in Vail recently sold for about $2,900 per square foot. And there are at least three condos in Vail on the market for more than $1,800 per square foot.
• In Crested Butte, where the ski resort was purchased this year by Triple Peaks Ltd., headed by Tim and Dianne Mueller of Vermont, there were 618 real estate sales totaling about $176 million in the first 10 months of the year. That's almost three times the 246 properties that traded hands during the same period in 2003 and more than twice the dollar volume of about $81 million during the same period last year.
• Aspen started the year strong when Hollywood producer Peter Guber sold his Mandalay Ranch for $46 million. It's the most paid this year for a residential property, said the broker on the deal, Bob Ritchie of Coats -Reid & Waldron.

"The only properties that sold for more were pure ranches with development approvals," Ritchie said. "A ranch sold in Jackson Hole for $100 million and immediately was split into 35-acre lots. That can't happen on this property. It has a house, two guest cabins and 650 acres. You can put one more house on it and that is it."

Ritchie has four offers for the 797-acre Aspen Valley Ranch, which he is listing for Mary Jane Garth for $25 million. The ranch is 15 minutes from downtown Aspen.

Even more modest properties, at least for Aspen, are selling fast. Friends of Ritchie's bid $1.98 million for a condo listed at $1.995 million. "They came in fourth." The winning bid was about $2.08 million, he said.

"I'd say we're just starting on the way up," Ritchie said. "In the '70s and the '80s, we saw, after years of flat appreciation, properties went from rising maybe 5 percent a year to 25 percent or 30 percent and even 50 percent. That's the cycle we're heading into."

$6 billion not far off

This is the second consecutive strong year for mountain real estate sales and comes at a time when the national economy and stock market remain fragile.

Sales stalled and prices were relatively flat in 2001 and 2002, following the terrorist attacks and the national recession.

But this year, sales could top $6 billion if the frenzied buying continues.

And there is no sign that it is letting up.

"Sales are very, very strong," throughout mountain states, said Dennis Hanlon, head of the Rocky Mountain Resort Alliance based in Park City, Utah. The nonprofit group tracks sales in Colorado as well as at ski resorts in Utah and Jackson Hole, Wyo.

"Last year was the first year we started seeing a comeback after a few years of flat sales," he said. "We had Sept. 11, the stock market crash, the dot-com crash, the war in Iraq. That made investors nervous."

For the past couple of years, he said, many wealthy people were pulling money out of the stock market and investing in mountain real estate.

"They see mountain homes as a nice place to visit and a safer investment," he said. "And we're seeing the lowest level of inventory ever. That's also driving up prices. There's just not that much to choose from."

He said he doesn't think a bubble is forming in mountain real estate.

"The thing you've got to understand is that all second-home buyers are already well off. So they'll be under no pressure to sell," he said. "They're not worried about where their next loaf of bread is coming from."

Byron Koste, director of the Leeds School Real Estate Center at the University of Colorado, agreed.

"This is 100 percent discretionary," -Koste this. "These are emotional buys, not economic buys. For these people, interest rates are not an issue because they pay cash. We're not going to see any major bubble in mountain real estate unless there is a significant, overall economic downturn nationwide."

Koste also said that mountain real estate received an unexpected boost this year - a series of hurricanes in Florida.

"Every year you have these rich families arguing whether they should buy second homes on the beaches of Florida or in the mountains or in the desert," -Koste said. "And now, the deserts and the mountains have lost a major competitor."

Hurricane factor

Rick Pirog, a broker with Slifer Smith & Frampton in the Vail and Beaver Creek areas, doesn't buy that.

"The hurricane season didn't hit until September, and we have had a strong market all year," Pirog said. "We set an all-time monthly sales record in August."

Not that Florida's woes won't be a help down the road.

"That might be another component in our future, but clearly that has not been a factor yet," Pirog said.

Doug Bitetto, a broker with Vail Realty Co., is listing a 1,600-square-foot Row House next to Vail Village's clock tower for $2.95 million. That comes to $1,843.75 per square foot, apparently the current highest asking price on a per-square- foot basis in the area - and probably anywhere in the state.

Another home in Vail, with about 3,500 square feet, recently sold for $2,900 per square foot, he said. And several others have sold for north of $2,000 per square foot, he said.

Although the Row House was built in 1964, it has been totally rebuilt. Owners in the Row Houses make up a who's who of business executives, he said. Members of the Pritzker family, which owns Hyatt Regency; top executives at Motorola and Time Warner; and even members of the Watson family, heirs to the founder of IBM, live there, he said.

"This is one of the smaller units there, and the smaller units tend to go more on a square-foot basis," he said.

The seller, who is from New Jersey, sold a chemical plant and now is an investor.

"He wouldn't be selling, but he doesn't get up here very much anymore," he said.

Jerry Jones, a longtime resident of the Vail area and the developer of the $450 million Grand Elk Ranch & Club in Granby, recently sold a home in Arrowhead west of Vail for $1.7 million. He paid $715,000 for it 10 years earlier.

"I bought a house valued at $3.9 million on seven acres of land out in Pilgrim Downs in Lake Creek, which is the most desirable spot in the Vail Valley because you are surrounded by 600 to 700 acres of open space," Jones said.

Jones said you can't name a mountain community in Colorado where sales aren't off the charts.

"In general, I would say that real estate in the mountains has never been stronger," he said.

Doug Labor, a broker in Steamboat Springs, said that transactions are up 30 percent to 35 percent across the board.

Unlike at many resorts, regular people can still afford to buy there, he said.

"The introductory market is the most active part of the market, and you can still find a two-bedroom, two-bath condo a few blocks from the ski slopes in the $150,000s," he said.

But it is Crested Butte that is the king of the mountain as far as improving prices and sales.

"We saw a dramatic increase in the number of sales about three weeks before the Muellers closed on Crested Butte," last spring, said Reggie Masters, an agent with Coldwell Banker Big Horn in Crested Butte.

"How can I say it diplomatically? The previous owners had lost interest or the ability to spend money on the mountain that was needed. The Muellers just brought a lot of new energy."

She said the Muellers' reputation at the Okemo ski resort in Vermont preceded them to Crested Butte.

"There had been this pent-up hope for a number of years that it would be sold," she said. "The mountain needs improvement as far as grooming and snowmaking and new lifts."

And Joel Vosburg, a broker with Prudential Becky Hamlin Realty in Crested Butte, said that as good as the numbers are, they're understating the activity.

"The Gart family (from Denver) bought a hotel and turned more than 100 rooms into condos and quickly sold them, and a developer out of Beaver Creek came down here and did $23 million in sales, and another 30 condos are under contract in addition to what the records are showing," Vosburg said.

Asked if sales this year are up from all of last year, he laughed.

"Try the last three years. Basically, so far this year we've sold the equivalent of what we did in the last three years. We've never had a market like this."

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