Telluride, first and foremost, is a ski town with great summer activities. Because of the nationwide financial crunch, we are forced to examine the underlying basics of our local economy, cultures, lifestyles and priorities. When I get enough of the local and national media financial reporting frenzy, I go back to look at the basics.
    Telluride is a wonderful tourist destination in both summer and winter and despite the economic turmoil we are holding our own. Our lifestyle and culture are extraordinary. It may possibly be adjusted but not likely to change. Our priority still is to enjoy, contribute and support our community. Telluride’s motto used to be “the most beautiful place you will ever ski” but its recent trends demonstrate “Telluride is the most beautiful place you will ever live”. With telecommunication a reality, many people have chosen to move to places a little more rugged and beautiful with a strong sense of community to enjoy the outdoors and raise a family. I do not see these basics changing. The markets will swing, the banking crisis will pass and the liquidity will return; it is a business cycle. Now how is this affecting real estate in Telluride? What is my home, condominium, land or ranch worth in these uncertain times? If I had to sell, how deep do I need to discount or if I want to buy, what bargains are out there? Telluride’s real estate market is small and a handful of sales in any market segment will be a perceived boom. Undeveloped or unbuilt lots or land are probably the least affected, but with proper research there is value to be found. Improved property, homes and condominiums, are a different story. Having been part of the building industry, I look at these conditions more in depth, analyzing the premiums paid or discount taken off the replacement value of improved property. For example, how much is the land value and how much will it cost to build this home. The discounts compared to replacement value have never been deeper. The last time I observed these types of deep discounts was in the inflation era of 1979-1983. There are a few contributing factors of course, in recent years construction costs have seen a significant increase. This is not only due to wage and price increases, but also level of detail and use of materials that are of significant higher quality, cost than ever before. These construction costs will be adjusted down in the future, but not to previously low levels. My advice for buyers is: Analyze what you can afford, do your research, connect with a competent broker who has extensive market knowledge and with superior local connections who knows who is truly motivated to sell and who is not. The reason for a buyer to act now is no building permits are being issued; the inventory will not increase. The largest selection is now available and the best bargains will go first. Lock in with the current low interest rates; when inflation surfaces rates will go up. My advice to sellers is if you do not have to sell, take your property off the market. Current buyers are sophisticated and will not be paying premiums for dreams or emotion; it is a buyer’s market. Be realistic in your expectation of value in today’s market conditions; an offer from two years ago or what the neighbors sold for is no longer relevant. If you can afford it, offer seller financing. This will most likely get you a better price. Also, talk to your listing broker and ask the hard questions: If this property has to be sold in 30 days, what would the price have to be?
    The market pendulum has swung too far in the opposite direction and as with any cycle, it will start moving to equilibrium. But after all, the mountain will be here, the tranquility will continue to sooth us no matter how much chaos is occurring beyond our mountains.
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    As some of us are boldly spending some of our discretionary funds, snapping up consumer bargains on anything from automobiles to socks and underwear, this deflationary cycle will probably soon come to an end. It has been swift and ruthless and hitting this bottom has been painful for would-be sellers of real estate in Telluride. This swift downward market correction caught many sellers and real estate brokers by surprise, and with sellers not adjusting prices very quickly, the number of transactions was sliced in half. Most sellers in the Telluride market are strong enough to wait out the cycle and will hold firmer on their pricing, but some sellers have had enough and will discount significantly to move on with life and may comeback into the market another day.
For real estate brokers representing buyers and sellers it has been an interesting dance to see how much courage buyers have and how much pain sellers are willing to take. There are savvy buyers who are buying now when everyone is trying to sell; they will be picking the low hanging fruit in this deflationary cycle, snapping up some bargains for themselves and their families to enjoy. These sporadic fire sale priced properties will not last long and deals not made by the end of the ski season usually have sellers resigning themselves to the fact that a sale will not occur until next summer season, holding firm on their pricing in anticipation for a better summer sales season. Recent broader economic numbers show very slight inflation, inflation with our government printing money to pay for our past sins can be a problem and as the business cycle swings the other way it would be wise for investors to brace themselves for future inflation. Real estate has historically been a good inflation fighting asset; and resort real estate, unlike gold, has an added enjoyment component. The conclusion of all this is it maybe wise to pick up a price deflated property today and have an enjoyable inflation fighting asset in the future. As the old saying goes: buy when others sell and sell when others want to buy.

Where Are the Foreclosure Deals?

This is a question I get asked regularly. With foreclosures at an all time high nationwide, vulture funds are springing up like daisies in the spring trying to snap up bank discounted foreclosure values. San Miguel County and the Telluride region are not seeing a big volume of foreclosures coming through the pipeline yet. The questions are being asked: Are the banks waiting to start foreclosing on non-performing loans? Is the market here different than the rest of the nation? Etc., Etc. First, we need to put foreclosures into perspective; foreclosures nationwide represent only slightly less than one percent of all residential real estate. The Telluride region is not a very big real estate market compared to the markets where there is a lot of foreclosure carnage like the Phoenix area, Las Vegas, California, south Florida, etc. and our market is fairly diverse in product.

The 21 properties on the County Trustee’s January 14, 2009 single page foreclosure list represent many different facets of our real estate market. Neighbors are watching if a property in the area is coming up for sale and like the two West Meadows parcels that were up for public sale, were purchased by a neighbor who saw good value, before the parcels were offered on the Court House steps. The reality seems to be many of the properties being foreclosed on are not premier properties, and savvy investors can probably find better value for more premier properties if they are willing to spend the time to research and work with a knowledgeable broker. Whether it is investment or development property, or that dream house or parcel that just a few years ago was priced out of reach, right now there is value and opportunity out there that we have not seen in quite some time. Sellers are depressed and downtrodden by the constant barrage of bad economic news.

But as the old market saying goes, sell when others are buying and buy when others are selling. The best advice I have for sellers, if you have to sell, is be realistic in your pricing. It does not matter what you were offered two years ago, or what the neighbor sold for; you have to meet market pricing. If you don’t have to sell, pull your property from the market and come back to the game another day when conditions are better. Sellers and brokers are fooling themselves listing overpriced properties. There is no dreamer’s buying in this market, just realistic buyers looking for good value. Cash is king and buyers know it. My advice to buyers is look for value, do not get too emotional about a single property. If the seller of your first choice does not want to come down to your price, move on to the next property. This will be a lot of work for your real estate broker, but he or she should not be afraid of hard work in this market. Good hunting!

The snow conditions trump the economy. Last December 11th when Ralph Garretson made his presentation at the Tourism Board’s (M.T.I.) Annual Meeting in the historic Sheridan Opera House he projected a slide that showed skier days from the 1980’s through last year. One astonishing observation was that good snow conditions had trumped previous economic down turns in the last thirty years. When snow conditions were good, people went skiing; economic conditions seemed to have a minimal effect on skier days.

This part of the presentation was viewed by many of us with suspicion; doom and gloom ruled in early December with bookings down 20%-30%. Ralph’s statistics could not be correct and the recession would surely apply to the local economic realities of the 2008-2009 holiday season. Surprise! Many visitors decided to book late and come anyway, despite the national economy and related doomsday media stories. On December 30th TelSki logged a record 8,156 skiers on the mountain and some restaurants reported business in 2008/2009 similar to the 2006/2007 season; slightly lower than our record season in 2007/2008. Good news is scarce these days, but skiers have always marched to their own beat.

Telluride had a few planned and unplanned boosts to the season. The opening of Revelation Bowl lift that gives access to some spectacular high alpine terrain surely helped, but it was a pleasure to see that our resort received high rankings in both Ski Magazine and Skiing Magazines as well as a #2 rating of Best Ski Resorts by Conde Nast Traveller. As visitors and locals know, we may not be the most convenient resort to get to, but that keeps the crowds away. Once you are in Telluride you do not need a car, lift lines are minimal, and everyone can enjoy the mountains and town at their own pace. Dad can be in the powder line (the only lift line in Telluride) at 8:00am and Mom and the kids can start at the crack of noon without the hassle of shuttling or standing in long lines. As locals, we have a great lifestyle and although it maybe a trek to our mountain Shangri-la, it looks like visitors and friends are starting to recognize this too. Hopefully, after our usual January thaw the snow will pick up again for us and our visitors to enjoy the rest of the season.

Prices remain steady, however there many great deals to be found. The developer of 2 Rivercrown units has dropped his price from $3.2 million to $2.1 million. Needle Rock #1 is a great value at $1,100,000 fully remodeled, just a block from the Gondola and Chair 8 with a designated parking space.