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Is the real estate sky falling?

Cindy Kleh
Grand County Homes and Properties
Cindy Kleh photo
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2007 was not a kind year for real estate in the United States.

In fact, as the fourth quarter numbers for this year are being tallied, it’s bordering on ugly.

Responding to a crisis fueled by low interest rates, questionable lending practices and highly leveraged spending, mortgage lenders are now raising the qualifications for approval of more desirable loans, and although the real estate climate is a buyer’s market, not many are buying right now.

But despite the subprime mortgage meltdown and subsequent credit crunch, the housing and real estate industry in the Western United States

seems to be holding its own, especially in mountain towns. While home prices across the country fell, foreclosures signs popped up and the single-family housing market plunged deeper into despair, the higher parts of Colorado have been experiencing banner real estate sales.

The Denver Post reported a record real estate-selling year in 2007 for five mountain counties, which include the resort towns of Aspen, Vail, Breckenridge and Steamboat Springs. According to Land Title Guarantee Co., the combined sales totaled $8.56 billion. Garfield County around Rifle (the only non-resort of the top five) has seen a natural gas boom that has drawn workers to high-paying jobs and sharply increased their demand for housing.

Aspen/Pitkin County, where the average home runs $4.52 million, led the pack with a reported $2.2 billion in sales through October, 2007. Vail/Eagle County is a not-so-close second with an average home price of $1.41 million and a 2007 sales pace set to break a record $2.54 billion set in 2005.

Winter Park and Grand County were not listed in the top five, which begs the question: What’s happening here? Is the county experiencing the stagnation that mirrors the country’s present real estate trends, or is our mountain town status pulling us through the hard times?

Grand County Holding its Own …

Katie Riemenschneider of Coldwell Banker Mountain Properties in Winter Park quotes totals compiled by the Grand County Board of Realtors, which represents the majority of Realtors in this area. (Totals are from the last quarter of ’06 to the third quarter ’07.)

Riemenschneider sees similar numbers of residential units sold this year compared to 2006, however, the average sale price of homes in the Winter Park area has gone from $546,188 to $614,081, an increase of 12 percent in one year. The condo market has seen a five percent increase in average sales price from $270,970 to $286,747, while vacant land has risen 27 percent.

Dan Harper, Riemenschneider’s partner at Coldwell Banker, comments that residential sales are up a little bit and condos are down, but as a team, he and Reimenschneider had their best year ever in 2007.

“We have not experienced the falls (of the rest of the country’s real estate market), but it has leveled off. Other Realtors have said that things have slowed down for them.”

County Assessor, Tom Weydert, does not have 2007 numbers available yet, but he is cautiously optimistic about Grand County’s real estate future. “It’s too soon to say, but I think Grand County is poised to grow because of Intrawest. Winter Park Resort has always been a good ski area, but now we have the backing of the ‘big boys’ and we’re becoming more world-wide.”

Second Home Cushion

Weydert and Harper also point out that 60 percent of the county’s housing consists of second homes, and this home sector is affected less than Front Range neighborhoods by falling home prices and foreclosures.

“Wealthier people don’t panic,” Harper explains. “They plan well and ride out the slow times. Appreciation is not as high as in previous years, but it’s still 7 to 15 percent (a year) depending on the unit.”

“The second home market consists of people who can afford to buy here. We don’t see as many foreclosures because there wasn’t as much 100 percent lending going on,” says Harper.

In fact, Grand County has relatively low numbers of foreclosures compared to other Colorado mountain towns: (no foreclosures at the present time in Winter Park or Hot Sulphur Springs, two in Fraser, one in Grand Lake and four in both Granby and Kremmling) compared to Breckenridge (12), Dillon (7), Frisco (5), Silverthorne (3), Aspen (2), and Vail (2: one was a two-bedroom in central Vail for $60,000; the other a nine-bedroom with 5,476 square feet for close to $4 million).

Construction: Full Steam Ahead

Greg Bayda, owner of Complete Construction, Inc. has been doing construction business in Grand County since 1972. He also believes that the county is “doing ok” and that “it’s going to be a good year.” He’s been receiving several phone calls about prospective construction jobs in 2008, and believes that what’s going on at the ski area in terms of development is fueling growth across the county, citing improvements to the Kremmling Airport and downtown Granby as examples of the ripple effect.

Brad Smith, owner of Terra Firma Custom Homes Inc., wonders how much the country’s present real estate trends will affect home buying and building in Grand County. “Right now, we’re looking at a full schedule with all of our projects. The market is relatively strong in Grand County, but I’m confident that the general economics of the U.S.A. will eventually begin to hurt us. But, how deep? How long? … Who knows?”

Smith constructs BuiltGreen Colorado®-certified custom homes, and is predicting even more consumer demand for energy and water-efficient features in ’08. Smith adds that as the price of heating a home goes up, the difficulty of convincing a client of green features goes down.

“Green things that we offered as options a few years ago are standard features now. I don’t even have to pitch this stuff because customers making this type of investment want to spend less on long-term energy costs.”

Clark Lipscomb, president of Grand Park Development, LLC concurs with Smith: residential units around the Winter Park area continue to be built and are still selling well, and that consumers are seeking green features, not only in their dwellings, but also in their community design. By building residences close to amenities and providing walkways, people are more likely to park their car and take a stroll.

Like Terra Firma homes, Grand Park homes are all inspected by BuiltGreen Colorado® for minimum heat loss and water waste as well as maximum air and water quality. Green homes earn points from independent inspectors by using superior insulation, moisture management and/or ventilation, just to name a few categories.

“Grand County is the most promising of all resort properties in the state with the most to gain from all markets,” Lipscomb claims. “It’s unbelievably inexpensive compared to other mountain towns in Colorado. This is a great place to be from an investor’s perspective.”

He cited completed improvements on Berthoud Pass, more focus on developing the core of downtown Winter Park, and the passing of a new community recreation center as signs of positive directions in the in the Fraser Valley. “Baby Boomers are still retiring ….”

Commercial Land Tougher to Obtain

David Michel, a Winter Park attorney who specializes in real estate law and land use law, has noticed changes in the last few months of 2007 in obtaining financing to purchase raw land.

“Before, financing was easy to obtain. Now banks and finance companies want 50 percent down on purchases of raw land,” Michel claims. “The real estate market has historically been cyclical, and financing could become easier in the future, but I fear that with the sub prime rate lending debacle, this could become the norm, and this could stymie future development in Grand County. The effects are causing pending real estate deals to go south, and will make real estate deals for raw land more challenging in 2008.”

Michel predicts that larger developers won’t feel the crunch as much, but that it will cause smaller to mid-tier developers nightmares.

MPLT Acquiring Conservation Easements

One trend that is reassuring: Grand County is putting more land aside in its natural state for future generations to enjoy. According to Billy Sumerlin, Director of the Middle Park Land Trust, 2007 was their busiest year ever with an additional 1,800 new acres and a total of 5,000 acres put into conservation easement in the county. Sumerlin suggests that “due to generous federal and state tax incentives (for putting private land into easement), the IRS has increased scrutiny of bad promoters and players that take advantage of tax codes. (MPLT) applauds this, and we are working with legislators to improve the appraisal process.”

So, as Grand County real estate eases into the year of 2008, there is an old saying that still rings true: “Lucky you live up here.”


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