Mountain High : Second-Home Market Heats Up From the Sierra to the Rockies
The voluminous snowfalls that have helped end the drought in California and across the Southwest have been a windfall for mountain real estate markets from the High Sierra to the Rockies.
After rough sledding through much of the 1980s, the second-home market has been slowly rebuilding for several years. But in the first two months of 1993, sales of mountain homes in particular have soared--especially in communities where blizzard conditions have not kept visitors away.
“The combination of the lowest interest rates in 20 years and 500 inches of snowfall makes second homes real salable,” said Stacey Bardfield, owner of Prudential Mammoth Sierra Properties in Mammoth Lakes.
Some proof:
* In Mammoth, Bardfield’s office saw sales volume double from 1992 levels for the first two months of 1993.
* Vail, in central Colorado, reported a 38% increase and here, in nearby Summit County, a 25% hike.
* In the southwestern corner of Colorado, Telluride recorded a 36% increase from early 1992 levels, with January sales skyrocketing 277% before the market calmed down in February.
On the north shore of Lake Tahoe and in Park City, Utah, real estate agents say that heavy storms after the first of the year kept visitors away and actually depressed sales initially. But other signs of a strong year are in evidence.
“Every weekend that the weather is good, we have people coming up to look at real estate, saying they’ve been waiting seven years for this, and they’re ready to buy a second home,” said Jacqui Gay, president of the Tahoe Sierra Board of Realtors on the north shore of Lake Tahoe.
Indeed, the market in some locations threatens to be restrained by the lack of enough houses to offer.
“I had two attorneys who wanted a house in the $200,000 range,” said Larry Laird, managing broker of Re/Max Properties of the Summit in Summit County, Colo., home to four ski resorts about 75 miles west of Denver. “There were only three houses I could show them, and they bought one. That leaves two. That’s the downside of a hot market. We’re starting to run out of inventory.’
“Hot market” hardly described the second-home business through much of the 1980s. First came the interest-rate spiral of the early 1980s and congressional mutterings--ultimately hushed--about axing the mortgage interest tax deduction for second homes.
Then came $2-a-gallon gasoline and the 1986 tax reform act, which eliminated the option of writing off real estate losses against ordinary income.
These and adverse circumstances in some local markets--volcano scares in Mammoth Lakes, the oil bust in Texas and the peso devaluation in Mexico, which shrunk buyer ranks--combined to devastate the second-home business.
“The market fell on its face,” Bardfield recalled. “Everybody and their brother gave their project back to the bank. I personally sold $40-$50 million in foreclosures. If you didn’t sell foreclosures up here in the mid-1980s, you didn’t sell real estate.”
Housing prices in many communities dropped by as much as 50%, according to agents.
Just as economic fundamentals once combined to depress the market, however, they began converging in the late 1980s to stimulate it.
Baby boomers began aging and earning their way into the second-home market just as prices were hitting attractive depths. With lower prices, more buyers found they could nearly cover their mortgage and tax payments by renting their vacation homes for part of the year.
By 1992, a reviving national economy, falling long-term interest rates and rising consumer confidence were weighing in, and many mountain resorts saw a banner year.
The record snowfalls and record skier visits of 1993 have now become the tangible frosting on the second-home cake.
“We had well over 70 inches of snow in February, the biggest snow month we’ve ever had,” said Mac Hodge, president of the Vail Board of Realtors. “That’s certainly helped our exposure nationally and internationally and, in the long run, will help our real estate market.”
Something else helping the mountain real estate market is a phenomenon that agents say ultimately may still the historic convulsions of the second-home market: Primary home buyers are making the mountains their home.
“People who might have been second-home buyers before are moving here on a year-round basis,” said Peg Marty, president of the Park City Board of Realtors in Utah. “They are finding they can live here and work anywhere in the country because of fax machines, computer terminals and an airport half an hour away.”
Gay, in Lake Tahoe, notes that agents there dealing with primary home buyers have “a whole little dialogue about lifestyle, weather, schools, medical facilities--an entirely different orientation than what we do for the second-home buyer.”
In Mammoth, Bardfield estimates that 20% of the buyers she sees are moving in to stay.
“I’ve had people calling from Orange County to say they’d just bought a home there, and then a kid got shot at the local high school, so they’re not even having the moving van unloaded,” she said. “They want me to find them a home here.”
Inevitably, rising demand and shrinking supply are putting upward pressure on real estate prices in the mountains. Just how much varies by location.
In Telluride, perhaps the trendiest mountain market in recent years, the cheapest house on the market is priced at $340,000--for two bedrooms and 1 1/2 baths in 1,100 square feet, according to George R. Harvey Jr., owner of Harvey & Co.
Properties that sold 10 years ago for $40,000 are selling for five times that today.
Elsewhere, however, better buys may be had.
In Summit County, Colorado, prices have risen 18% to 22% in the last two years, only now bringing them back to levels before the early-1980s plummet, said broker Laird. According to Bardfield, Mammoth prices are still about half what they were at their hottest.
On the south shore of Lake Tahoe, where Southern California buyers traditionally predominate, Gary Brand of Prudential Timberline Properties said the continued malaise of the Los Angeles area’s economy has prevented prices from moving up at all.
Taken together, all these factors have mountain real estate communities in a state of high anticipation.
“We talk to (agents) in Orange County who are dying, waiting tables, because they can’t sell real estate, and we’re just fine,” Bardfield said. “I’ll tell you--if things do begin to pick up elsewhere, things up here are going to go just plain crazy.”
A Thaw in the Market After being moribund for most of the 1980s, the second-home market in mountain resorts is reviving. Chart tracks sales in what is probably the most highly charged market-San Miguel County, Colo., around the Telluride ski resort.
Sales (millions of dollars) Source: Judi Kierman, president, Telluride Consulting.
