List prices dropping
Real estate sales in Crested Butte appear to be gaining momentum. Sotheby’s real estate agent Channing Boucher reported in his July newsletter that 101 homes and condos have sold in the north end of the valley this year, from Crested Butte South to Mt. Crested Butte.
That’s roughly 30 percent higher than this time last year, and includes a few surprises, like high-end home sales in the town of Crested Butte. It’s a sign, Boucher says, that the market is self-correcting. But predicting what will happen next is anybody’s guess: the market is drastically different from area to area, and for the most part, sale prices continue to decline.
“The reason there have been so many sales is that prices went down. Price opportunities came out that were super low, and it caused people to buy. People are snagging foreclosures… They were finally like, ‘No sh*t, let’s buy. This [price] is ridiculous,’” said
According to Boucher, the median price for this year’s transactions is $280,000 (half sold for less than $280,000, and half sold for more), down from last year at this time, when 68 sales had a median price of $340,000. The obvious culprit is foreclosure activity.
“Foreclosures have been the biggest level of activity,” said Coldwell Banker Bighorn Realty owner Dan McElroy. “We went through a long period where things were on the foreclosure list, but they didn’t go to sale… That started to change last fall, and what that’s done is put more properties on the market. As bank-owned properties, they come on at a list price and if they don’t sell in a 30- or 40-day period, it just keeps ratcheting the price down.”
When that happens, shoppers previously put off by high prices become buyers. According to McElroy, it’s a predictable part of a real estate cycle that fluctuates between ascending and descending. And resort markets always fluctuate. Once an ascending market hits its peak, there’s a flat spot: buyers stop pushing prices up, so they stabilize. Then, sellers reduce prices to make the sale, and that happens more and more until the market descends. When there are a high number of foreclosures, like Crested Butte has now, bank-owned properties must be purged from the market before it can stabilize and ascend.
“It’s a double-edged sword because on one end, all these properties have sold. So homeowners think ‘My property’s going to sell,’” McElroy said. “It’s sort of a false hope, I think, because the reality is unless they have primo property in the best location, they’re probably not going to see a lot of activity unless they lower the price until they’re competing with banks. Most people aren’t willing to do that, so most people are in a holding pattern.”
Numbers from Gunnison County public trustee Teresa Brown confirm a high level of foreclosure activity over the last two years. In all of Gunnison County, 89 foreclosures have sold so far this year, and 70 sold during the same time period in 2010. Historical foreclosure averages and Crested Butte-specific numbers were unavailable, but the active foreclosures list still includes 112 properties.
Doug Kroft, owner of Red Lady Realty, believes that the quantity of foreclosures makes sense if you consider the sale of Crested Butte Mountain Resort (CBMR) in 2004.
“While the rest of Colorado, and the rest of America for that matter, had been experiencing a 15-year growth pattern where values had gone up quite considerably, it was compounded in Gunnison County by the Muellers buying the ski area. Prices jumped disproportionately. And the feeding frenzy of buyers happened to coincide with the availability of mortgage money,” Kroft said.
Even with high foreclosure rates, Kroft sees the recent increase in activity as a positive sign. He believes it indicates that buyers are recognizing great deals and moving on them; that could create the perception that good deals are starting to disappear.
“We’re a long way from a bullish market, but the difference between a buyer’s market and a stable market is subtle. It’s discernable only in people’s minds, because once it becomes a mindset that deals are starting to disappear, the whole momentum can change,” Kroft said.
Momentum appears to be changing in the town of Crested Butte, where several homes off of Butte Avenue have sold or are under contract in the $1 million to $2.5 million range, including 6 Ruth’s Road, which sold recently for $1,320,000.
“All of a sudden, within what’s now been a four-week period, four homes over on Butte Ave. and one on Teocalli listed in the $1.8 million to $2.4 million range went under contract within a few days of one another, and they’re mostly being bought with cash,” Kroft said.
Boucher and McElroy have also taken note of the sales, and while not everyone is convinced it will mean a rebound—McElroy was careful to note that has yet to reverberate anywhere else in the Crested Butte market—they are paying attention. So is town finance director Lois Rozman, who credits the sales with bringing the town’s capital fund, which is funded by the real estate transfer tax, back on track.
“Through June we were way off of last year’s pace, and now through July we are flat and caught up to last year’s pace,” Rozman said.
The town has collected $256,061 as a result of the recent activity, not including some of the most recent high-end transactions. It’s still a far cry from the peak of $2,015,271 in 2005, but it puts the town in a better position to stay even with last year.
The cautious hope among some real estate professionals is that the activity in the northwest quadrant of Crested Butte could spark activity elsewhere in town.
“It could impact the middle of the market in the town of Crested Butte,” Boucher said. “It could be a concentric circle that expands… It demonstrates that the wealthy are willing to invest in the market so that could trickle down, and people will go “Oh well, I better buy that $900,000 property on Whiterock while I still can.’ Whether that happens or not, I’m waiting. It could be anomalous, or it could be a sign that people are fed up and ready to buy.”
Whether there will be similar upticks throughout the rest of the market is also uncertain. What happens in Crested Butte does not necessarily happen elsewhere. As Boucher explained, the scarcity in town does not exist in places like Crested Butte South. Of 363 land parcels for sale north of Round Mountain, only about 20 are in Crested Butte, and they’re sought after by a very specific buyer who wants the town lifestyle. That recipe doesn’t necessarily exist outside of town, where land values have declined significantly. Citing data that suggests land values have dropped 50 to 70 percent since 2006, Boucher says that equates to a decline of roughly 1 percent every month for over 50 months.
“Until that stabilizes and we get some demand for raw land, we won’t really have an idea of when the market will stabilize,” Boucher said. “Everybody who has a piece of dirt is trying to sell it at the same time.”
Boucher estimates that there’s a 15- to 17-year supply of land for sale; with only 18 land sales to date this year, it could take a long time for the inventory to go down and prices go up. Low land values drive down the value of improved lots down, and that could keep values in places like Crested Butte South down for quite some time. But real estate brokers like Kroft are starting to see new movement in Crested Butte South.
“In my own experience,” Kroft said, “we had some folks up from the Front Range looking at homes in Crested Butte South, and of the homes we emailed for [information] about just three weeks ago, three or four of them are under contract. If buyers think good deals are starting to go, and I think there’s some evidence in little sectors of our market that they are, then things can turn around… With everything going on right now, all it takes is small things and I think we’re going to get a stable market. I don’t believe it when people tell me this is going to be double-dip recession.”
The one thing that is clear? It’s difficult to put a timeframe on market stabilization. McElroy guesses another three to four years for prices to rise.
“Just based on inventory and the fact that we are still seeing additions to the foreclosure list, albeit not at the rate we had, leaves a lot to speculation. Add the debt crisis nationally and it is actually a loaded gun. The key is that there are a lot of people that came through the recession unscathed and if they decide they want a property in CB, they have the means to do so as evidenced by the uptick in high-end sales in town,” he said.