Sales in many vacation communities across the U.S. soared last year to levels not seen since boom times, driven by deep discounts, cash purchases and buyers' rising stock portfolios. On Mercer Island, Wash., waterfront sales nearly tripled in 2010, compared with a year earlier, reaching par with 2006 volume there. Sales on Hilton Head Island, S.C., rose 14% for the year. Palm Beach, Fla., experienced a 40% annual increase and a 54% increase in homes under contract, indicating an especially strong fourth quarter. Palm Beach sales volume now is comparable to its 2007 peak. These figures were gleaned by brokers in each locale. "The proverbial train has left the station," said Ned Monell, an agent with Sotheby's International Realty in Palm Beach. "We haven't felt energy like this in a long time. Buyers sense that they've been on the sidelines long enough." The question now is whether the momentum will last. The strength of second-home sales paints a stark contrast to the overall housing market, which is expected to worsen in 2011. Existing-home sales in November rose 5.6% on an annualized basis, according to the National Association of Realtors, a trade and lobbying group. Last month, the Case-Shiller housing index of 20 cities showed prices across the U.S. fell in October, and most analysts predict another 5% to 10% slide in the coming year. Data for the nationwide vacation-home market aren't tracked regularly. The National Association of Realtors conducts an annual survey of home buyers, but results for 2010 won't be out till March. Yet the market for vacation homes, based on local sales data, appears to be booming. The comeback, NAR economist Lawrence Yun said, has been helped by gains in the stock market and an improving economy, which have made wealthier Americans more upbeat about the future. "It also implies that prices in some markets have come down so much that people are fighting for those properties," said Mr. Yun, noting that demand is strongest in areas close to stable labor markets. According to the NAR, one in 10 real-estate transactions in 2009 was for the purchase of a vacation home. And though a small fraction of the overall market, it is significant because vacation homes are often big-ticket properties and attract discretionary buyers. Just four houses sold last year on Madeline Island, Wis., for example, but the island's average dwelling sells at two to three times the price of the county average, said Eric Kodner, a realty broker on the island. Sales of second homes are showing an uptick even in more-affordable communities. In some locations, prices are even inching upward. Cape Cod sales climbed nearly 9% in 2010 from 2009, while prices rose 7%. Monroe County, Pa., in the heart of the Pocono Mountains, saw a 3% decline in transactions, but its Lake Naomi resort community was up nearly 15%. A one-acre plot off Lake Naomi recently fetched $1.1 million, a record deal for the area. Still, in most markets where demand has improved, prices haven't. For Realtor Andy Twisdale in Hilton Head, S.C., it is too soon to rejoice; prices are down almost a third over the past five years. "People are buying at the very low end of the product," he said. "The financing is very difficult. Banks are requiring 25% down and crystal clean credit." Buyers who qualify or can pay cash say this is the time to take the plunge. On New Year's Day, the Makarewicz family arrived in Pocono Pines, Pa., to look for a vacation home. They already own their primary residence in northern New Jersey and own a property in Damascus, a northeastern Pennsylvania town along the Delaware River. But the family says the latter doesn't offer enough things to do: Not enough shopping. Not enough activities for kids. Not even enough fish. "How's the bass here?" Joe Makarewicz, a vice president for sales at a financial-services firm, asked Re/Max Realtor Rob Baxter as the two looked at floor plans. The family plans to sell the Damascus house, which would allow them to pay cash for one near Lake Naomi. The resort community at Lake Naomi boasts pools, tennis courts, a recreation center and a golf course—and is equidistant from New York and Philadelphia. Some second homes had been stuck on the market because sellers wouldn't budge on price; unlike owners of primary homes, they often aren't in a hurry to move. "Sellers have become aware that they have to price their homes accordingly," said Harald Grant, a senior vice president at Sotheby's in New York's ritzy Hamptons region. "There's a perk in the market because a lot of prices have come down to where they should be." This shift became clear to K. David Hirschey, who runs a consulting business in Minneapolis, as he hunted for a home on Madeline Island. After competing in a summer swimming competition on the island, Mr. Hirschey decided to buy a home there, perhaps to rent it a few years and maybe retire there eventually. The first offer he made was rejected, he recalled, because the seller said, "We don't negotiate on properties here." The same thing happened with his bid on the next house. Then he found a third property—four bedrooms, three baths—that began as a sale by owner, was taken off the market, then relisted under one broker, then another. It had been initially priced at $1.25 million, and remained on sale for two years. "When I saw it, it was listed at $687,000," said Mr. Hirschey, a father of four children. He offered $530,000, furnishings included. "They wanted to negotiate and I said no," he said. The tactic—an all-cash offer—worked, and Mr. Hirschey closed on the house in November, just in time for his family to spend the holidays there.
MARKET FOR VACATION HOMES IS ON THE RISE - WSJ
MONDAY, 10 JANUARY 2011 07:33
Today's Wall Street Journal article is about Vacation Home sales picking up due to lower prices and deeper pockets due to the stock market recovery. Our home prices in Crested Butte, CO are still quite low and offer great bargains. I don't think this situation will continue into July. Happy reading.
By S. MITRA KALITA
![[VACAY]](http://si.wsj.net/public/resources/images/P1-AY965_VACAY_NS_20110109193003.jpg)
The wildfire in Boulder County this weekend is a terrible thing, many people have lost their homes, and others are in limbo while firefighters work hard to save their homes. This terrible event got me thinking about how lucky I am to live in Crested Butte. Sure, our weather and altitude necessitates us to be hardy and unduly optimistic, i.e. looking forward to shovelling snow in big snow years as it's a great upper body workout! But the benefits of living in a harsher clime are being spared the pine beetle devestation that has claimed millions of trees to our north, and having more moisture year round than many other places in Colorado.
We rarely have drought situations here - in fact we have had so much rain this summer, I haven't watered my lawn since the end of July. In contrast, Boulder had a month of no rain which added to the dry conditions that fueled the wildfire.
The bark beetle situation is the one that scares me the most. Anyone who has driven I-70 near Dillon has seen the endless acres of copper colored trees killed by bark beetles. The US Forest Service just announced plans to cut down 14,000 acres of dead trees caused by the bark beetles at a cost of $30 million. Unfortunately, the beetles are estimated to have killed trees in about 3000 square miles of Colorado lands, which is the equivalent of 1,920,000 acres - which would cost $4.1 billion to cut down! I doubt we will get those resources, and clearly to burn down the trees would take a considerable amount of manpower, timing and luck - not to mention the air pollution that it would cause.
I don't think there is any great solution to this devestating problem. So, instead I keep an eye on the pine trees and keep hoping they remain alive and green here. I try not to drive on I-70 near Dillon and Silverthorne (unlike many that drive from Denver to Vail) because I can only imagine how devestating it would be to be stuck on that slow moving highway during a wildfire. And I feel very fortunate to live in the amazing place in which I live.
(Diane Aronovic is a former Managing Director at Bank of America Securities, and a real estate agent at Red Lady Realty in Crested Butte, CO)
(Diane Aronovic is a former Managing Director at Bank of America Securities, and a real estate agent at Red Lady Realty in Crested Butte, CO)
As I have been noting for the past few months, real estate looks like a great investment currently. Interest rates are low, making it less interesting to invest in bonds than to borrow at these rates (i.e. mortgages). The stock market has undergone a terrific appreciation from the lows, but the economy will need to show much more impressive signs of strength in order for the Dow to rise past 11,000 or the S&P to surpass 1200-1250. I am glad not to have exposure in any other currencies besides the US $ (though I would make an exception for the Canadian $ despite its being referred to as the Loonie).
Here in Crested Butte, CO our home prices are at inexpensive levels relative to the past few years - in some cases prices are the same as they were in 2004. The extra special bonus for local buyers with the volatility we are seeing in the markets come in commodity prices. I'm sure most people are familiar with the price of oil currently trading at around $65/barrel, a relatively inexpensive rate given the fluctuations over the past few years. And yes, summer driving season is coming up, making it less expensive for drivers to take in our amazing scenery in the rental car from Denver or elsewhere. But oil is not the commodity to which I am referring.
Molybdenum is a commodity that is very important to Crested Butte. Mt Emmons, or the Red Lady, is a mountain clearly visible from town and is purported to hold vast amounts of molybdenum, a substance used in hardening steel. The debate over allowing mining to occur on Mt. Emmons has been raging on and off for almost 40 years here. The correction we are seeing in worldwide commodity prices has been sparked by signs that the Chinese are going to start trying to slow down the growth in their economy. And the Chinese have been the ones demanding the most steel, and hence, molybdenum.
So I take heart today with the markets correcting and commodity prices coming down. I take heart that more people will be taking advantage of lower gasoline costs and make it to Crested Butte this summer. I take heart that those same individuals will recognize the value in the local housing markets, low borrowing costs and the fact that we represent a dollar investment. And lastly, I take heart that once they come here, experience the great joy of Crested Butte in the summer, they will look at Mt. Emmons and take heart that molybdenum prices are falling along with the other commodities and Mt. Emmons continue to exist, untouched by the mining companies.
(Diane Aronovic is a former Managing Director at Bank of America Securities, and a real estate agent at Red Lady Realty in Crested Butte, CO)
With the economy just coming out of a deep and scary recession, now is a great time to look ahead and anticipate the next phase. The government has obviously been spending a great deal of money in order to thwart a deeper recession by borrowing, i.e. printing money. When the government does this, the inevitable outcome is that inflation rises. It may not happen for a year or a few, but it is inevitable.
So, what should an investor do in order to maximize profits during an inflationary period? Stocks are usually a good bet, but in this economy, the stock market ran ahead of other markets in 2009, so one would not be buying a relatively cheap market. Bonds are not a great idea, as inflation raises interest rates, which simultaneously depresses bond prices. In other words, if you own bonds and rates rise, the value of your bonds falls.
My idea is to invest in an underappreciated asset that will rise as inflation rises: real estate. As everyone knows, real estate prices are low. They have been low for a little while now, so why is now the time to buy? I look at it like the perfect storm. Real estate prices are low, interest (borrowing) rates are low, and inflation is looming. If you are looking to buy real estate as a medium term investment (3-5 years), I think that now is a great time to invest. You can buy cheap assets with low borrowing costs, with the knowledge that inflation will soon raise both housing prices and interest rates. If I was buying, I would also try very hard to get an assumable loan, so that when inflation hits in the future and you want to sell, you can offer your buyer a low interest rate loan as further enticement.
One important thing is to buy real estate correctly. There are some great opportunities available all over the country, including the Crested Butte, CO area. From ski condos to luxury single family homes, some sellers are eager to sell their properties and these properties can be had for bargain prices. Now is the time to ride that perfect storm and make an investment that will pay off well in a few years time.
(Diane Aronovic is a former Managing Director at Bank of America Securities, and a real estate agent at Red Lady Realty in Crested Butte, CO)
I can give you expert financial advice for your Crested Butte property purchase. Now, more than ever, every property is an investment.
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