2011 Telluride Real Estate Market Update

Overview of the Town of Telluride and Ski Area

Written by Mike Shimkonis, Broker

Greetings from Telluride (with 30+ inches of new snow in the last ten days!),

In 2011, the San Miguel County real estate market saw a 17% increase in number of sales and a 22% decrease in dollar volume , year over year. The change in dollar volume/sales for the town of Telluride was a 7% increase in sales and a 7% decrease in dollar volume, year over year. For the Mountain Village, the change was a 22% increase in number of sales (because of fractional and Peaks hotel room sales)but a decrease of 40% in dollar volume. The region had its lowest level of sales in terms of dollar volume since 1997! The most vulnerable market segments are large ski homes in Mountain Village that, with limited recent exception, are not selling because they are seemingly overpriced; as well as many luxury condos in town and Mountain Village (although two Castellinas (ski-in/out near MV core) asking $2.775m each contracted in past ten days. At the same time, parts of the market have stabilized. The good news is that the number of transactions occurring in San Miguel County in 2011 is the best since 2007.

Since the downturn for Telluride in 2008, there is an overwhelming sense of a sputtering market with never-to-be-believed or who-would-have-thought new realities. Having a measured, informed perspective moving forward is prudent. Fortunately Telluride real estate sales have been steady this year with nearly an equal number of transactions occurring during each half of 2011. Not bad considering unexpected, major global events (earthquakes, tsunami, Euro crisis etc) caused everyone to pause.

In general, market prices have been reset by 20-40% while others have yet to re-establish themselves (nice ski homes in Mountain Village are moribund; property sales on both the nearby and outlying mesas are slim, luxury condos are only selling when priced to today’s market). Much depends on the property, unique circumstances and motivations in order for a property to sell. At the same time, many properties are still subject to continued pricing pressures.

The Telluride region is at historically high levels of inventory for sale in the marketplace and there are many more properties for sale than there are buyers. Over supply and under demand equals pricing pressure. It’s a great time to be a buyer, especially with cash or being qualified with attractive financing terms. About three quarters of the transactions I handled last year were cash buyers. There is certainly a sense that “catching the bottom” is driving some buyers. Others continue to espouse a “wait and see” attitude. There are yet other buyers who aren’t paying bank-owned prices but still are finding value for properties that meet their objectives.

Unless motivated by a property they can’t live without at a price that demonstrates real value, serious buyers will move onto the next property or wait until another property that interests them comes on the market. At the same time, there are several buyers who are ready to strike based on the few multiple offer situations I have been involved with this past year. There are also sellers wanting to sell who are waiting for market conditions to improve, yet the conditions aren’t getting better and, in certain market segments, likely to drop further. Any solid hint of price firmness might cause these sideline sellers to flood the market and re-exert downward pricing pressure. In the luxury sector of Telluride, price firmness is unlikely to occur in the next 12 months or at least until inventory levels subside. I expected meaningful price reductions in the luxury market to have occurred by now but they haven’t. There haven’t been many price reductions since the start of ski season with high-end properties either.

The uncertain U.S. financial and political picture along with a tenuous global economic situation has created a sense of vulnerability and a stressed global psyche. Conflicting, topsy turvy, volatile data being reported every
month by various governments and research firms is not generating confidence around the globe. Who should
we believe except our own intuition in determining how these global matters will affect our life? A general mood of fragility and lack of solid conviction that we’re going to pull out of this in a positive manner remains in collective minds.

Heading into 2012, there are certainly positive signs locally, nationally and globally. Locally, there are 42 properties currently under contract ranging in price from $69,500 for a fractional in town to $14.9
million for a home in Mountain Village according to the Telluride Multiple Listing Service. 1100+ acres of the Sound of Music ranch on Wilson Mesa recently contracted before Christmas, asking $18.8
million, by a buyer looking to park cash – certainly a positive sign if it sells. And there are several E52 contracts idling and hopefully closing soon. Nationally, the unemployment rate is falling, the U.S. is out of Iraq and the stock market is at promising levels. As long as various leaders around the globe skillfully handle their current situations as well as the unforeseen events bound to surface this year, the global psyche should firm up.

For a seller, if a buyer perceives the property is priced mark-to-market, the property stands a reasonable likelihood of selling in 3 – 12 months with perfect conditions (i.e. all cash buyer or well-qualified buyer working with a reasonable lender, a supportive appraisal and a skilled underwriter). Otherwise they will become part of the overflowing properties for sale with small chance of selling and wasting years on the market. At some point in the selling process, other factors in one’s life — such as the time value of money, the costs of maintaining a property, the opportunity costs of using money for better opportunities, and the importance of “getting on with it” in order to move into another life phase – should create strong enough reasons to get a seller to sell at a compelling price for a buyer.

Please see the subsequent blog posts for specifics on the home, condo and land components of the 2011 year end Telluride real estate market stats.

 

The Tale of Two Towns

Written By Brian O’Neill, Broker

The Historic Town of Telluride and the Town of Mountain Village have always enjoyed vastly different characteristics, yet a very complimentary relationship. The Town of Telluride is the reason Mountain Village is here, but at the same time MV has sustained Town. Full time, part-time and short time residents have varied preferences as to which town they prefer.

Nowhere is this more evident than when considering the purchase of a home. There are more full-time residents in Town, most likely due to the convenience. The higher ratio of part-time residents in MV is commonly due to the increased privacy and sizes of homes/condos. Oddly, these varied preferences lead to cycles in our market.

In 2011, the region saw a decreased dollar volume in sales of 22% from 2010. Homes in Town decreased by only 7% and homes in MV decreasing by 40%. Further analysis shows that home prices in Town appear to have stabilized, most likely due to lack of inventory from decent sales velocity (21 homes sold in 2011 and 26 in 2010), while home prices in MV remain under more pressure due to a glut of inventory from a lack of sales velocity (9 homes sold in 2011 and 20 in 2010). The median home price in Town increased 14% and the median home price in MV decreased 23%.

What this translates into is an emerging opportunity as sellers in MV capitulate to the market. The MV home market appears slower to heed the market due to individual strength and therefore prices for the better products tend to hold firm, but sellers interested in selling will create opportunity along with condominium developers who look towards moving some of their swollen inventory. Once sales velocity improves in MV, the tides will change; MV will see some gentle appreciation and the Town will slow, inventories will increase and pressure will be put on pricing.

1985 – 2011 SALES VOLUME: TELLURIDE VS. MOUNTAIN VILLAGE

 

Some of my favorite things…. Telluride’s big back yard

Written by Damon Demas, Broker

The snowy La Sal Mountains behind Arches National Park, Moab Utah

As Telluride locals, we spend months of our lives within our happy valley, surrounded by the massive and mighty San Juan Mountains. The San Juan’s are a sub range within the greater Rocky Mountain range that forms the nations Continental Divide. Our surrounding landscape is dramatic, with sheer granite walls, intense waterfalls and a multitude of high country streams that form the headwaters of the San Miguel River. The general impression one gets when eyeballing the Telluride surrounds is that of a lush, water abundant, high alpine paradise. However, we that live here understand the delicate balance that exists between the snowpack that hovers above us, providing the illusion of water wealth and the vast desert lapping at our flanks to the west, laughing at our precarious position. It is this juxtaposition, the gradual yet profound transition from mountains to desert, that gives our climate its temperate allure- mild winters and spectacular summers.  This desert influence plays a subtle yet important role in our remarkable weather here. The winters do offer up some powerful storms, yet they are brief and immediately followed by bluebird days of sunshine and warmth. The summers have their afternoon monsoonal downpours followed by rainbows and then crystal clear skies. I have not encountered a better climate to live in, it is as close to perfect as I could imagine.

My wife, Elaine Demas, hiking in Zion National Park - Utah.

Over the past twenty two years I have been exploring the beautiful red rock canyon country to our west. These adventures have proven to be some of the most satisfying of my life. My wife and I have always had a Volkswagen camper which is a perfect mode of transportation and lodging for our desert outings. Our children have accompanied us since their earliest years. The unique rhythms of our mountain existence have typically dictated that we take our vacations away from our valley when the ski runs close and before they open. The months of April, May, October and November are particularly compelling in the desert. The temperatures and setting are a perfect complement to the mountain existence we have been living, the best antidote to the high altitude box canyons that comforts and confines us in Telluride.

Cedar Mesa's Grand Gulch. Hand prints of the ancient ones.

The closest power spot to the west of us is Moab, Utah. This is home to Arches and Canyonlands National Parks. Moab lies about three hours drive from Telluride and is truly one of the wonders of the world with the Colorado River cleaving its way through the red rock canyons, domes and spires surrounding Moab. The biking is unparalleled and the visual panorama is magnificent. This is an easy way to gain an appreciation of the magic that the western landscape holds. We have found that going deeper and further south and west can offer up even more staggering scenery, most of it remote, wild and with varying degrees of accessibility. We have traversed much of the territory served by roads, then hiked into the Havasupai Indian reservation with its 500 foot waterfalls of aqua blue waters that spill into the Colorado River, backpacked sections of the Grand Gulch with its stupendous assemblage of ruins built by the Ancient Ones, slept on the edge of Dead Horse Point overlooking the confluence of the Colorado and Green Rivers, ruined my VW in getting to the Grand Canyons edge at Toroweap Point, hiked the Narrows at Zion National Park and floated the water filled canyons of Glen Canyon (Lake Powell).

Balanced Rock in Arches National Park, Moab Utah.

These are some of the gems that lay within striking distance of our Telluride home base, there are innumerable others waiting for us around every bend of the road or river. Telluride is uniquely poised on the western edge of the San Juan’s, looking west to the smaller mountain clusters of the La Sals, the Henrys and the Abajos- snow covered sentinels surrounded by desert. The main thrust of my message is that Telluride provides a remarkable platform from which to leap into some of the most astounding and inspiring landscapes of the world. This immense and stupendous territory is a hop, skip and a jump away, right out our back door. I came west with the barest inkling of what lay beyond the ski slopes that beckoned me to Telluride and have been happily astounded ever since. Telluride possesses all of the ingredients that provide for the ultimate life style, that is why we are here. However, I have become aware that within our big back yard to the west, extraordinary forces have been at work over eons, the product of which has resulted in a masterpiece of natural beauty- all seemingly meant for our exploration and pleasure. So, if you have thought you are lucky to be here in Telluride, you certainly are…yet there is so much more that awaits you. As this ski season winds down I am already looking west, perhaps a seventy mile float down the Escalante River, ending in LakePowell! Why not? Let’s Go!

Cedar Mesa ruin and sandstone panel.

Joshua Tree National Park.

Cedar Mesa Arch.