Greetings from Telluride (with 30+ inches of new snow in the 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.
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