Keystone Real Estate: Now is not the time to wait for the market to ‘bottom out’
The good news is that market activity in Keystone and Summit County has increased significantly over the past few years – 2010 was approx 12 percent higher than 2009 and, so far in 2011, it’s up another 18 percent from 2010.
There is renewed hope in our economy that the prospects for all real estate will once again be a solid and wise investment – including resort real estate.
However, with all the renewed interest and activity to purchase resort real estate, I am continually hearing from prospective buyers that “We think prices for resort real estate are going to come down in the future…so I’m going to wait until they do – and buy at the bottom of the market.”
The interesting thing about this statement is that the only way one really knows where the bottom of the real estate market is (including the resort real estate market), is AFTER IT GOES UP. It’s like some people trying to play the “interest rate game.” In other words, there are always those “bargain seekers” who want to wait for interest rates to go down “another 1/4 percent…or even another 1/8 percent” – even when interest rates are already great – currently just over 5 percent.
The problem is that they try to “time it” sooo right that they MISS OUT. Then, instead of going down, the interest rates go up and they’ve “missed the bottom.”
Sometimes one needs to realize how good current pricing really is. Here in Summit County, the market has remained relatively stable compared to many other areas in the nation (Florida, Arizona, Nevada, California – to name just a few) …and, compared to other ski resorts, real estate in Keystone and Summit County is ALREADY AFFORDABLE – because we have not yet reached build-out. However, since prices had gone up so much in 2006 and 2007 (due to EXTREMELY low inventory levels at that time – 3-4 percent), sales prices have already “adjusted” here by approx 15-20 percent – compared to the levels of 2007 and 2008. Therefore, there are some VERY GOOD opportunities to purchase prime resort real estate currently – AT ALREADY LOW PRICES.
Could pricing go down even further? Probably. However, although we did enjoy inventory levels of 3-4 percent in 2006/2007 (and that’s why we had 30 percent appreciation during those years) – consider the fact that right now the inventory levels are about 8-10 percent in Keystone and Summit County…and usually a 10-15 percent inventory level in any given market is considered a “normal market.”
Therefore, we currently have a VERY healthy market and unless inventory levels go up dramatically – say over 20 percent (two times current levels), there is no reason to think that prices will go down THAT MUCH further than they already have. In 2002 – after the tech stock market bottom fell out AND 9/11 occurred, we had inventory levels swell over 30 percent. Even with that, prices only fell about 5-10 percent on average at that time. Since we’ve already experienced 15-20 percent lower prices at present, why would they go down even further? Remember, although most everyone is effected by this economy to one degree or another, we ARE a secondary resort market and most of our owners are professionals, executives and successful business owners who, for the most part, don’t “need to sell” – for the most part, they WANT TO SELL – when the time is right! Therefore, with NO PRESSURE from large inventories AND the fact the most homeowners here defray their costs by renting their properties out with “short term” rentals (so they can still use them as well!), there’s VERY FEW REASONS TO LOWER PRICES THAT MUCH MORE. Therefore, if you’ve even been considering a resort real estate purchase, you may want to “stop thinking and start doing.” It may just be the “right time” TO TAKE ACTION. Also, with loan rates hovering around 5 percent, how long can they remain there? If one needs a loan, money IS available – one just needs to qualify for it – as it should have been before, then we all wouldn’t have been in this financial mess.
Could inventory levels go up further and prices go down? Sure, but WHY WAIT and find out that inventory didn’t go up and prices didn’t go down? Just like with the “interest rate game,” you may find out that your timing was off and you “missed the bottom.” If one can find a property that fits your parameters, if the price is pre-2006′ (15-20 percent off of peak prices in 2007/2008) and if one can get (and qualify for) an extremely low rate loan, then my question would be: WHY NOT?
Remember the words of Warren Buffet, probably one of the most successful investors of our time: “Be fearful when others are greedy and be greedy when others are fearful. What is likely is that the market will move higher, perhaps substantially, well before either sentiment or the economy turns up. So, if you wait for the robins, spring will be over. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.”
His words definitely apply to Keystone and Summit County real estate – there is really “no better time to buy.” Now the question is: “Is it a good time for YOU?”
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