Greetings from high up the Rockies where summer is in full bloom and the weather magnificent.  We have been getting a lot of questions as to how Vail might look over the next few months given current economic conditions and pandemic social distancing.  Colorado has lifted a number of Eagle County restrictions for a Phase II rollout.  Restaurants and retail are now allowed to open provided social distancing is maintained.  Our big crowd events have been canceled but the season will look far more normal than we expected just a couple of weeks ago.  On Thursday Vail Resorts announced it will begin mountain operations as of late June or early July which is clearly great news.  We assume that means gondolas running and other on mountain activities although that is not yet clear.  As to real estate I had expected the property market to be dead but to my surprise properties are selling with little or no discounting.  Until the inventory accumulation cycle peaks the week of July 4th some of this commentary is an educated guess because like health professionals, I need more data.

1. Stock market indices are confounding. There are no reasons for the recent bull market run other than an anticipation that the economy will start recovering later this year with 2021 even stronger. Q3 data will be sobering with more bad news to follow through year end.  The Rocky Mountain Resort Alliance reports a staggering 48% level of unemployment for CO ski towns.  Corporate America top and bottom line performance along with forward guidance reports will be horrendous despite the Wall Street dream with unemployment at 25% (40M) which may eventually prove worse than the Great Depression. Small businesses are going under at an alarming rate because consumers are not spending money.  TIME to turn all of this around is the enemy because the longer it takes to reopen the economy, an exponentially longer period of time will be required for employment to return, some jobs will never come back.
2. Americans have clearly raised their hands against the lockdown as being worse than the disease. Money for food and rent is trumping (no pun intended) the human death toll along with the disruptions of social distancing. The public is not going to accept another lockdown knowing that the cost will be more sickness and loss of life which will be the price to save our country from ruin while politicians sweep this reality under the rug.
3. High end luxury good spending is driven by confidence in employment income and investible asset performance. Real estate suffers when these elements falter in tandem.  Income will be less for many and in particular for employees in the hardest hit one-third sector of the economy.  Top 10% family wealth has remained relatively intact due to resilient capital markets with many suspicious that the fantasy party just can’t last. I am not expecting much in the way of distress for Vail Valley real estate given current activity and meager levels of inventory.  The rich don’t typically sell during recessions resulting in fewer and maybe a lot fewer homes coming on the market. Buyers who are looking to diversify their portfolio, live in crowded cities with a “get out of town” mind set, and baby boomers who know time is running short will buy for lifestyle and family gathering reasons supported by mortgage interest rates that are headed towards historic sub 3% lows.
4. Investors are waking up to the fact that with enough printed money ($3T and counting) liquidity can trump asset valuation metrics. As the smartest economist I know said “DON’T FIGHT THE FED” with liquidity driving stock market indices to what might be unsustainable levels.  Jerome Powell clearly stated he will do whatever it takes to prevent an economic meltdown on top of the already in place Covid 19 recession, even if that means saddling future generations with mountains of debt and inflation which over time helps lessen that burden.
5. If I were to place a bet it would be on an improving 2020 second half with even stronger growth next year. That doesn’t mean a return to pre Covid exuberance which is probably 4 years out, but a solid reassurance to the public that the worse is over.  Consumer spending drives 70% of GNP.  Confidence has to improve if we are going to get out this ‘health scare recession’ which is a must if we are going to get back on the economic road to recovery.

What does all of this mean for Vail? The rich are getting richer and while they might have less, they still have money. Fear, volatility and uncertainty are today’s distress issues which will lessen over the next 12 months. Buyers who want portfolio diversification and who doesn’t, have a renewed interest in lifestyle enhancement, and understand that they can make more money but not more time, will buy. Real estate has a resurgence coming driven by an estimated ten million home shortfall across the country as construction fell well below replacement levels during the GFC.  Millennials & Generation X number almost 140 million Americans which is twice as large as my Baby Boomer generation, so don’t look for a solution to the housing crisis which just isn’t going to happen.  No growth policies and NIMBY density restrictions will continue to drive prices higher causing future generations to suffer.  The challenge continues to be a scarcity of inventory with affluent areas positioned for the biggest gains due to Top 10% earning price elasticity. If the right property can be found, at the right price, in the right location, with rental income offsets Vail Valley real estate will continue to be an above average performer for reasons further explained on our web site.  While there are many unknows, nuances and narratives that go along with this bold declaration, the data is undeniable given limited supply and expanding household formations.  As to buying real estate during a time of crisis, it is very difficult for most people to go against the grain when the herd is stampeding in an opposite direction.  It takes conviction, purpose, confidence and focus to make major decisions in times of turmoil which also brings opportunities.

I am known as a pessimistic naysayer making me suspicious of most “good news” spins.  Right now, I am more confident about our country than ever.  Americans are innovative, determined, and will rise to the current challenges so don’t bet against them. Our country will come out of this stronger, more efficient, supply chain aware, with an increased global market competitiveness driven by technological innovations. If you can ride out the Covid 19 storm, taking decisive action now will be rewarded so long as common sense and vigilance are maintained.

While many of the summer events that make our resort so very special have been canceled, we will not be completely shut down and hope you will consider spending time in the Rockies during the latter half of this summer.  A new focus on exploring our magnificent Rocky Mountain playground will culminate in an entirely new appreciation of our natural environment so get outside because it’s a beautiful world out there waiting for discovery on this magnificent but oh so small planet called Earth.

After living the Vail Valley dream for more than 25 years I can whole heartedly say that there just isn’t another place I would rather be than among towering peaks, a huge backyard of wanderlust terrain, and cobalt blue skies interspersed with some of the most magnificent Alpenglow sunsets in the universe.

Best wishes and stay safe during this very difficult time and as always, replies and questions are always welcome.

Greg Strahan & Connie Kincaid-Strahan

Lifestyle enhancement coordinators and real estate guides to the Vail Valley.
40 Years’ Experience.  One Billion Dollars In Completed Transactions.  250 Happy Families.