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.

There seems to be an inflection point in the media that a resolution to the pandemic is within sight and the country should get back to work.  This change in tone has nothing to do with the fact that COVID-19 is still rising in many medium size cities and rural America but as in all things, perception trumps reality with a movement towards reopening the economy gaining momentum.  The stock markets have reacted aggressively and is nothing less than speculation given metrics which do not support the recent upswing in valuations.

The Vail Homeowner Association (VHA) released a plan for the reopening of tourism.  VHA is not a governmental body but is influential.  The following observations are based upon last week’s Vail Daily press release and my own interpretation of what is happening in the Vail Valley.

Re-opening for Vail is going to be difficult given that our local economy is totally dependent on tourism. The town faces not only all the problems of the rest of the country but will also need visitors to feel safe about traveling.

Airlines are operating at less than 10% of capacity with a recent national poll stating that 85% of those surveyed do not yet feel comfortable about flying.  It’s beginning to look like our summer season could be a bust.  There are significant barriers to travel which was the first to suffer and will be the last to bounce back.  By the end of 2021 Vail could return to 90% of what was normal, with ground transportation as the first phase.  Business travel will follow which should help thaw the public’s resistance to getting on an airplane and/or staying in hotels.  The local economy may begin to recover towards the end of this summer with ski season accelerating the reopening process.  Vail Resorts released an adverse impact earnings statement through the end of first quarter 2021 which means next ski season will be less robust but hopefully not a complete write-off.

Businesses with little or no public interface will be the first to restart because risks can be controlled by temperature screening and social distancing. Public transportation will have to be reinstated and procedures implemented—such as screening, face masks and limits on numbers so employees can get to work.  Eagle County has already adopted some of those evolving procedural changes.

Restaurants, bars and public gatherings will be the last to re-open until the virus spread is contained. This places a heavy burden on our local merchants, but if Vail is going to be a safe place for citizens and guests, there will need to be restrictions.  Sweet Basil is making plans to reopen with the expectation that there could be more than a 50% loss in business while paving the way for other merchants to follow.

As to this coming summer I have no idea what to expect.  Fear and uncertainty may be so imprinted on the public that going to an airport, getting on a plane, renting a car, and staying in a hotel with bars, restaurants, retail and many other summer activities potentially suspended; many will choose staying closer to home.  If all we have to offer is outdoor activities, there are less costly and easier places to visit.  Front Range Colorado and other folk within driving distance will come, but major markets that require airplane travel will be less inclined to visit.  It remains to be seen whether BRAVO, the Dance Festival, our Sunday Farmers’ Market and other special events will be canceled.  Right now, no one is talking but there has to be a significant risk that these events might not happen making for a very uncertain future.

The flipside to the COVID-19 recession is the stock market.  Wealthy families are most exposed to losses which have been mitigated by the recent run-up as irrational as that might seem.  For some, escaping city congestion and contaminants may be compelling but right now not even the Realtors are being allowed access to for-sale property which is a non-essential activity and strictly prohibited.  Whatever happens, this summer will be the first step. Looking ahead I can’t help being concerned about the coming winter season. A Vail Valley ski vacation is expensive so if workplace income or investible assets have been depleted it’s an easy item to take off the list.  The fear of travel will continue to be our biggest threat.

An optimistic prediction for reopening the US economy would be a 90% pre COVID-19 recovery by the end of 2021.  If that happens, the country and destination travel would be doing well.  Vacation home real estate could remain in hibernation for another 15 months, but for those willing to go against the grain there will be opportunities. The economic implications for America in the short run are severe, but together we will ride out this storm while coming out stronger, more efficient, with increased self-reliance, expanding innovation and global competitiveness; but at the cost of a brutal societal and employment reset.

The Vail Valley’s highly affluent customer base is financially deep and should not be underestimated.  The wealthy may come out of this with less, but they will still have money.  An awareness of health safety and time with family and friends will be reinvigorated, with those very special places in the world poised for a renaissance. Quality of life, the ability to work on-line, and the health benefits of getting outside will be the attractions so look for a change in social mobility.  While people may be able to make more money, none of us can make more time.  The clock is always ticking so try and make the most of this very precious resource.

Springtime in the Rockies is a crazy time of year.  It snowed a foot last week, will likely rain this week, with sunny summertime temperatures coming.  The aspen trees are budding and the birds chirping.  While most of us came here for the snow, it’s the glorious summers that make us stay.  Best regards from our family to yours and please think about a visit.  We know getting here will not be easy but if you make the trip we promise the family will not be disappointed.