WHY ARE OWNERS SELLING AND WHAT IS THE PROCESS
When owners decide to sell, their thought process typically follows this emotional pattern. Buyers tend to be in the mid-fifties and sell in the 70’s. After the initial purchase the family uses the property 2-4 weeks a year for about 10 years. Years 11-15 is when conflicts begin to arise with use declining due to changing family dynamics, career entanglements, ageing children the arrival of grandchildren, physical fitness and other emerging conflicts. Years 15-20 most families rarely use the property where what once started as a dual benefit stream purchase transforms itself into just another portfolio asset. Elderly parents know it is time to sell but are reluctant to do so with given nostalgia and fond memories of younger years and time with family and friends who are now too busy to visit. With the owners now in their 70’s altitude, fear of getting hurt, retirement and with few visitors, they decide to sell which doesn’t come easily and not without the urge to test the market with a high price because they are not in a hurry and feel that a buyer will have to pay if they want their very special place; like children theirs is special the best looking kid in class.
On average it is not unusual for homes to stay on the market 1-2 years which mostly sell between June and September. While 30% of the inventory goes under contract during ski season these tend to be ski proximate or walk to lift condominiums. Sellers oftentimes miss the summer selling season due to unrealistic pricing and/or dated condition forcing them wait until that following summer window reopens which is the reason for the high number of days on market. It takes 9-15 months for sellers to test the market, accept the fact that one of their prized possessions will soon be gone, while settling on the right price which is why new listings are problematic for our buyer clients.
During the Great Recession the market went illiquid starting Q1 2008 and did not really begin to percolate until mid-summer 2010. Rich families don’t run out of money in months but rather years with prices dropping by about 17% during the Great Recession. Most owners were not willing to sell nor did they need to at highly discounted valuations with the market suffering 30-60 months of gridlock until the recovery set in. Ski proximate real estate has regained all of the Great Recession discounting and are in fact setting record 20%-25% premium highs. If you have the holding power very few owners have ever lost money in Vail or Beaver Creek and have in fact made a surprising amount of money on these homes which was not their original intention.
If you want to know how a world class resort market is going to do over the long run, study the traffic generator which in our case is the ski company. If Vail Resorts increases demand for their products, goods and service (VR has 38 separate operating entities) and the industry has fixed supply (ski property may be some of the rarest real estate in the world because there are thousands of miles of beaches, thousands of golf courses, but only 3 world class ski resorts in the US) then everyone wins including vacation home owners, small business owners, locals, restaurants and real estate in general. If the ski company hurts demand as American Ski did when it laid off 25% of their Steamboat workforce resulting is a 13% drop in property values, we all lose. VR is a Fortune 1000 company with deep pockets, dominant market share, experienced personnel, superior management and the largest market share in North America including 40% of the CO market alone. We expect their success formula will continue with continuing dominance of the industry worldwide.
This is just a smattering of the issues that drive our vacation home investment advisory and consulting service platform and welcome your questions of which there are sure to be many.