Since I am a numbers person, I always like looking at numbers to examine what is going on in a market. Whether it's looking at historical trends to predict future trend lines, or just examining numbers to be able to gauge the past, numbers never lie. So let's take a look at what the Crested Butte real estate sales number show us.

In 2005, CB real estate had a banner year, closing $333 million in transactions. We all know what happened next, after the Mueller's 2005 purchase of CBMR (as subsequent sale to CNL) and the economy's downturn, the numbers all went south. 2006 yielded a total of $209 million in transactions, 2007 $200 million, 2008 $114 million, 2009 85 million and 2010 bottomed out at $84 million in sales. 

I say bottomed, because the numbers are starting to show that we are coming out of the sales slump and sales numbers are starting to increase. As of the end of September 2011, we have had $82 million in sales, vs. $61 million for the same period in 2010. New construction has been sneaking into our lives again with a number of new projects in town this summer, including a spec house that is under contract while under construction, with a list price over $1.5 million. 

I believe this shift in the trend line is something to watch. After this summer's buyer's frenzy of high end homes in town, the fall has had some sales of high end homes in and outside of town and on the mountain. If high end buyers are getting their feet wet, it bodes well for the middle market buyers as well. The people who have the money usually set the buying trends, and it seems they are ready to put their money to work in our market. Whether it's the lack of good options in other asset classes, the feeling they have been under spending for a few years, or just the attractiveness of our valley, the trend is up. 

In Crested Butte we really haven't experienced an influx of foreign investment that has been rising in other areas such as Florida and Las Vegas, picking those markets up off the bottom. Foreign buying makes good sense though, and we would welcome it. We are often compared to European ski towns due to our beautiful valley's scenery and remoteness. It will be interesting to see the aftermath of this August's USA Pro Cycling Challenge and the amazing televised shots of the pro riders in the Crested Butte area and how it effects an increase in visitors, and presumably home sales down the road. 

It's nice to be able to report that things are picking up, hopefully we will see this new trend for a number of years. 
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Although economic uncertainty is proliferating in our country, high end homes in Crested Butte, CO are selling. People are realizing that there are bargains to be had, and they are jumping on them, mostly with all cash deals. For example, 3 houses on Butte Ave, within 1 block of each other are under contract with listing prices that range from $1.7 million to $2.5 million. Additionally, a house on Teocalli Ave that is listed for $2 million is also under contract. These houses all have in common fantastic views of our beautiful valley, as well as being larger homes on larger than typical lots. There are more houses in town left to sell, but the time seems to be right for people sitting on cash to start spending. 

In the news, we are also hearing about the declining supply and rising prices in the new home market. The other side of the coin is that we still have amazing deals on vacant land and ski condos, and the supply in these markets will hold us for quite a while. In general, it is nice to see our high end selling and to see people holding cash deciding that now is a great time to start putting that cash to use in our special part of the world. 

On CNBC.com today, there is a blog about foreign investors taking advantage of the relatively low prices in the US housing market. I have been seeing this trend for a while and I couldn't agree more. It's nice to see that overseas investors are seeing the value in both real estate and the dollar at these levels. Foreign investment will continue to grow in volume until the paradigm shirts. Unfortunately for Crested Butte, we are less well known to overseas investors, but if they are able to find us, they will certainly get better values than at other ski resort towns. 

I think that overseas investors are going to be able to get some great deals in the market, especially when they are all cash buyers, Our current lending channels are so illiquid that it will be difficult for US based investors to get the same deals. It will help the market rebound however. If only credit were to loosen so that US and overseas investors were all able to take advantage of today's low prices. 

Mining company withdraws
Great news for Crested Butte Realty! Yesterday, we in Crested Butte got the news that Thompson Creek Metal Company, Inc has Tentatively withdrawn its agreement with US Energy Corp. to mine Mt. Emmons (aka red Lady) for molybdenum. I think most locals were very excited about this news, as although it would greatly increase local jobs, the threat to our outdoor lifestyle would be threatened too severely by a mining operation so close to town. One of my biggest concerns was the effect the mine could potentially have on our fragile ecosystem, and more specifically, our water supply. 

My understanding of the situation is that although US Energy (a relatively small company) could still partner with a larger entity and a mine could be a threat to Crested Butte. But now the likelihood of that happening is greatly diminished. One of the reasons for my being skeptical about another operator is the past 3 failed attempts to get this highly controversial mining operation welcomed by the local townspeople. Seeing other mining operation as one drives throughout the state, one appreciates the lack of one in our part of the state. I just drove through Somerset yesterday, the site of a large coal mining operation, just 30 some miles from Crested Butte. Watching the endless number of train cars waiting to be filled with coal, and then snaking through Glenwood Canyon on the way elsewhere is somewhat awe inspiring. Viewing the enormous piles of coal waiting to be loaded on more train cars makes one wonder about the reality of similar amounts of molybdenum through our little town, and how that would have effected our lives. It's nice to now not have to consider this, and I am happy that Crested Butte will retain its status as one of the most beautiful parts of Colorado without a mine. 

As a real estate agent, I think the news is especially good. If people were hesitating to buy property in and around Crested Butte due to the threat of a mine, it's no longer an issue. We won't be having exploratory drilling accompanied by the constant whir of helicopter rotors this summer, or now hopefully ever. Our water supply, though never officially threatened, will not be actually threatened. And as the Wildflower Capital of Colorado, we will keep from becoming the Molybdenum Tailings Capital of Colorado. 

Ok, I may be jumping the gun here a little, but with the majority of real estate people I talk to starting to get positive about the upward trends in real estate prices, the lack of building might, in the not too distant future, be a problem. Housing starts have just about stopped. 

The reality is that the lack of new construction in the past few years may cause a shortage of housing in the future. Of course, there is a supply of listings the market has to get through before we have a proper shortage, but the quality of those homes are typically quite different from the new homes that are more universally desirable. Our foreclosures tend toward the lower end, are not centrally located, older and more cheaply built residences. Being a destination resort, many of these are homes that owner let go before they would their primary residence. We are already seeing those properties being snapped up, at least the ones in good locations like Mountain Square. The older ones are languishing and are still available at low prices.

So what happens with the lack of new construction, and how does this correlate to Manhattan real estate? As prices stabilize and even rise (due to the shortage of new construction) people may be content to stay in their current residence and add a second home in a resort market. If you can be financially comfortable in your home, why not splurge on a second home in an area that hasn't seen the uptick quite yet? Actually, there are a number of higher end, nicely finished homes here in Crested Butte available at relatively low prices compared to the peak of the market. Our market and town is so small that once these residences are purchased, we may also experience the shortage in quality homes available that the big cities are experiencing. We still have lots of buyers looking for a specific property that does not currently exist, be it new construction, a smaller footprint or more energy efficient. Additionally, our town council is debating insisting that any new annexations into town comprise 70% local residents. All this means that there won't be any more annexation into town, further increasing existing home prices. 

The primary point I am making is that the lack of new construction will have the long term effect of raising prices. Undoubtedly, once the existing properties are sold, we will see a boon in new construction, and lot represent a very good value right now. 

Charts are a terrific tool for visualizing trends, long term or short. I am looking at these 3 charts as a tool in showing how real estate may go over time, especially in comparison to stocks and bonds. The top chart shows a general REIT index in its 2 year cycle (note: it's not easy to chart a national trend, so this chart is a good representation of general, nation real estate pricing). After an obvious, sustained fall, prices in the chart are just starting to break out of the range of 4.8% to 2%, yields are now in the middle of the range: around 3.3%. They are showing a recovery from the intentionally shocking time during the 2008 financial crisis. Rates are still relatively low, which bodes well for real estate investors looking for, and hopefully qualifying for, loans. The third chart is of the S&P 500 index. This is the best chart for looking at stock prices as it is much more comprehensive than the DJIA. The chart shows it current range of around 700 to its current place over 1000. This is around a 40% recovery off the bottom

My point is that as an investor, I don't like to buy the high or sell the low. The biggest problem is determining when you are experiencing them. As we recover from the financial shock of the past year, these charts make an excellent case for real estate investment. Bonds and stocks have already made recoveries off their lows. I like to wait for pullbacks before putting money to work in a recovering market. Bond yields are at very reasonable prices which translate to around 5% for a mid-range 30 year fixed loan. This coupled with real estate values still being at their lowest levels in years, makes a case for a real estate investment rather then putting money into stocks and bonds. The first chart shows just the beginning of a bounce off the lows, exactly the time I like to invest, since it shows that a recovery is well under way.

So, I think it's a good time to consider investing. The values in the Crested Butte market are in line with the REIT chart, they have come down considerably in the past few years, and second home markets haven't seemed to experience the same bounce that primary home markets have experienced lately. We are through the summer, but I feel it is just the beginning. After all, charts don't lie.