I ran some reports recently to nail down an average price paid on a square foot basis for both homes and condominiums in the Telluride Mountain Village over the past three years.  Here is what I uncovered:

2006 Homes - $674/sf
2007 Homes - $729/sf
2008 Homes - $768/sf

2006 Condos - $707/sf
2007 Condos - $760/sf
2008 Condos - $836/sf

While I concede that 'averages' are not the most statistically significant figures to look at, the trend is still noteworthy and worth noting in my professional opinion.  While the number of transactions in Telluride has dropped significantly, values have not.

The most recent Kiplinger's Letter provided a good history lesson into some of the challenges faced by incoming presidents.  These appear to be very scary times but I remain optimistic for our future:

For a parallel to the challenges Obama faces as he assumes office…
You don’t have to look as far back as FDR and the Great Depression.
Most presidents of the past 60 years have taken the oath amid varying degrees of economic stress. Though the present situation may turn out to be more dire than what other rookie presidents faced, their crises were very real at the time.

Truman had to guide the nation from a wartime to a peacetime economy, shifting from strict controls to a free market. The transition didn’t go smoothly.

Ford and Carter were dogged by problems mostly not of their own making
but spurred by a 600% hike in the global price of petroleum from 1973 to 1980.

The presidents Bush, father and son, took office at the end of expansions
that eventually collapsed of their own weight in late-stage speculative excesses. Both suffered the hangovers. What’s more, both had the misfortune of presiding over recessions when international crises further weakened the U.S. economy.

Reagan faced an economic crisis most similar in magnitude to today’s.
Unemployment was a nasty 7% and climbing fast. Inflation had been running at 12.5%. Interest rates in the high teens crippled residential real estate and business investment. The stock market had been in a rut since 1966.

The cost of the cure was high. The Fed tightened the screws on credit, pushing the economy into the worst recession since the 1930s. Despite stimulus from deep cuts in tax rates and a military buildup, output still took a nosedive… down 5%-6% in back-to-back quarters. Joblessness hit almost 11% in late 1982. Tax receipts fell but not spending, producing a modern record deficit...6% of GDP.

In short, Reagan inherited a sick economy that worsened before recovering.
But recovery did come…in the middle of his first term…and voters credited Reagan with playing a key role in bringing it about, gratefully reelecting him in 1984. 

Obama will likely experience something similar with this difficult economy,
which will probably worsen before growth resumes. Today’s unemployment rate of about 7% will hit at least 9% and may approach the double-digit peak of 1982. The contraction will probably bottom out by midyear, but the ensuing growth will be weak for another year or so. As tax receipts again plunge and costs zoom, Reagan’s record federal deficit will be eclipsed, topping $1 trillion…7% of GDP.

Like Reagan, Obama has tax cuts in his quiver, and he will use them.
But most of his faith is in the stimulus of infrastructure spending
on transportation, alternative energy and public school renovations…projects he views not as New Deal-style make-work, but as investments in the future. 

Obama will be judged on how well the economy is nursed back to health
by the White House, Congress, the Fed and American business leadership.

This will take time, but all recessions eventually end. What’s more, since they’ve never run their course without a variety of remedies being tried, no one can be sure which treatments work and which might prolong the slump.

On Inauguration Day, the new president and all Americans can take heart:
The challenges ahead are not unprecedented in recent U.S. history.
The nation has met and matched equally daunting crises before, finding a way to get back on track. There is no reason to believe America can’t do it again.

I thought some of you might be interested in having the year end statistics for MountainVillage.  The statistics from the Mountain Village Design Review Board are attached below this text.  You will see from studying the report that we have 1,742 developed units in Mountain Village.  This includes single family homes, duplexes, condos, hotel units, etc.

To the best of my knowledge we only have three properties in the Telluride MountainVillage that have a foreclosure sale date that has been set.  One is for the LaMelza property at 106 Highlands Way.  The second is a Northstar unit on Adams Ranch Road.  Lastly, the Allegheny Lodge on Rocky Road (off of Benchmark Drive) has a foreclosure sale date in February.  As many of you already know, the Courcheval property on Mountain Village Boulevard is included with the Rosewood Hotel loan (Country Club Drive).  That loan is in foreclosure and Chapter 11 but with no foreclosure sale date set as of yet.

You can see from the chart that there are 237 undeveloped single family lots and I am not aware of any lot that is in trouble excluding the Rosewood site.  With 237 vacant single family lots plus 1,742 developed units we have over 2,000 properties in MountainVillage diversified into an incredibly broad ownership.

I have done some limited research into single family homes in Mountain Village that were for sale that might have had troubled loans including delinquencies, defaults, etc.  I discovered two houses that were financed by Indy Bank from California that are located at 312 Benchmark and 159 Benchmark.   Right now these loans are not in default and 312 Benchmark is likely to be transferred to a new partnership in the near term.  159 Adams Ranch defaulted on their loan in November and they received a one year extension from their bank in December, but are still under a lot of pressure to sell.  145 Russell Drive also defaulted on their note in November and ownership was transferred to the first lien holder.

The profound thing that I discovered in my research is that there are many more homes that are for sale that have no debt on them versus homes that have a problematic loan.  Just one more sign of the staying power our seller set possesses.

Please let me know if I can provide additional information on any of the properties mentioned above.

drb_stats_12-08_year_end.xls
File Size:	37 kb
File Type:	xls

Download File

---

My brother, Bill, is a man with a boundless heart, a brain like a sponge and the writing skills of an experienced novelist.  He has started to make blog entries to the web site at Shaker Elementary School, where he is currently the principle.  The following was included in one of his recent posts and I thought it was worth sharing.  Enjoy, and Happy New Year!!

Asset Preservation - an investment philosophy that places great emphasis on the protection of wealth that has already been accumulated 

In recent times, the term asset preservation has not been as commonly used as it once was.  With historically low interest rates and the ability of anyone with a pulse to secure a loan, much more common terms in recent years have been appreciation and guaranteed gains.  Now that the spigot has been shut off and investors everywhere seek a safe haven for their wealth, asset preservation is once again a popular phrase. 

Several years ago Warren Buffett prophetically warned the investing class that the financial markets were headed toward a period of uncertainty.  What was his recommendation to investors at the time?  Real estate.  Specifically, real estate where the supply is tightly controlled and the demand is consistent (or growing).  He included a strong word of caution at that time with regards to supply, warning investors to be aware of any new flood of inventory that would alter the supply/demand ratio.  Telluride is the exact type of market Buffett was referring to.  We are surrounded by public lands.  The Town recently purchased the 570 acre gateway to town, forever protecting it from development and a flood of new inventory.  The private land that does exist in the region is subject to the rigorous zoning and development regulations that are in place in San Miguel County, with virtually no opportunity for new subdivisions or development plans.  So, the supply is all but fixed while the demand continues to grow from ever more diverse sources.  Several new hotel operations – including Capella Telluride and lứmiere from Valencia Hotels – will increase Telluride’s exposure to international travelers and investors at a pace never before seen. 

When the national market entered a recession after the attacks of 9/11 and the bursting of the dot com bubble, values in the Telluride real estate market did not follow those trends.  Between 2000 and the end of 2002, the average selling price for a home in the Historic Town of Telluride increased by 28%.  We are seeing that again today in 2008.  While transactions have decreased dramatically, values in both the Town of Telluride and Mountain Village have increased slightly.  When the national economy thrives, values in Telluride outpace the growth at an even larger clip.  When the national economy goes soft, values in Telluride hold strong. 

People buy in Telluride primarily as an investment in lifestyle and family.  They buy here for the unparalleled natural beauty and the rugged yet sophisticated setting, for the historic charm and the contemporary luxuries.  But for those investors who cannot help but focus on the financial aspects of a deal with their thoughts always on asset preservation, then I submit the paragraphs above.