By Karen D. Lorentz posted Apr 11, 2012
Photos by Steve & Susan Pearson (Above) Before photo: This chalet built by Killington sold for a package price of $20,000 including foundation and furniture, in the 1960s.
With low interest rates and prices still below recent peaks, most real estate brokers in Killington have been busy and are very optimistic that 2012 activity will trend upward once again.
“Price is definitely driving sales,” noted Judy Storch, owner of Killington Valley Real Estate. “There are great deals out there, and long-term seasonal renters are aware of market trends as are others interested in the area. We are very busy and seeing many cash deals,” she added.
Others agreed, citing a national housing market recovery, faith in the future of Killington, and the historical fall sales pattern as further reasons 2012 may top previous years since the housing bubble burst in 2008.
Year off to a good start
In their first quarter review of the real estate market in Killington, Heidi Bomengen and Ted Crawford, co-owners of Prestige Real Estate, noted that in spite of the weather and shortened ski season, “The numbers of real estate sales and total market revenue are slightly higher than the first quarter of 2011 which represented one of the best skiing quarters in a long time.
“There were 13 property sales in the first quarter of 2012, one more than last year and total market revenue was a little over $200,000 more than last year for the same period. For everything nature threw at us this year, this has to be viewed as a very positive sign for the Killington real estate market,” they note.
Crawford also observed that the 2011 real estate market experienced “remarkable improvement” in sales volume and revenue compared to 2010, which in turn was up over 2009. “The number of 2011 sales was up 33 percent over 2010, and total market revenue was up 58 percent. Transaction volume seems to have hit bottom in 2009 with a steady
rise over the past couple of years while market revenue bottomed out in 2010. Transaction volume was the highest it has been in five years and revenue was the highest it’s been in four years,” he added.
Bomengen said that 2012 first-quarter property sales saw 13 properties closed from January through March although the mix was different (8 condos and 5 homes versus 10 condos and 2 homes in 2011).
As of March 31, there were 21 properties under agreement (for second-quarter closings) as opposed to 20 in 2011, she added.
However, the 2011 second-quarter closings were the highest of the year. Calling that “an anomaly,” she said that in a typical year, the fourth quarter is the busiest with folks closing in time for the ski season. Based on that unusual occurrence for 2011 and various data the firm has analyzed, Bomengen and Crawford observe that “patterns might be changing.”
But they also note that current values are stimulating the desire to purchase for those who are financially stable and who feel good about the future of Killington, thus believing 2011’s fourth quarter rebound after Irene could occur again this year.
Ski Country view
Lenore Bianchi, principal broker and a co-owner of Ski Country Real Estate, is “very optimistic” that the activity level will continue to pick up this year, noting the unusual 2011 best second quarter does not worry her because the historical pattern of a busy fall season didn’t happen due to Tropical Storm Irene.
She attributes the current uptick in business to the time of year, noting people are busy at Christmas and in January tend to ski and go home because days are darker. But as days grow longer with more sunlight, property showings trend up and activity levels increase in February and March through Easter, she said.
“They still ski during the day, but showings definitely get busy around 3 p.m.,” Bianchi said, adding, that pattern has continued and the “last three weeks were really busy” despite not being a typical snow year.
Bianchi cited the news of the start of a national housing market recovery as a positive influence, noting, “It actually began six months ago, and we usually lag the national trend by six months.” So the “very good and in some cases great values” are stimulating buyers who are feeling financially secure and wanting to take advantage of low interest rates, she added.
Bianchi said that property showings slow in the second quarter with the end of the ski season but start to pick up again in August. After Labor Day begins another slow time as kids go back to school. During foliage, activity picks up again, contributing to the historically best fourth quarter as buyers want to be in for ski season. With this year’s good start, Bianchi expects the recent pattern of progressively better years will continue.
Tricia Carter, also a broker and co-owner at Ski Country, is “very optimistic” that the pattern will continue. She believes 2011’s last quarter broke with tradition because “Irene affected people throughout the East. For people without power for several weeks, the last thing they were thinking about was looking at real estate,” she said.
Carter cited patterns of family, intergenerational, and retiree interest in vacation properties as reasons for optimism, noting “Many people like having something tangible to feel good about versus investing in the stock market… Parents are living here in the summer but Florida in winter when their children and grandchildren use the home to ski.”
She also stressed the “potential for the resort and town” as factors that engender interest in Killington real estate, saying she sees “the beginning of an expansion. There is a lot going to happen with the future village and mountain expansion, including the new peak lodge and eventual interconnect with Pico. The central Vermont location is convenient and there are plane, bus and train services. The new Streetscaping of Route 4 and bring a sense of arrival. There are many other things to do outdoors as well as cultural and arts opportunities and the revival of the summer scene,” she said, noting “excitement and momentum are building. Killington has so much to offer now and in the future,” and that bodes well for continued interest in vacation properties.
Carter also noted that “interest rates in the 4 percent range are close to the lowest they’ve ever been,” recalling rates of 10 to 16.5 percent plus points in the 1980s and 6 percent range a few years ago.
Steve Reilly, senior loan officer at Caliber Funding in Rutland, said that currently rates range from 3.375 percent for a 15-year fixed loan to 4 percent for a 30-year fixed (no points) for those with the best credit.
Judy Storch, who is in her 40th year selling real estate, recalls interest rates as high as 18 percent in 1982 when the condo boom started.
“There was a time in the early 1990s recession when prices were lower than now, so prices are not quite the lowest they have ever been. But where we are seeing some pricing at historical lows, there are some real steals. Bargain hunters at the low-end and high-end have done the best,” she added.
A case in point is a one-bedroom Mountain Green condominium that recently sold for $35,000 on a short sale. “They originally went for $70,000 to $71,500 at preconstruction pricing. Other one-bedrooms recently sold in the high 30,000s and were not short sales,” Storch said.
A large, three-bedroom, two-bath, two-level Mountain Green unit that sold for $155,000 in 1984 (12.5 percent mortgage) recently sold for $117,500. The buyer got a bargain price, lower interest rates, and a nice unit, Storch commented.
But she added that the owner of 28 years also had the enjoyment of using it, noting “Return cannot just be measured in dollars. Most people purchase vacation homes for personal use and don’t look at them as investments, and today that is even more true.”
Additionally, if there were rental income, as is often the case with Mountain Green units, a lower price can help offset the capital gains tax incurred on the depreciated cost basis.
Luxury properties also continue to sell. Bomengen said that trailside Topridge duplex homes constructed in 2002-03 cost $525,000 to $550,000 while those built in 2005-06 peaked in the $800-900,000 range. Recent sales have generally been in the $600-650,000 range, so some have been bargains while others have actually appreciated in value.
Value and appreciation
Brokers observed that while lower than the peak years of 2005-06, many recent prices have not dipped to historical lows. “We have seen appreciation – it depends on when, where, and what was purchased. While an owner buying at the peak price has lost ground, many who purchased earlier have gained,” Storch said.
In 1983, a pre-construction Highridge two-bedroom unit went for $127,500 and the same unit sold for $155,500 in 2011 while a one-bedroom unit that was $91,750 (1983) sold for $130,000 in 2011, she noted.
In 1984, the new ski-on/off Sunrise development near the base of Bear Mountain featured 1-4 bedroom condos ranging from $120,000 to $260,000. They now sell for $100,000 to $325,000 although they went as high as $400,000 in 2006, Bomengen noted.
New Telemark Village townhomes, a project just north of Bill’s Country Store on Route 100, sold for $125,000 to $149,000 for 3-level, 2-bedroom, 2-or 3-bath unfurnished units in 1984. A unit sold for $127,000 to $132,000 when prices dropped in the early 1990s, noted Peter Metzler, a broker and co-owner at Ski Country. In 1999, they increased from $140,000 to $154,000 in a matter of months. Then prices peaked at $310,000 in 2005 and one 3-bath unit recently sold for $262,000, he said.
“The precipitous drop in prices has stopped and transaction volume is up, but it will take a few years for prices to trend back up, Bomengen opined, noting she believes pricing will continue to experience “a slow recovery.”
Storch observed that the era of “flipping is gone, but there have been very few foreclosures although some short sales are occurring. The number of cash sales have been up with around half being cash deals,” she said.
Ted Crawford said he continues to see people pay cash for property, particularly among buyers reluctant to invest in the stock market.
Bomengen added that, “Most cash sales are not going for a price higher than the last comparable sale.”
While most brokers are optimistic that real estate activity will continue its upward trend in 2012, they don’t see the peak prices or year-round non-stop activity of 2006 repeating.
“The supply of condominiums still exceeds demand by a wide margin, but the gap is narrowing. If this trend continues, it should eventually result in less pressure to reduce prices below the last comparable sale. However, it is likely to take at least another year of solid sales, to see this affect,” Crawford said.
He added, “The inventory of homes represents more than a three-year supply. With the average listing price at $578,000, the abundance of supply will most likely continue to force lower prices for Killington homes for at least a couple more years,” he said.
Brokers noted that financing became a major challenge in late 2011 and into 2012 with a tightening of standards causing several deals to fall through. Additionally, some
lenders no longer granted conventional loans on condos based on an erroneous belief that they are condo hotels and therefore do not comply with Freddie Mac or
Fannie Mae standards. However, other lenders are easing that situation with condo loans.
A second challenge concerns obtaining a property appraisal that is higher than the sale price of the last comparable property sold. “All of the appraisers with whom we have spoken expect to continue to designate the market as ‘declining in value’ in 2012. This can keep prices from rising and makes a cash offer particularly appealing to sellers and a good move for buyers looking for a good deal on their vacation home,” Crawford concluded.