Brianna Anthony and her boyfriend, Keenan Montague, have lived in three homes over the past six months in Telluride. The five-bedroom house that the local bartenders rented with friends sold last fall, and the new owner, an East Coast doctor with a home in nearby Mountain Village, launched a major renovation. They moved into another house, which this spring sold — sight unseen — for $2.2 million. And they moved again as that owner began renovations.
They found a rental home in Rico, about 30 minutes away. And, yes, that house just sold. Now they are looking again for a place to rent.
“I feel like Telluride is becoming a community where locals are not welcome but the people who are there six weeks a year, they are welcomed,” Anthony said. “What happens when the only people in these ski towns are here for a month or so a year?”
When Anthony and Montague were living in a long-term rental home on the east side of Telluride last fall, they watched four long-term rental homes sell and get ripped down to studs as new owners renovated. The renters in those homes, some of whom lived in Telluride for decades, left town, they said.
“The culture is definitely changing in Telluride,” Anthony said. “I wonder if these new owners know the dramatic effect they are having.”
It’s not just Telluride. Across Colorado’s resort communities, a real estate frenzy is breaking records and transforming cultural landscapes. The record-setting pace of sales over the past year has turbo-charged a trend that has unfolded in recent years with more urban refugees relocating to mountain towns. This resort-home mania has happened before — and it didn’t end well.
In the few years leading up to 2007, mountain real estate brokers trumpeted their successes like a broken record. And, in fact, every month, quarter and year did break a record, thanks largely to loose lending that pushed ill-qualified buyers into homes with no money down and principle-only mortgage payments. When that lending fiasco fell apart, a yearslong recession and mighty crash in real estate values followed, leaving long-lasting impacts.
Last year’s real estate sales in Colorado’s high country looked eerly similar to 2007, with every month in the last half of the year setting sales volume and pricing records. More than $15 billion changed hands in property deals last year in eight resort counties, a historic 61% increase over 2019 despite a nearly three-month shutdown of all real estate activity. Land Title Guarantee Company reports show Eagle County with a 153% annual increase in sales volume in 2020. Pitkin County was up 129%. Sales in Telluride more than doubled, as did sales in Crested Butte.
Homes are selling sight unseen for highest-ever prices. Ultra-wealthy buyers, flush with 2020 stock market millions and the recognition they don’t need to be in an office, are flocking to mountain communities. Those who are not quite as rich are swarming into downvalley enclaves. Prices are at all-time highs while supplies of homes are at all-time lows. It’s a frenzy that leaves even the hardened longtime locals and brokers agape. And it’s forcing some locals to leave, which suggests that the real estate boom of 2020 in the high country could forever alter the cultural identities of mountain towns.
“It’s wrenching what’s happening in our communities,” said Amy Levek, executive director of Telluride’s Trust for Community Housing and a former mayor of the town, which has seen a mass migration of newcomers replacing longtime locals. “I don’t know of anywhere that isn’t saying, ‘What are we going through and what are we becoming?’”
Levek counts about 125 Telluride workers who have lost their rental housing in the past year because it sold. She talks about urban newcomers shopping for homes with a budget in the several millions. If they can’t buy, they are ready to rent for as much as $15,000 or more a month. That shift has left local employers struggling to find workers.
“There is a real shortage of people here right now,” Levek said, describing how the town of Telluride and San Miguel County are raising their subsidies for affordable housing to “obscene levels” to help offset the sudden spike in both homes and construction costs.
“I hate to be negative, but we are in a bad place,” she said. “The pace of change is so extreme. From month to month, we are seeing costs go up and our community change and our culture change, and it’s unsettling.”
Wealthy urban refugees spending big
The wealthy from big cities such as Chicago, New York, Miami and Dallas are driving some of the biggest shifts. In Eagle County in 2020, there were 83 deals for more than $5 million each, up from 40 in 2019. In Pitkin County, 51% of buyers were from out of state, marking the highest percentage of non-Colorado buyers in recent memory. The majority of out-of-state buyers in the Roaring Fork Valley came from Texas, followed by Florida, California and New York.
And those out-of-towners were dropping big dollars. In 2020, Pitkin County logged 106 deals for more than $10 million each, up from 27 in 2019.
And so far this year, homebuying in Pitkin County’s Aspen and Snowmass “has been off the charts,” said Tim Estin, a longtime Roaring Fork Valley broker with Sotheby’s.
From July to December, real estate records were set nearly every month in Aspen and Snowmass.
“A constant refrain last summer and fall was this can’t possibly sustain itself,” Estin said. “But at present, it is and even more.”
Estin keeps close tabs on soaring prices. The average selling price for the 30 three-bedroom condos that sold in downtown Aspen in April was $2,425 per square foot. “A staggering number,” he said.
As the average price for a single-family home in downtown Aspen reached $12.6 million last month, sales have exploded in Snowmass, where the average selling price for a home was $4.9 million in April.
Estin remembers the crash of late 2008 and 2009 in the valley, one of the few moments when Aspen real estate stuttered.
He remembers watching real estate markets collapse in other locations but joined just about everyone in the Roaring Fork Valley in thinking that the bursting bubble would not reach Aspen and Snowmass, where real estate values have never endured a sustained decline.
“It didn’t look like anything could affect us. The best experts missed it,” he said.
This time, he’s looking hard for signs of another collapse. Maybe it could be inflation. Historically low interest rates could climb and chill the market. Any time every financial metric is pinned at record levels, it’s safe to expect some sort of correction or downturn, he said.
“At some point, things have to change and they will change,” said Estin, who suspects that the loosening of pandemic restrictions will sustain a strong economy for the coming months, maybe even a year or two. “I look back at last summer, and everyone who was buying, they were sort of fear-motivated. They wanted to get out of urban areas and come here to open spaces and beautiful country. Now, the motive is not fear. It’s relief. It’s almost like a celebration.”
Home and land sales in Telluride and Mountain Village were 166% over the five-year average in 2020, with prices climbing more than 30% last year.
TD Smith moved to Telluride in 1971 when residential lots were $200 and any house in town cost $400. Like other brokers in resort communities, he has been selling a record amount of vacant land as wealthy buyers search high and low for a dream home that isn’t available. That means architects and custom homebuilders are lining up jobs that are several years out.
So, buyers in recent months are scooping up older properties that can be remodeled and renovated in six months, without having to spend years pushing their projects through local approvals and waiting for builders and designers, Smith said.
“I’ve seen a lot of ups and downs here. I know the bubble is not going to last forever. It never does,” said Smith, who has been selling real estate in Telluride and Mountain Village for 40 years. “We are a small community and we have never had a lot of inventory. But demand has always outstripped supply here.”
Hunting for signs of a bursting bubble
When prodded for signals that could trigger a market correction or slowdown in the frantic pace of sales, brokers who lived through the Great Recession have some ideas. They are quick to point out that lending in 2020 is much stricter than it was in 2007, when entire financial markets were supported by bad mortgages.
They point to increased regulation possibly slowing real estate spending by the very wealthy. The Biden administration’s proposed adjustments to capital-gains taxes and 1031 exchanges — which allow property owners to transfer profits from a sale into a new property without paying capital-gains taxes — could dampen the market, as could a rise in interest rates from historic lows that are driving more buyers into homes.
“It would be hard to fathom a drop like we had in ’08, but how long can this sustain?” said Trevor Theelke, who has compiled monthly reports on Eagle County property sales for Land Title Guarantee Company for nearly two decades. “It’s something we’ve never seen before, that’s for sure.”
It’s not just the uber-wealthy from big cities who are electrifying the real estate market in the high country. Lots of people from along the Front Range, too, are fleeing to the hills.
In Eagle County, where property buyers spent nearly $3.5 billion last year, sales in downvalley locations such as Eagle, Gypsum and Basalt accounted for more than 35% of the last year’s record-setting 2,572 deals.
“We are seeing a lot of Front Rangers moving up here,” said Timm Kluender, a broker with Berkshire Hathaway.
And they are cashing out of the urban homes in metro Denver and driving up prices in enclaves popular with working locals. The pace of sales in Eagle County — sales volume is up 156% through March compared with the same period last year, and the number of deals is up 160% — is challenging buyers, Kluender said.
“If you are going back further than a couple months to look at comps, they are not really comps because the market has gone up so much in the last three months,” Kluender said. “You almost have to look at active and pending sales to get an accurate comp right now.”
The interest in downvalley communities has spurred many longtime locals to sell homes that they purchased more than a decade ago.
“The challenge is being able to find them a replacement property because so little is available for sale,” Kluender said.
Locals priced out of resort communities
The inability for locals to remain local is troubling housing advocates.
Voters in Routt County in 2017 approved a property-tax increase that directs about $1 million a year toward affordable housing. Last year, the Yampa Valley Housing Authority built and rented 72 units. This year, the authority will bring 90 new units on the market. Another 72 are planned for next year.
“We are building supply as fast as we can,” said Jason Peasley, executive director of the Yampa Valley Housing Authority, noting that as soon as homes are offered for rent, locals fill them in a matter of days.
But the authority is still only catching up. The 2017 ballot measure promised about 600 new units, which is less than 40% of the demand for affordable rental units, Peasley said. When the tax is set to expire in 2027, Peasley expects residents will see the role of affordable housing in the community and renew the tax.
“Our goal was to prove to the community that we would take these resources and make an impact — and we’ve begun to show that.” he said. “A lot of what we are doing is cultural preservation for Steamboat. We are creating a big melting pot for everyone in the community.”
Peasley is not critical of the influx of newcomers to Steamboat Springs and the Yampa Valley. They are attracted to the same things that bring everyone to Routt County: a wealth of outdoor amenities and a vibrant community. They are bringing good jobs, putting kids in local schools, paying taxes and spending at local businesses. They are the new locals, only with more money.
“From an economic-development standpoint, these are good people to be bringing into our community, but from a community culture standpoint, I don’t know,” he said. “That’s the hard part. It’s such a balancing act.”
Newcomers are a “blessing and a curse.”
Phillips Armstrong owns three restaurants in Steamboat and one in Breckenridge. He’s building another in Aspen and another in Breckenridge. They are higher-end eateries and his employees earn high wages, with managers making about $80,000 a year and servers taking home a few hundred dollars on a busy night.
Housing for his well-paid workers “has always been an issue, but mostly background noise,” he said.
“But now, the shift has been dramatic,” Armstrong said, noting how workers are not returning to his restaurants’ jobs after the slow pandemic winter because they can’t find housing. “It’s just been a fever pitch this last six months.”
So, Armstrong’s company, Destination Hospitality, is leasing its own properties when it finds anything and then offering rental homes to workers.
“We have kind of gotten into the landlord business, which is not a business I’ve ever wanted to be in,” he said.
Steamboat has traditionally been able to accommodate workers. It’s a wider valley than, say, Crested Butte, Aspen and Telluride, so there’s more space for affordable-housing options. Workers in Steamboat don’t necessarily have to live in downvalley communities such as Oak Creek, Hayden and Craig.
But that’s changing. Armstrong is seeing his priced-out workers renting homes in communities such as Craig and Fairplay, which hinders his ability to staff his restaurants in Routt County and Summit County, where public transportation does not stretch to far-away satellite communities.
“This new wave of people, they are the blessing and the curse,” he said. “We definitely have — and will have this summer — an insatiable demand for the restaurants. But I never, as a restaurant-business owner, … thought staffing would be limiting my revenue. But that’s where I am. Dropping days I can be opening. Curtailing hours I am open. That’s my only solution.”
Montague, the Telluride bartender who is looking for his fourth rental home in barely six months, has an idea about what Colorado’s resort towns are going to look like when locals are priced out. Food will take hours at local restaurants. Galleries and shops will be closed for most of the week. Ski resorts will struggle to remain open. Long waits for everything will be the new normal.
“The impacts will be known soon, when the customer service goes down at every business in town,” Montague said. “I’m afraid that will be the only thing that will wake everyone up to the impacts of this real estate craziness. Everyone wants to come here and buy here for the atmosphere, but they are the ones who are actually killing that atmosphere.”