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Ski Real Estate Still Golden

By Mountain News Staff
August 07, 2006

RANGELEY, Maine - Real estate sales will remain the money machine driving winter resorts for the foreseeable future, but the industry should be prepared for a gradual slowdown of the market and be ready to adjust to changing economic conditions say industry observers.

"I don't envision ski area developments to become ghost towns as the real estate market turns down," said James Chung of Reach Advisors, a Belmont, Mass., research firm. He said the industry will be able to manage a gradual but inevitable decline in real estate sales the next five years

"Skiing real estate isn't the investment du jour," said Chung, indicating that less than 30 percent of ski area condos are bought by investors while up to 80 percent of golf or "sun" resort condos are bought by investors.

Chung told snow sports journalists and resort marketing representatives at the Bob Gillen Snow Industry Seminar at Saddleback Maine Saturday that skiing isn't a fad and buyers build community with their resort home purchases, which tends to make them view the ski vacation home as a lifestyle rather than an investment. He also noted the resiliency of the industry to weather economic downturns.

"We have strong survival instincts," said Smugglers' Notch President Bob Mulcahy. "We find ways to work our way through the bad times." Mulcahy has been involved with real estate development at the northern Vermont resort for more than 30 years.

John Cannizzaro, director of planning and development at Saddleback, relies on a conservative approach to development to ward off any possible real estate crashes. "We got permits to build 30 units, and we built six," he said. "They sold and now we are building six more. We are not going to get too far ahead of ourselves."

The higher end developments tend to grab the headlines with their $2 million per unit price tags. But for the most part resorts are staying within their established market and judiciously building to those markets.

"We have product available for our market that is affordable at all price points," said Mulcahy.

Real estate development might slow the next few years but it is not going to stop because of the price of mountain homes.

"We call it price elasticity," said Chung. "As the prices go up, the supply goes up." The danger however, according to Chung, is that developers reach a point where they overshoot the demand.

"That's when you will see isolated Chapter 11 filings and fire sales," said Chung. "But ski resort real estate products are not going to disappear."

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