When Peter Forsch set a deadline of early January to accept offers on the first 25 condominiums at the
Club at Spanish Peaks in Montana, he wondered if the national real estate
malaise would restrain buyers. During the residential property boom in 2004 and 2005, Forsch, the development’s president, and
residents alike celebrated frenzied demand and rising home values. But in 2006,
sales of cabins and homesites at the 3,500-acre ski and golf resort tapered off. Forsch anticipated that buyers would still covet condos in the
lodge, where the club planned no more than 49 units; he presumed the limited
number would heighten demand. Their location, too, near the 18th hole of the Tom
Weiskopf–designed golf course and a high-speed quad lift, seemed ideal. Forsch
was right. On January 10, buyers snapped up all 25 units in one day, generating
$50 million in sales. "Given the quirkiness and the softness of the market, we
wondered—although we were confident we had the right product at the right time,"
he says. "But the only way to test that is to really put it out there." The broad real estate market continued to suffer in the second half of 2006,
with the median home sales price slipping up to 3.5 percent nationwide. But not all properties are
languishing. Second-home real estate in places such as the Club at Spanish Peaks
continues to perform well, enticing buyers who fuel rising property values.
Certain vacation-oriented communities seem to share characteristics—exclusivity
and limited supply—that have shielded them from the general real estate
downturn. Today smart buyers of second homes (and third, fourth and fifth
residences) are shopping carefully for these attribute
Natural Selection
Admittedly, measuring the performance of the second-home market
requires at least some divination. No one seems sure of even how many second
homes exist in the United States. Conflicting studies put the number of second
homes as a percentage of all homes at anywhere from less than 10 percent to a
high of 30 percent. The National Association of Realtors tracks average home
sales, but does not specifically identify luxury vacation properties in its
data. Finding comprehensive statistics on high-end vacation properties priced at
$3 million and above presents an even greater challenge. But canvassing real
estate agents, developers and recent investors suggests that buyers of such
homes are still acquiring them at a healthy rate, and are focused more on
lifestyle issues than market vagaries.  These types of buyers enjoy greater immunity from the rise in
30-year mortgage rates, which climbed from 5 percent to higher than 6
per-cent from 2005 to 2006. Overall, most vacation-home investors do not
finance their purchases with mortgage debt, according to a 2006 study sponsored
by the Research Institute for Housing America, a Washington, D.C.–based
nonprofit. Second-home mortgages comprise only about 4 percent of all mortgage
activity, according to the study. And those individuals planning to pay cash
for a multi-million-dollar second—or third or fourth—home by and large say
that their decision requires little more than cursory financial calculations.
Certainly no buyers at this level invest recklessly, but, for many, purchasing a
beach house or mountain retreat may entail finding a property that suits the
tastes of an entire multigenerational family rather than trying to time the
bottom of a local real estate market.
When John Robbins, co-owner of Concord, N.C.–based Greathorn
Properties, signed a contract for one of the units at the Lodge at Spanish Peaks
in January—a four-bedroom condominium for $2.9 million—he remained unfazed about
purchasing during a national lull in real estate sales. Robbins and his wife,
Holly, sought a fourth home where they could bring their daughters, who are in
high school and college, for ski vacations and summer breaks. "My family has an
interest in luxury and a lot of amenities at your fingertips," he says. "This
selection for us is a personal one and a long-term one."
The Robbins family, who reside in Concord most of the year and
own a summer home in northern Ontario, watched the cooling real estate sector
carefully. But they believe that Spanish Peaks offers a unique property—one that
will hold their interest. The family members intend to vacation there for years
to come, a plan that will protect them from any short-term volatility in
value. As a buyer and a seller, Robbins experiences both sides of the
luxury real estate market. He and his business partner are building on two
homesites at the Yellowstone Club in Montana, along with a number of others,
including one at Spanish Peaks. Greathorn recently completed framing one
6,000-square-foot home. Robbins will watch the market to determine a price, but
he reports stable prices at Yellowstone in the range of $1,100 to $1,250 per
square foot.
|
