Summit County Conundrum?

While things have cooled in Summit County, any real pain isn't likely. Recent numbers indicate while the number of home sales is dropping off considerably, average sales price and number of listings CONTINUED to rise through the first half of 2008. Home prices have some falling to do, but will escape the carnage of SLC or other major areas of the west.

Indeed, sales figures in the Avenues have plummeted 29% from 2007 to 2008, while in the same period Summit county prices rose 1%. Year over year statistics (ex-condos), January 1-June 24 2005-2008, indicate strong growth and paint an interesting picture. In 2005 32% of all listings sold for an average price of $550,903. In 2006, 07, and 08 the percentage of listings sold were, 23%, 19% and 9% for average prices of $807,729, $929,057 and $946,091 in these years respectively.

It's harder to give an accurate picture of the road ahead than it would be for the Avenues or other areas of SLC, as Summit County sales are highly dependent on out of state buyers of second homes. For those with the resources to afford these properties, price consciousness is less of a factor than for those of us in the middle class. That said, many owners in resort areas likely made purchase decisions based on an increase in net worth from properties they own in other hot markets like CA, AZ or NV. As they experience losses in these markets, many will be forced sell. The unknown factor will remain whether there are enough high end buyers to pick up the slack.

I believe while Summit County is unique to SLC, the totality of housing woes and a slowing economy mean the price declines have still yet to come. I would look for a 10-15% price decline over the next year. I would not anticipate anything close to a return to 2005 prices, but rather a softening in the average sales price to around the low-mid $800,000 range. It's still too early, but this is an area I would continue to keep an eye on.

The following is an AP story regarding the fate of Western resorts and Park City.

Best,

Matt

PARK CITY, Utah - With the developer forced into bankruptcy, Hugh Smith worries about the $1 million he and a partner sunk into bare lots at Promontory, a half-built, sprawling residence club in a post-Olympic town saturated with second homes for wealthy baby boomers.


By Paul Foy • The Associated Press • June 25, 2008

As Promontory began showing signs of distress a few months ago, Francis Najafi, chief executive of Phoenix-based Pivotal Group, gathered members together in an opulent timber-and-stone clubhouse and said he was in default and was pulling out.

"He was telling everybody he was sorry for our troubles and blaming events beyond his control - the nation's real estate," said Smith, who believes Promontory will bounce back in a year or two under new ownership. He still hopes to develop two lots with multimillion-dollar vacation homes for sale.

"The project is not in trouble other than Francis Najafi decided to pull money out of it," said Smith, holding his anger in check. "We can't wait until the court decides who's going to be in charge."

Promontory is among Western vacation spots facing financial uncertainty or worse, including Nevada's Lake Las Vegas golf resort, Idaho's Tamarack Resort and Montana's venerable Yellowstone Club. Sales are off at other resorts in the region, according to the Rocky Mountain Resort Alliance.

Overdevelopment is one of the problems.

Around Las Vegas, a quarter of all housing sales on the market are listed as short sales, going for less than the loans owed on them. On the Strip, plans for 24,700 condominiums are on hold or have been canceled, according to research firm Applied Analysis.

"Many of them were speculative projects to start," said Brian Gordon, principal of Applied Analysis, which tracks the market.

At the more exclusive resorts, the market had seemed recession-proof, with buyers generally paying cash. They had nothing to do with the failing subprime loans that are causing market turmoil. But the turmoil is making banks less forgiving for resort developers who took out huge construction loans.

Credit Suisse bank says Najafi defaulted on a $275 million loan in December and told a loan officer he had no money to pay for anything at Promontory. Najafi and other Pivotal executives declined repeated requests for interviews. The bank said it wouldn't comment beyond court papers.

Credit Suisse also is trying to call in a loan at Tamarack Resort, one of the nation's newest ski resorts, about 100 miles north of Boise. In Nevada, at Lake Las Vegas - a golf community 17 miles from the Strip that defaulted on $540 million in loans - a group of lenders led by Credit Suisse forced the development into new ownership at the start of the year.

"We're not out of the woods," said Frederick Chin, chief executive of Las Vegas-based Atalon Group LLC, which is trying to salvage lenders' investments at Lake Las Vegas, where homes cost up to $10 million. "There's a lot of financial problems here, a lot of legal problems we're sorting through, and our journey is at the beginning."

The bank says Yellowstone Club is current on its loan, but that club faces other troubles.

A divorce of the owner and his wife has turned into a nasty battle for control of the club. In another dispute, a group of charter members led by cycling legend Greg LeMond are fighting for their shares of equity.

The Yellowstone Club received a $375 million loan from Credit Suisse in 2005, but members say little of the money was spent on the resort - the $100 million Warren Miller Lodge, named after the ski filmmaker, now 83, is still unfinished. The resort didn't respond to requests for comment.

The Yellowstone Club opened in 1997 with a private ski area for members near Big Sky, Mont. Its members include Microsoft's Bill Gates.

Some vacation-home buyers seem to be becoming skittish. Accustomed to depressed Southeast and West Coast markets, they are looking for bargains, but equally well-heeled owners are refusing to cut their prices. "This is really upsetting to the buyers, so they're just not buying," said Dennis Hanlon, president of the Rocky Mountain Resort Alliance. "Both parties are upset."

The standoff has chilled sales at major resort towns in Colorado, Idaho, Utah, Wyoming and British Columbia. Sales at 11 resorts that belong to the alliance in those locations plunged by nearly half in the first quarter from a year ago, Hanlon said.

"There's no doubt about it. Our volume and number of transactions are down," said Tyler Richardson, president of Park City Board of Realtors. "But if you look at median sales prices, they're stable."

Park City is still considered a bargain by the wealthy, and real estate agents believe it will rebound after some casualties. Basketball great Michael Jordan has a house in Glenwild, Utah, which is financially sound. Golfer Tiger Woods is a regular and low-key visitor to Deer Valley Resort, which launched Park City's transition in the 1980s from a tired old mining town.

The area's transformation into vacation-home hot spot, which picked up after the 2002 Winter Olympics, has clearly chilled.

"We're chugging along. It's not like we're knocking them dead," said Jake Doilney, owner of Glenwild Realty, who said 10 homes averaging nearly $4 million apiece were for sale, then had to update the count to 11 in the middle of a conversation.

Glenwild members pay a one-time fee of $115,000 for a golf membership plus annual fees of $9,600.

"They're buying a lifestyle, and the subprime fallout and gas prices have very little impact on a buyer like that," Doilney said.

Yet some developers are running out of cash or income.

Promontory, for one, can't sell any resort-owned lots because of legal wrangling. Bankruptcy petitions have been filed but no hearings have been held. The developer is taking reservations instead. Owners can still sell their lots, but it's not a great time to try.

In the meantime, Credit Suisse says, developers of Tamarack Resort, a ski and golf community, are in default on a $250 million loan.

"We're still a financially viable resort," said Ken Rider, director of marketing and sales at Tamarack. "Our hospitality and recreation options are nearing break-even in profitability even through financially challenging times."

Other developers may be finding buyers scarce. At a defunct ski area in central Utah, backers of a resort community won't say how many $1.5 million building lots they've sold after more than a year of trying.

The Mount Holly Club - where membership fees for skiing and golf will be $24,000 a year - exists in concept only. The partners say they plan to build a gatehouse this summer as a show of confidence in their plans.