The Telluride Real Estate Market

Market Update, year end 2011

Happy Holidays from Snowy Telluride ~

As we gear up for the busy Christmas / New Year’s holiday period, we are looking forward to a gain in momentum in our local real estate marketplace. After a very active spring and early summer, sales slowed reacting to the volatility in the stock and financial markets. However, sales in the month of October nearly equaled those of October 2010 and November of 2011 exceeded those of the prior year. Definitely momentum is shifting in a positive direction, as prospective investors are engaged and, once again, are considering adding recreational, resort property to their family portfolios. Given that our upscale, niche market with limited supply has likely reached its bottom, potential buyers are beginning to recognize inherent stability within the Telluride marketplace and value for long term use and enjoyment.

Year to date, incidents of sales have increased 15% over 2010 (Region – 14%, Town of Telluride – 10% and Mountain Village – 15%). While gross dollar sales have declined, the fourth quarter 2011 and the first quarter of 2012 look promising with $80,000,000 currently under contract throughout the region. The brightest segment in the market continues to be the Historic Town of Telluride with 18 properties sold above $2,000,000 at an average price per square foot of $928. These values attained are on par with the ten such properties sold in 2010, suggesting that price levels have stabilized.

A significant contributor to market stabilization is the fact that Telluride regional property owners have substantial owner equity ($4,000,000,000 +) underlying $6,900,000,000 in assessed residential property within the region. Those sellers without a need to sell have maintained strong price levels and have facilitated a market bottom. Nevertheless, there are excellent opportunities for investors entering the market or current homeowners desirous of an upgrade. For those who wish to preserve their cash position, financing has never been more attractive in decades.

It has never been easier to travel to Telluride. Check out the link below or call (866.850.5286) for airline schedules or to speak to the air concierge desk for discounted fares into Telluride and Montrose for this ski season.

http://www.flytelluride-montrose.com/

Below is an abbreviated schedule of holiday events and we hope to see you on the slopes in Telluride this winter. As always, feel free to give us a call with any questions or to discuss any of the real estate opportunities that could be of interest.

Cheers,

TD Smith and Chris Sommers

Date: 12/24/11 – Every year, skiers and snowboarders carry torches down the mountain into both Telluride and Mountain Village - - A must see!

Date: 12/26/11 – Ski into history with Johnnie Stevens.

Date: 12/26/11 – Mountainfilm’s Shorts in Winter – Annual holiday event is a family program of winter themed short fils.

Date: 12/26/11 – George Winston in Concert

Date: 12/27/11 – Joe Pug, solo acoustic in concert.

Date: 12/29/11 – Justin Townes Earle, solo in concert

Date: 12/31/11 – New Year’s Eve – Come out and enjoy the party in Telluride and the Mountain Village

Date: 12/31/11 – Ah Haa NYE Winter Gala Fundraiser

Date: 12/31/11 – The Fabulous Thunderbirds and Canned Heat in Concert

Date: 1/3/12 – Books and Cooks with Blakely Stein and Raw Food

Date: 1/4/12 – Tours of the Historic Sheridan Opera House - - Every Wednesday in January

Date: 1/5/12 – First Thursday Art Walk is a celebration of arts in downtown Telluride for art lovers.

Date: 1/14/12 – 2nd Annual Lifesavers Ball – Telluride EMS and San Miguel Search and Rescue non-profit fundraiser

Market Update, 2011

Friends of Telluride ~

After demonstrating strong signs of recovery in 2010 with gross dollar sales performing 20% above 2009 and numbers of transactions increasing 18%, the 2011 Telluride marketplace appears to be holding its own.

Within the Historic Town of Telluride, transactions are up 20%. The quality of six of those sales and under contract properties offers a more positive outlook for the sale of upper end residences in the region. The average per incident of sale was $3,440,000 with a low sale price of $2,600,000 and a high of $6,950,000. Sales within the Telluride region (outside of Historic Telluride and Telluride Mountain Village) have remained relatively stable with a modest increase of 4% in transactions while the Telluride Mountain Village experienced a 20% increase in numbers of sales. It is also noteworthy that through the end of July all regional transactions are up 17% with a total of $83M in transactions currently under contract. Nearly 40% of those contracts have asking prices above $1M with an average ask of $3.2M.

This data seems to indicate a renewed interest in investment in the Telluride lifestyle with its limited, high quality inventory. As mentioned in prior market updates, the catalyst for stronger sales has been a willingness by some sellers to accept price levels 20% - 30% below the market highs of 2007. Those sellers are not necessarily in "must sell" situations, but are often times seeking liquidity for alternative investments. Investors are gravitating to discounted "Grade A" properties, and seem to be avoiding the limited number of problematic foreclosure and short sale scenarios in the region.

Another strong indicator of a possible resurgence of the upper end market is the dramatic increase of upscale residences in Aspen. Typically, the Telluride market follows suit with an uptick in sales in Aspen. A recent article (7/6/11 Aspen Times) noted the closure of 14 homes closed in excess of $10M with three additional residences under contract at that price level. That stat is only one sale less than Aspen’s all time record with one half year remaining.

While partisan politics resulted in a federal debt crisis and, in turn caused havoc in the financial markets, investors are beginning to relate that real estate in proven resort markets like Telluride should have a place in their investment portfolios. Not only have values likely bottomed out, but liquidity can be preserved by borrowing at historically low interest rates for investment in very high quality properties below replacement cost. Those same investors are likely to hold resort assets for many years to come and enjoy the use of a "family asset" that is protected by a market with limited inventory and very significant ownership equity. In short, there have been too many sleepless nights watching recaps of the markets and many feel the time has come to experience an investment that will provide years of intangible returns for generations of family.

We look forward to seeing you in Telluride this fall.

Best,
TD Smith & Chris Sommers

Recap 2010 Market Recap:
Telluride’s Market Continues to Show Signs of Recovery

Year end gross dollar sales in the Telluride Region during 2010 performed 20% above 2009. Sales of $317.6M paced at 92.5% of 2008 which was the last partial year of sales production not negatively influenced by the current recession. Numbers of transactions increased 18% and the average price per incident remained stable indicating a stabilizing in value across all market categories.

According to statistics compiled by Telluride Consulting, a total of 103 sales transpired in the Town of Telluride representing total gross dollars of $107.2M. A total of 136 sales occurred in the Town of Mountain Village with gross dollars sales of $148.6M. The remainder of San Miguel County experienced 88 sales totaling $61.9M. The brightest segments of the market occurred with a 67% increase in gross dollar sales of Town of Telluride condominiums, a 55% increase in Mountain Village homes and a 126% increase in the Town of Telluride homes.

There are 15 pending transactions above $2,000,000, and, when coupled with those already closed above that dollar amount YTD, a total of 60 sales / contracts in 2010 is a very healthy increase over only 13 such sales in 2009.

This data seems to indicate a strong renewed interest in investment in the Telluride lifestyle with its limited, high quality inventory. As mentioned in prior market updates, the catalyst for stronger sales has been a willingness by some sellers to accept price levels 20% - 30% below the market highs of 2007. Those sellers are not necessarily in "must sell" situations, but are often times seeking liquidity for alternative investments. Investors are gravitating to discounted "Grade A" properties, and seem to be avoiding the limited number of problematic foreclosure and short sale scenarios in the region.

With the gross dollar sales increasing, it is likely that a "bottom" has been reached and sellers will over time resist these deeper discounts and the market will respond with gentle appreciation. Those sellers who have held firm with price structure must remain patient, but oddly have contributed to "setting the bottom" and will influence the rise in future values. Premium properties at significant higher pricing will likely lead the market into a slow, but steady appreciation cycle. With 14 homes and condominiums transacted YTD at an average price of $5,250,000 and with an average PSF of $859, this cycle is likely in motion, given that these sales represent nearly 23% of total sales volume.

Market Update September, 2010

The 2010 marketplace is best characterized as “rounding the corner.” Gross dollar sales are pacing at 90% of 2008 and are 76% above the sales production of 2009, so that would seem to indicate that the worst is behind us. Numbers of transactions have also increased 34% over 2009, and when one considers that gross dollar figures are considerably higher, this points to more transactions at higher price levels. While recent media and partisan politics have dampened incidents of closings in August, September experienced strong stats with an increase of 76% over the same month of 2009. It certainly appears that we could return to the sales level achieved in 2008 that was the beginning of the downward spiraling of our national and global economies.

According to statistics compiled by Telluride Consulting, a total of 77 sales transpired in the Town of Telluride representing total gross dollars of $84.9M YTD. A total of 109 sales occurred in the Town of Mountain Village with gross dollars of $135M. The remainder of San Miguel County experienced 58 sales totaling $46.3M. As mentioned above, it appears as though the upper end of the market is garnering considerable investor interest. According to MLS statistics, there have been a total of 36 sales in the Telluride region above $2M with 15 sales above $4M and 4 transactions between $8M - $10.1M YTD. There are 22 pending transactions above $2,000,000, and, when coupled with those already closed above that dollar amount YTD, a total of 58 sales / contracts in 2010 is a very healthy increase over only 13 such sales in 2009.

This data seems to indicate a strong renewed interest in investment in the Telluride lifestyle with its limited, high quality inventory. As mentioned in prior market updates, the catalyst for stronger sales has been a willingness by some sellers to accept price levels 20% - 30% below the market highs of 2007. Those sellers are not necessarily in "must sell" situations, but are often times seeking liquidity for alternative investments. Investors are gravitating to discounted "Grade A" properties, and seem to be avoiding the limited number of problematic foreclosure and short sale scenarios in the region.

With the velocity of sales increasing, it is likely that a "bottom" has been reached and sellers will over time resist these deeper discounts and the market will respond with gentle appreciation. Those sellers who have held firm with price structure must remain patient, but oddly have contributed to "setting the bottom" and will influence the rise in future values. Premium properties at significant higher pricing will likely lead the market into a slow, but steady appreciation cycle. With 14 homes and condominiums transacted YTD at an average price of $4,500,000 and with an average PSF of $961, this cycle is likely in motion, given that these sales represent nearly 25% of total sales volume.

Best,
TD Smith & Chris Sommers

Market Update August, 2010

Friends of Telluride ~

We hope you all have been enjoying your summer. The Telluride Real Estate marketplace has experienced a bit of a rebound in the first half of 2010. Year to date, gross dollar sales have increased 89% over that same period in 2009. Numbers of regional transactions also increased at the rate of 45%. Currently, dollar volume of sales are 55% of sales achieved in 2007, our last good real estate year pre-recession. This represents an increase of 26% when one compares 2009 sales to 2007. Sales in the region appear to be tracking better than those in Aspen where that resort’s sales have increased 22% during the same time period.

A total of 51 sales transpired in the Town of Telluride representing total gross dollars of $54.9M YTD. A total of 72 sales occurred in the Town of Mountain Village with gross dollars of $94.6M. The remainder of San Miguel County experienced 38 sales totaling $39.7M. It appears as though the upper end of the market is garnering considerable interest. There have been a total of 29 sales in the Telluride region above $2M with 15 sales above $4M and three transactions between $8M - $10.1M YTD. Another Mountain Village home with an asking price of $10.5M is currently under contract. These high end sales show a dramatic improvement as during the same period in 2009, there were only 13 sales above $2M.

While we do not anticipate a boom cycle on the near horizon, this data seems to indicate a strong renewed interest in investment in the Telluride lifestyle with its limited, high quality inventory. The catalyst for stronger sales has been a willingness by some sellers to accept price levels 20% - 30% below the market highs of 2007. Those sellers are not necessarily in "must sell" situations, but are often times seeking liquidity for alternative investments. Investors are gravitating to discounted "Grade A" properties and seem to be avoiding a limited number of problematic foreclosure and short sale scenarios.

With the velocity of sales increasing, it is likely that a "bottom" has been reached and sellers will over time resist these deeper discounts and the market will respond with gentle appreciation. Those sellers who have held firm with price structure must remain patient, but oddly have contributed to "setting the bottom" and will influence the rise in future values. Premium properties at significantly higher pricing will likely lead the market to a gentle appreciation cycle. With 12 homes transacted in the past 120 days at $800 PSF - $1,075 PSF, this cycle is likely in motion.

We look forward to seeing you in Telluride.

Best,
TD Smith & Chris Sommers

Market Update May, 2010

Dear Friends of Telluride ~

The Telluride real estate marketplace experienced its seventh consecutive month with an increase in sales over the prior year. Fourth quarter sales of 2009 increased 231% over that same quarter of 2008, producing $114.9 million in dollar volume of transactions. Dollar volumes in January, February, March and April exceeded those same month's sales in 2009 by 55%, 86%, 120% and 350%, respectively. Perhaps a more important indicator of a rebound in the marketplace is the fact that the numbers for April are nearly 2/3rds of those realized in April 2008. At that point in time, sales began to decline sharply with the ongoing economic crises.

According to Telluride Consulting 107 transactions have closed year to date, with 82 of those sales occurring in the Telluride Mountain Village and Historic Telluride. Six homes closed in the Village at an average of $5.2 million and 8 Homes in Historic Telluride at an average of $2.4 million. According to the MLS, there are 79 properties currently under contract in both those communities, totaling $115 million in potential sales volume. Eighteen transactions YTD have been above $4 million, 14 above $2 million with Historic Telluride experiencing a transaction at $9.9 million and the Mountain Village two sales at $8.0 million and $10.1 million.

While we do not anticipate a boom cycle on the near horizon, this data seems to indicate a strong renewed interest in investment in the Telluride lifestyle with its limited, high quality inventory. The catalyst for stronger sales has been a willingness by some sellers to accept price levels 20-30% below the market highs of 2007. Those sellers are not necessarily in "must sell" situations, but are often times seeking liquidity for alternative investments. Investors are gravitating to discounted "Grade A" properties and seem to be avoiding a limited number of problematic foreclosure and short sale scenarios.

With the velocity of sales increasing, it is likely that a "bottom" has been reached and sellers will over time resist these deeper discounts and the market will respond with gentle appreciation. Those sellers who have held firm with price structure must remain patient, but oddly have contributed to "setting the bottom" and will influence the rise in future values. Premium properties at significantly higher pricing will likely lead the market to a gentle appreciation cycle. With thirteen homes transacted in the past 120 days at $800 PSF - $1,000 PSF, this cycle is likely in motion.

We look forward to hearing from you.

Regards,
TD Smith & Chris Sommers

Market Update April, 2009

Dear Friends of Telluride ~

Telluride is enduring an 18 month global economic downturn which began in the fourth quarter of 2007. Our real estate market has remained relatively stable with regard to pricing, but volume of sales declined in 2008 by 55% versus 2007. That decline in gross dollar sales has continued into 2009, down some 80% as compared to the first quarter of 2007 - - the last year of a bullish local market.

Contributing to the stability of values is an overwhelming majority of non-leveraged, non-speculative owners who continue to enjoy the Telluride lifestyle in a market where supply is severely limited and quality tightly controlled.
It is this firm belief in the inherent quality of life and its real property that breeds patience on the part of owners / sellers.

At present, the market, for the most part, has stalled. Although media instilled panic and significant paper losses have driven many investors underground, substantial focused interest was realized this past winter despite negative economic circumstances. A surprising number of offers were processed with buyer expectation of significant discounts falling well short of seller willingness to accommodate those discounted offers.

Better news seems to be forthcoming related to the global economies and the gap between buyer and seller expectations is likely to narrow during the late summer and fall months. Sellers must exercise patience and buyers must recognize the historical significance of Telluride as a safe haven for investment - - both as to the bottom line and personal lifestyle. Business cycles always reverse themselves, and while we are in that reversal process, buyers have some select opportunities to acquire improved properties below replacement cost and sellers, with motivation for liquidity, can achieve such if price levels below the 2007 standard are sought. For those less-than-desperate sellers, develop a detailed pricing strategy now such that upon the first signs of recovery, your property might be one of the first to move related to the competition.

The bottom line—Telluride is no less a special place than before the economic downturn. Its inherent beauty, controlled growth, sense of community, pristine environment, abundance of public lands, lack of vehicular congestion and cultural events posture this market place in the medium term as a landing place for investors for generations to come.

Regards,
TD Smith and Chris Sommers

Market Update January, 2009

Dear Friends, Clients and Property Owners ~

What a tumultuous year for our national and global economies! Although many in Telluride have considered our community an island, relatively unaffected by outside influence, there is no doubt that volatile paper markets have negatively affected our real estate economy. Through the end of November, gross dollar sales are down 54% and incidents of sales down 47%. The Historic Town of Telluride has experienced sales of $87.2M as compared to $164.3M a year ago and the Telluride Mountain Village sales of $151.9M vs. $309.9M in 2007.

There is a silver lining to our market’s sluggishness: Price levels have not noticeably declined during the past year, with the percentage of settlement price vs. asking price at 91.1% relative to a year ago at 92%. The average sold price per square foot for a single family home in Historic Telluride has risen 12% and in the Telluride Mountain Village 1% YTD. We have experienced at least a half dozen economic downturns during my 37 year tenure in Telluride (although none as volatile as the present) and our marketplace is responding as it has previously - - slower sales with stable pricing. There are several reasons why Telluride has become a “safe haven” for capital:

· A vast majority of Telluride owners have not leveraged their ownership and are under no pressure to sell.
· Telluride is an upscale, non-speculative marketplace.
· Investment is made in the Telluride lifestyle as much, if not more, than the bottom line.
· Supply is severely limited and quality tightly controlled.
· Diverse demand for property emanates from local, regional, national and international markets.

Another characteristic of our market is its ability to rebound in advance of a full recovery of the national and global markets. There are winners in every downturn and those winners will seek the stable and proven havens for capital and lifestyle in the Rocky Mountain West. Those who have experienced “paper losses,” will also gravitate to mountain resorts at the first sign of a positive economic recovery.

Other factors point to a positive marketplace in the medium term:

· The Rocky Mountain region is the fastest growing area in the country for persons between the ages of 40 – 60 - - the baby boomer generation.
· With this migration, it is just not secondary homes being purchased, but primary homes for retirement, as well.
· Key factors for this relocation include attractiveness of an abundance of public lands, controlled growth with sensitivity for the environment, a lack of vehicular traffic and low crime rates.

There are isolated buy opportunities which investors are focused upon, but in general, what has been said about the Aspen market is also true related to the Telluride market - “Today’s price may have been last year’s record, but in a flat, stagnant market, that price is still today’s record… and historically, it will be tomorrow’s discount”. For those seeking the bottom of the market, they will have found it only when price levels rise again which will be too late for “perfect timing”.

We look forward to seeing you in Telluride this winter.

Regards,
TD Smith & Chris Sommers