The Telluride Real Estate Market

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