Mountain Real Estate
An Appreciating Market: Breckenridge
By Daniel Webster Johnson

The number one question I am hearing, from sellers, more than buyers

What is the market in Breckenridge doing?

To put the answer in perspective I interviewed Tim Forsythe, CEO of Forsythe Appraisals LLC, the largest residential appraisal firm in America with the ability to complete appraisals in 95% of counties in all 50 states.

“I don’t know of any other area of the country that is enjoying the level of appreciation we are seeing in Summit County right now.”

As this graph shows Breckenridge has had strong appreciation since 2004.  The three major factors that have allowed the Breckenridge market to break away from national market trends are:

1.      The baby boomers changing their lifestyles and driving demand.

2.      Local developments which have catapulted Breckenridge into being on par with other world class resort.

3.      Until about 2000 Breckenridge predominately served Front Range families.  Since 2000 it has become well known as a destination resort.  The result: An increase in sophisticated buyers from a broader spectrum of diverse locations far beyond Colorado.  These buyers are viewing Breckenridge real estate as having been overlooked and being under valued as compared to Vail, Aspen, Jackson Hole, Kitzbeul, Austria…

For more information on the factors driving the Breckenridge market please email us and ask for the free report on the 8.5 Market Indicators of Summit County Real Estate.  We would love to send it on to you.

The Trends

The second most frequent question in the market today comes equally from buyers and sellers.  Everyone wants to know where the market is going. 

Over the past 20 years I have learned much from the futurist and author, Daniel Burrus*.  He has taught me to follow hard trends which are certain to create lasting change.  For example the fact that there are 78.2 million aging baby boomers is a hard trend.  Another recommendation that Burrus makes is to review past trends as history repeats itself.

I am a third generation real estate professional.  I have been taught by my grandfather’s example to have a long term outlook.  My personal experience owning and investing in property spans 30 years.  History along with my own experience in varying markets shows that real estate markets cool off.  Few continue appreciating unabated. The trend is for prices to drop then plateau.  A review of the graph will show this holds true in Breckenridge.  Anyone in the real estate business that “promises” appreciation is either too young to know better or just plain stupid.  The question is not if prices will stop climbing the question is when.

Point to Ponder: Are you ready?  If you are investing in real estate for the long term you’ll be fine.  When you look back the dips along the way will appear minor. If your view is short term be cautious.  My mother taught me to never be in a position where I must sell more then one property at time.  She used to say that taking a beating on one property is OK however losing money on several properties or your entire portfolio is deplorable.

The Buyers

Chris and Rebecca, a professional couple who are engaged to be married, typify the buyers in an appreciating market.  I walked into Chris’ condo in Summit County to meet with them before viewing a half dozen properties and the first thing Rebecca said was, “We have studied the tax records on each property.  How can they claim the duplex in Summit Cove is three bedrooms when the county data shows they have only paid tap fees for two?”

Buyers have more easy access to information that ever and they are using it.  The old real estate sales axiom that ‘people buy with emotion and justify their decision with logic’ isn’t applicable in Breckenridge. What I observe is that they buy with information and justify their decision with emotion.  I have seen very judicious buyers who have determined their market value of a property then pay a slight premium because they love the property.  They justify the premium they pay because the market is appreciating.

Not all buyers are astute.  Plenty are unrealistic, uninformed and not well prepared to make a purchase.

The Sellers

In recent years there have been plenty of buyers and a shortage of properties for sale in Breckenridge.   Of course different market segments vary however as a whole this statement is valid.  There are many examples of properties going under contract within hours of being placed on the market especially among the least expensive properties which have seen the most dramatic price increases. 

In the spring of 2006 one of our clients, a new pilot with Southwest Airlines, wanted to buy a unit in one of the least expensive condominium complexes within the Town of Breckenridge.  A unit came on the market that needed renovation, just what he was looking for.  I prepared a contract immediately and he took it to Starbucks to review it.  In the time it took him read each page the property went under contract.  He bought the next unit that came on the market three months later at a 21% increase in price.

Stories like that can cause sellers to be over confident with the result being properties that are exceedingly over priced.  In the Breckenridge market we are seeing judicious buyers that are paying more than the last sale in a complex but only an increase that is in sync with the market appreciation as a whole. 

The sellers we work with tend to be realistic.  As the potential marketing broker for a property I will never walk into an interview and say our marketing efforts will generate a definitive sales price.  Never.  Our ideal process for determining the marketing price of a property is to review the comparable properties that have sold recently and those that are currently on the market with the seller.  Together we determine the marketing price.  This method ensures the seller is viewing the market from a buyer’s prospective.

The Appraisers

During the interview with Tim Forsythe, a third generation appraiser himself, I asked if it is difficult to appraisal Breckenridge property right now.  He said it is much more work that the rest of the country because the banks and lenders, who make the decisions to approve loans, are located in depreciating markets therefore they need an extraordinary amount of justification before they will accept an appraisal.  The appraisals Forsythe’s firm completes in Summit County (hundreds every year) have twice as much data on comparable sales and they include comparable properties that are on the market (very rare for an appraisal).  As Tim said, “Our appraisers in Summit County really need to roll up their sleeves to convince underwriters of the values.”

Having spoken with Tim at length I am taking the challenge of determining the marketing price of a property even more sincerely than even.  The price whne a property is placed on the market must be, as we say in Australia (I have dual citizenship), spot on.

The Tango

It takes two to tango.  In an appreciating market the dance between buyer and seller is filled with drama.  The seller might say, “It’s a seller’s market. I want my price.”  While the astute buyer refuses to pay more than their determination of fair market value.  Decades of experience bringing buyers and sellers together has provided me with the tools necessary to encourage the parties to co-operate with each other.  Each needs the other as you can’t dance alone.

When representing the Buyer, while I do not communicate directly the Seller, there are several steps we can take that inform the Seller of the realistic market value of the property.  On the other side when working on the Seller’s behalf showing a buyer their offer is unrealistic in an appreciating market requires finesse.

The Future

If I could predict, with certainly, the timing of the next change in prices in Breckenridge a subscription to Summit Lifestyle & Real Estate would be +/- $1,750,000 a year and would be limited to only ten subscribers. I only unequivocal forecast I can make is that the market will change. Be prepared.

Heraclitus of Ephesus, the Greek philosopher (535bc – 475bc), said it best when he said:

Change is the only constant.

If you are in need of real estate advice based upon experience contact your trusted advisor, Daniel Webster Johnson.  (970) 393-3300 – daniel@YourMountainBroker.com – RE/MAX at 220 S Main St, Breckenridge.

* We, Summit County, were extremely fortunate to benefit from Daniel Burrus’ wisdom at the 4^th annual Economic Summit in 2007 held in Keystone.  A huge thanks goes out to all the sponsors in particular Keystone Resort and the Summit Chamber of Commerce.