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Resort Real Estate - Why Its Prices Behave Differently



Luxury Resort Real Estate

What is resort property? It may be defined as property located in a residential area that thrives on tourism and where ownership of second or third homes constitute a considerable area of the overall home ownership.

Aspen property is really a prime illustration of an extravagance resort market. Aspen is home to four exceptional ski mountains having a lively winter tourism industry and summers offer mild temperatures to enjoy the plentiful outdoors. The majority of homes owned within the Aspen or Snowmass market are second homes. The typical vacation home within the Roaring Fork Valley is utilized less than 30 days each year normally.

Average single-family homes in Aspen start at about $5 million, Snowmass homes come in just a little lower around $3.5 million on average. So it's clear that property within this mountain resort falls into the luxury homes category. However the Colorado Mountains and it is ski resort towns like Vail, Beaver Creek and Breckenridge are in no way the only resorts with a luxury designation. Resort towns span coast to coast. From the Florida Keys or the Carolina cost line to the mountains of Utah and California.

One thing all these resorts have in common is that their real estate markets are not following a same rules as suburbia.

Real Estate Finances

1) People who are able to afford to buy second homes must obviously be somewhat successful to get to that stage. It seems therefore less likely they would fall for obscure financing products.

2) Lending criteria on second homes are and have been tighter than for primary residences. It's not uncommon for lenders to ask 20% recorded on these types of deals. Therefore it is harder to obtain inverted on your mortgage.

3) In luxury resorts like Aspen or Snowmass 60%-70% of property transactions are cash transactions. No financing involved. Negative income is therefore not an issue in these situations.

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4) Rental income from properties not used for the majority of the year can soften the negative cash flow if a mortgage is involved.

Real Estate Desirability and Liquidity

1) Resorts by definition are something special. They've something which people desire. This could be mountains, lakes, the ocean, a special climate or island setting. Really anything, however it must be special.

2) Resort property is really a luxury good. It's not necessary to own. Therefore makes it easier for individuals to divest of luxury real estate holdings. Properties owned in any of the desirable luxury destinations are a more liquid asset. The security that properties tend to be more fungible helps home owners divest of these more quickly if need be.

3) Generally resorts offer limited availability. Associated with pension transfer things desirable they aren't obtainable in unlimited quantities. There's only a lot land in a mountain valley and there's only that much beachfront property, you will find only a lot of skiable mountains, you get the drift.

Overall it may be said that resort second homes would be the first asset that'll be sold when people have been in financial distress. However it's less likely that owners of resort property like Aspen real estate might have overextended themselves to begin with. This combined with tighter lending criteria for second homes makes it not as likely the general mortgage troubles spell to the second home market. As long as the economy only experiences a moderate downturn the luxury real estate segment might actually profit. It is not uncommon to locate a re-allocation of wealth from stocks and bonds into real estate when in uncertainties. And so the top quality of the market will weather the storms much better than most people expect.