“It’s horrible,” said the Brookfield, Vt. resident, who has been trying to sell his “Middle Earth” condominium near central Vermont’s Sugarbush Ski Resort for three years.
“I’ve known some that have been on the market for three to four years,” said Russell, who runs a lodging reservation business. “They’re in very good shape and grossly underpriced and they can’t sell them.”
Real estate brokers and appraisers who track the New England resort condominium market aren’t as discouraged as Russell. But they do confirm slower sales and even price decreases — a market contrast to the sales frenzy of a few years ago.
Many of the region’s banks, meanwhile, have grown increasingly wary of resort development and have boosted their reserves to cover possible loan losses. Vermont’s largest bank, the Chittenden Trust Co., for example, has blamed a softness in resort real estate for a $5.3 million addition to its reserve fund.
The down market, part of a regional recession that rolled north into ski country from Massachusetts, should serve as a warning to ski area operators that any real estate project must be carefully planned and financed, said Jim Branch, president of Sno-engineering, a consulting firm based in Littleton, N.H.
“Most of the ills in ski resorts during any recessionary period are caused by real estate,” Branch said. While skiing itself is relatively recession-proof, “the truth of the matter is real estate is a big cost item” and will suffer greatly during an economic downturn, he said.
“It (condo development) is a separate business from skiing but it’s got to be integrated at some level,” he said. “Most people sell (real estate) prematurely, for the wrong purpose and at too low a price. . . . The desire to sell dirt, sell condos, is usually bad news. If you don’t have a strong financial plan, you’re just whistling in the dark.”
Branch said the Northeast ski condo market is now bloated by unsold units, “I don’t know exactly how large the inventory is, but it’s significant. It’s not as bad as 1979, but it’s bad.”
Figures gathered by the National Association of Realtors show that poor sales are mostly confined to the Northeast. Third quarter condo sales — including those of residential condos — are off 30.5 percent in the Northeast, according to the association. By comparison, sales in the West dropped only 2.6 percent from the second to the third quarter, while sales in midwestern and southern states were up slightly.
Yet despite the poor sales, prices actually rose one percent, leaving the Northeast condo market the most expensive in the country. “That tells me condo owners who have a lot of inventory are not being realistic,” said Branch. “They’re holding the price and they’re going broke.”
Of course, real estate people are quick to point out the silver lining in the slowdown. Bargain hunting buyers now have an extensive selection to choose from, said Diane Meier, sales manager for Sugarbush Village Real Estate, which now has about 140 condominiums listed for sale. She said other firms in the area probably are listing about 50 more. There are about 600 condos near the mountain’s base.
“We have a large inventory,” she said, noting that prices for some of the units have declined 10 to 20 percent. “There are more condos in supply than there is demand for them. But as a result, we have some of the best values in the state.”
Meier said one reason for the slowdown is the delayed impact of the tax reform act of 1986. “Those kinds of changes diminished the investment value” of condominium ownership, she said. “Before the 1986 act, you could buy one of these and it would most likely carry itself on the tax benefits alone.”
Branch said that the New England ski condo market is not uniformly poor. Hotter spots include areas like Sunday River in Maine, Vermont’s Stowe and New Hampshire’s Loon Mountain, he said.
But in three major Vermont ski towns, sales of resort property have sharply dropped, according to figures compiled by the Vermont Tax Department. Although the department does not tabulate condominium sales separately, it does keep track of sales of vacation property with less than six acres of land, a category that includes condos.
In Sherburne, home to Killington, Warren in central Vermont and Stratton in southern Vermont, sales totals declined in the first nine months of 1989 compared to the two previous years.
In Warren, 94 vacation homes were sold in 1987, 94 were sold in 1988 while 43 changed hands through September of this year. In Stratton, sales totals dropped from 120 in 1988 to 31 so far this year. In Sherburne, 224 sales were posted in 1987, 319 in 1988 and 77 so far this year.
Robert Montgomery, president of Century 21-The Montgomery Co. in Sherburne, said the Kilington area, where he has worked since 1971, is recognized as a safe place to invest in real estate. “The larger condo developments (at Killington) have had some softness,” he said. “Those prices have dropped a hair.”
Several hundred condominiums are for sale in the Killington area, said Montgomery. “That’s not an unhealthy number from the standpoint that there’s not a lot of new development going on.”
Ski areas that manage condos as rental space should be well-insulated from the effects of a real estate downturn, said Joe Parkinson of the Vermont Ski Areas Association. “The rental end is pretty stable. As long as we’ve got snow, people come,” he said.
While condo construction has slackened around the region, operators of the Burke Mountain ski resort in northern Vermont are going ahead with a master plan that calls for construction of 900 new condominiums over the next 10 to 15 years, said Dixie Nohl, general manager and vice president of Burke Mountain Enterprises.
The company also hopes to finish about 48 condominiums before ski season, Nohl said. He said the company has tried to carve a market niche of “affordable” trailside condos. Some of the new units sell for around $99,000, “which is low for slopeside,” he said.
But Branch warned that Burke is not immune to the vagaries of the real estate market elsewhere in New England. “Burke has its work cut out for it,” he said. “What’s going on at Burke is dictated by what’s going on in Boston and what’s going on in Boston is pretty sick.”
He predicted the condo market will remain poor for another two to three quarters. “If it doesn’t come back by spring, a lot of developers will have to wholesale their stuff,” he said.
