House of Cards

House of Cards ♦

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The rise and fall of Routt County’s real estate economy A five-part series by the Steamboat Pilot & Today | July 31, 2009 WWW.STEAMBOATPILOT.COM/HOUSEOFCARDS

Part 1: Steamboat goes all in

House of Cards ♦

♦

A five-part series by the Steamboat Pilot & Today |

WWW.STEAMBOATPILOT.COM/HOUSEOFCARDS

The rise and fall of Routt County’s real estate economy

Part 1 — Today

Part 2 — Aug. 7

Riding the wave of an unprecedented real estate boom, lenders were quick to deal out loans and buyers anted up, as some buyers flourished and others took a hit.

The national mortgage meltdown hit hard locally, as homeowners and businesspeople struggled to face a new reality of vastly decreased values.

Story by Tom Ross

Story by Brandon Gee

Photos by Matt Stensland

Photos by John F. Russell

Part 3 — Aug. 14

Part 4 — Aug. 21

Part 5 — Aug. 28

Declining tax revenues have hit local governments hard, and falling home prices and a tighter lending market are hurting affordable housing initiatives, as well.

Everyone has an opinion about the future of housing in Routt County as interested players in the real estate business look for footing in a shifting landscape.

Story by Blythe Terrell

Story by Zach Fridell

Story by Margaret Hair

Photos by Joel Reichenberger

Photos by Matt Stensland

Photos by John F. Russell

Since the market’s plunge knocked the wind out of the work force, businesses have been forced to change and shrink — and some have closed their doors.

On the cover The first impacts of the national housing crisis weren’t felt in Steamboat Springs until fall 2007. When the reper-

cussions of subprime lending, bank failures and the contraction in consumer spending were fully realized in Ski Town USA in spring 2008, they touched every aspect of the local economy. Declining home sales and construction, the increasing rate of foreclosures, dwindling restaurant and retail receipts and worker layoffs were all evidence of how the local real estate economy had become a House of Cards.

Photo by Matt Stensland/Staff | Design by Christopher Woytko/Staff

House of Cards

A Supplement to the Steamboat Pilot & Today

Friday, July 31, 2009

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Story by Tom Ross | Photos by Matt Stensland

T

he deal wasn’t supposed to go down this way in the resort towns of the Rocky Mountain

West.

The rising tide of affluent baby boomers was supposed to lift Steamboat Springs’ vacation home market for years to come. And it did just that for the better part of a decade.

But the bubble has burst, and the future of the real estate development market in Steamboat and ski towns like it might never be the same.

From 2003 to 2007 the demand for vacation homes here encouraged speculation by investors who competed to get in on pre-construction prices. They were confident that by the time a new condominium project was complete, they could turn around and sell for a profit.

It was the best of economic times, and it was too good to last.

F

ord Frick, the consultant who first gave voice here to the transformative power of boomers intent on retiring in the mountains, says the arrival of the next high tide may be years in the future.

“It doesn’t bode well perhaps for the next four to five years,” Frick said in late June. “I have to say, I don’t think we’re at the bottom. This is only eight months old. We’ve not seen the full (impact). I don’t know exactly where the new normal is.”

The financial fortunes of affluent people in suburban Connecticut, Texas, Illinois and California probably hold the key to the recovery of Steamboat’s real estate market.

“Everybody is asking me these days, ‘What’s the market in the mountain towns?’ I tell them, ‘If you want to do a market survey, go to Greenwich, Conn.; Lake Forest, Ill.; and certain suburbs of Houston, Dallas and Los Angeles.’ If these markets are strong, the mountain markets will be strong.”

Frick knows that many of the people

MATT STENSLAND/STAFF

The marketing of Catamount Ranch & Club in 1999 signaled a new price level for estate building lots in the Yampa Valley. The development also attracted a new level of buyer — people who could afford to build vacation homes anywhere in the world. With them came a dramatic escalation in the cost per square foot of resort homes.

in those cities were working in the collapsed financial industries and that their neighborhoods aren’t as flush with cash as they once were.

“The mountain real estate markets are driven by the top 5 percent of Americans in terms of income, maybe the top 2 to 3 percent,” Frick said.

“This recession was unlike most in that the economic downturn exploded from the top. It’s right at the optimum mountain real estate market.”

By the third week in July 2009, there was evidence that, at least temporarily, some of the people working in the financial markets again would reap the rewards of the boom.

Goldman Sachs, Bank of America and even beleaguered Citigroup reported multi billion-dollar secondquarter profits, but analysts speculated that would be a one-time windfall attributable to billions of dollars in bailout money.

Frick is with BBC Research and Consulting and has built a specialty in mountain towns. He has worked for resort operator Intrawest — the parent

Home equity: Homeowners build equity in their real estate throughout time as they begin to pay down the principal on their mortgage.

However, they also gain equity as market values increase. During the first part of this decade in Routt County, property owners saw their equity in real estate increase by six figures. In the space of five years,

company of Steamboat Ski & Resort Corp. — in Colorado resorts including Copper Mountain. He came to Steamboat in the late spring of 1996 to give the keynote address at the first Steamboat Springs Economic Summit and made a prediction about the future.

He told his audience here that for the coming decade there was nothing the Steamboat Ski Area could do to become the dominant force in the local economy. Instead, he said, it would be the real estate development industry, not ski resort operators, that would drive the economies of mountain towns.

That trend would be powered, he said, by baby boomers in search of vacation homes, and their arrival would begin to transform towns like Steamboat Springs.

No reference point

F

rick’s prediction came true, and Routt County’s real estate market reached unprecedented heights in 2007, topping $1.5 billion in

they had the ability to leverage their homes — that is to say, they could borrow against the equity in their homes to pay for college, buy a boat or take a European vacation, for example. It was newfound wealth, but a day or reckoning was just around the corner.

sales and nearly doubling the record volume of 2005 in the process.

The 2007 numbers were helped along by several transactions in which outside interests paid $25 million or more for development land in Steamboat.

Seemingly everyone in Steamboat was trying to get in on the action.

Between 2003 and 2007, the perceived value of even modest homes soared from $250,000 to $325,000, to half a million and more.

It was a classic seller’s market, with limited supply — particularly for building lots — and over-heated demand.

In summer 2007, those typical $600,000 homes near Steamboat Ski Area, homes that would have appeared ordinary in a subdivision outside a major American city, were on the market for all of six to 12 days before going under contract.

By the end of July 2007, longtime Steamboat Realtor Ken Gold had labeled it a “buying frenzy for which I have no reference point.” ➤

On the ’Net For more photos from Part 1 of the Steamboat Pilot & Today’s special section House of Cards, visit www.steamboatpilot.com/houseofcards.

House of Cards

Ward snaps up development ground near ski area

Ford Frick predicts future of mountain towns

Ward seizes the opportunity to purchase development ground as the cash-strapped American Skiing Company seeks to tame its heavy debt load by selling off its real estate holdings. Ward snaps up a 4.2-acre site including the gondola parking lot and a 44-acre site known locally as Tennis Meadows near the remote parking lot, all for $9 million.

MATT STENSLAND/STAFF

Consultant Ford Frick, of BBC Research, addresses the inaugural Steamboat Economic Summit and foretells the future of mountain towns, which he says are destined to become suburbs of seven major urban centers in the U.S. When the largest generation in American history reached the prime secondhome-buying age of 55, its most affluent members would begin transforming the economies of mountain resort towns.

24 of 25 lots sell at Catamount Ranch The developers of Catamount Ranch & Club, who had previously developed the exclusive Cordillera in the Vail Valley, have sold 24 of 25 golf course lots at Catamount Ranch.

Whistler Village auction

SUMMER 2003

APRIL 1982

MAY 2001

Whitney Ward enters picture

In the throws of the Savings and Loan Crisis, Steamboat developers Bob Alter and Bob Enever make the difficult decision to auction off two-bedroom townhomes at Whistler Village for an average price of 50 cents on the dollar.

The two hoped to rent the townhomes to resort workers for $500 a month, but softening employment undermined the plan. During an outdoor auction at the site on the last day of the ski season, they sold to out-of-town speculators for $54,000 to $65,500.

Whitney Ward, a former founding partner of Invesco Realty Advisors from Beaver Creek, is in construction on a new commercial center off Mount Werner Road.

OCTOBER 2000 MATT STENSLAND/STAFF

F

or most of the 20th century, homes in Steamboat Springs have reflected the city’s humble roots as a coal mining and ranching town. The grand Victorian homes of Aspen, Telluride, Breckenridge and even Ouray that were built by gold and silver barons can’t be found in the Yampa Valley.

The early condominiums built for skiers in Steamboat were similarly modest.

Examples include the slopeside condos at Storm Meadows and The Rockies.

Built in 1969, a one-bedroom unit in the Storm Meadows east building measures 590 square feet. A typical unit sold for $33,000 in 1998 and is valued for tax purposes today at $300,000.

A Rockies condo removed from the slopes but carrying the right to purchase a membership at Rollingstone Ranch Golf Club measures 524 square feet and offers one bedroom. It sold for $88,000 in 1998 and is valued at $228,000 today.

Steamboat Springs City Council President Loui Antonucci recalls that for decades after the Steamboat Ski Area came to prominence in the 1970s, Steamboat retained that modesty in its housing markets, even as prices sustained a steady climb.

A Realtor himself, Antonucci wonders where he would be had he not purchased his building lot when prices were favorable.

He came here from the East Coast as a young construction worker, bought into a downtown building and became a restaurateur without having planned it. With his business partner, he sold the business and the real estate, and later became a Realtor.

Antonucci purchased a lot in Fox Estates off Fish Creek Falls Road for $44,500 in 1993 after working with Realtor Dan Picaro.

“I had told Dan that the next time (prices) go down, make me buy something,” Antonucci recalled.

When Picaro showed him the Fox Estates lot, Antonucci admired the views into Strawberry Park and didn’t hesitate.

On a beautiful fall day, he told Picaro: “Write a contract.” He built his home in 1996 and continues to live there today. That opportunity might no longer exist, even in the slump of 2009, when most building lots in the city are priced above $400,000.

“None of us could afford to go to the free market today and buy the homes we live in,” Antonucci said.

Longtime building contractor Tom Fox has presided over the construction of many luxury homes this decade. He said that as recently as 20 years ago, the biggest homes in Steamboat didn’t cost any more than smaller homes on a per-square-foot basis.

“For a very long time, we were building homes for $75 a square foot,” he said.

He recalled when he and architect Joe Robbins collaborated on a new home for the late city councilman Dick Yeager in 1986. At 4,500 square feet, it was the biggest house in Steamboat. Yet it cost no more than $75 a square foot.

That modest standard was not destined to last into the 21st century. The cost of building materials went up, and Steamboat homes were being built to a more luxurious standard.

“All of a sudden, when it started, it just kept on going up,” Fox said. ➤

MAY 1996

Continued from Page 3

MATT STENSLAND/FILE PHOTO

Historical perspective

A Supplement to the Steamboat Pilot & Today

JANUARY 2004

4 | Friday, July 31, 2009

Steamboat Grand Resort Hotel finished American Skiing Co. completes the Steamboat Grand Resort Hotel behind schedule and continues marketing quarter-share ownerships. Even though the local market is strong, the reception is lukewarm.

Peaks & Valleys House of Cards

A Supplement to the Steamboat Pilot & Today

Friday, July 31, 2009

2007 2008 Total Dollar Total Dollar Volume by Month Volume by Month $74.8M

$141.8M $154.0M $205.5M $151.5M $176.0M $152.7M $132.6M $100.5M $89.8M $107.8M $100M

$50M

J

F

F

M

M

A

A

$67.2M

M

M

$68.2M

J

J

J

J

A

A

S

S $37.4M

O

O

N

N $38.0M

D

D

$0M

$0M

$80.8M $59.8M $52.3M

Building projects slow to a crawl Despite the recession, developers of some of the largest resort housing projects Steamboat has ever seen — One Steamboat Place, Trailhead Lodge and Edgemont — are pushing on to completion. Yet, it’s evident that new projects won’t get built until the real market absorbs much of the existing inventory of vacation condominiums.

$101.8M $71.1M $58.9M

$49.7M

$40.1M $50M

$100M

$150M

Source: Land Title Guarantee Company

OCTOBER 2007 Realtors realize Steamboat market has gone flat It becomes apparent to veteran Realtors, based on volume of showings and contracts pending, that Steamboat’s booming market has gone flat.

TOM ROSS/FILE PHOTO

$150M

MATT STENSLAND/STAFF

$200M

J

Annual sales obliterate those from the previous record year of 2007, but a slowdown is fast approaching.

2009

$100.4M

Despite slowing market, Steamboat sales pass $1.5B mark for 2007

MATT STENSLAND/STAFF

A year after it broke the $500 million plateau, Rout County’s real estate volume blows away the billion-dollar barrier by November 2006 and reaches $1.12 billion by year’s end.

JANUARY 2008

MATT STENSLAND/FILE PHOTO

The rise and fall of the housing market in Routt County

Routt County breaks $1B mark

JANUARY 2006

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House of Cards

6 | Friday, July 31, 2009

A Supplement to the Steamboat Pilot & Today

Residents become swept up Continued from Page 4

M

arcus Williams was one of many Routt County residents who saw opportunity in the rush for retirement homes in the Rockies. He built a grand home and for years paid the mortgage by renting it for as much as $2,000 a night to vacationers. When guests were in residence, he either couch-surfed at a friend’s place or rented a motel room. Vacation rentals more than paid for his mortgage.

Williams said he wasn’t in it to flip the house.

“I intended to keep it for life,” he said.

Williams’ story may not be typical of how the mortgage meltdown washed up on Steamboat’s shores, but it paints a vivid picture of how the arrival of retiring boomers has transformed a previously humble mountain town.

Williams’ business plan worked well for about six years, until late 2008, when financial markets began to crumble and the stream of high-end vacation rentals suddenly dried up. To complicate matters, his relatively modest payment of between $4,000 and $5,000 on a fiveyear adjustable rate mortgage was due to reset at $7,750 a month.

He fell behind on his mortgage payments and the national bank that held them floundered. By 2009, he had been foreclosed on, lost his dream home and moved to a fixer-upper south of Boulder. The experience left him soured on ski country but defiantly looking forward.

“If I really wanted to be a slave to the bank, I could have paid for the house. Losing it was a choice. I just lost my taste for Steamboat,” Williams said.

“The equity is gone. You end up being a slave to the bank. Therefore there’s no value. It should never have been foreclosed on.”

Luxury living

C

ondominium projects such as The Rockies and Storm Meadows were built to provide luxury amenities — either ski-in/ski-out access or the right to buy country club privileges. But both were clearly built for people with modest expectations in terms of the actual living quarters. It was a different era.

Those expectations have ratcheted up significantly.

Robbins, the architect, looks back and says he thinks Steamboat housing changed permanently when Catamount Ranch & Club met with success in the marketplace.

“Catamount brought me the first clients that were international — they were people who could live anywhere in the world,” Robbins said.

The Catamount development was undertaken by a group of developers who had already successfully cre-

PHOTOS BY MATT STENSLAND/STAFF

Leather couches and stainless steel appliances from Marcus Williams’ foreclosed house in Steamboat Springs are now packed into the garage of his new home in Lafayette. Below: Williams looks through photos inside his Lafayette home of his former luxury Steamboat home, which was foreclosed on.

ated Cordillera above the little town of Edwards west of Vail. Catamount consists of two main components — golf course estate lots just south of Steamboat city limits and larger lots grouped around a restaurant and outdoor center on the shores of Lake Catamount, seven miles south of town.

When the developers introduced the golf course lots in 1999 at prices beginning at $350,000 and higher, local Realtors were skeptical.

But by May 2001, 24 of 25 lots had been sold and the 25th was under contract. The timing of the Catamount developers was good. Nobody could have known that the Steamboat market was headed for a post-Sept. 11 flat spot that would persist through 2002.

The sales history of Lot 4 at Catamount Ranch, which overlooks the 10th fairway, illustrates the sales histories of the building sites.

A couple named Barbara and Frederick Hudoff made the original purchase from the developer in February 1999 for $495,000. A decade after, when developed lots in Steamboat’s family subdivisions are valued at $500,000 for tax purposes, the Hudoffs’ purchase looks like a bargain.

The Hudoffs sold the lot 18 months later to a development entity, VGS Enterprises, for $725,000. VGS held it for five years before selling it for $1.35

Appraised value: The run-up in commercial property values in Steamboat Springs during the middle part of the decade presented a challenge for some business owners. The sale of some modest commercial buildings on key street corners along Lincoln Avenue as multi-million-dollar redevelopment sites effectively caused a dra-

million to Acanthus Design. Principals Nancy Jeffrey and Mary Litterman built a nearly 10,000-square-foot home on the lot, which is now listed for sale at $7.9 million.

It was at the same time Catamount Ranch began taking off that Marcus Williams made plans to build his dream home.

He had been patient, holding on to the lot for eight years before he decided to build.

Williams said he strapped on a tool belt.

matic increase in the value of the ground beneath every downtown building.

The sale of buildings housing Rocky Mountain Wine and Liquor, the Harbor Hotel and Nite’s Rest Motel and their subsequent demolition, served as comparables used by appraisers to place a value on

“I hired subcontractors and built the house myself,” he said.

He finished the house and occupied it in 2002 but continued working on improvements.

“I invested thousands in it every year,” Williams said.

Vacation rentals were strong in winter and summer. The new people discovering Steamboat and looking at real estate provided a ready-made customer base for his expensive vacation rental. ➤

similar properties. When it came time to reappraise downtown commercial properties for tax purposes, many property owners, some of them landlords, saw their property taxes increase dramatically.

House of Cards

A Supplement to the Steamboat Pilot & Today

Friday, July 31, 2009

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Lavish details Continued from Page 6

I

n ski country circa 2009, granite countertops are now taken for granted and it’s presumed that there will be a full bathroom for every bedroom.

A ski locker with benches, racks and cubbies isn’t considered a luxury. But the electric boot driers might be.

Hostesses expect to entertain with comVIDEO mercial-grade kitchen ONLINE appliances, and if there www.steamboatpilot.com/ isn’t a dedicated wine houseofcards cellar, there should at least be a temperature-controlled wine cabinet in the kitchen. A pair of dishwashers permits one-step cleanup after a large dinner party.

Beverage refrigerators in the game room are paneled with the same hardwood facings as the cabinetry. A warming drawer for towels in the master bathroom adds a touch of luxury. A stacked washer and dryer set in the walk-in closet is a practical luxury.

The latest status symbol appears to be a canine shower, so that when Ranger returns from field and stream, there is a warm place to bathe his muddy paws.

The run-up

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n 2005, the gross dollar volume of real estate transactions in all of Routt County was a record $885.9 million. Stoked by limited inventory and a spreading national awareness that there were big profits to be realized by flipping mountain real estate, Routt County’s market for million-dollar ski condos, rural estates and even modest family homes grew at a pace that

The hot tub from Marcus Williams’ former Steamboat Springs home now sits on a flatbed truck in front of his current Lafayette residence.

stunned even veteran Realtors.

Confronted with the 2005 first-quarter sales volume of $97 million, Doug Labor observed that record figure came on top of an outstanding year.

“It was surprising because the first quarter of last year was so good,” Labor said at the time. “To be up

almost 50 percent from the first quarter of 2004 was pretty amazing.”

For the next seventh months of 2005, the monthly dollar volume didn’t dip below $80 million. And the summer and fall of 2006 were even hotter.

On the strength of five consecutive months of more than $100 million in

MATT STENSLAND/STAFF

sales from July through November 2006, the gross dollar volume in Routt County reached the unheard-of plateau of $1.12 billion. To put that number in perspective, the gross dollar volume for all of 2000, when Catamount Ranch & Club and Marcus Williams were making their play, was about $360 million. ➤

Year-by-year comparison of Routt County sales by total dollar volume

$ 2 Billion

$1.59B

$ 1 Billion

$1.12B $885.91M $725.10M

$636.91M

2004

2005

2006

2007

2008 Source: Land Title Guarantee Co.

Pre-construction pricing: The rapid appreciation of real estate values in Steamboat Springs attracted a certain number of speculative buyers less intent on owning a vacation home than they were on turning a quick profit. The idea was, that if a major project was going to take nearly two years to build, speculative buyers could put down a refundable deposit,

or even a cash down payment and expect that by the time their new condo was completed, their equity would have increased sufficiently for them to sell the unit, pay a real estate commission and still collect a handsome profit. In some cases, the same piece of property saw two real estate closings in a single day.

For more: For more multimedia from House of Cards: Steamboat goes all in, visit www.steamboatpilot.com/houseofcards.

House of Cards

8 | Friday, July 31, 2009

A Supplement to the Steamboat Pilot & Today

Just the beginning Continued from Page 7

T

he display of dazzling numbers was just beginning.

The first quarter of 2007 accounted for $360 million, before May came along and did something Routt County had never seen before. May 2007’s sales of $205.5 million marked the first and only time a single month had topped $200 million. The boom kept on rolling until the calendar year had reached $1.58 billion.

However, before the final tallies could be counted, veteran Realtors saw the market flatten in September and October 2007. It took another seven months before it really hit home that Steamboat’s real estate boom had been caught up in the looming national financial crisis. By summer 2008, Williams also knew that his business plan had been altered.

“The summer season was a joke,” Williams said. Adding to his woes was the knowledge that his mortgage was due to readjust.

Things were crumbling around him, but Williams proved nimble. Before he fell behind in payments and his credit was damaged, he went to the Front Range and purchased an inexpensive fixer-upper house out of foreclosure, through a different lender, and held on tight.

By autumn, with no winter reservations in the pipeline, he was confronted with the possibility of losing the house in Steamboat. He thinks that had his lenders been more willing to work with him, foreclosure could have been avoided.

Williams said he had intended to file for bankruptcy but the deadline passed while he was out of the country and his attorney didn’t take the necessary steps.

After vacating the house in late winter, Williams returned in May 2009 to finish moving out. He held a multiweekend garage sale to get rid of some of his accumulated possessions.

“I took four truckloads of stuff out of there,” he said. “After being in there for 10 days, I was in awe of the house all over again. But that wore off.”

Summer found him in Lafayette, remodeling his new home. The hot tub from his Steamboat mansion sat forlornly on the bed of his truck out front.

But the resilient Williams, a native of Bermuda, was contemplating a bigger pool of water. He said he had planned to spend the summer in the Caribbean pursuing business interests in emerging economies there. Still, it was going to take time to get over the loss of his Steamboat home.

“It cost me thousands to lose my house. It wasn’t free,” he said. “What really hurt was that house was my baby.”

Williams’ story is just one of many like it in the summer of 2009 — just one example of how the Steamboat dream can crumble. As of July 24, the number of foreclosure filings in the office of the public trustee totaled 96, and the story was still unfolding. ❖

Jennifer Calderazzo and her husband, Michael Warren, recently moved into a deed-restricted townhome in West End Village.

Back from Bend J

ennifer Calderazzo and her husband, Michael Warren, proved this year that you can come home to Steamboat Springs, even in difficult economic times.

Calderazzo and Warren each sold a business in Bend, Ore., in 2008. They sold their home there and returned to the Yampa Valley, where they looked at homes for nearly a year before purchasing a deed-restricted townhome in West End Village.

“Bend felt like home in a lot of ways,” Calderazzo said. “I always described it as a much larger version of Steamboat. But Steamboat always has been home for us.”

The geography of Bend, population about 76,000, could be described as Steamboat without aspen trees and with much bigger mountains.

The perpetually snow-capped volcanoes of the Cascade Range loom on the horizon in Central Oregon. The ski area, Mount Bachelor, is about a 40minute drive from town. In summers, people love to float on inner tubes down the Deschutes River, which flows through the heart of the city.

Sounds familiar, doesn’t it?

Calderazzo moved here in 1998, met her husband, and rented in Stagecoach. They left to look for opportunity and quickly caught on to the real estate boom in Bend.

Jennifer started her own company, manufacturing organic bedding.

Michael established a business as a siding contractor, working with regional builders in subdivisions. The couple

realized they could tie up new homes at pre-construction prices in neighborhoods where Michael worked, and then resell them at a profit. At the time, the value of homes in Bend was increasing at an annual rate of 29 percent, she said.

“We bought several homes, but we weren’t moving in,” Calderazzo said.

“We were either renting or selling them.”

When Bend’s real estate bubble burst in fall 2007, the landing was bumpy.

“It hit very hard in Bend. We were fortunate with the last (investment) house we sold,” she said. “We knew people who got stuck” with homes they couldn’t sell. “We were extremely lucky and blessed to have sold our own home (in June 2008).

Before and after the economic meltdown, there were more attainable homes in Bend than there are in Routt County. For example, at NorthWest Crossing, on the city’s west side, there is the potential for 1,200 single- and multi-family dwelling units in neighborhoods laid out along the principles of new urbanism — front porches and garages on the alley, for example.

There remains an abundance of undeveloped lots with prices in the $70,000 to $90,000 range. About 410 homes are complete and 592 building lots have been platted.

“When things started getting strange in Bend, everything kind of fell into the right path for us to return to Steamboat,” Calderazzo said.

MATT STENSLAND/STAFF

Couple finds a different market after time in Oregon Construction work had dried up in Oregon, but Michael had a standing offer to return to his previous role as an asphalt foreman with Connell Resources in Steamboat.

Upon their return in 2008, they began looking in Stagecoach, because based on experience that had been the place to look for affordable single-family homes.

Working with Realtor Adrienne Stroock, the couple re-adjusted to the cost of housing in the Yampa Valley.

“Adrienne was great,” Calderazzo said. “I would say, if you’re coming back to Steamboat, you need a Realtor who will help you” come to terms with the reality of the marketplace.

The couple wrote several offers on houses they wanted to buy. Each was declined. Their experience was that although Steamboat’s market had gone flat in 2008, not all sellers felt urgency.

Calderazzo and Warren looked at the townhomes in West End Village but were initially wary. They fit into the income caps but felt insecure about whether they’d be able to sell the property in the future. Specifically, they worried that income limits would limit the number of future purchasers.

“It still has to be affordable (for the buyer),” Calderazzo said. “We looked at it for six weeks before we put an offer in on it.”

— Tom Ross

House of Cards ♦

♦

The rise and fall of Routt County’s real estate economy A five-part series by the Steamboat Pilot & Today | Aug. 7, 2009 WWW.STEAMBOATPILOT.COM/HOUSEOFCARDS

Part 2: The mortgage market folds

House of Cards ♦

♦

A five-part series by the Steamboat Pilot & Today |

WWW.STEAMBOATPILOT.COM/HOUSEOFCARDS

The rise and fall of Routt County’s real estate economy

Steamboat goes all in

Part 2 — Today

Retiring baby boomers helped fuel the demand that led to record real estate sales in the mid-2000s. But when the market went upside-down, the impacts were widespread.

The national mortgage meltdown hit hard locally, as homeowners and businesspeople struggled to face a new reality of vastly decreased values.

Story by Tom Ross

Story by Brandon Gee

Photos by Matt Stensland

Photos by John F. Russell

Part 3 — Aug. 14

Part 4 — Aug. 21

Part 5 — Aug. 28

Declining tax revenues have hit local governments hard, and falling home prices and a tighter lending market are hurting affordable housing initiatives, as well.

Everyone has an opinion about the future of housing in Routt County as interested players in the real estate business look for footing in a shifting landscape.

Story by Blythe Terrell

Story by Zach Fridell

Story by Margaret Hair

Photos by Joel Reichenberger

Photos by Matt Stensland

Photos by John F. Russell

Since the market’s plunge knocked the wind out of the work force, businesses have been forced to change and shrink — and some have closed their doors.

On the cover Main photo: Homeowner Kathy Woodford holds 1-year-old Kira

1

while watering the front yard of her Red Hawk Village home in Stagecoach. Kathy and her husband, Scott, bought the home at the top of the market, and have watched as prices of other homes in the community have dropped.

2

1. Elizabeth “E.A.” Black 2. Mike Larson 3. Ed Allbright

3

4. Jeremy MacGray Photos by John F. Russell/Staff Design by Christopher Woytko/Staff

4

House of Cards

A Supplement to the Steamboat Pilot & Today

E

rik Griepentrog doesn’t take bagels to work on Mondays anymore.

For Griepentrog, it is one of many steps — others include selling a car and cutting back on child care expenses — he and his family have taken in the past year to curb spending.

For his employees, those who are still left, it’s a small yet poignant reminder of the status of the economy, the condition of their company and the precarious state of their jobs.

Construction valuation through June 2009 was just $43.53 million, down 80 percent from the $208 million Routt County saw through June 2008, according to the Regional Building Department.

That kind of drop is terrible news for designers and engineers like Griepentrog, owner of Landmark Consultants, a surveying and civil engineering company.

Griepentrog is thankful for the work he has and that his business is only down half that much, at 40 percent. There’s no work in the pipeline, however, and Griepentrog is preparing for a grim winter, the season that is usually his busiest.

“The problem is we’re doing work two years old. We’re still eating off our plate. We’re not getting a second course,” Griepentrog said. “I think it’s going to be tough for a little while. I don’t worry about making it, though. I worry about other people, like our employees. … We’ve got another year or two years of getting worse before it gets better.”

G

riepentrog has cut his staff in half and, more recently, cut hours to four days a week and instructed his employees to only come into work when they have work to do, in an effort to avoid shedding more jobs. He was surprised with the way his employees took the changes.

“The only backlash was people who asked, ‘Why didn’t you do that all along?’ The reality now is there’s nowhere for them to go,” said Griepentrog, who said one of his former employees applied for a new job along with 250 other people. “They’re saying, ‘This is better than nothing.’”

Friday, August 7, 2009

|3

Story by Brandon Gee | Photos by John F. Russell

JOHN F. RUSSELL/STAFF

Erik Griepentrog, owner of Landmark Consultants, holds his oldest son, Connor, while he sits at the dinner table with his wife, Lori, and youngest son, Casey. The economy has hit home for the Griepentrogs, who have had to cut back at the office and around the house.

This is a different picture from just a few years ago, when construction was the county’s largest creator of jobs and real estate sales volume surged to a record $1.58 billion in 2007. Griepentrog was advertising as far as the Midwest in an effort to hire enough people to handle all the work, which wasn’t just coming from the private sector. Griepentrog listed the new Soda Creek Elementary School, the expansion and remodel of Bud Werner Memorial Library, the Routt County Justice Center and new Steamboat Springs Community Center as public construction projects that were built in a very short period of time.

“If you’re in public sector work, you really enjoyed a boom there,” Griepentrog said. “It just shows the growth and the activity in this area was just crazy. … It was more, ‘How the heck do we get this done,’ as opposed to ‘Oh boy, what are we going to do this week?’”

As the rest of the country and state started to show signs of the recession, Steamboat stayed resilient. Although foreclosure filings hit a record high nationwide and jumped by 40 percent in Colorado in 2007, they actually decreased

Adjustable-rate mortgage (ARM): A mortgage loan with an interest rate that can change at any time, usually in response to the market or Treasury Bill rates. These types of loans usually start off with a lower interest rate comparable to a fixed-rate mortgage.

by more than 10 percent in Routt County.

But inevitably, things fell apart, shaking the foundations of life in Northwest Colorado. The Steamboat Springs market managed just $31.8 million in sales volume in the first quarter of 2009, according to data compiled by the Rocky Mountain Resort Alliance, down from $118 million in the first quarter of 2008 and $190.3 million in the first quarter of 2007. Through July of this year, there have been 99 foreclosure filings in Routt County. The pace of foreclosures in Routt County is about three times that of 2008, when there were just 55 filings for the entire year.

“Just a couple years ago it was so hard for Erik to get quality employees,” Griepentrog’s wife, Lori said. “He spent all that time getting these good, quality people here and then he just has to say, ‘Good luck.’”

Mortgage madness

T

he Griepentrogs are far from the only family suffering from the local housing market’s fall from

grace.

Scott Woodford said he and his wife, Kathy, probably owe more money

Foreclosure: The legal process by which a property may be sold and the proceeds of the sale applied to the mortgage debt. A foreclosure occurs when the loan becomes delinquent because payments have not been made or when the borrower is in default for a reason other than the failure to make timely mortgage payments.

on their mortgage than their house is worth. The house is in the Red Hawk Village subdivision in Stagecoach. The Woodfords, who have three young children, paid $430,000 for the 1,800square-foot home in July 2007 — a price inflated by Front Range investors who bought homes in the neighborhood for speculative purposes and later were unable to make their payments.

Some Red Hawk homes are now selling for less than $300,000.

Scott Woodford said the initial plan was for the family to stay in Red Hawk Village for four to five years before taking the next step up the housing ladder.

“I just imagine with what’s happened it’s going to take a little longer than we originally thought,” said Scott Woodford, who also said the family was able to sell their townhouse at the height of the market. “You win some, you lose some, I guess.”

Central to all these problems, and to the recession of the global economy in general, is the American home mortgage industry. Saying the mortgage industry is in flux right now is like saying the Yampa River flows a little bit in May. The statement fails to capture ➤

For more: For more about House of Cards Part 2: The mortgage market folds, visit the Steamboat Pilot & Today’s Web site at www.steamboatpilot. com/houseofcards.

House of Cards

4 | Friday, August 7, 2009

A Supplement to the Steamboat Pilot & Today

Continued from page 3

the magnitude of the situation.

The uncertainty has led some to leave the industry altogether. Mike Larson left his position as vice president of Mountain Valley Bank at the end of 2008 to play the markets. Others, like Kathy Arce of Phoenix Resources Mortgage in Steamboat, have supplemented their incomes with extra work.

“I have time,” Arce said. “I have lots of time.”

To fill the hours, Arce has become an independent contractor for the gourmet foods direct-sales company Tastefully Simple. Her day job has been anything but.

Ed Allbright, of Columbine Mortgage in Steamboat, says selling a mortgage is like selling a handy but dangerous piece of equipment.

“Any loan you do is like a chain saw.

It can cut a lot of wood if used properly,” Allbright said. “It’s a great tool if you understand how they can help you and how they can hurt you.”

For the better part of this decade, there was a fire sale on chain saws in the form of products such as adjustable-rate, interest-only, no-documentation and subprime mortgages with fewer safety features than the traditional 30-year, fixed-rate mortgage — the safest chainsaw of them all.

A variety of factors led to the proliferation of these products. Larson recalled the mood of local Realtors as the market effects of Sept. 11 emerged.

“You’ve never seen such long faces. It was an instant high level of uncertainty that fairly quickly, late that fall, began to rotate into real estate as a safe haven.”

The local market dipped a bit that year, Larson said, but that slowdown was followed by a record year in 2002.

Buoyed by a healthy economy, low interest rates and high levels of consumer confidence, real estate values continued to surge in the early part of this decade. That attracted developers, speculators, second-home owners and regular folks to the market like never before. Locally, Intrawest’s purchase of the Steamboat Ski Area and other major investments by deep-pocketed, out-of-town developers fed the fire.

“Steamboat was an immediate, instant beneficiary of that dynamic,” Larson said. “It fed on itself. … It’s unbelievable how we went from $200 million (in annual total sales volume) to more than $1 billion.”

With values increasing, lenders were more comfortable lending money to people who had been unable to borrow in the past because they would be able to tap into the equity in their home if they ran into trouble. Lenders also began to make widely available “creative” financing tools previously reserved for wealthy borrowers looking for flexibility.

“We had a very generous supply of debt or borrowing out there (so) that when the job market shifted and the economy shifted, people are struggling to figure out how to pay it,” said John Kerst, director of business devel- ➤

Easy lending Markets on the rise

A healthy economy and low interest rates increase consumer confidence in the early part of the century and push real estate values up. Skyrocketing prices lured real estate speculators and developers, which further increased demand and put upward pressure on prices.

Looking to get in on the action, residents go to their local mortgage broker or bank to obtain a mortgage.

During the housing market boom, they meet with great success. With values increasing, lenders are more comfortable lending money to people who had been unable to borrow in the past because borrowers will be able to tap into the equity in their home if they run into trouble. Nationwide, home ownership rates surge to a record 69 percent in 2004.

Following the mortgage trail How modern mortgage practices affected the housing market meltdown

“The more liberal the loan, the more house you could buy. As prices go up, that works beautifully.

But once values go down, that whipsaws on you.

Overleverage became the enemy.”

Mike Larson

Former vice president of Mountain Valley Bank

“I think any intelligent analysis of the market would say 30 percent gains year to year were not sustainable, regardless of any world or national trends.”

David Baldinger Jr. Managing broker at Steamboat Village Brokers

“We had a very generous supply of debt or borrowing out there (so) that when the job market shifted and the economy shifted, people are struggling to figure out how to pay it.”

John Kerst

Director of business development at Yampa Valley Bank

“When you have a customer who is asking for that particular program and it’s available to me from the lenders, we sold the product. … Let’s face it: If they don’t get it from me, they knew they could get it from the broker down the street.”

Kathy Arce

Phoenix Resources Mortgage broker

“Any loan you do is like a chainsaw. It can cut a lot of wood if used properly. It’s a great tool if you understand how they can help you and how they can hurt you.”

Ed Allbright

Broker for Columbine Mortgage in Steamboat

“We definitely don’t look at it as a bust. We’ll acknowledge that the market is slower than we’d like. … There was a pretty solid demand until this financing hiccup came about. … It will just take some time. It’s going to cost us more.”

Mark Scully

Developer with Green Courte Partners

House of Cards

A Supplement to the Steamboat Pilot & Today

Friday, August 7, 2009

|5

Foreclosure statistics in Routt County by year

Mortgage sell-offs

* Numbers for 2009 are through July 31, 2009

Unlike in the old days, mortgages originated locally are not held locally. Banks and mortgage brokers sell the loans they originate on the secondary market to major lenders with the resources to hold long-term debt. Competition among lenders hoping to capitalize on the growing pool of borrowers further liberalizes mortgage practices. Creative financing products previously reserved for high-income borrowers looking for flexibility are made widely available to the general public.

99

100 90 80 70

50

51

55

53

50

60

47

50

42 38

Market takes on risks

Individual mortgages are bundled together and pieces of the bundle are sold to investors. The investments are known as mortgage-backed securities.

While the bundle includes risky loans, the securities are given good credit ratings. This, combined with their high rate of return, makes the securities extremely popular. Regulators exercise little control over the booming mortgage market.

40 25

25

27

30

22

20

*

0

20 09

20 08

20 07

20 06

20 05

20 04

20 03

20 02

20 01

20 00

19 99

19 98

19 97

10

Source: Routt County Treasurer’s Office

Housing bubble bursts

The bubble bursts. Housing prices flatten and ultimately fall. In 2007 and 2008, $636 billion in adjustable-rate mortgages — $367 billion of which are subprime — reset to higher interest rates. Many homeowners counting on appreciation are unable to refinance their loans and can no longer make their payments. Delinquencies and foreclosures surge.

Lending tightens

The money flowing into mortgagebacked securities decreases. Financial institutions suffer huge losses as they are forced to shore up the decreased value of the securities. Many institutions and mortgage companies go bankrupt. The rest have less money to lend and dramatically increase lending standards.

Economy crippled

The credit or liquidity crunch cripples economic activity. Unemployment increases. Inventory of homes for sale increases. The unprecedented ease of obtaining a mortgage just a short time ago reverses itself. People are unable to take advantage of low prices and increased housing options because of restricted lending and decreased or negative equity in their current homes.

House of Cards

6 | Friday, August 7, 2009

A Supplement to the Steamboat Pilot & Today

JOHN F. RUSSELL/STAFF

A sign just outside of Stagecoach frames the area’s once booming development. The collapse of the housing market has hit the area hard, leading to short sales and homeowners willing to take the extra steps to sell their homes in a very competitive market. Below: Elizabeth “E.A.” Black, a consultant who formerly worked at Millennium Bank and the Yampa Valley Housing Authority, said some lenders engaged in predatory lending practices.

By making as many loans as possible and placing people into loans they could not afford, she said, the lenders added to troubles that played a role in the collapse of the housing market.

Continued from page 4

opment and former president at Yampa Valley Bank.

Mortgage meltdown

W

hen real estate prices flattened and fell, the system that had been built on appreciation met with disaster. While the severity of our current recession is a shock to most, many say there were signs that the heyday wouldn’t last forever.

“I think any intelligent analysis of the market would say 30 percent gains year to year were not sustainable regardless of any world or national trends,” said David Baldinger Jr., of Steamboat Village Brokers.

Mike Larson, the former mortgage broker, agreed.

“You had the sense that it couldn’t stay this hot forever,” he said. “You had this sense that when we had 400 Realtors in a town of 10,000 and a county of less than 30,000.”

The slowdown hit nationally first, but then it trickled its way into Steamboat and other resort markets.

In 2007 and 2008, $636 billion in adjustable-rate mortgages — $367 billion of which were subprime — reset to higher interest rates, according to First American CoreLogic, a real estate data firm. Many homeowners counting on appreciation were unable to refinance their mortgages to a lower rate and could not make their payments.

“Our values rose so fast here from

2002 to 2007 that, even if you overextended yourself, you could sell and make a profit,” Larson said. “The more liberal the loan, the more house you could buy. As prices go up, that works beautifully. But once values go down, that whipsaws on you. Overleverage became the enemy.”

Who to blame?

M

ortgage brokers and bankers have taken much of the heat for the meltdown, and some think that is deserved. Elizabeth “E.A.” Black, a consultant formerly of Millennium Bank and the Yampa Valley Housing Authority, said overzealous lenders engaged in predatory practices and greedily made as many loans as possible by aggressively putting people in loans they ultimately couldn’t afford.

“I think it was happening in every major city. I have reason to believe it happened here,” she said. “We had this free-for-all mortgage availability.”

Colorado is a top-10 state for mortgage fraud, according to the FBI. Black said products that required no documentation of a person’s income or other verifications were particularly troubling.

“A person could essentially lie on their application and sign they were telling the truth,” she said.

The practice of selling mortgages on the secondary market also is a problem, some argue, because the people originating the loans don’t have any skin in

Refinance: Paying off an existing loan (such as a balloon mortgage) with a newer, usually lower rate loan.

the game.

“I’m not saying it was rampant, but certainly that dynamic of not having to worry about whether the loan performed invites liberal lending practices,” said Larson, who added that he doesn’t think such practices were widespread in Routt County. “That was a very large systemic problem, and as a result of that, that’s why we’re seeing nationwide underwriting standards significantly tightened up now.”

Although some acknowledged that a few of their customers have gone into foreclosure, all mortgage originators interviewed by the Pilot & Today said they did not regret any of their loans because of factors that existed at the time the loan was made and unanticipated events that happened after.

Kathryn Pedersen, a mortgage loan officer at Yampa Valley Bank, and Holly Rogers, a mortgage loan officer and vice president at the bank, said they think they have skin in the game because if they sell bad loans on the secondary market, lenders will stop working with them.

“We’re not going to do anything that’s going to risk our reputation because that’s our biggest asset,” Rogers said.

Many brokers said borrowers should take personal responsibility and that many were so eager to take part in the booming housing market that they did not heed advice to avoid purchasing risky loans.

Subprime mortgage: Generally, a mortgage loan made to a borrower with a weaker credit profile than that of a prime borrower. As a result of the weaker credit profile, subprime borrowers have a higher likelihood of default than prime borrowers.

“There were a few people I told this does not make sense and I’m not going to do it,” Pedersen said.

“But if I wouldn’t do it, someone else would.”

Others said they didn’t feel it was their place to block someone from getting a loan if it was compliant, a lender would accept it and the customer insisted on it.

“My role as I saw it was to educate you as best I could,” Allbright said.

As an example, Allbright said he would advise any customer seeking 100 percent financing to have six ➤

On the ’Net For more photos from Part 2 of the Steamboat Pilot & Today’s special section House of Cards, visit www.steamboatpilot.com/houseofcards.

House of Cards

A Supplement to the Steamboat Pilot & Today

Friday, August 7, 2009

|7

Continued from page 6

months worth of reserves to pay his or her mortgage.

“If you decide to take my advice, great. If not, I still have to submit the loan to the underwriter,” Allbright said.

“My job is to give you advice, not be your dad. Is it my job to say you can’t rent the chainsaw because you’re an idiot? My job is to explain to you and make sure you understand what all the issues are.”

Arce agreed.

“If it’s your life and your loan and your house and your future, ask the questions,” she said. “When you have a customer who is asking for that particular program and it’s available to me from the lenders, we sold the product. … Let’s face it: If they don’t get it from me, they knew they could get it from the broker down the street. That’s a fact of business.”

Holding the bag

A

lthough the housing market meltdown has global causes and effects, it also has hit very close to home — from the wealthiest to the most vulnerable sectors of our society.

Steamboat’s economy floats on a sea of outsiders, and John Kerst, of Yampa Valley Bank, noted that if people have less disposable income to spend nationally, they are less likely to visit Steamboat. And, perhaps more important, they are less inclined to buy real estate here. The latter hesitancy has had dramatic effects that have soaked through all layers of society, including the immigrant community that is estimated to make up 5 percent of Routt County’s population.

“The most obvious is the decline in job opportunities in the construction and landscaping industries. The majority of the immigrant community work in those industries,” said Tatiana Achcar, executive director of Integrated Community. “It’s weird to think about how the halt in the luxurious homes has affected the immigrant community.

They are the ones who were feeding the industry all along.”

The middle class is reeling, as well, and residents are struggling to buy and sell property.

Joe Birkinbine, of ATP Financial Services in Steamboat, hopes to move his family out of a Steamboat townhouse and into a larger single-family home, but has taken his home off the market because of a lack of interest.

“Had we had the crystal ball, we would have sold in 2006, rented for two years because our crystal ball would have told us there was going to be a downturn in the market, and then we could have been a cash buyer,” he said.

On the plus side, Birkinbine is glad he resisted the temptation to purchase a new truck after a record year ➤

JOHN F. RUSSELL/STAFF

Red Hawk Village may be Routt County’s best example of the effects of the housing market crash. Instead of young, local families envisioned as the residents of the development, developers Mountain Valley Communities found themselves popular among investors on the Front Range. Home sites sold for as much as $555,000 to the out-of-town investors, and when the market came crashing down, a number of properties went to short sale.

Red Hawk Village W

alk into the Steamboat Springs offices of Mountain Valley Communities and an empty desk will greet you. It turns out a receptionist is an expendable luxury for the company in times like these.

“As developers, we’re struggling,” Managing Broker Ren Martyn said.

“We’re all feeling the pinch.”

If you were to pick one Routt County subdivision to illustrate the housing market crash’s impact locally, Mountain Valley Communities’ Red Hawk Village might be it. The neighborhood in Stagecoach south of Steamboat was built at the height of Routt County’s real estate boom. The first units came on the market in 2006.

Martyn and his partners envisioned Red Hawk Village as an affordable development for young families, with homes ranging from 1,600 to 1,800 square feet. They even offered eight deed-restricted affordable units. Buyers were not interested in the deed restrictions, however, and they were removed.

And instead of young families, specu-

Short sale: The process in which a servicer works with a delinquent borrower to sell the house by a real estate agent prior to the foreclosure sale.

lators poured into Red Hawk Village looking to capitalize on Steamboat’s booming market. Most home sites in Red Hawk Village were sold to investors from the Front Range for prices as high as $555,000.

“The prices were very high,” Martyn said. “Philosophically, it was difficult because here we were trying to build an affordable product. … But as a developer, we like to sell our property.

Developers don’t hold our property.

That’s not our business.”

But when the market fell apart, the investors were unable to make their payments, leading to a sizable number of short sales at Red Hawk Village.

Offerings of short sales come about when a property owner alerts his or her lending institution that the owner cannot keep up with the payments, and the bank agrees to sell the property for less than the loan value. The motive is to avoid the expense of a foreclosure.

The property owner faces losing his or her equity but also avoids some of the other negatives of a foreclosure.

Home Equity Line of Credit (HELOC): A way of borrowing money against the equity or assets that you have in your home to pay for things such as home repairs, college education or other personal uses.

Source: Fannie Mae

A case study

Investors aren’t the only ones who are struggling. Martyn said some locals made purchases in Red Hawk Village at the inflated, speculation-driven prices, “and now they’re upside down.”

“There are so many similar situations,” Martyn said. “Red Hawk has just been the perfect storm. … The irony is the original plan has come to fruition.”

Martyn was speaking to the fact that the bank-driven short sales have deflated prices to a point where Red Hawk Village is affordable for the young families that were targeted all along. A three-bedroom home that sold for $555,000 in April 2007 sold for $297,000 on June 29.

Although he bought at the height of the market, Red Hawk Village resident Jamie Morgan said he and his family are glad to see that the speculators gone and that the neighborhood is filling up with families.

“I could see us staying there a long time,” Morgan said.

— Brandon Gee

For more: For more about the housing market crisis visit the House of Cards Web site at www.steamboatpilot.com/houseofcards.

8 | Friday, August 7, 2009

House of Cards

A Supplement to the Steamboat Pilot & Today

Continued from page 7

for his business in 2007 and instead paid cash for a good, used one.

“That’s wise spending,” Birkinbine said. “Now that my income is declining, I don’t have a second car payment.”

In Stagecoach, Shamus and Julie Spitzley are offering a $10,000 finder’s fee to anyone who can find a buyer for the house they have been trying to sell for two years. Their latest price for the house, $489,000, is $135,000 less than its most recent appraisal.

“It’s tough because there’s so many houses on the market, so you just got to try to stand out from the guy next door,” said Julie Spitzley, owner of Storm Mountain Roasters. “Many (buyers) just want the perfect house, and they can be picky right now.”

Although she said she doesn’t regret buying the house, she and her husband are certainly sick of it being for sale. They bought the house in 2005 as an investment and hope to build a new home on another lot they own in Stagecoach.

“I bought it to sell it,” Shamus Spitzley said, “not to live in it.”

On the other side of the coin are potential buyers like Matthew and Jessica Farrington. The couple has a 3-year-old daughter and another child on the way. They tried for years to find a home. They were consistently told their only real options were in Hayden and Oak Creek. Now that prices are down and the Farringtons could realistically afford a place in Steamboat, the lending markets are too big of a challenge.

“His personal opinion is that it’s impossible for anybody to get financing right now,” Matthew Farrington said about a friend who is a mortgage broker.

Friends have urged the Farringtons to stay, arguing that Steamboat is a great place to raise children. Matthew Farrington would agree, but with one caveat.

“If they live in a cardboard box, it’s not that great.”

The Farringtons moved to Australia in July to live with Matthew’s mother.

Overbuilt?

O

nly 55, or 3 percent, of Steamboat’s 1,791 active listings sold in the first quarter, according to the Rocky Mountain Resort Alliance, and only 20, or 5 percent, of 380 single-family homes listed were sold. Fourteen percent of Steamboat’s inventory sold in the first quarter of 2008, and 40 percent sold in the first quarter of 2007.

Some interpret stats like that to mean that Steamboat was overbuilt during the boom. Others disagree and say people were merely building according to information available at the time.

“There’s definitely a lot of product right now, but the market is so bad,” said Jeremy MacGray, of JSM Builders in Steamboat. “The market isn’t bad.

It’s really bad. It’s ridiculous. If the market had simply corrected itself

PHOTOS BY JOHN F. RUSSELL/STAFF

Renters Matthew and Jessica Farrington pack their suitcases before moving back to Australia, where Matthew is from. The Farringtons had hoped to buy a home in Steamboat Springs, but they could not afford a home when the market was hot, and now that things have slowed, they can’t qualify for a loan. Below: Julie Spitzley gets some help from her daughter Virginia while making smoothies in the kitchen of the family’s home in Stagecoach. The Spitzleys have been working to sell their home for two years and have resorted to offering a $10,000 finder’s fee to anyone who can find a buyer for their home.

instead of just tanking, I don’t think we would have overwhelming supply.”

Mark Scully, of Green Courte Partners, developers of major downtown redevelopment projects, also doesn’t think that Steamboat was overbuilt, but he said the company would have delayed things a year or two if it could have foreseen the recession.

“We definitely don’t look at it as a bust,” Scully said. “We’ll acknowledge that the market is slower than we’d like. … There was a pretty solid demand until this financing hiccup came about. … It will just take some time. It’s going to cost us more.”

Out of 45 residential units in Green Courte’s projects, five have closed and another 17 are under contract.

“We certainly expect to lose a few (contracts),” Scully said.

About 65 percent of 24,000 square feet of commercial space is leased in two projects, Alpen Glow and Howelsen Place. A third redevelopment project, River Walk, has been delayed indefinitely, Scully said.

Similarly, Baldinger said he thinks the redevelopment of Ski Time Square will be delayed two to five years.

“Developers are not going to overbuild on purpose,” Baldinger said.

That’s bad news for Erik Griepentrog, who bought a condominium on Ski Time Square Drive speculatively after learning about Ski Time Square and Thunderhead Lodge’s $54 million sale for redevelopment in 2007.

He regrets that purchase, particularly

because lending practices have thwarted his efforts to refinance the condominium. He might feel better about it if and when The Atira Group moves forward with plans to build a million square feet of high-end, mixed-use development at the site of the demolished properties.

“I sure don’t like to have to bleed out of it right now,” Erik Griepentrog said.

In addition to taking hits from investment properties, many in Steamboat are also struggling because their home-equity lines of credit, or HELOCs, have now run dry. “Using your house as an ATM” was common in Steamboat, Rogers said.

The most troubling trend she saw was people using home equity lines of credit to pay off credit cards that they would

immediately run up again and pay off with their home equity. When values went down, many HELOC users got a call from the bank saying their credit line was maxed out and could no longer be used.

Jeff Steinke, general manager of Steamboat Motors, said some buyers — but not many — used HELOCs to purchase cars. But if nothing else, Steinke said, growing home values certainly boosted buyers’ confidence. Sales at Steamboat Motors are down about 10 percent, or four or five cars, a month.

“People thought that forever they would have equity,” Rogers said. “But the well is dry. You have nothing to dip into anymore.”

House of Cards ♦

♦

The rise and fall of Routt County’s real estate economy A five-part series by the Steamboat Pilot & Today WWW.STEAMBOATPILOT.COM/HOUSEOFCARDS

|

Aug. 14, 2009

Part 3: Holding a losing hand

House of Cards ♦

♦

A five-part series by the Steamboat Pilot & Today |

WWW.STEAMBOATPILOT.COM/HOUSEOFCARDS

The rise and fall of Routt County’s real estate economy

On the cover

Customers stroll along Lincoln Avenue in downtown Steamboat Springs in front of Stephen’s Colorado Factory Outlet. Owner Stephen Sanders said the store is trying to liquidate its merchandise and will close soon. Sanders, who also owns and operates Stephen’s Furs and Outerwear in Torian Plum Plaza, said the downtown store’s layout isn’t ideal, but no matter the design, customers simply aren’t spending money on higher-end clothing. “These days, it’s fashionable to be frugal,” he said.

Photo by Joel Reichenberger/Staff | Design by Christopher Woytko/Staff

Steamboat goes all in

The mortgage market folds

Retiring baby boomers helped fuel the demand that led to record real estate sales in the mid-2000s. But when the market went upside-down, the impacts were widespread.

The national mortgage meltdown hit hard locally, as homeowners and businesspeople struggled to face a new reality of vastly decreased values.

Story by Tom Ross

Story by Brandon Gee

Photos by Matt Stensland

Photos by John F. Russell

Part 3 — Today

Part 4 — Aug. 21

Part 5 — Aug. 28

Declining tax revenues have hit local governments hard, and falling home prices and a tighter lending market are hurting affordable housing initiatives, as well.

Everyone has an opinion about the future of housing in Routt County as interested players in the real estate business look for footing in a shifting landscape.

Story by Blythe Terrell

Story by Zach Fridell

Story by Margaret Hair

Photos by Joel Reichenberger

Photos by Matt Stensland

Photos by John F. Russell

Since the market’s plunge knocked the wind out of the work force, businesses have been forced to change and shrink — and some have closed their doors.

House of Cards

A Supplement to the Steamboat Pilot & Today

W

Friday, August 14, 2009

|3

Story by Blythe Terrell | Photos by Joel Reichenberger

hen the tentacles of the national housing bust slithered into Routt County last year, they didn’t stop with foreclosures and a lending crunch.

They crept onward, sneaking into the lives of engineers, interior designers, contractors, restaurateurs and retailers.

Average employment for the fourth quarter of 2008 dropped by 544 people compared with the same quarter in 2007. Jobs decreased in construction, leisure and hospitality, retail, food services and other sectors. As the housing construction market skidded to a crawl, people clung to whatever employment they had.

In Steamboat Springs, where good workers had been hard to find and harder to keep, the tentacles of a growing global recession curled around every person marginally connected to the building industry.

And they squeezed.

JOEL REICHENBERGER/STAFF

D

avid Connolly, a structural engineer, worked for architects to make sure buildings such as The Victoria downtown could withstand snow, wind and seismic loads. Connolly came to Steamboat in 2000 as part of a Denver company. He was laid off after Sept. 11, 2001, and switched to a local company.

In 2004, he started ERS Consulting Engineers.

Connolly’s workload rose with the red-hot construction industry, and he took on three employees.

He remained confident while watching the national market falter.

Connolly started to see a problem late last year.

“Coming into the end of 2008, I had between eight and 10 projects all ready to go, or the people said, ‘Yeah, we’re going to move on for the spring or summer of 2009,’” he said.

“And by January 2009, I didn’t have a one.”

Connolly laid off his staff in mid-December and kept his office space through January. He moved to

Christine Lindmier, left, and Barb O’Connor eat lunch around noon on an otherwise empty patio at Rex’s American Grill and Bar in Steamboat Springs. Restaurant owner Rex Brice said even businesses that rely heavily on locals rather than tourists have suffered in the economic recession.

Pennsylvania with his wife and two children in April. His $1,100-a-month house there is slightly larger than the house he rented in Steamboat for $2,300 a month.

Connolly and his wife bought a house in Old Town and sold it for a pretty penny in 2007. They then bought a piece of land, planning to build on it, and rented a home.

“I’d say we definitely sold at the high point in the real estate market,” Connolly said. He isn’t pleased with where that cash went. “It would’ve been better if I just put the money I made in the bank.”

Instead, the couple used the money to buy 5.5 acres in Elk River Estates and to invest in ERS Consulting Engineers. The Connollys haven’t seen much interest from buyers. They’ve dropped the price for the land from $379,000 to $269,000.

“That hurts,” David Connolly said.

Like Connolly, Rick Lobato took a chance on the market in Steamboat.

Work in the Storm Mountain Ranch

Unemployment rate: The percentage of total workers in the work force who are unemployed and are looking for a paid job. The unemployment rate is one of the most closely watched statistics because an increasing rate is seen as a sign of a weakening economy. A decreasing rate, similarly, indicates a growing economy, which usually is accompanied by

development drew Lobato to town in spring 2006. The builder and his wife, Karen, pulled up roots in Boulder in September 2006 and bought a 1952 ranch house in Old Town.

When Lobato moved to Steamboat, “it seemed like things were gangbusters on all fronts,” he said. Lobato started Chaparral Construction and kept it small, building one high-end house at a time.

After the Storm Mountain house, Lobato worked on one in Elkins Meadows for 16 months.

“By the time I delivered that home, my next opportunities went up in smoke,” he said.

Chaparral Construction all but collapsed.

“It’s literally a mouse click away from oblivion,” Lobato said. “I still have an open corporation under the state offices, but at this point in time I really don’t see, I don’t see Chaparral having any opportunities in the foreseeable future.”

higher inflation rates and may call for increases in interest rates. Routt County’s labor force decreased from 15,184 to 14,584 from June 2008 to June 2009. Unemployment increased from 3.4 percent in June 2008 to 7.7 percent in June 2009.

Source: BusinessDictionary.com

#

Employment snapshot

Number of employees Company High July name point 2009 ERS Associates 4 1 Harbert Lumber 31 16 Johnson Excavation 40 10 Mountain Millworks 7 1 Peak Mechanical 24 11 Steamboat Interiors 12 3 For the first time since age 16, Rick Lobato isn’t working. For the first time ever, he’s drawing an unemployment check.

“The short end of my short story is I’ve been unemployed for the last eight months, and we’re struggling, to say the least,” he said. ➤

For more For more photos from Part 3 of the Steamboat Pilot & Today’s special section House of Cards, visit www.steamboatpilot.com/houseofcards.

House of Cards

4 | Friday, August 14, 2009

A Supplement to the Steamboat Pilot & Today

Continued from page 3

A strained work force

P

eople across the valley are experiencing the pangs that come with government help, said Brian Bradbury, an employment specialist at the Steamboat Springs branch of the Colorado Workforce Center.

Bradbury and his colleagues at the center often serve as a connection between the jobless and the government. He answers the phone in a soothing tone, prepared to walk people through the tangle of unemployment benefits.

“We get people in here who say, ‘I’ve worked for 15 years, and I’ve never had to collect unemployment, and I have a home and a mortgage,’” he said.

The average person is receiving unemployment checks for 15 to 20 weeks, Bradbury said.

“The people who’ve gone through regular unemployment and have to go to emergency unemployment, what’s that telling them?” he said. “It’s a long road. The psychology of that, the stress level goes up, the frustration goes up.”

People are willing to take a lowerpaying and lower-skilled job than they would have accepted a year ago.

Bradbury also is seeing more people doing what Connolly did.

“We’re talking to a lot of people who are picking up and leaving Steamboat,” he said.

Routt County’s labor force decreased from 15,184 to 14,584 from June 2008 to June 2009. Unemployment went from 3.4 percent in June 2008 to 7.7 percent in June 2009. At times, the Workforce Center has listed 250 jobs.

In late July, it listed 17.

“We are the worst part of the Northwest region for jobs,” Bradbury said.

Craig, Granby, Meeker and Rangely have had fatter listings, he said. Routt County residents are traveling to Moffat County for work, and it used to be the other way around.

The drop-off has been astounding, Bradbury said.

“Since I started in 2001 or 2002, it’s been definitely a climb along with everything else,” he said. “The number of jobs coming in just multiplied themselves up to six or eight months ago, then it just dropped by tenfold.”

That job scarcity has been positive for some employers. Peter Boniface, owner of Backcountry Provisions sandwich shop, said he had his steadiest staff in six years. Workers are hanging onto solid, year-round employment, he said.

“I just think if you looked at the paper even a year ago in the help wanteds, there were jobs all over the place,” Boniface said. “Everybody was hiring.”

Finding and keeping good workers was tough, he said.

“It was hard to find, first, qualified applicants, and jobs weren’t valued,” Boniface said. “You could just go get another one. Now, they’re scarce, so obviously the jobs have more value.”

The Workforce Center is partnering with Colorado Mountain College’s ➤

Architecture Architects were experiencing a heyday as speculative houses and new residences shot up across the Yampa Valley.

“In ’07, everyone was dancing naked on the tables,” said Tim Stone, co-founder of Kelly & Stone Architects. The company opened for business about three years ago.

From their place as step No. 1 in building a house, architects felt a housing slump early on.

“We started experiencing the slowdown I think as much as a year prior to builders and some of our consultants because they were still working on projects,” Stone said.

Things are down about 75 percent from the height, he said. KSA has cut its staffing.

Plumbing and heating installation When construction was going full tilt, plumbing and heating contractors were, too.

“We were running around like chickens with their heads cut off,” said Mark Hoovler, owner of Peak Mechanical Services. “It was crazy. You couldn’t get enough people to do the work, and it was hard to make deadlines and expectations and schedules because of the volume and the sheer speed of how people wanted things done.”

His company has gone from 24 to 11 people. Peak Mechanical has been in business 15 years, however, and Hoovler said he was confident that the company would make it through tough times.

Home systems Conundrum Technologies and Conundrum Energy provide systems for heat, temperature, lighting and music, among other services. During the boom, people weren’t as concerned with value as they are now, Chief Executive Officer Jason Perez said.

“It was an explosion with very little parameters, very little references for doing systems,” Perez said. “It was, ‘OK, I’m building a house. I want a huge music system, I want a theater.’ … It was just ‘put it in.’”

Customers are more interested in solar and other energy-saving products, and they want their systems to work together, Perez said. They’re also more interested in what their money’s getting them.

Landscape architects Carroll Zamzow, owner of the Lawn Lady, said she sees impacts of the recession around her but has kept the business busy. She started the Lawn Lady in 1989.

“We’ve had times like this in the last 20 years, and I think that if you have a really established business and you have the trust of your customers … you don’t suffer as much as others,” Zamzow said.

Consistent prices are crucial for her business, she said. Zamzow has 30 full-time employees, more than last summer.

Granite countertops

Greg Grasso, owner of Grasso Glass & Stone, said his small shop has kept busy during the downturn. He operates with just his wife, Julie Anderson, and sells granite, glass and ceramic surfaces.

“We do run a small business, and I do hire kind of day labor,” Grasso said. “Most of them are friends and acquaintances that help me, so we haven’t had to cut personnel, per se, we’ve just kind of had to cut back our own lifestyle.”

New construction has slowed down, and the company is doing more remodels now.

A Supplement to the Steamboat Pilot & Today

House of Cards

|5

Inside the walls

Accent businesses Scott Glynn, owner-operator of Mountain Millworks, said he employs 20 percent of the staffing he had two years ago. Glynn’s company does millwork and makes trim. He said he was surprised by the speed of the drop in business.

“Everybody talked about a slowdown and a slowdown and a slowdown,” Glynn said. “It was not a slowdown. It was like somebody threw the emergency brake on.”

Glynn said Mountain Millworks was down to him and “some volunteer hours” from his teenage son and accounting work from his wife.

Friday, August 14, 2009

How the recession has affected construction and home projects

Builders Vic Pappas, of Pappas Builders, has been building in Steamboat Springs since the 1970s. The housing bust moved him from custom and speculative homes to smaller gigs. Pappas and a few workers are doing cabinetry work at One Steamboat Place.

His crew expected to be building several homes, but people have put a hold on their projects.

“We’re basically subcontracting ourselves on some of the bigger projects around town,” Pappas said. “We also do interior trim and carpentry work, so my base crew I’ve tried to keep them busy doing that.”

House painters People are watching their pennies when it comes to refreshing paint, said Luke Norland, owner of Luke’s Colorado Colors. His crew doesn’t usually paint many new construction projects, but business still has tightened up.

“I will break it out and say, ‘Listen, it’s going to be $1,000 for this room, it’s going to be $850 for that, it’s going to be $600 for the bathroom,’” Norland said. “I let people pick and choose, and they’re picking and choosing more often.”

He laid off one member of his crew and is down to about three people.

“In January, I got the guys together and said, ‘We’re going to be tight this year,’” Norland said.

Driveways, excavation Lumberyards The people that provide the wood for projects across the valley said they saw a dramatic slowdown last fall and winter.

“We were able to finish ’08 relatively strong with the business we were already selling,” said Skip Dierdorff, northwest area manager for Alpine Lumber. “When the bad news came in October, November, with the stock market crash and everything, that affected the starts that we had in the spring, the construction starts.”

October was “like hitting a wall,” he said. But construction in the Yampa Valley is more robust than Grand County and the Vail Valley, Dierdorff said. Alpine has seen its staffing decrease by about 30 percent through attrition, not layoffs.

C.D. Johnson, owner of Johnson Excavation, has been in business since 1970. He said this recession was the worst he’d seen. Johnson Excavation has gone from about 40 employees to 10.

“There are very, very few big contracts that have continued and then also the bulk of our trade was the trophy home or starter castle … and that has just dropped,” Johnson said. “There’s none of that.”

But like many business owners, he said things were starting to pick up.

House of Cards

6 | Friday, August 14, 2009

A Supplement to the Steamboat Pilot & Today

2006 income and labor distribution in Routt County Income distribution

Labor distribution Other industries 62.4%

Other industries 60%

Top 3 industries 37.6%

Top 3 industries 40%

Health care 7.6%

Retail 9.3%

Construction 23.1%

Food, Lodging 10.8%

Real estate 10.2%

Construction 16.6%

Source: Routt County Livability Index Continued from page 4

Alpine Campus to get people into those valuable jobs. The American Recovery and Reinvestment Act promotes the development of “green jobs,” where people do environmentally friendly work.

“There are monies coming from the stimulus package where we’re going to try to retrain people,” Bradbury said.

Lobato said he has considered a new career but isn’t interested in leaving construction.

“It’s what I know,” he said. “It’s what I’m good at. It’s what I’m most qualified for, and you hear all sorts of things about career shifting and stuff like that, but that is a very difficult thing to do.”

The tentacles

T

he construction slowdown has touched every industry in the area, Bradbury said. There could be a threshold for how many people the Yampa Valley can sustain.

“I think there is, I really do,” Bradbury said. “It’s definitely going to limit who can make a living here in the valley. It affects everything.”

Widespread layoffs have had a domino effect on the community.

Carl Steidtmann, chief economist for Deloitte, said the housing bust and recession have affected spending.

Deloitte is a global firm that provides audit, tax consulting and financial advisory services. Steidtmann lives in Steamboat.

“I think the biggest effect that it’s had is on consumer spending,” he said. “If you’re looking beyond the obvious areas of construction, real estate, the things that are directly affected … the inability of households to refinance and extract equity, the contraction in the availability of credit in general, has had a significant

impact on consumer spending.”

That’s limited the spending of tourists and locals, Steidtmann said.

“The banks that issue credit cards have significantly changed the terms on those cards and reduced the credit limit for many households,” he said.

“The cost of the credit has gone up, the length of time that you’ve got until you pay your balance has been shortened, so all those factors have a dampening effect on consumer spending.”

Sales tax collections in Steamboat reflect sluggish spending. The figures have decreased for the nine months through May, the most recent month for which numbers were available.

Restaurants were among the categories that were down, slipping 14 percent in sales tax collections compared with 2008.

“No doubt, we’ve seen an impact from it,” said Rex Brice, owner of Steamboat Restaurant Group.

He runs Rex’s American Grill & Bar, Mazzola’s Italian Restaurant and Big House Burgers.

“Everybody says, ‘Oh, Rex, you don’t have anything to worry about in the economy, all your business is locals,’” Brice said. “But if the tourists don’t spend the money and the rich people aren’t building houses, the locals don’t have money to spend at our restaurants.”

Of the three restaurants, Rex’s was hit hardest, Brice said. He said he’s noticed fewer construction workers and locals at happy hour. And the realestate agents, developers and contractors having business lunches are gone.

“Last year, you’d walk through the dinning room and you’d see people with laptops open and their building plans out on tables and lots of developers and architects and Realtors in having lunches with clients,” Brice said. “And of course, not only does the hammer and nails kind of guy stop coming in, so do

Emergency unemployment compensation (EUC): Emergency unemployment compensation, or EUC, benefits are additional benefits granted by the federal government during difficult economic conditions. EUC allows unemployed workers to claim benefits for an increased time period. Under EUC legislation, qualified persons can claim an additional

JOEL REICHENBERGER/STAFF

Rolin Stone, of Alpine Lumber, moves a stack of lumber last month. Stone said the business has changed in his more than three years working there. “The last two years were really good,” he said. “This summer was bad.

It started last winter. It’s about medium now, but what’s really scary is this winter. If we can make it through this winter, we’ll be all right.”

the developers, Realtors and bankers and so forth.”

Brice hasn’t had to lay anyone off, though he said some employees have left and haven’t been replaced.

Steamboat Restaurant Group is focusing on being more efficient with what it has, he said.

According to numbers from the state Department of Labor and Employment, fewer workers held jobs in accommodation and food services in the fourth quarter of 2008 compared with the same months in 2007.

In October, November and December, 1,880 people worked in the industry.

That was a decrease of 125 people, or 6.2 percent, compared with that time frame in 2007.

But Joe Winter, a senior economist with the department, noted that Routt County’s construction cuts were most significant.

Construction employment decreased

20 weeks of unemployment compensation through the federal program.

An additional 13 weeks, for a total of 33 weeks, can be claimed under the EUC program in states with an unemployment rate of 6 percent or higher for three consecutive months.

Source: Colorado Department of Labor & Employment

an average of 273 people, or 8.8 percent, in the fourth quarter of 2008.

“What I find is that the construction industry, which has heavy ties to not only how employment in general is going but to how levels of finance are going, is suffering,” Winter said. “And your total employment is down a bit as well, but the lion’s share of that is leisure, hospitality and construction.”

Leisure lag

W

hen you talk leisure in Steamboat Springs, you’re typically talking about skiing.

Numbers were down across ski areas in Colorado this year, though Steamboat Ski and Resort Corp. would not provide numbers. Skier visits decreased by 6.9 percent for Colorado Ski Country USA members from 200708 to 2008-09.

Ski Corp. also has seen changes ➤

On the ’Net To read parts 1 and 2 of the Steamboat Pilot & Today’s special section House of Cards, visit www.steamboatpilot.com/houseofcards.

House of Cards

A Supplement to the Steamboat Pilot & Today

Friday, August 14, 2009

Comparative employment numbers for Routt County Numbers are from data compiled in the three months of the fourth quarter — October, November and December — in 2007 and 2008

2007: 596

➤

Mining & Logging

3.3%

2007

2008: 609

2007: 3,088

➤

2007: 167

➤

Construction Manufacturing

2008 8.8%

2008: 2,815

7.2%

2008: 155

2007: 2,562

2007: 229

➤

Information

➤

Trade, transportation and utilities

1.0%

2008: 2,536

4.8%

2008: 218

➤

Financial activities 2007: 1,035

5.0%

2008: 983

2007: 1,208

➤

Professional and business services

3.9%

2008: 1,161

2007: 2,022

➤

Education and health services

3.2%

2008: 2,087

2007: 3,136

2007: 502

➤

Public administration

5.0%

2008: 842

➤

Retail trade 2007: 1,794

2007: 909

➤

Educational services

4.0% 2008: 1,717

4.6%

2008: 951

Health care and social assistance 2007: 1,113

2.1%

2008: 1,136

2007: 2,005

1,000

1,500

Credit: The purchasing power created by banks through lending based on fractional reserve system. Banks literally ‘create’ money with their bookkeeping entries.

2,000

2,500

➤

Accommodation and food services 500 Number of workers

2008: 2,899

2008: 564

➤

2007: 574

7.6%

1.7%

➤

Other services

➤

Leisure and hospitality

6.2%

2008: 1,880

3,000

3,500

Source: Colorado Department of Labor and Employment Fractional reserve system: Under FRS, banks are required to hold only a fraction (typically 12 percent) of the depositors’ funds as cash reserves. The remaining 88 percent of deposited funds can be loaned out to create new deposits, which in turn create new loans ... and so on, exerting a multiplier effect on the total money supply. However, in case

|7

Continued from page 6

at its residential properties. The company keeps 120 units at Walton Pond Apartments to house employees, Ski Corp. President Chris Diamond said.

“During the winter, we don’t have any trouble filling that with seasonal staff,” he said. “In summer, we usually fill that with people, construction workers. That’s been way off.”

In the past three or four years, those units have been close to 100 percent full, Diamond said. He estimated that 30 to 40 percent are empty this summer.

That could be a result of a looser rental industry in Steamboat, Diamond said, where more rental units are available at lower prices.

Companies that sell ski gear also are seeing the impacts of the housing bust and the recession. Bob Dapper, director of mountain operations for Christy Sports, said the five Steamboat stores had seen a 20 percent drop this summer.

Business was worse during ski season, Dapper said.

“There’s still a significant hangover from winter,” he said. “Regardless of what we’re selling, people are watching their dollars pretty carefully.”

The stores haven’t had to lay anyone off, he said, but they’ve changed the way they do summer business. Christy Sports hasn’t taken on the summer employees it typically hires, instead consolidating its salaried staff members at one store.

“We’ve changed the entire culture of our company,” Dapper said. “As an example, we closed every store in Steamboat but Central Park for the summer.”

Christy is doing what dozens of other employers have had to do: trim overhead and employee costs. Layoffs have spread across the Yampa Valley, as have personnel reductions through attrition.

Harbert Lumber Manager Rod Wille said his company’s staff has decreased from 31 to 16 people. The company was BMC West until 2007, and Wille said the lumberyard was bustling full force in 2006 and 2007.

“Probably toward the middle of last year, you could definitely tell that things were starting to slow up,” Wille said.

“Our numbers weren’t the same as far as our history or what we were projecting. We were kind of getting prepared for it because we could see it coming.”

Company leaders had to make difficult decisions.

“That’s when we started laying people off was last fall,” Wille said. “Your payroll’s your biggest expense, so that’s where you have to start making the cuts.”

Mike Roberts, of Habitat Construction, started his company in 1977 in Evergreen and has been in Steamboat since 1980. He’s had to lay off about 10 people and is down to a staff of about six. ➤

of a bank run, this policy can cause banks to suffer huge losses and may even push them into bankruptcy.

Source: BusinessDictionary.com

House of Cards

8 | Friday, August 14, 2009

A Supplement to the Steamboat Pilot & Today

Continued from page 7

Roberts saw that he had no choice.

“I don’t know too many businesses that haven’t been confronted with layoffs, you know,” he said. “I think like everybody else we tried some pay cuts … and that works for a while. But that’s really, truly the hardest part of all, especially in a small company like mine where we’re all friends, we like working with each other and being with each other, and it’s hard.”

C.D. Johnson, owner of Johnson Excavation, had the same experience.

He’s run the company since 1970 and said his staff has gone from more than 40 to about 10.

“It’s very difficult,” Johnson said.

“We’re a small company, so you knew these people. You knew their families; you knew what you were doing … and it was very difficult. Somebody didn’t hand out the pink slips, my son or I have done that, and it’s very difficult; it’s not easy to do.”

Shrinking, streamlining

I

nterior designer Michael Buccino has seen his business, Steamboat Interiors, shrink from a staff of 12 to a staff of three. His company is working more on remodels than on designing the interiors of new and speculative houses.

At the height of business, Buccino was in what he called his “ivory tower,” an office above his showroom in eastern Steamboat.

“I was so busy I was having to turn business away and just through not being able to get back in time with people, and they would find someone else and we were like, ‘That’s cool,’ because we were busy.”

Buccino said he lost touch with his clients.

“People came to Michael Buccino at Steamboat Interiors, and they felt he wasn’t around. … It lost the relationship part of the business,” he said.

“It became a sale. It was like going to McDonald’s or Wendy’s.”

In 2004, he opened a store called Cabin Collections that sold accessories and furniture.

Customers were coming to Buccino and other interior designers, asking them to furnish full second homes so they could turn around and rent them out.

But last fall, things crashed for Buccino.

In “probably August, I stopped and looked at incoming sales, the pipeline, and the pipeline was not full,” he said.

He cut his staff to himself and accountant Regina Andrew. Buccino hired Nicole Martin, a former intern and recent college graduate, in June.

He sold part of his space to a neighbor, Kinetic Energy physical therapy.

Buccino rents another large chunk to Coldwell Banker.

He owned 7,500 square feet of space and is down to 5,200. Steamboat Interiors uses 3,200 square feet of that and rents out the rest. His overhead went from $55,000 in November to $18,000 in June.

JOEL REICHENBERGER/STAFF

Chad Johnson operates an excavator at a home off Clubhouse Drive in Steamboat Springs. Johnson Excavation has had to slash its staff from nearly 40 workers to about 10 because of the lack of building projects.

“Getting rid of that nut, I’ve realized I was seriously wasting money,” Buccino said. “I mean, thousands of dollars a month were getting wasted.”

And he wasn’t the only one letting loose with the dough.

“I’ve talked to a lot of friends my age who own businesses, and it’s amazing how much waste we did during the fat years,” Buccino said. “Hundreds of thousands a month were going out unwatched.”

The company’s sales have dropped by $1 million, and it’s still as profitable as it was in high times, Buccino said.

He said he enjoys being the face of Steamboat Interiors again.

“Now we’re having to work down in the trenches, and I enjoy it,” he said.

“I’m more efficient than any of my staff, so I can do it faster than them, and I have the luxury of the time.”

Silver linings

S

ome business owners say the housing market collapse has brought people back to basics.

“I think we’ll have to change a lot of our habits,” said Roberts, of Habitat Construction. “I think this is a clear sign that things can’t continue as they have in the past, and we all need to participate in a solution that’s going to

involve simplifying our lives and our lifestyle. I do see this as the beginning of really a new era in our society.”

Irene Nelson, an interior designer who runs Irene Nelson Interiors, said she wasn’t heartbroken about her clients’ belt tightening. Nelson hasn’t had to reduce staffing, and she’s pleased to see a slowdown in the construction of “McMansions” in town.

“The whole thing has actually warmed my heart that people are thinking a little differently about stuff, about their stuff … and about reusing and not just tossing everything,” she said. “You know, I’m not one bit unhappy about what’s happened because I think it has caused people to think a little more and be more conscious of what they’re buying.”

Some business owners are looking at the bright side of a slowdown that gives them more time to enjoy life in Steamboat. Mark Hoovler, owner of Peak Mechanical Services, said that it’s been tough to cut back staffing but that more time off is nice.

“You get your life back,” Hoovler said. “You start to remember why we actually moved here. It wasn’t to work our tails off 60, 70, 80 hours a week.

We’re back to working 40 hours a week and having weekends off. We get to go camping again, and we get to go enjoy the outdoors.”

Continued challenges

I

t’s more complicated for those who are unemployed, however. Lobato, who ran Chaparral Construction, said it was tough to play when he knew he should be focused on finding a job.

“It’s been a nationwide search,” he said about his hunt. “I am pounding the virtual pavement every day, making contacts and sending out résumés.”

Lobato hopes to leave, probably for a bigger market. That’s worked for Connolly, who said he still had houses under way in Steamboat and was working and bidding on commercial projects in the northeast. Population brings diversity in construction projects, Connolly said, and that’s what he needs.

“In Pennsylvania, there’s a town every 15 miles, so I don’t have to find all my work here in State College,” the structural engineer said. “I can go to the next town over … and an hour away there’s a bigger city yet.”

Connolly and Lobato said they’d stay if they could.

“When you look at general life adventures, I wouldn’t have changed it,” Connolly said. “Loved it.

Wouldn’t have stayed there 10 years if I didn’t.” ❖

House of Cards ♦

♦

The rise and fall of Routt County’s real estate economy A five-part series by the Steamboat Pilot & Today | Aug. 21, 2009 WWW.STEAMBOATPILOT.COM/HOUSEOFCARDS

Part 4: New game, new odds

House of Cards ♦

♦

The rise and fall of Routt County’s real estate economy A five-part series by the Steamboat Pilot & Today |

WWW.STEAMBOATPILOT.COM/HOUSEOFCARDS

While touring the property Aug. 6, Michelle House wondered whether the No. 1 parking spot at First Tracks at Wildhorse Meadows would some day be hers. (Matt Stensland/Staff)

On the cover Buck and Tara Chavarria bought their deed-restricted home in West End Village in 2004.

Photo by Matt Stensland/Staff | Design by Christopher Woytko/Staff

Steamboat goes all in

The mortgage market folds

Retiring baby boomers helped fuel the demand that led to record real estate sales in the mid-2000s. But when the market went upside-down, the impacts were widespread.

The national mortgage meltdown hit hard locally, as homeowners and businesspeople struggled to face a new reality of vastly decreased values.

Story by Tom Ross

Story by Brandon Gee

Photos by Matt Stensland

Photos by John F. Russell

Holding a losing hand

Part 4 — today

Part 5 — Aug. 28

Declining tax revenues have hit local governments hard, and falling home prices and a tighter lending market are hurting affordable housing initiatives, as well.

Everyone has an opinion about the future of housing in Routt County as interested players in the real estate business look for footing in a shifting landscape.

Story by Blythe Terrell

Story by Zach Fridell

Story by Margaret Hair

Photos by Joel Reichenberger

Photos by Matt Stensland

Photos by John F. Russell

Since the market’s plunge knocked the wind out of the work force, businesses have been forced to change and shrink — and some have closed their doors.

House of Cards

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Friday, August 21, 2009

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Story by Zach Fridell | Photos by Matt Stensland

Buck Chavarria talks during a Sk8 Church meeting Aug. 6 at his home. The Chavarrias were able to buy their home through an affordable housing program.

MATT STENSLAND/STAFF

T

he plot in West End Village purchased by Tara and Buck Chavarria gave rise to more than a house.

After the final roofing tiles were nailed on, the house became a hub of activity for a growing family and a growing church, often with as many as 50 Sk8 Church teens packed into the basement for weekly meetings and, occasionally, for a safe place to stay the night.

As real estate values skyrocketed in Steamboat Springs, making it increasingly difficult for many middle-class families to purchase their own homes here, the Chavarrias were among those working-class residents who achieved home ownership through affordable housing programs.

T

he demand for such programs — and local government interest in encouraging or even mandating them — increased along with the run-up in Routt County’s real estate market throughout much of the decade.

It wasn’t the only thing that increased for local governments.

Flush with cash during the economic boom, the city of Steamboat Springs and other government entities spent that money accordingly, taking

on expensive capital projects and growing their payrolls to meet increasing demands for services.

But that all changed when the national and local economies crashed.

Tightened lending practices and decreasing home prices have made affordable, deed-restricted homes in Steamboat less desirable. And declining tax revenues have forced local governments to cut back on capital projects, as well as employee pay, hours and, in some cases, jobs.

Building-use tax: A building-use tax is charged on all building materials used in construction within Steamboat Springs city limits. The amount of the use tax dedicated to capital improvements is 4 percent of the estimated materials used. The revenue from this source is highly variable because it is based on construction activity. The revenue source also has

A deed-restricted ‘godsend’

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he Chavarrias, now both 33, said that when they bought their home in 2004, it was a godsend.

“When we first looked, you could buy a single-family home for $250,000,” Tara Chavarria said.

The couple owned a mobile home in Fish Creek Mobile Home Park, but even the most modest free-market, single-family homes were more than they could afford, particularly with four children.

“We prayed for a house. We prayed a

a reasonable nexus for new infrastructure requirements and for those reasons it is dedicated to capital improvements. Before 2003, the building-use tax was accounted for in the city’s general fund.

Source: City of Steamboat Springs

lot,” she said.

The Chavarrias were among the first to add their names to a waiting list with the Regional Affordable Living Foundation, or RALF, the precursor to today’s Yampa Valley Housing Authority. More than 200 people had the same idea, and the Chavarrias drew number 158. There were 20 lots available, and the prospect of getting into their dream home seemed dim.

For two years, nothing happened.

Then they got the call. ➤

For more For more photos from Part 4 of the Steamboat Pilot & Today’s special section House of Cards, visit www.steamboatpilot.com/houseofcards.

4 | Friday, August 21, 2009

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Continued from page 3

Other applicants ahead of them on the list had backed out or were not eligible, and of the 20 plots, one remained. The Chavarrias jumped at the opportunity, and after one year of construction, they had a 2,200-squarefoot, four-bedroom, three-bathroom house to call their own. And it was accomplished by two busy parents on missionary salaries.

They avoided the creative and risky mortgage loan products that might have helped them purchase a free-market home — and might have landed them in trouble when the market tanked.

“We stayed pretty conservative in our finances and pretty traditional,” Tara Chavarria said. “Had we tried to do a regular market-value home, we would have had to do creative financing and we would be in a bad spot.”

The Chavarrias help troubled teens looking for a place to stay by giving them short-term, rent-free housing in the basement, and they are raising their children and two new foster children, ages 2 months and 10 months.

“We felt we were really blessed and we shared this with all of our family.

We realized that our first house, being affordable housing, was more expensive and larger than any home that any family member has ever had,” Buck Chavarria said.

The cost of the Chavarrias’ home includes a deed restriction, an enforcement mechanism meant to ensure that a home stays affordable for buyers in specific income brackets. The deed restriction on the Chavarria’s home, for example, stipulates that the house can be sold only to another qualified buyer certified by the Yampa Valley Housing Authority.

When the time comes to sell, Buck Chavarria is worried about being able to find a qualified buyer. It’s a common concern among those who purchase deed-restricted homes.

“It does narrow down the market quite a bit,” he said.

And that concern has been amplified in the current market. In many cases, deed-restricted homes are less of a bargain — and less desirable — as the prices of free-market homes have fallen.

Bob Litzau, the city of Steamboat Springs’ interim finance director, said many homebuyers are willing to stretch themselves a little more if it means they can purchase a home without the burden of a deed restriction.

“Why pay $300,000 for deed-restricted when I can pay $320,000 for nondeed-restricted?” he asked.

Elk River Road

West End Village West End Townhomes

Total Units: 66 Deed-restricted units: 30 Subsidized units: —

Total Units: 22 Deed-restricted units: 11 Subsidized units: —

Changing the rules of affordable housing in Steamboat Springs The city of Steamboat Springs’ affordable housing regulations have been under scrutiny and subject to change since their inception in 2007. The debate is continuing this month. In early August, City Council voted to reduce the fees charged to developers from about $118,000 per unit to $39,000 to $63,000 per unit.

Another change to the affordable housing program went before City Council Aug. 18, potentially changing how the inclusionary zoning ordinance generates funds for the city’s programs. The inclusionary zoning program was designed to require developers to either build affordable housing units in new developments or pay a fee in lieu of the units.

The potential change read, in part, “The current draft of the ordinance allows for either (a) the payment of a fee in lieu, or (b) payment of 1/2 the calculated fee in lieu if also accompanied by a Voluntary Real Estate Transfer Fee of a percentage to be determined by the City Council after public hearing.”

The outcome of the discussion was still under way at press time.

Supply and demand

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hat’s the issue that Michelle House, branch manager with Vectra Bank in Steamboat, encountered as she shopped for a home.

“I’ve probably been looking since April or May,” she said.

She is under contract for a First Tracks unit at Wildhorse Meadows, a development on Mount Werner Road.

Wildhorse developers Resort Ventures West designed First Tracks units ➤

Projects with proposed affordable housing elements Elk River/CopperRidge One Steamboat Place Riverwalk Ski Time Square Sundance North Thunderhead

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Friday, August 21, 2009

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Affordable housing in Steamboat Springs Hillside Village Apartments Total Units: 55 Deed-restricted units: — Subsidized units: 36

Fox Creek Village Condominiums Total Units: 30 Deed-restricted units: 30 Subsidized units: —

Trappeur’s Crossing/ Bear Lodge

Sunray Meadows Phase XIV/ Edgemont

Total Units: 36 Deed-restricted units: 6 Subsidized units: —

Total Units: 136 Deed-restricted units: 7 Subsidized units: —

Oak Street

Yampa Street

Hilltop Parkway

Mount Werner Circle U.S. Highway 40

Walton Creek Road

Victoria Total Units: 8 Deed-restricted units: 1 Subsidized units: —

Alpenglow Total Units: 16 Deed-restricted units: 2 Subsidized units: —

Iron Horse Inn Total Units: 52 Deed-restricted units: 52 Subsidized units: —

Under construction Chadwick Estate Villas Fulton Ridge/Emerald Knoll Howelsen Place Olympian Steamboat Barn Village

Fish Creek Mobile Home Park Total Units: 68 Deed-restricted units: — Subsidized units: —

First Tracks at Wildhorse Meadows Total Units: 133 Deed-restricted units: 47 Subsidized units: —

Mountain Village Apartments Affordable Units: 26 rental units 77 market-rate rental units

House of Cards

6 | Friday, August 21, 2009

A Supplement to the Steamboat Pilot & Today

Continued from page 4

to meet requirements of the city of Steamboat Springs’ affordable housing program, which requires developers to build affordable housing as part of their development or pay money to the city in lieu of providing units.

Citing a lack of demand, Resort Ventures West successfully lobbied the city in May to remove deed restrictions from 39 First Track units. The units entered the free market in early August, with prices ranging from $179,000 to $470,000. House picked a “premier” unit with two bedrooms and two bathrooms on a top floor with views of Mount Werner.

“I call myself one of the fortunate ones,” she said.

She said she has thus far committed $3,000 to the unit, but she’s still waiting for a contract that details the down payment assistance promised by the city — and part of the deal with Resort Ventures West to remove the deed restrictions from the First Track units.

“It’s turning from affordable housing into something else,” House said. “Last August I thought I would already have moved into the First Tracks unit.”

Because she thought the move to the First Tracks unit was imminent, House decided not to sign another year’s lease at her previous apartment and instead moved into a room in a friend’s home in Oak Creek. Her furniture remains in storage, where it’s been since August 2008.

And now, the changes in the housing market have changed her definition of affordable.

“Stuff that wasn’t affordable to me last year at this time — two bedrooms, one bath or two bedrooms, two baths — they’re completely affordable,” she said. “I’m a first-time homebuyer, so it’s all a new experience to me.”

She has renewed her search for smaller free-market condos and townhomes, but she said she’s still excited about the potential of moving into First Tracks.

“I’ve been tempted to (find another place to live) and I’ve looked at other properties, but nothing is as appealing to me,” she said. “I’m very proud of my unit.”

Tough choices

Scott Ford moved to Steamboat in 1992 and has worked with the Steamboat Springs Chamber Resort Association, Steamboat Springs School District and Colorado Mountain College’s Small Business Resource Center. He said deedrestricted units changed the market by allowing home ownership but that that trend began to reverse when prices dropped.

“As a result of the deed restrictions, and they sound very, very good in theory, folks are going, ‘I’d rather own a non-deed-restricted home than a deed-

PHOTOS BY MATT STENSLAND/STAFF

Michelle House has a deed-restricted condo under contract at First Tracks at Wildhorse Meadows and is waiting for a decision on her financing. Below: Jennifer Ringer and her son, Jack, watch television in their living room. The Ringers live in a deed-restricted condominium in the Fox Creek development.

restricted home,’” he said. That leads homeowners to tough decisions about how far they are willing to travel to get the home they want.

“Would you be willing to commute to Hayden to have a non-deed-restricted home? It depends on what it has,” Ford said.

Jennifer Ringer, a front office manager with AvantGarde Dental, lived in Steamboat for 11 years. After a divorce two years ago, she wasn’t sure of her options.

She looked at a home in Hayden and other places, but after two years of searching and waiting on a lottery list, she found a new, 1,100-square-foot condo in the Fox Creek development, a Housing Authority project on Hilltop Parkway.

“My plan was to own something within five years of getting my divorce,” she said. And although a free-market home in Hayden was attractive, she wanted to be near Steamboat for her 11-year-old son, Jack, and his after-school activities and sports.

Homeownership provides stability for her and her son.

“With a son I didn’t want to move every two years, because you never feel at home,” she said.

The cost of living The cost of housing in Routt County has long been an issue, but its signifi-

Excise tax: The excise tax was passed by voters in November 2002 to replace the city’s impact fee structure. The tax rate is 1.2 percent of the stated building permit valuation. The tax is specifically dedicated to capital improvements.

Source: City of Steamboat Springs

cance grew with the explosion of the local real estate market. Steamboat’s sense of community, considered one of its most attractive and unique characteristics, largely depends on the ability of working-class residents to not just earn their paychecks here, but also live here.

But addressing the affordability issue is controversial and challenging. RALF and the Housing Authority were created specifically to address affordable housing, but without dedicated sources of revenue, their success has been limited.

Capital Improvement Plan: The fund used by the city for large, onetime expenditures.

The revenue problem forced the Housing Authority to downsize to one staff member in December, and its ability to lead future affordable housing projects has been compromised.

Ford said Steamboat’s quest for affordable housing morphed into affordable home ownership, further complicating the discussion.

“Typically, affordable housing is apartment living. The challenge that happens in our rental market is we don’t have a lot of apartments,” he said. ➤ Ford said 25- to 45-year-olds

Affordable Housing: Affordable housing refers to government’s efforts to provide and maintain housing for people who make less than average.

Requirements between programs and housing units differ widely.

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A Supplement to the Steamboat Pilot & Today

Friday, August 21, 2009

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Sources of revenue for the city of Steamboat Springs

Sales Tax — 43%

Accommodation tax — 2% Proceeds from issuance of debt — 0%

Use tax — 5% Excise tax — 2% Franchise fees— 3%

Operating transfers — 2%

Other taxes — 0% Licenses and permits — 0% Special assessments — 0%

Other revenues — 8%

Fines and forfeits — 1%

Intergovernmental revenues — 12% Charges for services — 22%

# Year 2003 2004 2005 2006 2007 2008

Building excise tax Amount collected $609,623 $1,116,546 $1,480,354 $1,305,514 (estimated) $2,800,000 (projected) $1,200,000

Source: 2009 Steamboat Springs City Budget

Source: City of Steamboat Springs 2009 budget summary

Building-use tax Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Amount collected $777,477 $670,919 $1,958,650 $1,472,532 $1,353,852 $1,308,811 $599,181 $1,040,423 $7,700,142 $2,257,351 $2,031,960 (estimated) $4,475,000 (projected) $2,000,000

MATT STENSLAND/STAFF

Continued from page 6

make up about 39 percent of the population in Routt County, and they occupy 39 percent of housing stock.

“To me, that would (indicate) we don’t have a home ownership problem,” he said. “We have an affordable housing problem, but we don’t have a home ownership problem.”

That view isn’t universally shared.

Taking action against the perceived problem, a previous City Council adopted affordable housing ordinances in 2007 — at the height of the real estate market — that mandated developers build affordable units as part of their projects or pay the city a fee to be used for the creation of affordable housing.

First Tracks is one of the projects that has resulted from the ordinances.

Other recent developments, including Howelsen Place and Alpen Glow in downtown Steamboat, also have built affordable units as part of their projects.

Many in the development community and others have criticized the ordinances for forcing the construction of deed-restricted units that are difficult to find qualified buyers for and that aren’t necessarily desirable to the folks who do qualify.

A Work Force Housing Demand Analysis completed in fall 2008 shows the complexity of the issue. Among its findings, the study stated that the lack of affordable housing — be it rental or ownership — negatively impacts the

Linkage: Linkage is a fee the government imposes on developers to mitigate the impact of housing needs created by new developments.

Developers may pay the linkage by paying the fee or creating affordable housing units.

Scott Ford says deed-restricted units changed the market by allowing home ownership but that that trend began to reverse when market value prices dropped.

community’s ability to attract and retain a quality, well-rounded work force.

At the time of the study, Steamboat’s rental supply was determined to fall well short of the need. And the types of ownership units being created by the city’s affordable housing policies weren’t attractive to potential buyers, who expressed a desire for detached, singlefamily units, not one-bedroom condos in large complexes.

In the wake of heavy criticism from developers, the current City Council has taken noticeable steps to undo some of the provisions of the two-year-old affordable housing ordinances. The

RALF: Regional Affordable Living Foundation, a group formed to create affordable housing units. RALF was succeeded by the Yampa Valley Housing Authority.

council first suspended the linkage ordinance, which required developers to create a number of affordable units in relation to how many jobs their projects would create in the community. Early this month, the council changed the formula used to determine how much money developers must contribute to affordable housing efforts. Under the old formula, developers were required to pay about $118,000 per unit. The new guidelines significantly decrease that contribution, which now ranges from $39,000 to $63,000 per unit.

Towny Anderson was a member of the City Council that adopted the ➤

On the ’Net To read parts 1, 2 and 3 of the Steamboat Pilot & Today’s special section House of Cards, visit www.steamboatpilot.com/houseofcards.

House of Cards

8 | Friday, August 21, 2009 Continued from page 7

original affordable housing ordinances. He said their effectiveness should not be judged on a year-toyear basis.

“Affordable housing, linkage and inclusionary zoning are designed to go up and down with the economy.

In other words, if you see a downturn like we have now, you don’t have any new affordable housing because you don’t need it,” he said.

The effect of the economy

T

he national recession and the state of the housing market isn’t bad news for everyone. Housing Authority Director Mary Alice PageAllen said the altered market has given the affordable housing program “some vacancies … that are very much needed.”

Page-Allen said affordable housing prices also have depressed the price of homes in Steamboat by creating a “downward pressure on bedroom prices.”

“You have people shopping for what I’ll call — bargain isn’t the right word — reasonable rent,” she said. “Rents they can afford within what their earnings are.”

She said the realignment created by the lowered home prices left buyers with a new view of the market overall.

“This whole meltdown has had a big impact on how people think about housing and what opportunities and options there are,” she said.

Ford agreed that the demand for housing in Steamboat is unlikely to dry up.

“I would think that I don’t know what the new normal is going to be, but we’re not going to change this being a wonderful place to be,” he said.

Government spending

T

he decline in the housing market and, subsequently, the construction industry also has led directly to a reprioritization of projects for the city and Routt County. Because Steamboat is funded primarily through sales tax, the decline in home prices did not hit directly. Instead, as construction slowed, the funds pouring into the city’s Capital Improvement Fund through building use and excise taxes dropped.

In past years, the fund has been flush. The city paid for the $3.6 million Steamboat Springs Community Center, the expansion of the Tennis Center at Steamboat Springs and other projects without borrowing credit.

“It allowed us to do a number of projects without having to borrow money,” said Litzau, the city’s interim finance director.

Litzau said the city initially planned to borrow $2 million of the $3.6 million community center cost, but the city was able to complete construction, even with overruns, on a cash-only basis.

Anderson, who was a City Council member during the time the community center was approved, acknowledged that the price of the project went far

#

Summary of the Steamboat Springs capital improvements program

Fund General Government Historic Preservation Public Works Transit Public Safety Parks and Recreation Rehder Building Fund Wastewater Fund Water Fund Airport Fund Golf Course Fund Internal Services Fund Fleet Services Fund Total

A Supplement to the Steamboat Pilot & Today

2009 $1,275,000 — $8,020,000 $1,300,000 $1,682,467 $751,250 $670,000 $3,734,370 $2,626,735 $360,000 $34,000 $536,000 $613,854

2010 $2,525,000 $200,000 $8,900,000 $1,336,937 $829,850 $2,628,680 — $4,181,685 $2,254,731 $157,896 $65,000 $105,300 $597,321

2011 $400,000 $230,000 $7,995,000 $1,400,000 — $7,019,775 — $3,688,100 $2,771,216 $7,000,000 $70,000 $64,700 $513,873

2012 $1,550,000 — $8,784,000 $1,800,000 $1,466,430 $4,275,000 — $4,198,090 $1,641,029 $2,000,000 $235,000 $98,100 $738,106

2013 $19,930,000 $240,000 $7,635,000 $800,000 $14,310,000 $2,295,000 — — $1,714,237 $175,000 $50,000 $63,000 $624,518

5-year total $25,680,000 $670,000 $41,334,000 $6,636,937 $18,288,747 $16,969,705 $670,000 $15,802,245 $11,007,948 $9,692,896 $454,000 $867,140 $3,087,672

$21,603,716

$23,782,400

$31,152,664

$26,785,755

$47,836,755

$151,161,290

beyond what was initially agreed upon, but he said the alternative would have been to tie up the city in debt.

“You’d have to keep pumping in reserves to cover those payments,” he said.

He said he was critical of the community center project and was the sole dissenting vote when the project passed in December 2006. He said the decision to pay for the project in cash came from staff recommendations.

Now that the money has slowed — building use tax reached a peak of an estimated $4.48 million in 2007 and dropped to an estimated $2 million in 2008 — the city is faced with hard choices. Routt County government is in a similar position.

A new Routt County Communications dispatch center is on the ropes, as is a new Steamboat Springs Public Safety Building. A new city hall, initially planned for 2011, probably will be cut entirely.

The 2009 budget “is all stuff that is really important to do,” Litzau said.

That includes $2 million the city must pledge to match state funds for a renovation of U.S. Highway 40 in downtown Steamboat. Litzau said the state won’t wait, so if the city wants to piggyback on the construction plan, it must have the money ready.

As he considered the money that was spent on projects before the crash, Litzau said he still thinks that was the right move to pay for the projects without incurring debt. If the city had instead decided to borrow money and keep the cash in reserves, it would have been forced to pay interest on the projects as they were completed.

“I don’t know that anybody could have done anything without a crystal ball. I think the city responded timely and appropriately at this point,” he said.

The city overall is in “really good shape compared to other cities,” Litzau said, especially because constructionrelated tax revenues don’t go to the general fund. By using the money for

Source: Steamboat Springs 2009 budget

MATT STENSLAND/STAFF

Dan Strnad, county budget director, explains how the county has been dealing with budget shortfalls.

one-time projects, the city spent without going into debt, but also without saving significant amounts for the future.

“I think all in all, we’re not rolling in dough, but at least we’re not closing our doors next week,” he said.

Instead, the city will push back projects on a yearly basis as it updates the budget.

What lies ahead

I

n May, the most recent month available, the city pulled in $76,443 in building-use tax, compared with $259,277 in May 2008. Year to date, building-use tax revenue is down more than 38 percent.

Litzau said all the projects budgeted for this year and beyond are vulnerable to cuts.

That includes $16 million slated for the new public safety building, $3.75 million for an airport sports complex, $6.37 million for an expansion of Howelsen Ice Arena and $1.5 million

for a Fish Creek Falls Road underpass.

“Because of the lack of construction this year, a lot of them are probably going to get pushed out further,” he said.

In Routt County, however, construction-related revenues went directly into the general fund. Routt County Finance Director Dan Strnad said more than half of the money in the general fund goes toward salaries, so it should come as no surprise that the county has been laying off staff and using furloughs to survive the economic downturn.

“Right now, given the budget cuts we’ve done with the 10 percent wages and the (hiring) freezes and the overtime and the layoffs, we’re still looking at 20 to 21 (percent decrease),” he said.

“We don’t know what’s going to happen out there with the economy. Is it going to come back like the dot-com bubble and 9/11 thing where it came back relatively quickly?

“This recession feels a lot more significant than that recession did, let’s put it that way.” ❖

House of Cards ♦

♦

The rise and fall of Routt County’s real estate economy A five-part series by the Steamboat Pilot & Today | Aug. 28, 2009 WWW.STEAMBOATPILOT.COM/HOUSEOFCARDS

Part 5: Reshuffling the deck

House of Cards ♦

♦

A five-part series by the Steamboat Pilot & Today |

WWW.STEAMBOATPILOT.COM/HOUSEOFCARDS

The rise and fall of Routt County’s real estate economy

On the cover

Construction worker Justin Hayes frames a house in Steamboat Springs. The downturn in housing has slowed building in Steamboat Springs. Hayes, and many others like him, is hoping for a bright future in the housing and construction industry.

Photo by John F. Russell/Staff | Design by Christopher Woytko/Staff

Steamboat goes all in

The mortgage market folds

Retiring baby boomers helped fuel the demand that led to record real estate sales in the mid-2000s. But when the market went upside-down, the impacts were widespread.

The national mortgage meltdown hit hard locally, as homeowners and businesspeople struggled to face a new reality of vastly decreased values.

Story by Tom Ross

Story by Brandon Gee

Photos by Matt Stensland

Photos by John F. Russell

Holding a losing hand

Cam Boyd, a broker-owner at Prudential Steamboat Realty, shows Bill Spinder a home in downtown Steamboat Springs.

Spinder, who says he’s bought numerous properties from Boyd through the years, is looking for a good opportunity to invest in the valley.

Photo by John F. Russell/Staff

New game, new odds

Part 5 — today

Declining tax revenues have hit local governments hard, and falling home prices and a tighter lending market are hurting affordable housing initiatives, as well.

Everyone has an opinion about the future of housing in Routt County as interested players in the real estate business look for footing in a shifting landscape.

Story by Blythe Terrell

Story by Zach Fridell

Story by Margaret Hair

Photos by Joel Reichenberger

Photos by Matt Stensland

Photos by John F. Russell

Since the market’s plunge knocked the wind out of the work force, businesses have been forced to change and shrink — and some have closed their doors.

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A Supplement to the Steamboat Pilot & Today

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Friday, August 28, 2009

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Story by Margaret Hair | Photos by John F. Russell

n the summer of 2007, Matt and Stephani Murphy put in a $440,000 offer on a house in Stagecoach’s Red Hawk Village neighborhood. Another prospective buyer made a higher offer on the same day, and the Murphys lost out on the house in the modest subdivision south of Steamboat Springs.

The Murphys, who were recent transplants from Los Angeles, figured maybe it wasn’t the right time. So they rented a place at Sundance Creek Condominiums in Steamboat, and they held out.

Their patience paid off, aided by a drastic turnaround in the real estate market.

“I had a baby, and we were just busy with other things so we didn’t really get back in the market, which was the best thing that could have happened for us,” Stephani Murphy said. “For us, we ended up getting a bigger house than we originally planned on purchasing for so much less.”

On June 29, the couple closed on a three-bedroom, 3 1/2-bath, 1,950square-foot home in Red Hawk Village for $297,000. The property last sold for $555,000 in April 2007, according to the Routt County Assessor’s Office.

The transaction pace of the local real estate market has slowed dramatically from the frenzied pace of 2006 and 2007, and folks like the Murphys are taking advantage of it. Sales prices that were unimaginable just a year ago are the new norm, but stricter lending requirements and a general uneasiness about the economic climate is keeping many sellers and buyers from finding common ground. Whatever the future of Routt County’s real estate economy, there’s no shortage of opinions about if and when it will return to the record levels of the mid-2000s.

JOHN F. RUSSELL/STAFF

Stephani Murphy prepares dinner inside her Red Hawk Village home in Stagecoach. Stephani and her husband, Matt, took advantage of the downturn in the housing market to purchase their home.

W

hen Red Hawk homes started reappearing as short sales around February of this year, Matt Murphy couldn’t help but take notice of the distressed prices. Short sales take place when property owners can no longer make their mortgage payments and their banks agree to sell the

properties at a lowered price to prevent the costs of going to foreclosure.

Not only did the Murphys capitalize on drastically reduced prices, they qualified for a one-time $8,000 credit on their 2009 tax return; the credit for first-time homebuyers is part of the American Recovery and Reinvestment

Absorption rate: The number of listings divided by the rate of sale. For example, a market with 2,100 available properties that sells 300 properties in a year has an absorption rate yielding a seven-year supply of properties. The rate has to be adjusted periodically to account for changing listings and transactions.

Act of 2009.

“I just think if we didn’t get in now, we never would have been able to afford,” Matt Murphy said.

Standing in the entranceway of his Sagebrush Circle home — where he and Stephani moved at the beginning of July with their 18-month-old son, Cole

Federal Reserve System (the Fed): U.S. central-banking system comprising 12 regional central banks owned by private banks. Governed by a seven-member (each appointed by the president for 14 years) board of governors, the Fed regulates interest rates, availability of bank credit and sets other monetary policies such as legal reserve requirements for banks.

— Murphy said that if his family still lived in L.A., he might have entered into a risky loan to buy a house for twice as much money. If they’d bought during the height of the market, the $300,000 that got them a house in Stagecoach in summer 2009 would have netted only a condo or a house even farther out- ➤

On the ’Net To read the first four parts of the Steamboat Pilot & Today’s special section House of Cards, visit www.steamboatpilot.com/houseofcards.

House of Cards

4 | Friday, August 28, 2009 side of Steamboat Springs.

“Now with all the foreclosures and the short sales that have gone through, all these families have been able to afford that, and that’s great. It’s unfortunate for everyone else, and fortunate for all of us,” he said.

For the past 1 1/2 years, Matt has been a framer for Albertini Construction, first working on a 20,000-squarefoot log home near Clark, and recently helping with additions and renovations at Vista Verde Ranch, a luxury guest facility in North Routt County. Murphy hopes those projects will last for another six months to a year, he said.

“I think we might bridge the gap, and the economy might straighten out within a year or so, but who knows.

Hopefully. It would be great,” he said.

The market now

When the Murphys moved to Steamboat Springs three years ago, they walked into a real estate market where prices and sales volume were at a record high and available listings were at a record low.

In the first two quarters of 2009, the Steamboat Springs Multiple Listing Service, which tracks data for registered Realtors in Steamboat Springs and surrounding areas, recorded 163 transactions, said Doug Labor, broker-owner of Buyer’s Resource Real Estate and manager of MLS statistics.

At that sales rate, Labor expects to see about 320 sales in 2009. With just more than 2,300 residential, commercial and property listings available, that rate of sale saddles the market with supply that would last about seven years, he said. A typical rate of supply is about a year, Labor said.

At the end of 2008, Nick Metzler — a broker-owner for Colorado Group Realty — saw a gap between what buyers were willing to pay and what sellers were willing to accept.

“I can look back from, say, March to October of 2008 into March of 2009, it’s the first time in my career — minus just after 9/11 — that there was almost no market, meaning the sellers were up here and the buyers were down here and there were just almost no transactions,” Metzler said.

To an extent, that gap remains, he said.

“There is and was a gap, and I think that just is something that happens over time … the demand on the inventory slows down, and then it just takes awhile,” he said.

Metzler has been directly involved with four homes sales between $1.5 million and $2.5 million this year. Every deal is different, he said, but all four sales included a price reduction.

“That’s how the market will come together; sellers will come down more and buyers will come out of the woodwork thinking they’re getting a good value, or vice versa,” he said.

In July, David Baldinger Jr., managing broker-owner of Steamboat Village Brokers, said he had more showings than he did in any month this winter. ➤

2,500

Real estate listings vs. sales Real estate sales Real estate listings

2,000

1,500

1,000

500

Units

Continued from page 3

A Supplement to the Steamboat Pilot & Today

0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

1999

2000

2001

2002

2003

2004

The future of lending

K

athryn Pedersen, a vice president and mortgage loan officer at Yampa Valley Bank, didn’t want to paint too dark a picture of the housing loans market during a mid-July interview. She did, however, acknowledge that loan seekers are likely to see more and more regulations moving forward through the next few years.

“You always think of a pendulum.

There was no regulation or very little … and now the pendulum has gone to the absolute other side where it’s more and more hard to do things,” Pedersen said.

It’s that more difficult side where Pedersen sees things resting for the foreseeable future. As of mid-July, she felt the pendulum had a little farther to go in that same direction.

“One of the trends is that we’re going to need tax returns, we’re going to need asset statements, we’re going to need everything about you,” Pedersen said. The bank might then check a lender’s tax returns against the information sent to the Internal Revenue Service, she said. For the bank, it’s a longer process, but not an impossible one, Pedersen said. The new lend-

ing climate might seem muggier to a potential lender.

“We’re used to that, but I think depending on the client, it’s harder for them because they’re not used to giving everything but their blood for the loan,” Pedersen said.

As mortgage brokers change the way they do business every week, as Pedersen said, lenders have trouble shifting so quickly. But as the summer rolled on, so did Yampa Valley Bank’s mortgage loan traffic, with some of the best and easiest loans being those available to first-time homebuyers,

House of Cards

A Supplement to the Steamboat Pilot & Today

Friday, August 28, 2009

|5

Comparing ski resorts

There are about 2,300 real estate listings on the Steamboat MLS. At a rate of about 320 sales predicted for this year, it would take more than seven years to clear the inventory.

Listings Area Steamboat Summit County Park City Sun Valley Telluride Jackson Hole Vail

2004 1,474 3,846 2,107 1,216 518 628 1,596

2005 759 773 1,222 1,289 512 461 1,081

2006 1,222 3,577 1,698 1,756 386 446 1,550

2007 1,111 1,643 2,625 2,005 548 384 1,759

2008 1,992 1,347 3,084 1,442 753 574 1,337

2004 531 1,207 1,185 589 173 273 1,184

2005 748 1,105 1,883 524 191 343 1,577

2006 693 1,596 1,464 369 95 334 1,254

2007 913 1,094 1,166 327 96 294 1,317

2008 462 657 675 187 102 166 628

2005 197% 286% 308% 81% 75% 149% 292%

2006 113% 89% 172% 42% 49% 150% 162%

2007 164% 133% 89% 33% 35% 153% 150%

2008 46% 98% 44% 26% 27% 58% 94%

2005 $383,919 $231,605 $494,247 $729,065 $776,039 $973,874 $695,060

2006 $399,999 $359,826 $716,904 $744,391 $1,175,450 $1,089,171 $891,494

2007 $557,889 $510,464 $821,691 $819,057 $1,494,477 $1,311,817 $1,168,917

2008 $546,938 $588,167 $895,300 $742,713 $1,313,110 $1,708,098 $1,447,199

Sales As the market has slowed from an historic high, a gap between high supply and low demand could demonstrate a correction in drastically appreciated real estate prices, some Realtors said.

Area Steamboat Summit County Park City Sun Valley Telluride Jackson Hole Vail

Annual absorption rate Area 2004 Steamboat 72% Summit County 63% Park City 112% Sun Valley 97% Telluride 67% Jackson Hole 87% Vail 148%

In the first quarter of this year, the Steamboat MLS recorded 59 sales, the lowest number in records dating back to 1995.

At the height of the Steamboat Springs real estate market, supply of listings and demand for sales caused prices to increase and the absorption rate to pick up pace.

Average price Area 2004 Steamboat $350,803 Summit County $277,212 Park City $398,915 Sun Valley $520,292 Telluride $1,359,620 Jackson Hole $743,012 Vail $697,614

Source: Doug Labor, broker-owner of Buyer’s Resource Real Estate and manager of MLS statistics

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2005

2006

2007

2008

2009

Source: Doug Labor, broker-owner of Buyer’s Resource Real Estate and manager of MLS statistics

Pedersen said. For the most part, the bank is putting through 30-year, fixedinterest products, she said.

“I still see the 30-year being around for a while; that is the product that has been here, and I think it will stay no matter what. But I also think that we’ll continue to see some more legislation and regulation, and that may change the product structure down the road, and that may limit what people can and can’t do,” Pedersen said.

Locals are more likely to get a 20percent-down loan if they start taking steps now to get rid of debt and “have

some degree of savings,” said Elizabeth “E.A.” Black, a Steamboat Springs financial consultant.

Pedersen said she expects regulations to stay tight for a while, but she thinks there might be some things that will free up within a year or so. Before that can happen, lenders will need to figure out their cash positions and markets will need to figure out their new rules.

“It’s hard to say what’s going to happen, because I never would have predicted where we are now,” she said.

— Margaret Hair

Lending regulation changes ■ On May 20, Congress passed a bill into law that aims to prevent mortgage foreclosures by guaranteeing or modifying certain loans and providing HUD funding for certain people; changes to rules on foreclosure mitigation and credit availability; and creating a mortgage fraud task force.

■ In June, President Barack Obama proposed a new regulatory structure that would give more power to the Federal Reserve, the nation’s central bank, and create a new agency called the Consumer Financial Protection agency. Both moves would create more oversight of lending practices, with powers extending into different kinds of credit including mortgage loans.

■ On July 23, the Federal Reserve Board proposed changes to the Truth in Lending Act, this time focus-

ing on closed-end mortgages, according to a Federal Reserve news release. The proposed rules would require increased disclosure of the annual percentage rate, including information about fees and rates compared with other borrowers; and “require lenders to show consumers how much their monthly payments might increase, for adjustable-rate mortgages,” according to the release.

■ Regulations enacted on Aug. 1 of this year as part of the Housing and Economic Recovery Act require a three-day review of loan documents before the loan process can get started, and allows for another threeday waiting period at the end of the loan process if the annual percentage rate of the mortgage increases by more than 0.125 percent.

House of Cards

6 | Friday, August 28, 2009

A Supplement to the Steamboat Pilot & Today

Continued from page 4

The first quarter of any year traditionally is the slowest for real estate transactions, Labor said; the third quarter comes in first, followed by the fourth and then the second. From 2003 to 2008, the first quarter averaged 268 sales. In the first quarter of 2009, there were 59, Labor said.

Sometime in the third or fourth quarter of 2008, prices in certain sectors started to drop, Baldinger said. When prices come down, buyers start to bite.

He and Metzler said buyers might be slow to return out of caution.

“This is a hard and deep enough time financially for the whole country that people are going to be very careful, and that’s really the bottom line. Banks are being … extremely conservative, buyers are being conservative, and they’re just moving slower. They’re still coming, they’re just moving slower,” Metzler said.

Steamboat and the outside world

Nationally, there have been some signs of a pending recovery in the economy and the housing market.

Just this week, there was news that housing prices in 18 of 20 major U.S. cities increased 1.4 percent in June, marking the first time the S&P/CaseShiller index increased two months in a row since mid-2006. Consumer confidence also increased in August after two months of decline.

On Aug. 12, representatives of the Federal Reserve Board expressed confidence in the health of the national economy. The Fed extended its low short-term interest rate, predicted inflation would stay under control, announced an October ending date to its program aimed at buying $300 billion in Treasury bonds, and said it planned to continue a plan to buy $1.25 trillion of “agency mortgage-backed securities.”

July’s trade deficit numbers also were released Aug. 12, showing an increase in imports and exports, with the gap increasing from $26 billion to $27 billion. The increase could signal strengthening global markets.

Although national new-home construction and permits dropped slightly in July, single-family home construction grew, as did the number of permits issued for single-family homes.

Local financial analysts and those involved in the Steamboat Springs real estate market list macroeconomic factors, including consumer confidence, stock market strength and available wealth, as cues for rebounding demand in the Steamboat Springs housing market.

Labor said second-home owners, retirees and location-neutral business owners were key demographics of the mid-2000s housing boom.

JOHN F. RUSSELL/STAFF

Steven Hofman expects the future Steamboat Springs economy to look a lot different than the one that led to unprecedented real estate sales in the mid-2000s.

In Harry S. Dent’s “The Roaring 2000s,” a book about demographics, the author predicts baby boomers will drive vacation home demand until 2013; Labor said the retirement demand from the same population could hold those highs steady through 2026.

“The kind of underlying factor … that has been fueling our market, prior to this recession, has been the baby boomer population, and I still feel that interest from baby boomers is still out there, but they’re waiting for their own personal finances or positive news,” he said.

Elizabeth “E.A.” Black — a consultant specializing in financial literacy who has worked with Millennium Bank and the Yampa Valley Housing Authority — said consumer confidence has to come back in major markets for Steamboat to see the kind of rebound it might hope for.

“Everyone is nervous and they don’t know what to do, so they’re not doing anything. … I just think it’s going to take time,” Black said in mid-July.

Much of the money that fueled second homes and other big-ticket items has dried up, she said.

“All of these financial services people made a lot of money, and they were the kind of people who came to resort communities throughout the country, and that’s why I think it’s going to take us a little longer to recover,” Black said.

Inflation: Sustained, rapid increase in the general price level, as measured by some broad index number of prices (such as Consumer Price Index) over months or years, and mirrored in the corresponding decreasing purchasing power of the currency. ... There is no one single, universally accepted cause of inflation, and the modern economic theory

Differing paths forward Steven Hofman — who served as an assistant secretary of labor under President George H.W. Bush and is a former director of research and policy for the Republican leadership of the U.S. House of Representatives — moved to Steamboat Springs in December 2008 after buying his land in the Dakota Ridge neighborhood in 2000. A “kids ski free” ad first brought Hofman and his family on vacation here in 1994, he said.

He sees the recent low volume of this resort-town housing market the same way one might look at a place where the sole industry has rusted away.

“Because housing is such a large segment of the economy … (it’s like) you had the equivalent of a base closing, that you’re a one-plant town and that plant has just closed,” Hofman said.

When Hofman talks about the market he thinks drove the mid-2000s housing boom here, he can’t help but think about baseball.

In the new Yankee Stadium there is a cluster of seats — a top-of-the-line infield section with perfect views of home plate where seats at one point sold for $2,500 apiece — where hardly anyone sits.

“That stadium was built for an

describes three types of inflation: (1) Cost-push inflation is due to wage increases that cause businesses to increase prices to cover higher labor costs, which leads to demand for still higher wages (the wage-price spiral), (2) Demand-pull inflation results from increasing consumer demand financed by easier availability of credit; (3) Monetary inflation

economy that existed two years ago,” said Hofman, now a corporate business strategy advisor who enjoys going to see the Yankees play but would never consider buying a $2,500 ticket.

“People created all of this luxury product for an economy that no longer exists,” Hofman said. “The same thing applies to a lot of the construction that happened here in Steamboat.”

Looking out from his front porch in Dakota Ridge, Hofman can point in almost any direction and land on a house that’s on the market. Some of them were built on speculation during the boom, and others have gone on sale since the national recession began.

Hofman expects all of them to be empty for a while longer.

Scott Ford is a financial consultant who moved to Steamboat Springs in the early 1990s and has worked with the Steamboat Springs Chamber Resort Association, Steamboat Springs School District and Colorado Mountain College’s Small Business Resource Center. He acknowledges the hit on Steamboat from the rest of the economy, but is optimistic about affluence making its way back to the mountains.

On the recovery side of an economy, a recession creates catalytic events in people’s lives, he said.

“On the upside of this recession, we will grow and we will grow ➤

caused by the expansion in money supply (due to printing of more money by a government to cover its deficits).

Source: BusinessDictionary.com.

House of Cards

A Supplement to the Steamboat Pilot & Today

Friday, August 28, 2009

|7

Price per square foot for a single-family home in Routt County

$1,000

Low price

$800

Average price High price

$600 $400 $200

20 07 (2 20 nd 08 ha lf) ( 20 1st 08 ha (2 lf) 20 nd 09 ha (1 lf) st ha lf) 20 07 (2 20 nd 08 ha lf) ( 20 1st 08 ha (2 lf) 20 nd 09 ha (1 lf) st ha lf) 20 07 (2 20 nd 08 ha lf) ( 20 1st 08 ha (2 lf) 20 nd 09 ha (1 lf) st ha lf) 20 07 (2 20 nd 08 ha lf) ( 20 1st 08 ha (2 lf) 20 nd 09 ha (1 lf) st ha lf) 20 07 (2 20 nd 08 ha lf) ( 20 1st 08 ha (2 lf) 20 nd 09 ha (1 lf) st ha lf) 20 07 (2 20 nd 08 ha lf) ( 20 1st 08 ha (2 lf) 20 nd 09 ha (1 lf) st ha lf)

$0

Downtown/Fish Creek

Mountain Area

West of Steamboat

Hayden

Stagecoach

North Routt Source: Colorado Group Realty

Continued from page 6

more affluent,” Ford said. Finding a “new normal” could take time, he said, but Ford expects a return in consumer spending, followed by a return in real estate volume, then a return in construction. Since retiring, Ford has worked on the Community Indicators Project and the Routt County Livability Index.

What Hofman sees happening on a national scale is not a typical recession, but a shift from one business model to the next. Hofman said it’s a change that will move the weight of productivity from the financial sector to a to-be-determined area of the economy, and it will need at least 10 years to solidify.

“In my judgment, the era of the 8,000-square-foot home and all the economic activity that is thrown off of that is over,” he said. An employee in any economic sector creates an average $6 or $7 of economic activity for each dollar he or she is paid, Hofman said.

“When you have a huge sector of our local economy that’s a fraction of what it was, then you’re taking away six to seven times the productivity,” Hofman said. Those who represented a thriving affluent class drove much of that activity, he said.

“People will come here who want to live here, but a lot of what drove the economic activity was build it and they will come — people are not going to be coming because they can’t afford it,” Hofman said.

Ford said that although some people

“Because we only represent buyers, we are seeing some half-decent activity with our Web site hits, which leads me to believe there are a lot of people circling the area, circling the market from a distance, and they’re just waiting to see some positive indication of things turning around.”

might not be as wealthy as they used to be, he thinks a market for second-home owners and location-neutral businesspeople remains in mountain towns.

Steamboat will get its share, he said.

“I think we’ll see our development continue to be driven by individuals who will make the decision that because of the amenities in this community, ‘I will move to Steamboat,’” Ford said.

Doug Labor

The signs of recovery Metzler points to property showings as his No. 1 indicator of returning business for Colorado Group Realty.

“We are seeing an increase in showings in some of our areas,” he said in mid-August. He said that spike could be attributed to August being a traditionally strong month, or it could be the start of a turnaround.

In early August, Metzler showed homes to interested second-home buyers who said they weren’t looking in 2008 because their business back home was down. In early August 2009, those buyers said business had picked up, he said.

Doug Labor, whose Buyer’s Resource works exclusively with buyers, looks for increased Web site hits, phone calls and general inquiries to gauge his office’s volume. He also checks tourism and skier visit numbers for signs of the economic situation across the country.

“Because we only represent buyers, we are seeing some half-decent activ-

Economic diversity: Varying the industries and labor force demographics in an area to provide greater strength in a local economy.

Source: Steamboat Pilot & Today

Broker-owner of Buyer’s Resource Real Estate and manager of MLS statistics

ity with our Web site hits, which leads me to believe there are a lot of people circling the area, circling the market from a distance, and they’re just waiting to see some positive indication of things turning around,” he said.

Steve Downs, a Steamboat Village Brokers agent who has been selling real estate in Steamboat for 34 years, said there are elements of the market here that could help insulate it from macroeconomic factors.

Compared to larger areas, not as many people bought on speculation, he said. Families invested in multigenerational second homes, giving those properties a degree of stability. Resort-minded buyers viewed Steamboat as a value, and for years came here as other markets sold out, he said.

Location-neutral business: A business in any field, including production, technology or consulting, that does not rely on the local economy for its operation. Often small operations in which employees conduct business by computer or phone.

“You don’t know the bottom of the market until it starts to go up — well, has the market turned and started back up? No, that would be a lie, and people are waiting,” Downs said in mid-July.

Labor said the bottom could be an emotional point — when “every article you read, every newscast you turn to, every report that anyone’s aware of, and it’s all bad news.”

“The tricky thing with that is you never know you’ve hit the bottom until six months after the fact,” Labor said.

Prices per square foot for singlefamily homes in Steamboat Springs are lower now than they were in 2008, according to Colorado Group Realty’s 2009 mid-year market statistics. The report includes numbers for the ➤

For more For more photos from Part 5 of the Steamboat Pilot & Today’s special section House of Cards, visit www.steamboatpilot.com/houseofcards.

8 | Friday, August 28, 2009

House of Cards

A Supplement to the Steamboat Pilot & Today

Continued from page 7

first half and second half of each year since 2007.

Average price-per-square foot of a single-family home in downtown or the Fish Creek Falls area during the first half of this year was $314, according to the report.

That number was $383 in the second half of 2008, $405 in the first half of 2008.

Incubating businesses

Entrepreneur and software developer Jens Owen sees opportunity in decreased or corrected home prices.

A Steamboat Springs resident since 1994, Owen has started, grown and sold two location-neutral technology companies: Precision Insight and Tungsten Graphics. When it came time to look at starting a third business, Owen wanted to reach a broader audience, he said.

By early fall, he hopes to open the doors of the Storm Peak Innovation Center, an incubator for location-neutral technology businesses. Owen purchased space for the incubator’s headquarters on the 10th Street side of The Victoria in June 2008. The first 10- to 12-week incubator session is scheduled to start in January 2010.

He has worked with Noreen Moore, business resource director for the Routt County Economic Development Cooperative, to create networking opportunities for technology professionals in the Yampa Valley.

Increased access to the Internet has allowed more opportunity for computer-based workers to live here, Owen said. Decreased home prices help make a career move to a resort town more plausible.

“Timing-wise, as prices were going up from a housing (standpoint), we were kind of getting close to edging ourselves out of the market or the opportunity,” Owen said.

Things were still pretty strong for software professionals as recently as summer 2008, he said, but some of those workers might now be looking for new opportunities.

“At the same time the economic slowdown has allowed for some really good talent to become available,” he said.

Inside the incubator, Owen plans to have a digital media gallery; a glasswalled conference room; a flexible workspace; and a coffeehouse-style meeting area.

The idea is fashioned off TechStars, a technology business incubator that runs summer programs in Boulder and Cambridge, Mass., and includes seed money, mentoring and networking opportunities.

Participating business founders will be required to come to Steamboat for their incubation session, and after that, are free to distribute around the world, Owen said. He suspects at least some of those businessmen will stay; his last business, Tungsten Graphics, employed 18 people, with three living

JOHN F. RUSSELL/STAFF

Randy Rudasics, SCORE volunteer and manager of the Bogue Enterprise Center, has seen some traffic at the Colorado Mountain College’s Small Business Center. Below: Jens Owen, a technological developer who lives in Steamboat, plans to open an incubator in downtown where he will hold sessions helping people start location-neutral businesses. The space also will serve as a meeting place where this new generation of businesspeople can hold meetings and share ideas.

in Steamboat, five scattered around the U.S. and 10 based overseas. He thinks incubator clients will tend to stick around and keep businesses in Steamboat, though it’s not a requirement, he said.

“It’s going to be a natural evolution for many of the entrepreneurs to want to continue to be based out of Steamboat,” Owen said.

Randy Rudasics, manager of the Bogue Enterprise Center at Colorado Mountain College and volunteer small-business counselor for SCORE, said local construction and real estate have softened in the recession.

“I’ve seen several people come through in the past year who were real estate agents who wanted help putting together a small-business plan, but almost all of them kept their license,” Rudasics said. Most of those enterprises have been one- or two-person projects that are unlikely to add more employees, he said.

In the next three to five years, Rudasics expects to see a diminished available labor pool and skill set in professional areas, especially those related to the construction industry.

“My concern is that some skilled labor has left the valley because there wasn’t any opportunity here recently, and when some of that opportunity comes back, we will have a tough time recruiting folks

here for all the traditional reasons: cost of living, confidence in the long-term economy, things like that,” Rudasics said.

E.A. Black, the consultant and financial literacy teacher, said economic diversity — be it through Owen’s location-neutral businesses, Hofman’s new business model, or a return of construction and real estate — will

help expand and strengthen the economic base.

As the number of people with high incomes has dropped, Black said it’s hard to say when Steamboat Springs will pull out of its economic slump.

“We need consumer confidence, stability and certainty, job growth and time … and hopefully time will heal our financial wounds,” she said. ❖