A Vail Valley real estate bright spot?
August 9, 2009
EAGLE COUNTY – Looking for a bright spot in the county’s real estate market? Miller Ranch might be about it.
Since sales first started in late 2004, the 282-unit neighborhood in Edwards has hit several milestones. It originally sold out in a matter of months, and there have always been lines of people waiting for whatever condo, townhome, duplex or single-family home came on the resale market.
The key is price. In return for agreeing to a limit on appreciation, buyers can get into a home of their own for far less than the price of free-market units. A potential buyer can get into a 750 square-foot, two-bedroom, one-bath condo for less than $170,000.
County housing director Alex Potente said virtually all sellers are getting their asking price. Tori Franks of the county’s Eagle County Home Store said the only unit she could think of that sold for less than the maximum asking price was a single-family home that was sold for $410,000 instead of the listed price of $418,000.
At the moment, the limited appreciation available at Miller Ranch and a few similar projects is treating potential sellers better than the free market.
Home prices have dropped, but it’s hard to get a clear view of how deep the drop has been, Potente said, because sellers are sticking close to their asking prices and buyers aren’t biting. But there are neighborhoods, especially in Eagle and Gypsum, with plenty of for-sale signs in front yards.
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“There’s a lot of inventory out there right now,” Potente said, adding that there could be as much as five years’ worth of unsold homes on the market right now.
That isn’t a problem at Miller Ranch, where sellers can go from listing to closing in as little as 10 weeks.
But the same can’t be said for other “affordable” projects around the valley.
In Eagle Ranch, the original developers put deed restrictions on several townhomes and condos as they were built, and priced those units thousands of dollars below the free market units.
At the time, the lower prices were enough to entice buyers to accept lower appreciation. Now, though, the prices of comparable free-market units have fallen to levels about even with the deed-restricted homes. Given that a buyer now can get a unit with no contractual limits on future appreciation, the deed-restricted units have become a hard sell.
And those limits aren’t going away.
“The restrictions won’t be lifted, even for hardship,” said Don Cohen of the Economic Council of Eagle County. “That’s put some owners who want to sell in a real bind.”
Cohen said one person in an Eagle Ranch unit asked if the town or county would buy the home. That’s not how it works.
On the other hand, if a homeowner in a deed-restricted unit gets into financial trouble, the government or agency that enforces the appreciation cap just might buy it. The reason, Cohen said, is that the deed restriction could be voided if a lender or other bidder buys the unit at a foreclosure auction.
In fact, Cohen said, the county purchased a Miller Ranch unit at a foreclosure sale not long ago. It was under contract in about 24 hours. But the person who lost the unit took the usual consequences – a massive hit to the credit score.
But buying an already-restricted unit is different than buying, then restricting other units going into foreclosure.
“We aren’t seeing that many come up,” Potente said. “And we haven’t seen the deep discounts we need. We’d need $50,000 to $100,000 markdowns.”
While Miller Ranch is the best example of a project that’s doing well in a down economy, Tori Franks of the Eagle County Home Store said there are other areas doing well.
Apart from the previously mentioned units at Eagle Ranch, the town has its own restrictions on several units at The Bluffs subdivision and a few units scattered in other neighborhoods.
“There hasn’t been a lot of movement in The Bluffs,” Franks said, but the re-sales are selling fairly quickly.”
But Potente said Miller Ranch has something going for it that most other affordable projects don’t – the entire subdivision is appreciation-capped.
“Besides price, you’ve got location and community,” Potente said. “In the block I live on (in Eagle Ranch), probably 70 percent of the units are rentals. The whole block has a rental feel. In Miller Ranch, everyone’s an owner.”