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Mountain News: Will the real estate glass ever fill again?



ASPEN, Colo. - Two theories prevail about how the current economic travails will ultimately affect mountain destination resorts.

One school holds that if the balloon has burst, it will begin inflating once again - perhaps late this year, but perhaps not even for three, four or five years. This viewpoint sees drama, but no fundamental restructuring. Real estate, after emerging as the top-drawer economic player during the last 10 to 20 years, will revive to regain some of its former glory, although probably not to the same proportions of 2004-2008.

A second theory sees the lights being permanently dimmed. In this view, the real estate bubble that caused the profusion of big vacation homes will never again regain the vigor of the last several years, and perhaps not even of the last couple of decades. As such, the economies of mountain valleys will again be driven more purely by tourism.

Deep-thinkers gathered at a recent meeting in Aspen tended toward the latter view. "I don't see how anybody can say we're going to return to lost levels of prosperity," said Ford Frick, managing director of BBC Research and Consulting, a Denver-based firm. Frick, an economist, has analyzed mountain and other economies since the late 1970s.

Many people in the wealthy mountain towns had come to believe that their economies were recession proof. After all, even in the depths of the Great Depression, there were wealthy people in these places. The downturn of 2001-2002 was certainly felt in places like Vail and Aspen, but after a year of self-introspection and plenty of affordable housing, they roared back beginning in late 2003.

Another downturn, in the early 1990s, was barely noticed.

But this one is different, Frick argues. "We haven't seen this one before. The resorts are more vulnerable." He went on to explain that the wealthy travelers who visit or live part-time at high-end resorts were at ground zero of the recession. This, he predicted, will cause not just a temporary lull in real estate sales, but will bludgeon the market. Prices will start dropping. "We're hardly there yet," he said.

Many people had been buying real estate in resorts speculatively, because it kept going up and up. The same thing was happening across the country, of course. But the resorts may have reflected this more so, because the appreciation rivaled that found in places like Phoenix, Las Vegas and along the West Coast.

But what will happen now if there's no prospect of making money by flipping properties, with a remodeled kitchen at every flip helping swell the ranks of craftsman skilled in installing granite countertops?

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