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Resort Property - Why Its Prices Behave Differently

Luxury Resort Property

What is resort real estate? It may be defined as property situated in a community that endures tourism and where ownership of second or third homes constitute a substantial percentage of the overall home ownership.

Aspen real estate is a prime example of an extravagance resort market. Aspen is home to four exceptional ski mountains with a lively winter tourism industry and summers offer mild temperatures to savor the plentiful outdoors. Nearly all homes owned within the Aspen or Snowmass market are second homes. The typical vacation home within the Roaring Fork Valley is utilized less than Thirty days per year normally.

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

Something each one of these resorts share is the fact that their real estate markets are not following a same rules as suburbia.

Property Finances

1) People who can afford to buy second homes must by definition be somewhat successful to get to that stage. It seems therefore not as likely that they would be seduced by obscure financing products.

2) Lending criteria on second homes are and also have been tighter compared to primary residences. It is not uncommon for lenders to inquire about 20% recorded on these kinds of deals. It is therefore harder to get upside down on your mortgage.

3) In luxury resorts like Aspen or Snowmass 60%-70% of all real estate transactions are cash transactions. No financing involved. Negative income thus remains no problem in these situations.

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4) Rental income from properties not employed for the majority of the year can soften the negative income if your mortgage is involved.

Property Desirability and Liquidity

1) Resorts obviously are something. They've something that people desire. This may be mountains, lakes, the ocean, a unique climate or island setting. Really anything, but it must be special.

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

3) In most cases resorts offer limited availability. Associated with pension transfer things desirable they are not obtainable in unlimited quantities. There's only so much land in a mountain valley and there's only that much beachfront property, you will find only so many skiable mountains, you receive the drift.

Overall it can be said that resort second homes will be the first asset that'll be sold when people are in financial distress. On the other hand it is less likely that owners of resort property like Aspen real estate might have overextended themselves to begin with. This combined with the tighter lending criteria for second homes causes it to be less likely that the general mortgage troubles spell over to the second real estate market. As long as the economy only experiences a moderate downturn the luxury real estate segment could possibly profit. It is not uncommon to find a re-allocation of wealth from bonds and stocks into real estate in times of uncertainties. Therefore the top quality from the market will weather the storms a lot better than most people expect.