Originally Posted by sno'more
I also have a question, and it's about the 'tip of the whip' argument, which basically goes--prices of resort property, in ski country or on the beach, fluctuate more rapidly and violently than prices of primary residences in urban areas. In other words, a house in Atlanta or Cleveland is likely to be more stable (both slower to appreciate and less like to collapse in value) than a beach house on Maui or a condo in Telluride? Any thoughts?
I'll give you my own opinion but it's biased in two ways; first, it applies only to my home market Jackson Hole and second, I sell real estate.
Yes, the conventional wisdom says that values for resort properties are more subject to fluctuation. That's a sweeping generalization and is probably true for the country as a whole.
For specific markets, however, there are much more powerful local forces at work. My market, for instance, has a very significant supply-and-demand equation going on:
Less than 3% of the land in my county is privately owned (and therefore theoretically available for development). Of that very small fraction, about 3/4 has already been developed and the remainder is subject to extremely strict zoning requirements that make it very hard to add very many housing units. That's the supply side.
Couple that background with the fact that there is nowhere else in the United States or the world that has the Teton Mountain range, Yellowstone and Grand Teton National Parks, our part of the Snake River, the Jackson Hole ski resort, ZERO STATE INCOME TAXES AND A STATE BUDGET SURPLUS, and an enormous percentage of public and private land protected permanently from development. That's the demand side.
Now add extraneous market forces, the primary one being demographic. Millions and millions of baby-boomers like me are looking seriously at where they'll retire. Jackson Hole is already priced out of the market for a very high percentage of those, but we have such relatively limited supply that it doesn't take that many prospective buyers to saturate the supply.
I would agree that there are many ski resorts and literally hundreds or even thousands of other "second home" markets that don't have the supply constraints that my market has. I do know that ultra-desireable locations like Beverly Hills, South Beach, Aspen, Sun Valley, Santa Barbara, the Hamptons, etc. have not historically felt severe housing-price declines EXCEPT in severe recessions or depressions.
If a major housing downtrend is in the cards (I don't know and I submit nobody else does either), then maybe all boats sink with that tide. If I really wanted to own a property in some of those markets mentioned above, however, I doubt that waiting will result in huge bargains.
Just my opinion, of course.