Phil's Blog

December 7, 2009 Market Up Date

December 7, 2009
Keeping you updated on the market!
For the week of

December 7, 2009
Saying “I told you so” is rarely a good idea. At the least, it is boorish behavior. More often, you find you've spoken too soon, so not only have you alienated a few of your colleagues but you also find yourself eating a bitter slice of humble pie. So we refuse to say, “I told you so.”
That said, we are at least mildly pleased that the housing market continues to confound the naysayers (those pundits who insist on focusing on the clouds while ignoring the silver linings). It happened again last week when pending home sales rose for the ninth-consecutive month, posting a 3.7% gain in October (after posting a 6% gain in September). The consensus estimate for October ranged from no change to a 1% decline.
This persistent increase in home sales indicates to us that the housing market is unlikely to backslide. What's more, the pending-home sales index has been running ahead of the existing-home sales figures, which hints at continued improvement in actual sales in coming months, particularly if we see additional loosening in the credit markets.
The naysayers were further confounded by homebuilder news. On that front, residential home construction rose 4.4% in October, more than recovering from a 2% dip in September. It was the biggest monthly gain in private residential spending since March 1998.
Of course, the naysayers will point out that the surge in housing activity in October was due to the impending expiration of the federal first-time homebuyer's tax credit. Their point is valid. We're sure a portion of sales were driven by buyers seeking to beat the deadline, but we can't forget that the trend over the past six months has been up, before there was any push at all.
Last week we warned that change at the FHA was on the horizon. This week it appears the horizon is upon us. Housing and Urban Development Secretary Shaun Donovan confirmed that his agency is drafting new policies, including raising FICO scores, dropping maximum seller concessions, and increasing up-front cash on FHA-insured loans. In addition, HUD wants to hold lenders responsible for their origination quality and increase compliance reviews. Lenders would be required to indemnify the FHA for losses resulting from their failure to meet FHA requirements and will be sanctioned nationally for any improper activities rather than through the FHA's current policy of sanctioning individual branches.
In short, the cost of FHA-insured loans will rise, which means they will be available to fewer borrowers. And if HUD's plan to increase lender accountability prevails, fewer lenders will offer FHA-insured loans.
Indicator Release
Date and Time Consensus
Estimate Analysis
Consumer Credit
(October) Mon, Dec. 7
3:00 pm, et $9.5 Billion
(Decrease) Moderately Important. Consumers continue to reduce revolving debt to more manageable levels.
Mortgage Applications Wed, Dec. 9,
7:00 am, et None Important. Purchase applications are rising on growing homebuyer interest.
Wholesale Trade
(October) Wed, Dec. 9,
10:00 am, et No Change Important. Sharp inventory reductions could stimulate future production.
International Trade
(October) Thurs, Dec.10,
8:30 am, et $36.5 Billion (Deficit) Moderately Important. The trade deficit is expanding on a weak dollar and higher commodity prices.
Retail Sales
(November) Fri, Dec. 11,
8:30 am, et 0.4%
(Increase) Important. Overall sales are rebounding after a late-summer dip.
Import Prices
(November) Fri, Dec.11,
8:30 am, et 1.0%
(Increase) Important. Recent increases in import prices are raising the risk of dollar-based inflation.
Consumer Sentiment
(December) Fri, Dec.11,
8:30 am, et 68.2 Index Moderately Important. Sentiment continues to improve with the economic outlook.

The Federal Reserve and Mortgage Rates
There is another reason why we think saying “I told you so” is a bad idea: It can be thrown back in your face. For the past few months we've been forwarding an argument for rising mortgage rates, and yet they keep moving down. Should we toss in the towel? Not yet. We still think rates are destined to move up. The relationship between the Federal Reserve and the mortgage market might help explain why.
The Federal Reserve has done everything in its power to push mortgage rates down to record lows over the past year, and it has succeeded primarily by purchasing an unprecedented $1.5 trillion worth of mortgage-backed securities. This Fed-created demand has helped drive down mortgage rates. Some economists believe the Fed's purchases have resulted in a full percentage point drop in rates.
But the purchases won't go on forever. Last week the Fed stated that it would begin testing a strategy to shrink its portfolio of mortgage-backed securities. One variant is to taper off its purchases of mortgage backed securities. If that is indeed the case, the wheels toward higher rates will start turning.
We don't expect mortgage rates to spike, as any move will be gradual, but it's worth noting that as private operatives move in to fill the void, their objectives will differ from the Fed's: Their objective won't be to drive down mortgage rates, it will be to make money.
Posted by Written by Sean Martin, 1st Nat. Bank Glenwood

PHIL WEIR ASPEN The Observer December 2009

December 4, 2009
ABOR Observer
December 2009
ABOR Exclusive —
New development priorities in play at Snowmass Village
The final draft of Snowmass Village’s updated comprehensive plan includes a new emphasis on traffic mitigation, arts and culture and the creation of new employee housing.
The updates to the comp plan, which will guide development policies for the next decade, are built around the notion that Snowmass Village is nearing its total build out capacity, and that future development needs to be reviewed in the context of the Town’s needs and long-term viability.
Thus, transportation, employee housing, business mix and the town’s relationship with surrounding unincorporated neighborhoods play a big role in the proposed comprehensive plan. For instance, it insists that a conference center and major hotel remain a part of the mix in Mall, also known as West Village.
“The biggest change from the 1998 Comp Plan is the way we will start measuring transportation impacts,” Lesley Compagnone, Snowmass Village Community Relations Officer, told ABOR.
“It’s about per person trips now instead of per vehicle trips,” she said. “It’s a change in the science of how we mitigate traffic, and it will change the way we require developers to mitigate for transportation impacts.”
Another big change is the new chapter on arts and culture. It calls on the Town to create an arts plan and actively support the Anderson Ranch Art Center’s presence in Snowmass Village. It also encourages developers to create spaces that are beneficial to the arts.
New language about employee housing suggests three big changes are on the horizon:
- Developers will no longer be allowed to pay cash in lieu of affordable housing.
- New enforcement measures will ensure that accessory dwelling units are rented to Snowmass Village employees.
- Housing mitigation requirements will rise to meet the goal of creating an affordable housing inventory for 70 percent of the town’s employees.

“That’s a number they struggled with for a long, long time before they settled on that number as reasonable and attainable,” Compagnone told ABOR. The current goal is to house 50 percent of employees, so the change will be signinificant.
The town is taking final comments about the plan online before it goes to press in mid-December. Hearings are scheduled for Dec. 21 and Jan. 4.
To read the plan and leave comments, go to and click on the link under the headline “The Comp Plan Is Going To Print.”
Four lane advocates lose in court, again
A Colorado appeals court ruled last month against two locals who have fought for years for an unrestricted four-lane highway entrance to Aspen.
Jeffrey Evans and Curtis Vagneur have been fighting a hearing officer’s decision in 2007 that determined that their citizen petition asking voters to expand Aspen’s entrance was not valid.
The hearing officer ruled that the subject of their citizen’s petition pertained to administrative matters, as opposed to legislative matters, and could therefore not be decided by voters. It was upheld in district court last year.
The Entrance to Aspen has been the source of debate since the late 1960s, when the state highway department first proposed a four-lane highway into town. Voters have chimed in several times over the last four decades, sometimes supporting realignment and accompanying transit proposals, sometimes rejecting them.
Two years of complaints spur new construction regs
Aspen may tighten on-site construction regulations after hearing numerous complaints over the lifespan of a two-year project to build an 11,600-square-foot home near the Rio Grande Trail. An estimated 100,000 pieces of stone were cut on the home site, causing disruption and dust on neighboring properties around the construction zone. The work was in accordance with city regulations that limit construction noise to 80 decibels, so there was little that the city’s compliance officers could to do address concerns. But in late November, City Council directed city engineer Trish Aragon to modify the municipal code to address on-site manufacturing activities — specifically reducing the decibel level to 65, as well as limiting the duration of such projects both in terms of days and hours of operation.
City Council relaxes holiday construction restrictions
The Aspen City Council relaxed its holiday construction ban this year, citing difficult economic times.
Interior construction work in now allowed from 9 a.m. to 5 p.m. between Christmas Day and New Year’s Day in the central core of town. Outside the central core, both exterior and interior construction is permitted from 8 a.m. to 5 p.m.
Landlord sues Ruth’s Chris over lease
The owner of the now-closed Ruth Chris Steakhouse is being sued for $4 million in future rent.
Ruth Chris closed its doors at the old Guido's Inn space, located at the corner of Galena Street and Cooper Avenue, for good in October.
The suit, filed by landlord Galena Corner LLC in Pitkin County District Court, claims that Colorado Steakhouse LLC, which owned the Ruth's Chris franchise in Aspen, still owes $35,412 per month in rent until the lease expires in 2016.
City Council grants extension for townhome development
Aspen City Council voted 4-0 to extend the vested rights for a townhome development on the west side of South Aspen Street beneath Lift 1A, where the proposed Lodge at Aspen Mountain is under review. John Sarpa, representing Aspen Land Fund II, LLC, which owns the property along South Aspen Street near Lift 1A, said the extension is necessary as a key term in renegotiating a $22 million loan with Alpine Bank. The vested rights were set to expire in Jan. 28, 2011, and now they will end Jan. 28, 2013.
Lift One Lodge receives city council’s conceptual approval
City Council granted conceptual approval for a membership lodge on the east side of South Aspen Street, directly across the street from the proposed Lodge at Aspen Mountain. The vote allows developers represented by Bob Daniel to move forward with plans to build the 114,000-square-foot Lift One Lodge at the base of Aspen Mountain. It would have lock-off rooms that can be rented to the public when it isn’t full. Councilman Torre voted against the project, saying the developers haven't addressed numerous concerns, including the question of who will actually use a proposed Poma lift that will run from Deane Street through the property to a new base terminal for Lift 1A.
Torre and other council members also expressed concern about the proposed lodge's mass and scale, the size of the rooms are too big and the plan to sell them as fractionals. The majority nonetheless approved the conceptual proposal.
Lodging industry won’t tax itself
Aspen's lodging sector will not institute a voluntary 1 percent tax in the wake of a ballot snafu that scuttled plans to create a special taxing district to support marketing. Corporate properties aren't in a position to levy a voluntary fee, unlike the locally owned lodges, said Warren Klug of the lodging association. Another concern is that lodges, hotels and condominium complexes that rely heavily on group business would negotiate the fee off their prices with important clients. Resort officials will likely turn to city government for a short-term infusion of marketing dollars. The city supplemented this year's marketing fund with an extra $200,000.
City narrows developer field for housing project
The city will select one of three private developers to build and sell affordable housing on two publicly-owned properties in town.
The finalists are the LIFE Foundation Team, Theodore Guy Associates and Coburn Development. The city is seeking public-private partnerships for the first time in memory. The developers stand to gain from the sale of the units they build, while the city gains access to capital and building expertise.
The city will retain ownership of the land at both sites, 802 W. Main St. and 517 Park Circle.
Affordable housing sales nearly double
The pace of sales of affordable housing this year is nearly double that of last year, with 81 units sold so far for a total of $18.3 million.
By comparison, the Aspen/Pitkin Housing Authority recorded 43 sales worth a total of $9.3 million in 2008.
Studio and one-bedroom units are by far the most sought after units.
City, fire district won’t increase property taxes
The Aspen City Council voted to keep property taxes next year at current levels, setting the 2010 mill levy at 4.025 mills. Property owners will be credited 2.035 mills on their upcoming tax bills. By issuing the tax credit, the City is forgoing nearly the entire 35 percent windfall increase in property valuations.
The Aspen Fire Protection District will also forego windfall property tax revenues by using a temporary credit to lower its 2010 mill levy. The district already has enough funds to complete construction of its new downtown fire station on time and on budget, and move ahead with the purchase of a $1.1 million aerial ladder truck to be delivered in 2011.
Marmot sets up shop in Aspen
A Marmot retail clothing and equipment store is opening Dec. 4 in the Elks Building, in the 2,000-square-foot area previously occupied by Amen Wardy and the Hard Rock Café before that. Two new clothing stores were set to open Aspen this off-season: an expanded new Boogie’s kid’s store, as well as a lingerie shop in the small space at 405 S. Hunter St. And there have been at least three new restaurants and bar openings: Noodles by Kenichi, Il Mulino at the Residences at Little Nell and the nightspot Hunter Bar.
SkiCo wraps up mountain improvements
The Aspen Skiing Co.’s six year, $130 million on-mountain upgrades completed this year include:
- $18 million in renovations at The Little Nell Hotel;
- Glading a three-acre patch of evergreens on Aspen Mountain to help improve intermediate skiing terrain;
- New snowmaking at Deer Park on Aspen Mountain;
- A new cross-over bridge at the Buttermilk Mountain terrain park;
- Consolidation of the maintenance yard at Snowmass.

Open Space program reaps benefits of property value rise
Pitkin County will cut the mill levy for its open space program next year, but only partially. The program's current levy of 3.75 mills will be reduced, through a temporary credit, to 3.32 mills next year. The revised rate will generate estimated revenues of $12.3 million for open space acquisition, trails construction and maintenance. Had commissioners agreed to adjust the mill levy to keep next year’s collections in line with previous years, the program would have taken in about $11 million. Commissioners George Newman and Rachel Richards called for a limited reset of the mill levy after learning the program currently has the opportunity to nearly double the amount of land it has conserved.
New septic system regulations shift burden to seller
Effective July 1, 2010, Pitkin County will require landowners to obtain a septic system permit before their property can be sold or receive a building permit.
The new program, modeled after existing programs in other counties, will require the seller of a home to have their septic system inspected by a licensed inspector and complete any necessary repairs before a permit can be issued.
Pitkin County Environmental Health Program Supervisor Carla Ostberg told ABOR that the intent of the program is to improve wastewater treatment and protect drinking water supplies and streams throughout the county.
Jefferson County has found that about 25 percent of septic systems require some kind of improvement upon inspection.
“If a window is broken in a house, a buyer wants it fixed,” Ostberg told ABOR. “If a pipe out to the septic tank is broken, they would probably want to have that fixed too.”
The program will also allow the county to improve its documentation about septic systems in the county, including some installed in the 1960s and 70s without any record.
For more details, call Ostberg at 920-5438.
Bidders jump on property at lien sale
Thirty-seven bidders jumped at the chance to pay somebody else's property taxes — and potentially take ownership of their property — at Pitkin County's annual tax lien sale. The county treasurer's office sold liens on 88 properties, down from 333 last year. The mix this year includes a railroad car without any land, a handful of mining claims and a couple of parking spaces in Aspen.
Delinquent owners have up to three years following the date of the tax sale to pay back taxes plus 10 percent annual interest to whomever bought the tax lien at the auction. If the delinquent owner fails to make payment in three years, ownership transfers to lien holder.
There are about 14,400 taxable properties in the county.
County’s overall property value drops to $35.7 billion
The total actual value of property in Pitkin County has dropped to $35.7 billion following adjustments that came in response to an unprecedented number of protests.
A total of $264.2 million was shaved from the property values of 1,877 property owners who went through the county Board of Equalization review process.
Meanwhile, 115 property owners who did not receive the outcome they were seeking have elected to seek arbitration and 101 petitions have been filed with the state board in charge of appeals.
County donates water rights for health of the Fork
The Colorado Water Conservation Board approved a trust agreement with Pitkin County that allows the county to donate water in order to augment in-stream flows in the Roaring Fork River.
The agreement means 4.2 cubic feet per second of water rights held by the county on Maroon Creek will be managed by the Conservation Board to support flows in the Roaring Fork.
Opponents included the Basalt Water Conservancy District, Starwood Metropolitan District, Willow-Herrick Ditch Co. and the Roaring Fork Land and Cattle Co. They expressed concerns that the county's plan to devote its water rights to in-stream flows would impact their own water transactions.
Redstone approves sewage plant expansion
Redstone residents voted 40-20 to increase district debt to replace the village’s 35-year-old sewage treatment plant, contingent upon receiving $1 million in federal stimulus money at a favorable rate. The plant serves about 140 people.
Viceroy Snowmass opens
The Viceroy Snowmass opened in late November with considerable fanfare and rave reviews.
The173-room hotel in Base Village, on the lower slopes of Snowmass Ski Area, is the resort’s first new hotel in decades, and its most upscale. Rates of $1,100 per night are expected over the year-end holidays. Ninety-four condo-hotel rooms on the first five floors of the eight-story structure are now ready for guests. All rooms are expected to open by mid- to late December. Other Viceroy hotels are located in Santa Monica, Palm Springs, Miami, and the British West Indies. A Viceroy Abu Dhabi hotel is being planned.
Lawsuits filed against Base Village owner
Eight buyers at Base Village filed lawsuits against a Related WestPac subsidiary seeking to get out of their contracts.
The lawsuits allege the developers concealed a two-year rescission right and did not provide a clearly identifiable description of the property.
Liquid Sky, Junk slip into receivership
Liquid Sky and Junk restaurants in Snowmass Base Village went into receivership after owner Scott DeGraff defaulted on a $2 million loan with landlord Related WestPac. Judge James Boyd appointed local CPA firm Otte & Cotte as the receiver on behalf of Related Westpac, the owner of the spaces where the bar and restaurants are located.
Basalt Town Council balks at vested rights request
The Basalt Town Council is resisting pleas for extended vested rights for the nearly approved Stott’s Mill development next to Basalt High School.
Developer Briston Peterson is asking for a vested rights extension from the current three to five years with no strings attached. He said the issue is a potential “deal breaker” for the 110-unit project.
The Town Council approved the development on first reading in October, citing its hefty contingent of deed-restricted affordable housing. But when the vesting issue came up at second reading in November, the council balked, and demanded the developer commit to completing the infrastructure and public amenities connected to the residential project.
No final vote was taken.
Skico still to develop midvalley housing
The Aspen Skiing Co. remains committed to building worker housing in the midvalley even though demand has eased considerably. The company, used proceeds from its 2006 sale of the Base Village project to purchase several midvalley properties in recent years, including the 64-unit Sopris View apartment complex in El Jebel, the former Thunder River Lodge in Carbondale and 30 units in the new Keator Grove development in Carbondale. Skico told the Basalt Town Council that its goal is to have an employee-housing inventory of 1,200 beds by 2013.
Willits Winter Market slated through Feb. 27
A new Willits Winter Market will be held each Saturday through Feb. 27, featuring fresh produce, meat, eggs, cheese, bread, soup, pasta, baked goods, wine, cider, hot chocolate, coffee, honey, jewelry, art, glass, apparel, leather, iron, chair massage and gifts. There will also be live music each week. The market is in the indoor space located next to Kitchen Collage at the Willits Town Center near City Market on Highway 82. Sponsors include the Basalt Chamber or Commerce, the Town of Basalt, Alpine Bank and surrounding Willits merchants.
Trout fishing suffers due to Ruedi releases
The U.S. Bureau of Reclamation said trout fishing on the Frying Pan suffered for six weeks last summer because of water releases from Ruedi Reservoir required by the U.S. Fish and Wildlife Service. The Fish and Wildlife Service purchased the water to continue a recovery program for four species of native fish downstream in the Colorado River: the pike minnow, razorback sucker, bonytail chub and humpback chub. Water releases from Ruedi have been a point of concern for Frying Pan anglers and Basalt businesses for more than 20 years.
Garfield County foreclosures hit record high
Foreclosures have hit a record high in Garfield County in 2009. There have been 316 so far this year, and county officials predict the total will exceed 350 before the year’s end.
Last year there were 108 foreclosures in Garfield County. The previous record was set in 1985, following the collapse of the oil shale industry.
Most of the foreclosures this year have been in western Garfield County, which has been hammered by a plunge in natural gas production.
Carbondale P&Z endorses affordable housing
A plan by the Roaring Fork School District Re-1 to build 120 units of affordable teacher housing on 12 acres of school property in Carbondale earned a favorable nod from the town's Planning and Zoning Commission. The project is planned for the open field between the Bridges Center (the former Carbondale Middle School) and the former elementary school building, and includes a site for a new public library at Third Street and Sopris Avenue. At least 80 percent of the proposed units will be deed-restricted and offered first to teachers and other staff in the school district, and then to other public employees in Carbondale. The rest of the housing would be sold on the free market. The Board of Trustees begins reviewing the plan this month.
Dormant development comes back to Garfield County Commissioners
The proposed 6,000-acre Spring Valley Ranch development southeast of Glenwood Springs, which has sat dormant for years, is expected to go before the Garfield County Commissioners for Phase I approval in December. A group of local investors first presented development plans for the property in 1977. Years later, a new ownership group changed the development’s name to “Chenoa” and proposed an upscale housing development that would include 2,750 homes, a 150,000 square-foot “village center” and two 18-hole golf courses. Lehman Brothers was most recently involved in the project until going bankrupt.
The project's current owner is Spring Valley Ranch LLC, out of San Francisco.
REALTORS® testified in opposition to SB 246, an effort to award moratory interest to claimants in residential construction defect cases from the time the property is closed upon, until the time judgment is rendered. The additional costs of litigation would have ultimately been passed along to potential homeowners and threatened affordable housing. The bill died in Committee.
Amid much debate relating to the national Energy Bill, NAR was successful in getting harmful federal energy audit requirements and point-of sale triggers dropped from the bill as it relates to energy labels.

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