Bowden's Beat

Trends In . . . Ski Resort Demand

The National Ski Areas Association (NSAA) reported that US ski areas hosted 60.54 million skier/snowboarder visits in 2010/11, the second best season on record. One of the most interesting demographic shifts flies in the face of conventional wisdom:  There has been a trend in recent years toward an older skier/ snowboarder population.  The median age rose to 38.0 years last season, up from 36.7 the year before, and 33.2 in 1997/98. Transworld Snowboarding Business’ latest report shows the over 40 cohort now constitutes about 15% of the snowboarding population.  This aging pattern has been largely influenced by a Baby Boomer generation that refuses to “get old.” Collectively, the 45+ plus group has expanded from 21% of the market to 34.3%, representing an increase of more than 60%.

More specifically, since 1997/98, the proportion of visitors . . .

•   45 to 54 years of age has increased from 14% to 20.4%.
•   55 to 64 years of age has increased from 4.6% to 9.6%.
•   65+ has risen from 2.4% to 4.3%

A Multi-Generational Phenomenon - Snow sports have increasingly become a three-generation activity as Baby Boomers continue to participate while encouraging their children and grandchildren to take up skiing and boarding. Although the large majority of the industry’s real growth in visits over the past 15 seasons can be attributed to 45+ participants, children continue to play a major role in the industry’s success. While the trend toward aging ski resort visitors may have a limited future, Boomers will not stop traveling anytime soon, although priorities will change.

To read more about the multi-generational ski phenomenon, including the “Grandparent Factor” and the impact of affluence on the sport’s future, go to www.bowdensmarketbarometer.com and click on Buy Now to purchase the February edition.

 

Current Housing Conditions -- Sales and Prices Up – Inventory Down!

Sales and prices for both new and existing homes rose in April.

While sales and prices were up month-over-month for both segments, the more meaningful indicators are represented by the year-over-year benchmarks.

New Construction:  Sales of new single-family homes rose to an annual rate of 343,000 in April, representing a 9.9% increase over the April 2011 rate of 312,000 units.  The median sales price of new homes sold in April was up 3.74% year-over-year to $235,700.  Current inventory represents 5.1 months of supply, healthy by most standards.

Existing Homes:  Sales of existing homes are up 10%, year-over-year to a rate of 4.62 million.  The median existing homes sales price of $177,400 represents a 10.1% increase from a year earlier, representing the largest median price increase since January 2006. Foreclosures and other distressed properties made up 28% of April’s sales, down from 37% a year earlier.  Inventory now stands at a 6.6-month supply, down from a 9-month supply one year ago.

Other key indicators:

• The diminishing share of distressed properties is serving to buoy home values and some areas have actually returned to a seller’s market.

• Mortgage rates are at an all-time low and lenders are beginning to show a willingness to loosen up on restrictive credit standards.

• Builders are more optimistic. The builder sentiment index is up 5 points this month, and is at its strongest reading since May 2007.

• Toll Brothers recently reported a year-over-year surge in earnings driven by strong sales and cost saving strategies. The luxury builder delivered 671 units in its second fiscal quarter, representing a 14% year-over-year increase.

For scrutiny of individual markets, look for the June edition of Bowden’s Market Barometer in which we discuss specific recovering markets.

Green Building Growth

Bowden's Market Barometer reported in the April/May issue that the McGraw-Hill Companies (www.mcgraw-hill.com) recently released findings from its Green Home Builders and Remodelers Study. According to the study, the construction of green homes is projected to see a five-fold increase over the next five years growing from 17% of all residential construction in 2011 to 29% to 38% by 2016. The study also found that green building provides a competitive marketing advantage as most buyers recognize the cost efficiencies associated with the operation of a green home. To read the full release click here.

Foreclosure Down, Investment Up!

Bowden’s Market Barometer discussed the declining foreclosure activity in the April/May edition, and continuing coverage on the subject indicates that the trend has legs! 

 The volume of homes entering the foreclosure process was down more than 30% in March. This flies in the face of predictions that the number of homes entering the foreclosure process would rise immediately following the recent $25 billion settlement between banks and state governments over fraudulent mortgage servicing. New data indicate that the rate of borrowers past-due 60 days or more fell to 5.78% in Q1, the lowest delinquency rate since 2009. Further to this issue, foreclosure sales – sales of homes in the final stage of foreclosure -- dropped to their lowest level in over two years in March as banks are now making concerted efforts to modify more loans.  In Q112, 198,000 completed foreclosures were reported compared to 232,000 in Q111, representing a 15% decline. 

Some economists warn of an impending spate of foreclosures, perhaps as soon as this summer.  Shadow inventory was estimated by CoreLogic to total 1.6 million units in January representing a six-month supply, down from an eight-month supply in January of 2011.  Other estimates come in closer to 1 million units. That said, investor activity seems to be quelling a rise in distressed property inventory.

Unlike the huge run-up of for-sale homes previously exacerbated by “flippers,” the new investment strategy is to “buy and hold.”  Large investors including Colony Capital, GTIS Partners, Oaktree Capital, and the Waypoint Real Estate Group are buying up thousands of homes and filling them with tenants who are often displaced homeowners.  Waypoint, which has purchased about 1,200 homes since 2008, has kicked into high gear, recently signing a $400 million deal with private equity firm GI Partners with plans to buy 10,000 to 15,000 more homes by the end of next year.

Beazer Homes USA, one of the ten largest single-family homebuilders in the US, recently announced its contribution of 200 single-family homes in Phoenix and Las Vegas to a newly formed REIT.  Beazer Pre-Owned Rental Homes, Inc. (BPRH) was organized to acquire, refurbish and lease recently constructed, previously owned homes on a “large scale, in select US markets.”

The government’s program to turn foreclosed Fannie Mae, Freddie Mac and FHA properties into rentals is intended to clear the national backlog of distressed housing while having the side effect of growing the job market. Morgan Stanley estimates that the program can result in more than one million privately funded jobs in the construction and real estate industries. Estimates call for about eight million properties to be sold in some form of distressed sale over the next five years. Turning half of them into rentals would represent a 20% increase in the total number of single-family rentals while theoretically creating a cottage industry of an additional 800,000 permanent jobs for servicing, cleaning, managing and maintaining the units.

Perhaps by the time the next wave of foreclosures hits, the market will be ready for the competition. One school of thought is that the faster the wave hits, the quicker the inventory will be absorbed and the market will return to a more traditional balance.

Bowden’s Market Barometer is dedicated to providing “real time” data that serve to assist the decision makers of our industry in following trends that will shape the future.  Visit us often at http://www.bowdensmarketbarometer.com.  < >

Austerity Burnout?

The election of new heads of government in both France and Greece suggests a majority of voters weary of austerity measures that have so far failed to pull Europe’s fat out of the fire. Britain’s Conservative-led coalition was also battered recently as local voters favored the opposition Labour Party, a proponent of growth.  Prime Minister David Cameron recently opined: “When people think about the economy they don’t see it through the dry numbers of the deficit figures, trade balances or inflation forecasts – but instead the things that make the difference between a life that’s worth living and a daily grind that drags them down.” 

So is austerity out of vogue?  Here in the US, it’s been questionable for some time now, as affluent Americans appear to be “back to basics” buoying travel and premium brand consumption. But based on the Spring 2012 Affluent Market Tracking Study, a twice-yearly survey of the wealthiest 10% of households conducted by the American Affluence Research Center (www.affluenceresearch.org) indications are that while our wealthiest households are no longer avoiding conspicuous consumption, they appear to have developed a more thoughtful approach to it. 

Methodology:  The 21^st AARC survey focused on the 11.4 million households that represent the wealthiest 10% of all US households in terms of net worth.  These households have a minimum net worth of $828,000 and an average of $3.1 million, an average annual income of $256,000, and own a primary residence valued at an average of $651,000.  Survey respondents represent 27 states and the District of Columbia; 86% of respondents are married; the average age is 58.8 years; 61% are men; and, 39% are women.  Just a few of the survey’s comprehensive findings include:

    Respondents are much more upbeat about the economy than they have been in more than four years.  The current business condition index of 69 reflects an increase of 38 points from the Fall 2011 survey – the best rating since Fall 2007, just prior to the beginning of the recession. 

    That said, purchase intentions rose only “slightly” from the Fall 2011 survey with respect to major items such as autos and residential property.  On the other hand, categories showing double-digit increases include domestic vacation travel (+17%) and international vacation travel +(13%.)

    About 37% of respondents believe they will make a conscious effort to reduce or defer expenditures during the next 12 months, while primary investment objectives seem to continue to swing toward capital appreciation/growth versus preservation of capital, which declined by 8 percentage points since fall 2011. 

While the practice of austerity appears to have worn thin with the wealthy, there remains a general attitude that a return to pre-recession levels of spending is largely dependent upon fully recovered home and investment portfolio values. A more practical approach to spending is evidenced by the discount wholesale club Costco ranking #1 as the “highest quality retail chain” among respondents, and the relative popularity of loyalty programs becoming increasingly prevalent among those in higher income and net worth groups.  Among those that belong to a hotel loyalty program, for instance, almost two-thirds (64%) say that the loyalty program influences them to spend more with the hotel company than they would otherwise spend. 

Look for more findings from the AARC survey in the June issue of Bowden's Market Barometer (www.bowdensmarketbarometer.com).  < >