Banking on euros

Economist predicts renewed interest of foreign investors, Californians

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A leading Colorado economist thinks another wave of immigration from California is gathering steam, and a weakened dollar could lead to an increase in foreign investment in Steamboat Springs and other resort towns.

"Colorado is benefiting from the U.S. dollar's weakness versus other major currencies, helping the state's ski resorts attract bargain-hunting visitors from Europe and Japan," said Jeff Thredgold, a corporate economist for Vectra Bank Colorado. "With more foreign skiers vacationing across the West than in any time in the last 10 years, I expect to see more foreign investors buying real estate."

On Thursday, 1 euro purchased 1.3 U.S. dollars. And the exchange rate for the two currencies has widened by about 20 percent in the past 15 months. The result is that vacationers from abroad have more buying power, making stateside vacations more attractive to them.

Colorado's economic recovery has lagged behind other mountain states the past two years, but Thredgold thinks the state is poised for an accelerated rebound and expansion in 2005, in part because of the strength of international and regional economies. He thinks the return of tourists to the state will be one of the strong points of the Colorado economy in 2005.

The relative weakness of the American dollar against the euro and the yen makes mountain real estate an attractive investment to foreigners, Thredgold said. But international currency trends won't necessarily translate into Europeans looking for vacation homes here.

"It's less about people buying a second or third home and more about an investment opportunity," Thredgold said.

Investors who are finding limited real estate opportunity at home in Japan or Europe can purchase real estate here for 25 percent to 30 percent less than they could even a year ago, Thredgold said.

Andy Wirth, vice president of marketing for American Skiing Company's western resorts, said foreign tourism at Steamboat this winter is the highest it has been in a decade.

"We've seen the first cut of our on-mountain research and year to date, foreign travelers account for just shy of 10 percent of our total skier visits, and that includes season passes," Wirth said.

Anticipating the effect of the weak dollar, the ski area hired two new public relations firms to help it target foreign visitors this year. The United Kingdom, Australia and New Zealand represent Steamboat's primary foreign markets. But after strong growth this year, Germany is poised to move up from a secondary to a primary market next winter, Wirth said.

Bank of the West President Paul Clavadetscher said he has arranged real estate loans for foreign customers, but doing so presents challenges. American banks are focused on credit ratings, and some countries don't even have credit rating systems for individuals.

Still, Clavadetscher has helped several Australians make real estate purchases here.

"The people I've worked with have been coming here for a very long time and are in love with Steamboat," Clavadetscher said.

Michael Hurley, who represents an Australian developer planning to break ground on the newest phase of Trappeur's Crossing, said it's difficult to attract individual Australians to purchase resort properties.

"The market in Australia is already very competitive," Hurley said. "And if you're a foreign national (seeking to purchase property here), banks require a 70 percent loan-to-down payment ratio."

That means that one of his countrymen would have to come up with a down payment of $180,000 for a $600,000 condo.

For his employer, Rod Forrester, Hurley said developing a condominium building in Steamboat represents diversification and a hedge against his real estate investments in Australia.

That's in spite of the fact that the Australian dollar is much stronger against the U.S. dollar than it was two years ago. In 2003, the Australian dollar purchased 50 cents U.S., Hurley said. Today, it buys 78 cents.

And even as foreign developers eye potential mountain-town investments, migration closer to home also is expected to have a significant effect on the state's economy.

Migration to Colorado from other states has waned in the past four years as the state has struggled to replace lost jobs, Thredgold said. But he expects that trend to begin to reverse itself this year.

"We're going to see more movement of Californians cashing out of extreme opportunities with their existing homes and buying three times the home for half as much money in Colorado," Thredgold said. Colorado added 40,600 quality jobs last year, and the number could be 55,000 this year, he said.

"The quality of jobs being added tends to be in professional and business services," Thredgold said. "They're in an area of higher-quality jobs.

Thredgold said the Federal Reserve board is working to get to a neutral point in terms of its role in stimulating the economy.

"The Fed is trying to take the punch bowl way from the party," Thredgold said.

The Fed's efforts to back away from stimulating the economy can be seen in adjustment to the federal funds rate. The federal funds rate is the interest rate at which banks make overnight loans to other banks. It stood at 1.25 percent in June and was up to 2.25 by the end of the year. Thredgold expects to see it go as high as 3.5 percent in 2005. However, he doesn't think the Fed's efforts to get to a neutral position will cool mountain real estate sales.

"Sales of real estate in places like Aspen, Park City, Steamboat and Keystone have little to do with interest rates," Thredgold said. "It's very much about exercising of stock options."

Thredgold said he's optimistic about the stock market's prospects in 2005 and, consequently, predicts resort communities will do well again this year.

-- To reach Tom Ross call 871-4205

or e-mail tross@steamboatpilot.com

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