House of Cards: Red Hawk Village: A case study

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Red Hawk Village may be Routt County's best example of the effects of the housing market crash. Instead of young, local families envisioned as the residents of the development, developers Mountain Valley Communities found themselves popular among investors on the Front Range. Home sites sold for as much as $555,000 to the out-of-town investors, and when the market came crashing down, a number of properties went to short sale.

— Walk into the Steamboat Springs offices of Mountain Valley Communities and an empty desk will greet you. It turns out a receptionist is an expendable luxury for the company in times like these.

"As developers, we're struggling," Managing Broker Ren Martyn said. "We're all feeling the pinch."

If you were to pick one Routt County subdivision to illustrate the housing market crash's impact locally, Mountain Valley Communities' Red Hawk Village might be it. The neighborhood in Stagecoach south of Steamboat was built at the height of Routt County's real estate boom. The first units came on the market in 2006.

Martyn and his partners envisioned Red Hawk Village as an affordable development for young families, with homes ranging from 1,600 to 1,800 square feet. They even offered eight deed-restricted affordable units. Buyers were not interested in the deed restrictions, however, and they were removed. And instead of young families, speculators poured into Red Hawk Village looking to capitalize on Steamboat's booming market. Most home sites in Red Hawk Village were sold to investors from the Front Range for prices as high as $555,000.

"The prices were very high," Martyn said. "Philosophically, it was difficult because here we were trying to build an affordable product. : But as a developer, we like to sell our property. Developers don't hold our property. That's not our business."

But when the market fell apart, the investors were unable to make their payments, leading to a sizable number of short sales at Red Hawk Village. Offerings of short sales come about when a property owner alerts his or her lending institution that the owner cannot keep up with the payments, and the bank agrees to sell the property for less than the loan value. The motive is to avoid the expense of a foreclosure. The property owner faces losing his or her equity but also avoids some of the other negatives of a foreclosure.

Investors aren't the only ones who are struggling. Martyn said some locals made purchases in Red Hawk Village at the inflated, speculation-driven prices, "and now they're upside down."

"There are so many similar situations," Martyn said. "Red Hawk has just been the perfect storm. : The irony is the original plan has come to fruition."

Martyn was speaking to the fact that the bank-driven short sales have deflated prices to a point where Red Hawk Village is affordable for the young families that were targeted all along. A three-bedroom home that sold for $555,000 in April 2007 sold for $297,000 on June 29.

Although he bought at the height of the market, Red Hawk Village resident Jamie Morgan said he and his family are glad to see that the speculators gone and that the neighborhood is filling up with families.

"I could see us staying there a long time," Morgan said.

- Brandon Gee

Comments

steamboatsprings 5 years ago

Fortunately Red Hawk only illustrates some problems that we are seeing but is far outside the impacts that the average homes and subdivisions are seeing. Thus it does not represent or illustrate the local housing market in Routt County as the article suggests and there is no data to support that conclusion. It is easily the worst, far worse than anywhere else and very different from the average neighborhood.

Routt County's foreclosure rate was about 0.3% at the end of 2008 and is likely higher now at maybe 0.5% or so. Short sales are different but not much more common within the Steamboat area so fortunately Redhawk Village is still an anomaly driven by the high numbers of investors present there.

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steamboatsprings 5 years ago

Correction we are likely at about a 1% foreclosure rate which is close to what is seen in relatively good times in many markets. Sales volume is very low and only properties that are priced right are selling. The majority of our inventory is priced at 2007 levels and loans are harder but by no means impossible to get. Those sellers may have their homes listed but are not truly for sale since they are out of current values. Once pricing comes back in line and lending finds it's footing things will begin to improve.

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Scott Wedel 5 years ago

Except there are so few sales that it is hard to say what is happening in most neighborhoods. What is different about Red Hawk is that it has had a number of sales.

I think if sellers were to accept the pricing of what it takes to sell at this time then a whole lot of sellers would decide they'd be better off allowing their house to be foreclosed. (or sign the property back to the bank without going through foreclosure - note 3 Sierra View condos sold by the developer to the back for $100).

Because of the last leg upwards in the boom triggered by the optimism of Intrawest buying SB ski area, we were booming in 2007 when real estate markets were collapsing else where. We were continuing along in our bubble with values holding and a reasonable sales rate all the way until fall 2008.

The harder issue for a market to deal with is bad volume. Bad pricing and good volume provides a basis upon which prices can rise. Bad volume means there has to be some event that gets sales going again. Elsewhere that has been huge number of foreclosure sales at prices so cheap that buyers couldn't refuse or wait. That reset the rest of the market because some of foreclosure buyers were looking to flip.

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