Part of my reason for the Utah trip this past week was to attend the latest budget meeting for my property's homeowners association board. There are always some interesting tidbits in this one, as it allows me to look at the details of what's going on in an area far away from where I live most of the time. This year was no different.
- I was surprised that the maintenance increase was kept to under 5% this year. Given the costs I am seeing elsewhere, I expected it to be closer to 10%. Part of this is due to the fact that some large improvements and upgrades have been completed and won't need to be repeated for some time, and much of it due to good managament.
- Everything going to/from our property needs to be transported up a winding mountain road. Trucking and transportation is definitely getting squeezed. The increases are far smaller than one would expect given the price changes in fuel. The answer to this seems to be that on a national basis, demand is down somewhat, so fuel cost increases can't be passed on in their entirety.
- The local market though is booming. We have a tough time keeping employees and salaries are going up even at the low end. We have had to hire new supervisory personnel because the inexperienced people we are able to hire for some basic cleanup and maintenance jobs just aren't experienced enough.
I spoke this over with my friend Nigel later and he agreed that it's an issue in Salt Lake these days. He also believes it's at the core of the problem I had at Walgreens (NYSE:WAG). In his opinion low end retail help in Salt Lake is currently a disaster because of the difficulty in hiring and retaining anybody who is any good, even part-time high-schoolers.
- All of which has me wondering whether maybe buying a small condo or other property in the Salt Lake Valley might be a good idea. I'd use it from time to time, and I suspect that the market won't get hit much from here. Besides, downtown Salt Lake has had a very nice resurgence, less of a Mormon influence than the rest of the state, and could make a nice temporary escape from the California economy if things end up as bad as they might over the next couple of years.
Nigel thinks that's a good idea too.
- Property tax rates in Salt Lake County are going down, but assessments are still going up. We are fighting the latest increase in assessment and think we've got a good chance of winning given the prices of units in our (somewhat aged) facility. However, we also don't expect the rates to continue as low as they are. Even healthy states like Utah are in budgetary trouble.
- We've got a number of energy (mostly nat gas) guys on the board, and we expect that over the course of the year prices will moderate. We've been able to lock in rates below the current market so won't get hit too hard on energy costs.
- Upgrading to energy efficient appliances and switching lighting to CFLs makes a huge difference in operating costs. OK, I've notice this at home too.
Other thoughts, not directly from the owners meeting:
- Bar traffic is down this year. Both bartenders have complained about this. Much of the bar traffic is local skiiers stopping in for a drink rather than driving down the road in peak traffic hours and that's where most of the pain have been felt. Those who go on vacation are still spending, but the locals are clearly cutting back.
- The same seems to be true for local ski traffic as well. I've skied 51 days this year, much of it in the best conditions that I've seen in decades. Yet other than a few remarkable weekend powder days, there has never been much of a line for any lift. Part of this a result of some mountain improvements and a new lift, but part seems to be a falloff in traffic.
- Snowbird still can't sell out its new shared-ownership property and they've extended sales out in to next year while delaying construction another year as well. If they make it (and I doubt it), it'll be three years of sales compared to the original plan of one year's sales to justify constuction.
- The retailers on the mountain had to discount deeper and sooner than I've ever seen. I bought a new pair of skis for 50% off with a solid month left to the ski season. REI's current spring sale is echoing that experience.
-btc
Comments (3)
With all due respect to Nigel, people in real estate ALWAYS think that now is a good time to buy and that their particular area of focus is a good place to buy.
Posted by lux | May 8, 2008 11:44 AM
Nigel's no longer in real estate, though still interested. He's a renter himself now, believe it or not. Actually most of our investment conversation focused on everything but real estate.
And don't worry, I'm never going to make that kind of move based on a broker's recommendation, but the reality of that market is that the core markets never flew too high and haven't fallen much either. I don't think they'll avoid it completely, but I doubt they'll suffer the kind of double-digit decreases we're seeing in California.
(OK, the neighborhoods of McMansions on the fringes that Casey looked at are getting killed.)
That said, I've got better things to do right now than worry about it much. At best, that's next year's idea, and there's certainly more behind it than just an investment consideration.
-btc
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May 8, 2008 1:48 PM
Sounds like his life has changed somewhat since I last checked in. OK then.
And I know you're smart enough not to fall for spin. :)
Posted by lux | May 11, 2008 3:38 PM