As I have been noting for the past few months, real estate looks like a great investment currently. Interest rates are low, making it less interesting to invest in bonds than to borrow at these rates (i.e. mortgages). The stock market has undergone a terrific appreciation from the lows, but the economy will need to show much more impressive signs of strength in order for the Dow to rise past 11,000 or the S&P to surpass 1200-1250. I am glad not to have exposure in any other currencies besides the US $ (though I would make an exception for the Canadian $ despite its being referred to as the Loonie).
Here in Crested Butte, CO our home prices are at inexpensive levels relative to the past few years - in some cases prices are the same as they were in 2004. The extra special bonus for local buyers with the volatility we are seeing in the markets come in commodity prices. I'm sure most people are familiar with the price of oil currently trading at around $65/barrel, a relatively inexpensive rate given the fluctuations over the past few years. And yes, summer driving season is coming up, making it less expensive for drivers to take in our amazing scenery in the rental car from Denver or elsewhere. But oil is not the commodity to which I am referring.
Molybdenum is a commodity that is very important to Crested Butte. Mt Emmons, or the Red Lady, is a mountain clearly visible from town and is purported to hold vast amounts of molybdenum, a substance used in hardening steel. The debate over allowing mining to occur on Mt. Emmons has been raging on and off for almost 40 years here. The correction we are seeing in worldwide commodity prices has been sparked by signs that the Chinese are going to start trying to slow down the growth in their economy. And the Chinese have been the ones demanding the most steel, and hence, molybdenum.
So I take heart today with the markets correcting and commodity prices coming down. I take heart that more people will be taking advantage of lower gasoline costs and make it to Crested Butte this summer. I take heart that those same individuals will recognize the value in the local housing markets, low borrowing costs and the fact that we represent a dollar investment. And lastly, I take heart that once they come here, experience the great joy of Crested Butte in the summer, they will look at Mt. Emmons and take heart that molybdenum prices are falling along with the other commodities and Mt. Emmons continue to exist, untouched by the mining companies.
(Diane Aronovic is a former Managing Director at Bank of America Securities, and a real estate agent at Red Lady Realty in Crested Butte, CO)