Aziz Sunderji of Home Economics has come up with an interesting way of measuring luxury home sales. He starts by identifying the top-decile price in 2019 for a collection of metro areas (i.e., the top 10% of all home sales in a given market).

This means that if the top 10% of homes in a city sold for $1 million or more, then $1 million is the threshold for a home to be considered "luxury."

But to prevent general market inflation from skewing things over time, he then adjusts this luxury threshold according to how the entire market performed. For instance, if average home prices have increased by 30% since 2019, then the luxury threshold also increases by 30%. In our example, it is now $1.3 million.

Now what?

By definition, in 2019, exactly 10% of sales in a given market were deemed to be luxury. But because the luxury threshold moves in tandem with the general market, Aziz is then able to see if the luxury segment grew or shrank in a particular market.

If, for example, only 4% of home sales are now above the new trended luxury benchmark, well then this indicates a shift toward affordability, as opposed to luxury. To be considered luxury today, a home's value has to have grown faster than the average home in that market.

The result is the above chart, which shows three luxury outliers, and two in particular: San Jose and Miami. This illustrates that so-called "K-shaped" economy.

Cover photo by Charlie Lederer on Unsplash

Charts from Home Economics

The richest person in Utah is a man named Matthew Prince. Prince, who grew up in Park City and was once a ski instructor at Park City Mountain Resort, is the co-founder of a tech company called Cloudflare. I'm assuming his riches came from the tech company and not from being a ski instructor. But he still seems to like skiing because he's been mounting a highly public and aggressive campaign to buy the resort from Vail.

There is a narrative in the ski and snowboard community that Vail has destroyed the industry through poor management, expensive lift tickets, homogeneity, and just an overall loss of what the vibe used to be. The market may also agree with this narrative because Vail's stock price is down nearly 60% over the last five years.

So Prince's message to Vail is "you're a bad capital allocator" and his pitch to the Park City community is one that sounds really nice. It's basically a community-first rescue mission. He has promised zero personal profit of any kind (he apparently has enough money), pledged to reinvest 100% of the resort's profits into infrastructure upgrades and employee compensation, and floated ambitious ideas to build a massive gondola network connecting Main Street Park City to some of the neighbouring canyons (which would be totally awesome).

Vail's response continues to be that the resort is absolutely not for sale. But Prince is trying to encourage them to adopt a more asset-light model, where they control the brand and the Epic Pass, and local billionaires like Prince run the physical properties.

To provide a bit of real estate context here, Vail owns the mountain infrastructure, the snowmaking equipment, and the overall business operations, but much of the resort sits on land owned by Toronto-based Talisker. My understanding is that the land lease gives Vail all the practical indications of ownership for a very long time, but I thought I would explain this nuance given that we like to talk about real estate specifics on this blog.

I have no idea where this public pursuit will go, and I know nothing about Prince's values as an individual, but the story is certainly compelling. There's something to be said for a rich local wanting to buy a resort just for the love of skiing.

Cover photo by Patrick T'Kindt on Unsplash

And we're back!

It has been said that the definition of a habit is that you don't feel normal until you do it, and that's certainly how I've been feeling over the last few days without writing this blog. I've been unusually preoccupied. At the end of the day, you don't write a daily blog for 13 years without being someone who enjoys routine and consistency. I'm assuming I've written over 4,600 posts at this point.

Anyway, I just listened to this podcast by Malcolm Gladwell.

It starts with Malcolm proudly declaring himself a YIMBY. This is a recent thing for him, and so he goes on to say that he has "all the zeal of the recently converted." Then comes Stephen Smith, Executive Director of the Center for Building in North America, and they talk about the great American elevator tragedy.

It has been well documented that elevators in Canada and the US generally cost many multiples more than elevators in other developed countries. The result is that we tend to have fewer elevators per capita. Only certain projects and building types can afford and/or physically accommodate them. In the words of Malcolm, aiming for perfection comes with costs — fewer elevators and more expensive housing.

If you're interested in this topic, the Center for Building in North America has an extensive report titled Elevators that you can download here. But even if you aren't particularly interested in the trials and tribulations of elevators, all of this is an important reminder that the challenges facing new housing are fundamentally multifaceted.

If we want to unlock as much housing as possible and make it as affordable as possible, it's not just a question of zoning. It's also a question of utilities, environmental regulations, levies, construction methods, building codes and, yes, elevators.

Cover photo by Bagzhan Sadvakassov on Unsplash