Luxury Resort Real EstateWhat is resort real estate? It can be defined as property located in a community that thrives on tourism and where ownership of second or third homes make up a substantial percentage of the overall home ownership.Aspen real estate is a prime example of a luxury resort market. Aspen is home to four exceptional ski mountains with a lively winter tourism industry and summers offer mild temperatures to enjoy the plentiful outdoors. The majority of homes owned in the Aspen or Snowmass market are second homes. The typical vacation home in the Roaring Fork Valley is utilized less than 30 days per year on average.Average single-family homes in Aspen start at about $5 million, Snowmass homes come in a little lower at around $3.5 million on average. So it is clear that real estate in this mountain resort falls into the luxury homes category. But the Colorado Mountains and its ski resort towns like Vail, Beaver Creek and Breckenridge are by no means the only resorts with a luxury designation. Resort towns span coast to coast. From the Florida Keys or the Carolina cost line to the mountains of Utah and California.One thing all these resorts have in common is that their real estate markets are not following the same rules as suburbia.Real Estate Finances1) People that can afford to buy second homes must by definition be somewhat successful to get to that stage. It seems therefore less likely that they would fall for obscure financing products.2) Lending criteria on second homes are and have been tighter than for primary residences. It is not uncommon for lenders to ask 20% down on these types of deals. Therefore it is harder to get upside down on your mortgage.3) In luxury resorts like Aspen or Snowmass 60%-70% of all real estate transactions are cash transactions. No financing involved. Negative cash flow is therefore not an issue in these situations.4) Rental income from properties not used for most of the year can soften the negative cash flow if a mortgage is involved.Real Estate Desirability and Liquidity1) Resorts by definition are something special. They have something that people desire. This could be mountains, lakes, the ocean, a special climate or island setting. Really anything, but it must be special.2) Resort real estate is a luxury good. It is not essential to own. This in turn makes it easier for people to divest of luxury real estate holdings. Properties owned in any of the desirable luxury destinations are a more liquid asset. The security that properties are more fungible helps property owners divest of them more quickly if need be.3) In most cases resorts offer limited availability. As with most things desirable they are not available in unlimited quantities. There is only so much land in a mountain valley and there is only that much beachfront property, there are only so many skiable mountains, you get the drift.Overall it can be said that resort second homes will be the first asset that will be sold when people are in financial distress. On the other hand it is less likely that owners of resort property like Aspen real estate would have overextended themselves in the first place. This combined with the tighter lending criteria for second homes makes it less likely that the general mortgage troubles spell over to the second home market. As long as the economy only experiences a moderate downturn the luxury real estate segment might actually profit. It is not uncommon to find a re-allocation of wealth from stocks and bonds into real estate in times of uncertainties. Therefore the top end of the market will weather the storms much better than most people expect.