Past the Peak? Thoughts on the Local Market

With myriad factors in play, it’s challenging to neatly summarize the trajectory of our distinctive real estate market for any short period of time. That’s why, after a near-record year in 2015 with over $2 billion in real estate sales in Pitkin County, we are cautious about how we discuss the comparative slowdown of overall activity in the first half of 2016, a narrative which periodically grabs the local headlines and one that is endlessly interesting to Aspenites.

Randy Gold with Aspen Appraisal Group, Aspen’s most well-known and respected MAI appraiser, reminded his real estate colleagues earlier this year that, for four decades, our market has run in 6-7 year cycles and that 2015 was the sixth year of an upward market and likely the peak. Gold thought in February that 2016, while solid, would be more on par with 2014 in terms of overall dollar volume — around $1.5 billion (Pitkin County). It’s worth noting that 2014 was the strongest year we’d had since the recession began.

Now though, seven months into the year, it appears our market is trailing 2014, and while we historically do more business in the latter half of the year than the first, unless we have a flurry of very high-end home sales in the next few months, we’ll fall short of 2014’s numbers.

Through July 31, sales are down 28% overall in the upper Roaring Fork Valley compared to the same time period in 2015 (down 15% compared to 2014). Dollar volume is down 42% over 2015, although it’s important to keep in mind that’s compared to a year with a record number of sales (27) over $10 million. Overall inventory is up 11%.

MarketUpdate-7-16

Beyond the possible predictability of real estate cycles, we can ascribe our languishing activity to simple uncertainty and a profound sense of national angst. The market never does well in an ambiguous environment or when the future seems in doubt. While it may seem a lame reason, we truly do have the crazy election year to account for this. People are worried about our country and, fearful of troubling times, justified or not, many otherwise capable, serious buyers hesitate to commit to significantly large discretionary purchases — especially in the face of plenty of product on the market.

There is also another factor. Following several years of increasing activity, many of the so-called “deals” are gone. After the recession eased and buyers realized the bottom had passed, many found some of the best-valued listings in years. With so many “entry-level” properties gobbled up, what’s left are those more valuable ones whose sellers may not want nor need to negotiate. In Aspen, particularly, this is reflected in discounts off of list — now 6.3% for the last 12 months (6.7% the year before; 12.6% in 2009).

Finally, it’s worth noting that while real estate sales activity has slowed this year, other economic indicators are on fire. The value of Aspen’s residential building activity so far in 2016 is double what it was last year, and lodging occupancy in Aspen and Snowmass this summer is very strong, having set a record in June and with no signs of weakness through October. Sales and lodging tax collections, through June, are up 4% over 2015. Liquor and marijuana sales are up 12%! Sales tax collection on luxury goods (art, jewelry, etc), however, is down 17%, and Aspen’s real estate transfer tax volume is behind last year’s collection by nearly 50%. (Perhaps people have been too busy remodeling or enjoying what Aspen/Snowmass has to offer to shop for homes?)

Here are some simple numbers that tell the current real estate activity story:

Closings-Pendings 7-16

 

Closings-Pendings 7-15

And a few more nuggets to consider to give some context to the above:

— With the average price of an Aspen condo at $1.5 million and a single-family home at $4.1 million, buyers still looking for something in Aspen under $3 million are gravitating toward condos, where there’s still plenty of choice.

— There have been just 8 lot sales in Aspen in 2016, down from an average of about 20 per year the last few years. Since the recession, spec developers bought up lots to build luxury homes — and little remains.

— While Aspen single-family homes sales are down, they’re up in Snowmass Village: by 14% over the last 12 months. Buyers unable to find what they want in Aspen anymore, particularly in the lower prices ranges, are finding great value in Snowmass Village: very nice homes at an average price per square foot of $866, versus $1,319 for single-family homes on the market in Aspen.

— There have been 15 local property sales of over $7.5 million so far in 2016, compared to a record 48 in all of 2015. But while this segment of the local market is clearly down, it’s not that far off the average of 30 luxury sales per year. And, there’s still plenty of choice: 168 properties in that price range as of July 31.

— The luxury market represents just 10% of real estate activity. Put another way, 90% of buyers are not buying the most expensive properties. Besides skewing the dollar volume totals, here’s another example: Aspen’s average single-family home price across all categories is $4 million. Excluding luxury, it’s $2.4 million — a difference of 62%.

You can find all the numbers we slice and dice and analyze every month in our latest market report, the most comprehensive analysis of Aspen, Snowmass Village, Basalt, and valley-wide luxury properties.

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