December 2016 capped a strong fourth quarter, one that nearly eclipsed the first three of the year. While it wasn’t enough to pull 2016 up to the levels of the prior two years, the final four months of 2016 nearly equaled the first eight, as election-year hesitation was replaced by some pent-up demand. Aspen’s considerable 12-month drop seemed to have as much to do with weak inventory as election-year jitters, so we’re pleased to see the increase in single-family home inventory — increasing demand should allow prices to stay strong. With adequate inventory and its comfortable price advantage over Aspen, Snowmass maintained its performance, actually growing dollar volume by 3%. Basalt also fared well, especially in average sales prices which, overall, grew by an impressive 13%.
THE LONG VIEW
2016 was a bit of a setback in the gradual recovery happening in the valley for the last six to eight years (and which had begun to grow some serious legs in 2014). Last year began with a significant first-quarter drop that had a few of our local quasi-statisticians reporting that the sky was falling. Though it wasn’t an uncharacteristic first quarter (there had been eight lower quarters out of 28), when the second quarter was little improved, the most sensible explanation fell on the uncertainty generated by a very unusual election year. As each quarter improved with the approaching vote, this reasoning became more well-founded. When the dust settled, the fourth quarter finished as the third most active, with the sixth highest dollar volume, since 2007 … hardly a beacon, but with that continuously strengthening upward trend, not a bust either.
Snowmass dollar volume reached its best level since the collapse, about 55% of the former peak. Basalt continued to maintain about 60% of peak, where it has been for about two years. And while Aspen’s activity dropped to 2011 levels, volume only slipped back to 2014 numbers, about 65% of peak. All of this combined to create a valley adjustment to mid-2014 levels, but with overall activity and volume increasing 70% and 100% respectively in just four quarters, we expect 2017 to continue moving toward new post-recovery highs.
What really happened in 2016, and what does it suggest for the future? Let’s take a look:
At the heart of the adjustment was Aspen’s drop in business. Snowmass and Basalt were far less affected by the market pullback. It’s important to realize that Aspen not only produces the lion’s share of the market but is, as you may note from the graph above, considerably more volatile, quarter to quarter, than the rest of the valley.
Secondly, and also noticeable in the graph, 2014 and 2015 produced significantly higher activity and dollar volume for seven quarters. This volume was concentrated in Aspen, and was the result of renewed interest in the luxury end of the market, which not only nearly doubled the number of $7.5M+ properties sold during that time, but also dramatically increased the sales of building sites as developers stockpiled that inventory. And once they had acquired most of those sites, that segment of sales stopped. So part of the pullback was a fairly natural reduction of some high investor activity in the previous year.
Third was the election. Election years are always disruptors in the market, often due to simple uncertainty which makes people put off decisions. By the fourth quarter, however, activity and volume levels had risen to classify it as the sixth best quarter since the collapse. And actually, it was the second-greatest four-quarter increase in the last decade.
Will the improvement continue? Here’s why we think so:
- Average prices/square foot have continued to strengthen throughout this recovery, despite the ups and downs of activity.
- Asking prices have become more realistic as the recovery progressed, and sellers are still adjusting those that are high. In December, there were 56 price adjustments; 50 of those were price reductions, averaging 6%.
- Most economic indicators have continued to improve in the US in 2016.
- The trend line above, as well as our internal market index, suggests price escalations in some segments of the valley on the order of 10-15% are possible in the coming year.
OPPORTUNITIES FOR SELLERS
- Sellers of single-family homes in Snowmass priced under $2.5M or between $5M and $7.5M have the least competition from existing inventory as well as demand that exceeds the supply.
- Also in Snowmass, any residential property priced between $750-1250/sf has a high absorption rate.
- In Aspen, the absorption rate is highest for homes priced between $2.5M and $5M, and for condominiums under $3M. Single-family homes between $7.5M and $10M have maintained a sustained level of demand, although the supply of those homes is presently quite high. In general, the most sought-after properties, at present, are priced either below $750/sf or above $1750/sf (after that, $750-1250/sf has the highest absorption rate).
- Basalt continues to have good absorption rates across the price spectrum, although sellers with properties priced under $600/sf or below $1M have the most chance of selling.
OPPORTUNITIES FOR BUYERS
- For sure Snowmass, most property in Snowmass, which is about to bust out of its doldrums due to the recent transfer of ownership of Base Village and upcoming developing activity there.
- The inventory of Snowmass ski-accessible homes currently averages under $1000/sf, which is very attractive, while Aspen prime location home inventory averages $1700-2300/sf (and no ski access!).
Berkshire Hathaway HomeServices Aspen Snowmass Properties offers a full range of market reports and detailed analysis using exhaustive sets of statistics. Click here for the complete Aspen Report, a 12-month perspective updated monthly.