Aspen Real Estate Market Rising

The real estate market in Aspen, CO seems to know no bounds but a correction will come as sure as the sunrise.

ASPEN HOME PRICES HIGHER THAN ANY TIME IN HISTORY

If you plan to buy a single-family home or condo in the Aspen real estate market, you’d best be prepared for sticker shock. If you already own a home in Aspen, Snowmass or anywhere in Pitkin County and are wondering if this is the right home market scenario for selling, today’s supply and demand in Aspen has created a vortex. This is probably the best time for sellers in the last 16 years. It may be the best market for sellers in a lifetime.

In the Aspen market over the last year, 205 single-family homes have been sold. This is a record number of home sales for Aspen in any 12-month period — and more than double the market’s sales volume in the pre-pandemic years of 2018 and 2019. The previous record year for Aspen home sales occurred in 2006, when 146 Aspen homes were sold in a single year.

In many ways, last 2020 and the first half of 2021 were unprecedented. That meant record-breaking home prices and a massive volume of real estate sales in Pitkin County, both of which have continued into this year. The average price for a single-family home in downtown Aspen in April 2021 was $12.6 million.

What does that tell you about the Aspen and Snowmass real estate markets?

It tells you that it just took off like wildfire. For years – nearly 30, 40 years – investment in Aspen and Snowmass has been a relatively safe bet. Values have risen at such a rapid pace that it is a better investment than, say, the S&P 500 or most commodity markets. As a result, people have long parked their money in Aspen. And they did it in spades in 2020.

People are buying houses at record prices, with the majority of them paying cash. It will be followed by astronomical price increases in the first quarter of 2021.

One of the most interesting statistics was that 30 three-bedroom condos sold in Aspen and the downtown core in April. They were selling for an average of $2,500 per square foot. That is the cost of constructing a skyscraper in downtown Manhattan. It’s just a little nuts.

Other communities are experiencing a similar scale and magnitude of price increases. Eagle County, for example, grew by 153 percent in 2020 compared to 2019. There were 83 sales worth more than $5 million. The same could be said for Pitkin County, which had 224 sales over $5 million in 2018, compared to 92 in 2019. That is more than doubling the number of million-dollar homes and more than doubling total sales volume. And the values of these homes increased by 20%, 30%, or even more in 2020.

This has substantial effect on affordability and the working community in the Aspen real estate market. A significant cultural shift is taking place in these resort communities. Aspen real estate demand is pricing out even the most affordable housing. It isn’t just service workers and teachers. In Aspen and Vail, it’s doctors and lawyers. Living in these communities has become completely unaffordable.

When workers are priced out of the market, cultural amenities from ski resorts to restaurants that come along with high-priced resort communities are imperiled when no one is around to run them. That is a question that Telluride, Crested Butte, Vail, and Aspen will all have to address. The problem of prices already sent hundreds of locals packing last year because the homes they used to rent had sold and there was no place for them to live.

Are we going to see such high real estate prices for a long time? What does this imply for the future?

You probably remember what happened in 2007 and 2008 very well, when all the brokers were saying, “Oh, it’s not a bubble,” we heard the same soundtrack and watched the same movie. This is fantastic.” And, of course, we all recall what happened in 2008, 2009, and 2010, when the world came crashing down around us.

So, everyone says, there will be a market correction. Will it, however, implode as it did in 2008? Unlikely, but it will correct. It has to. These relative values will be around for a long time. They may not grow as quickly as they did last year and may even retract somewhat, but they are not going away. A number of brokers all agreed that we had established a new low in social impact because of a new high in Aspen home prices.

Even without a crystal ball, we can learn from the recession. It has a present implication. The housing market is going to be difficult. If your local housing authority isn’t on top of the new units that come online every year, it’s almost too late for any semblance of affordable housing.

If you want to buy a single-family home in Aspen, you should be prepared for sticker shock. If you already own a home in Aspen and are considering selling, this is probably the best time for sellers in the last 16 years.

In the Aspen market over the last year, 205 single-family homes have been sold. This is a record number of home sales for Aspen in any 12-month period — and more than double the market’s sales volume in the pre-pandemic years of 2018 and 2019. The previous record year for Aspen home sales occurred in 2006, when 146 Aspen homes were sold in a single year.

In the last year, home sales prices have ranged from $2.6 million for old homes purchased primarily for lot value to $72.5 million for one of the most expensive trophy home sales in the United States recently in the Red Mountain neighborhood. Over the same time period, the median home sale in Aspen reached an astounding $9.5 million, with the average sale price reaching an epic $11.4 million. In 2019, the median and average Aspen home sale price were $5.1 million and $6.4 million, respectively. This represents an 82 percent increase in Aspen home prices over the last two years, with the majority of the increase occurring since the summer of 2020, when the COVID pandemic accelerated local market activity.

Not only have overall home prices increased dramatically in the last year, but the median price of an Aspen home has increased roughly 35% on a per-square-foot basis, from $1,270 in July 2020 to around $1,714 today. This places Aspen in a unique position as potentially the most expensive residential real estate market in the country, outpacing markets such as New York City (current median price per square foot of $1,400) and San Francisco (current median price per square foot of $1,100), which have previously held the title of most expensive real estate markets in the country.

In the Aspen real estate market, approximately 2,350 properties are classified as single-family homes. On average, about 6-7 percent of the total inventory of existing homes — about 150 — goes on the market for sale each year. In a typical year like 2018 or 2019, the market would see about 83 single-family home sales, or roughly 3.5 percent of the total inventory of existing homes in Aspen, change hands. The 205 sales in the last 12 months represent 8.7 percent of Aspen’s total inventory, a 147 percent increase over the two previous years of 2018 and 2019.

The extraordinary number of homes sales over $15 million in the Aspen single-family home market over the last 12-month period is what is most intriguing about the Aspen single-family home market. During the three-year period from 2017 to 2019, there were 24 homes that sold for $15 million or more, an average of eight per year, with 11 homes selling for $20 million or more, an average of four per year. In comparison, 55 homes sold at or above $15 million in the previous 12-month period, with 30 sales exceeding $20 million. This represents a massive 588 percent increase in home sales in the upper tier of the market priced at $15 million or more. As a result, the median and average home sale price numbers in the Aspen real estate market have reached new highs.

Everyone is wondering how long this level of market activity for single-family homes in Aspen will last.

Real estate markets are a near-perfect example of the supply and demand economic principle. The monthly supply of new homes entering the Aspen market in the last 12 months has increased by approximately 60% when compared to new listings per month in the two years preceding the summer of 2020. The demand side of the equation, on the other hand, has skyrocketed in the last year, most likely as a result of the pandemic migration from major cities to resort towns like Aspen and Snowmass Village.

Over the last year, the total average available inventory of listed homes for sale in Aspen has fallen from nearly 200 to a historic low of around 84 today. Demand will fall as prices reach levels that discourage buyers from purchasing, as in all economic models.

When the Aspen housing market reaches that point, it will most likely be determined by national economic factors such as interest rates, stock market performance, and how life in this country will change following the pandemic. Until then, this is the best market in more than 15 years for sellers to sell a home in the Aspen area.