The summer crowds are dense in Aspen. Sales tax revenues are soaring. Lodging occupancy is high. So why is Aspen’s high-end real estate market — one of the most robust in the country, with dozens of options for buyers ready to spend more than $10 million — in its first-ever sustained nosedive?
High-end sales that fuel Aspen’s $2 billion-a-year real estate market are evaporating, pushing Pitkin County’s sales volume down more than 42 percent to $546.45 million for the first half of the year from $939.91 million in the same period of 2015.
Ask a dozen market watchers why, and you’ll get a dozen answers. Uncertainty around the presidential election. Fear of Trump. Fear of Clinton. Growing trade imbalances with China. Brexit. Roller-coaster oil prices. Zika. Wobbling economies in South America. The list goes on.
“People are worried about all kinds of stuff these days,” says longtime Aspen broker Bob Ritchie. “I’ve never seen anything like this before.”
Aspen is historically immune to the macro temblors that rattle most real estate markets. Yes, it slid in 2009 after the economy collapsed, but not by much. And it rebounded spectacularly, reaching pre-recession levels in 2012 and then getting back to setting records in 2014.
Pitkin County hit a record $2 billion in real estate sales last year, a nearly 33 percent annual increase driven largely by sales of homes in Aspen, where prices average $7.7 million.
This year, a slowdown in January turned into a free fall. Sales volume — the total of all residential real estate sold — in Pitkin County is down 42 percent, according to data compiled by Land Title Guarantee Co. Almost all of that decline is coming from Aspen, where the market is frozen. Sales in the Aspen-Snowmass market in the first half of the year were the bleakest since the first half of 2009, and inventory soared to levels not seen since the recession.
Single-family home sales in tony Aspen are down 62 percent in dollar volume through the first-half of the year. Sales of homes priced at $10 million or more — almost always paid for in cash — are down 60 percent. Last year, super-high-end transactions accounted for nearly a third of sales volume in Pitkin County.
Many Roaring Fork Valley brokers say the luxury market across the country is slowed, from Manhattan to Palm Beach.
“The high-end buyer has disappeared,” said Tim Estin, an Aspen broker whose Estin Report analyzes the Aspen-Snowmass real estate market.
Nearby Eagle County — home to Vail and Beaver Creek — saw sales finish just below $2 billion in 2015. Through June, sales are down almost 14 percent, with most of that represented in a steep drop in the sale of homes priced at more than $3 million.
Last year, Eagle County logged 93 sales over $3 million, which accounted for more than a quarter of the county’s total residential sales volume. Through the first half of 2016, the county has recorded 32 sales of more than $3 million, according to Land Title Guarantee Co. data.
Estin has a theory: The luxury nosedive is a lingering hangover from the recession.
“I really believe as we come out of the recession, everyone is looking over their shoulder, scared there may be another 2008-2009 event,” he said. “I call it the boogeyman of the 2008 crisis. It just makes people very cautious.”
The decades-old refrain in Aspen is that the valley’s real estate follows the stock market. There are surges and plateaus, but few significant and sustained declines. That was still the case in February as the stock market climbed out from a stall and a downtown penthouse in Aspen sold for $15 million, marking a high-point of $4,275 per square foot.
But though the stock market continued to improve, Aspen’s real estate market languished. Buyers are in town, but seem reticent. The occupancy rate of more than 88 percent in Aspen in July made for not only the busiest July in the city’s history, but also the busiest month — winter or summer — ever recorded in Glitter Gulch. And those visitors are spending. Aspen’s sales-tax collections this summer are up in every category except one: Luxury-goods sales — such as fur, jewelry and art — are down 17 percent through June.
Aspen has never experienced such a sudden and precipitous drop in real estate sales. Even more disconcerting for brokers who have always trumpeted Aspen as a safe and lucrative place to park a huge pile of money: Prices are dropping.
In the first half of this year, the average price per square foot of Aspen homes dropped 22 percent to $1,095 from $1,338 in 2015. Recent Aspen sales also closed at more than 15 percent below listing price, a rare discount.
Still, prices are jaw-dropping: $5 million for a 1960s home; half that for a scrape-off. Last year, buyers were getting those homes for a bit cheaper and it seemed more palatable.
Some brokers suspect that the frenzied sales and pricing pace of 2015 was not sustainable. The present decline is a correction, they say.
“I think a lot of people thought we would go to the next level in 2016. Take the next step up and that step got resistance from buyers,” said longtime Aspen broker Joshua Saslove, who just put an Aspen home for more than $10 million under contract. If it closes, it will be just the fourth sale above $10 million in Aspen this year, compared with more than a dozen by this point last year.
Back in 2007, buyers were looking and buying in a day. They’d come to Aspen, fall in love with the place during a fancy event such as Food & Wine, and drop several million cash on a place.
“I think a lot of developers thought they would push their, say, $5 million properties to $6 million this year, but no one is buying,” Saslove said. “I don’t see that nonchalance or cavalier attitude any more.”
Pitkin County’s real estate sales through June
2010: $521.56 million
2011: $653.92 million
2012: $566.87 million
2013: $501.30 million
2014: $662.80 million
2015: $939.91 million
2016: $546.45 million
