ASPEN, Colorado - Aspen-area real estate prices generally tumbled between 20 and 40 percent during the recession from their peak in 2007, according to a in-depth study released in April by the Aspen Appraisal Group.
Aspen real estate has been insulated to some degree from national economic downturns in the past, says the report, "Aspen/Snowmass Market Overview: 2009 Year End Review and A Look at What's Ahead." Tough times traditionally have resulted in fewer sales and lower overall dollar volume, but Aspen's property kept its value. The current recession was so severe that Aspen didn't escape unscathed.
"There is no question that in this current downturn both volume and value have been impacted," wrote Randy Gold, a principal in Aspen Appraisal Group. He has worked in the Aspen and Snowmass Village market for more than 30 years.
The report provides plenty of evidence. Sales of single-family home sales fell 8 percent in 2009 compared to 2008. Dollar volume dropped 5 percent.
The median sales price of an Aspen single-family home was $5.1 million last year, compared to about $6.1 million the year before and $5.5 million in 2007.
Meanwhile, the number of listings continue to grow, Gold noted. There was roughly a four-year supply at the end of 2009 compared to a three-year supply a year earlier.
The upper end of Aspen's luxury residential market is in even tougher shape. There were only three sales of houses priced higher than $20 million in 2008 and 2009, according to the report. There are 19 homes in that market segment currently listed for sale, indicating "this is likely going to be a slow part of our market for at least the next several years," Gold wrote.
One of the few areas of the real estate market showing strength is "well-located" houses in the $9 million to $15 million range. That includes houses in the West End and Red Mountain in Aspen, and Two Creeks, The Pines and The Divide in Snowmass Village, according to the report.
In Snowmass Village overall, the real estate market is suffering because of the condition of Base Village, the massive base area project that stalled in 2008 when owner and developer Related WestPac's funding disappeared.
"The chaos and uncertainty emanating from Base Village has infected most Snowmass real estate," Aspen Appraisal Group's report says. "Just as Base Village's success carried over into the rest of the Snowmass market, the opposite is now true."
The report's analysis of Aspen's commercial market indicates landlords have been forced to react to the widespread closure of retail shops and restaurants.
"The Aspen commercial market has more vacancy today than we have ever seen," Gold wrote. At the end of 2009, there was 90,000 square feet of commercial space available or becoming available, a vacancy rate of about 7 percent.
Gold said that number has increased since he completed the report. It's now at about 100,000 square feet, or as much as 8 percent vacancy. That excludes office space available at Aspen Highlands and the Aspen Business Center.
A vacancy rate under 10 percent is typical for many markets, but 7 to 8 percent is "very high" for Aspen, he said. He doesn't expect that rate to move much in the coming year, adding to the downward pressure on rents.
"Rent declines are in the roughly 20 to 40 percent range, although there are examples that exceed that," the report says.
"Most of the landlords have adopted a supportive attitude for their existing tenants, greatly slashing base rents for 6 to 12 months, or eliminating them in some cases," the report adds.
The drop in rents has renewed interest in Aspen among national retailers, according to Gold. Some landlords are resisting long-term leases at the reduced rents.
"It is likely going to be at least another year or two before we know whether or not rents will continue to fall, or if they have stabilized," the report says.
The major commercial property owners aren't trying to sell. Gold wrote that four or five groups dominate the commercial market, though he didn't name them.
"The erosion of value is really more of a 'paper loss,' as the dominant Aspen commercial landlords are not financially stressed, do not need to sell, and can ride out the downturn without being forced to sell at a significant discount," the report says.
Gold believes now is a good time to acquire Aspen-area real estate, particularly for buyers who can afford to be patient and hold onto property for a minimum of five years.
The Aspen and Snowmass Village real estate markets were slower to respond to the recession than many other resort areas, the study says. "It seems logical that we will be among the first markets to stabilize."
Aspen is already significantly further along toward stabilization than Snowmass Village because of Base Village's condition, the report says.
Gold noted that many buyers and sellers in the Aspen-area are connected to Wall Street, and Wall Street has been making money lately. Aspen also remains attractive to foreign investors because of the weak dollar.
"Much will be known about Aspen's recovery in the second and third quarters of 2010, and certainly by year end," the report says. "There are some bright lights in Aspen's real estate market. Snowmass, however, looks to have a more tenuous short-term prognosis, and that market will undoubtedly take much longer to stabilize."
The Aspen/Snowmass Market Overview is available for purchase at Aspen Appraisal Group's website: www.aspenappraisalgroup.com. Clink on the link for the report.