What’s next for Aspen’s single-family home market?
September 8, 2008
As most real estate sellers, buyers and brokers have come to realize that the Aspen real estate market has slowed significantly since last year. In September 2007, the Aspen residential real estate started shifting from the fast pace and volume that marked 2005, 2006 and 2007 to its current pace of roughly half the 2007 volume of sales. The question everyone is asking is where is the market headed next and is a turnaround coming soon? To answer that, we must track the direction of the market on a weekly basis. The direction of the market is indicated by the trend in the total inventory of for sale properties, the median listing price and demand for properties as evidenced by the amount of inventory absorbed each week. Since May 1, the inventory of for sale single-family homes in Aspen has grown from about 145 to 211, reflecting a 45.5 percent increase. The median list price for a single-family home in Aspen is slowing and now stands at $7.5 million. To more closely understand the direction of the market, we use whats called a Market Action Index. The Market Action Index is a leading market indicator to gauge whether prices will increase or fall from here. The Market Action Index measures available supply relative to the current level of demand, and average days on the market for unsold properties.An index value above 30 indicates conditions favorable to sellers; whereas a Market Action Index below 30 indicates the market is getting more favorable for buyers. With rising inventory, increasing average days on the market and slow absorption, the Market Action Index is trending down and currently stands at 7. This trend implies a weakening market and a good opportunity for buyers of single family homes in Aspen. In terms of supply and demand, the market is getting cooler more supply is coming on the market relative to the sales demand. At this time, all indications are that the market will continue to weaken for single family homes, giving buyers one of the best opportunities to acquire Aspen property.Sellers interested in completing a sale in the next few months must understand their property will be competing against a much larger inventory than weve seen in recent years. To compete successfully, sellers property must be staged properly, marketed correctly and priced competitively.Despite the slower market, buyers are looking at properties and deals are getting done, but buyers are looking for attractively priced properties. Sellers who are not interested in pricing their properties to sell, should consider waiting until the market shows signs of turning around and the Market Action Index is trending back toward 30.This soft part of the real estate cycle is already about a year old and is likely to have another six to 12 months to run before we start to see a reduction in inventory and the next upward trend in prices.
William Small, JD, CCIM, is managing director of Frias Luxury Estates, a division of Frias Properties of Aspen that specializes in the marketing of luxury properties. He can be reached at email@example.com.This guest commentary was published in Inside Business, published Tuesdays in The Aspen Times.