Aspen-area real estate rides out rough ﬁrst half
July 3, 2012
ASPEN – A June swoon contributed to a poor first half of the year for the Pitkin County real estate market in terms of total-sales dollar volume.
Despite the sale of a ranch and adjoining property in early June for $49 million by Prince Bandar bin Sultan, the dollar volume of all sales for that month were down 11 percent compared with June 2011, according to deeds filed with the Pitkin County clerk and recorder.
For the first half of 2012, the dollar volume of all sales was $600.23 million. That is down 15.5 percent from $709.57 million last year.
Despite the dismal numbers, real estate agents aren’t ready to throw in the towel yet on this year. Craig Morris, a partner in Aspen Snowmass Sotheby’s International Realty, said he foresees a strong second half for several reasons.
“I’m normally not a rah-rah cheerleader type. I’m pragmatic about it and tell it like it is,” Morris said.
There has been consistency in sales prices and in the price per square foot over approximately the past 18 months, according to Morris. That is a positive development, given that prices had dropped significantly early in the recession, he said.
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“There are clear signs the market is level and it has firmed up,” Morris said.
Another encouraging factor is the types of buyers. Morris said his firm has had a lot of real estate showings this summer, and many deals are scheduled to close in coming months.
“For the first time in several years, buyers are coming up with reasons to buy rather than finding reasons not to buy,” he said.
In addition, the market was infused with new inventory this summer. Many prospective sellers who were on the sidelines have decided the time is ripe.
“Last week and this week there’s a ton that’s entered the market,” Morris said. A key building momentum is pricing the property at an appropriate level for the current market. Some of the residences that were recently listed for sale are “overpriced,” he said.
Tim Estin of Coldwell Banker Mason Morse Real Estate said the slide in the total dollar volume is an important indicator of how the real estate market is faring, but not the only factor.
“It’s the bottom-line number and at the end of the year, it’s the one that everyone looks at,” he said. Estin believes several factors contributed to the dollar volume falling. Last year there was a surge in sales of homes prices above $10 million. There haven’t been as many sales in that price range this year.
This year there are more macro-economic issues affecting the psyche of buyers – the Euro-zone crisis, the so-called fiscal cliff of mandatory cuts facing the U.S. government if Congress cannot approve a budget that achieves certain reductions, and the November election.
Given that level of uncertainty, Estin said he is pleased by the number of transactions this year, even though the dollar volume is down. Estin writes a quarterly market analysis called The Estin Report and he takes a snapshot look each month. For his report, he examines sales data for Aspen, Snowmass Village, Old Snowmass and Woody Creek. He doesn’t look at fractional-ownership sales because mass closings at any given time can skew data, he said.
In the geographic area where he is looking, the number of transactions during the first half of 2012 was “so close” to the same period of 2011. That is significant, he said, because that shows buyers are out there.
In Pitkin County as a whole, there were 336 real estate transactions during the first half of 2012 compared to 389 during the first half of last year. However, in the market segments that Estin examines, there were only 11 fewer transactions for a decline of 7 percent.
Like Morris, Estin anticipates a robust market over the next few months. One particularly promising development this year is the sale of raw land. There were five sales of vacant lots in June 2012 compared to zero for the month the year before. For the first half of 2012, there were 20 sales of vacant land compared to nine for the first half of 2011.
Estin said inventory of speculative homes has dwindled drastically because so few have been built since the recession struck. There is demand for that type of house so developers that can get financing are rushing to fill the void, Estin said.
“Typically, when land sales start to pick up, it is an important marker of a market transition,” Estin wrote in his second-quarter report.
Andrew Ernemann, a real estate agent with B.J. Adams and Co., noted that 2011 started strong, then fizzled. This year the number of transactions has been stable, suggesting the dollar volume will equalize. Other positive indicators for the upper-valley market are a stable inventory and a decrease in the size of discounts needed to close a sale, according to Ernemann. In many cases, the average sales discounts are 10 percent lower than asking prices, an improvement over the recession-plagued years.
Prices are “very stable” in Aspen’s single-family home market despite the drop in dollar volume, Ernemann wrote in his mid-year report.
Morris said he expects the deficit in the total sales dollar volume from the first half of the year to be erased by the end of summer.
“There’s a lot of positive energy out there,” he said.