Aspen real estate: Was 2015 that good or is 2016 that bad?
Last year’s $2 billion-plus in total property transactions in Pitkin County exceeded expectations, while the pace of this year’s sales activity has fallen way short of meeting them.
There were 10 sales of more than $19 million last year, including Houston resident Dan Friedkin’s $72.5 million acquisition of the Hotel Jerome. The $29.5 million purchase of a Red Mountain home marked Pitkin County’s most expensive residential deal last year, while developer Mark Hunt continued to gobble up commercial properties, including his $18 million purchase of the Red Onion building on Aspen’s East Cooper Avenue pedestrian mall. Hunt hasn’t bought any Aspen commercial properties this year.
And through July 31 of last year, 39 properties had sold for at least $7.5 million in Aspen. This year, that figure totals eight, highlighted by April’s $23 million sale of the Sardy House, this year’s most expensive transaction so far in Aspen.
“Last year was a great year,” said Andrew Ernemann, a broker associate at Aspen Snowmass Sotheby’s International Realty. “Every segment of the market last year was either good, improved or really good. I think naturally every year you want to measure how we do compared to last year.”
The sliding sales certainly have been the talk of the local real estate community, and The Denver Post focused on the trend over the weekend with an article titled “Aspen real estate market’s sudden collapse in 2016 baffles brokers.”
Through the first six months of this year, Pitkin County registered $546.5 million in total sales volume, a 42 percent drop from the $940 million from January through June in 2015. But when compared to identical periods from recent years, this year is holding its own — $521.6 million was recorded in the first half of 2010, $654 million in 2011, $556.9 million in 2012, $501.3 million in 2013 and $662.8 million in 2014, according to Land Title Guarantee Co.
But it was last year’s lofty sales figures that ushered in hope for a big 2016, too. The city planned on similar numbers through collections of its real estate transfer tax, which requires buyers to pay a tax on Aspen properties they acquire. Collections are down by more than one-third of what of the city budgeted this year.
Through July, the city brought in $2.8 million in transfer taxes that support its housing program. That’s 35 percent lower than the $4.3 million the city budgeted for the first seven months of the year.
The portion of the transfer tax that supports the Wheeler Opera House reaped nearly $1.5 million from January through July, 35 percent short of the $2.3 million budgeted for that period, according to city finance records.
National and global forces, combined with the cyclical nature of the real estate market, are chiefly to blame for sliding property sales in Aspen and Pitkin County, according to industry experts. The plummet in oil and gas prices, China’s crashing stock market and the presidential election all come into play, they said.
“If you look back at the start of the year, there were a lot of world issues that gave buyers a reason to pause,” said James Benvenuto of Aspen Snowmass Sotheby’s.
Another broker offered a similar view.
“Beyond the possible predictability of real estate cycles, we can ascribe our languishing activity to simple uncertainty and a profound sense of national angst,” reported B.J. Adams of Berkshire Hathaway HomeServices in a newsletter last week. “The market never does well in an ambiguous environment or when the future seems in doubt. While it may seem a lame reason, we truly do have the crazy election year to account for this. People are worried about our country and, fearful of troubling times, justified or not, many otherwise capable, serious buyers hesitate to commit to significantly large discretionary purchases — especially in the face of plenty of product on the market.”
The trend has especially pierced the Aspen market, Ernemann noted in a newsletter issued last week.
“Through the end of July there were 12 single family home closings in Aspen by way of comparison there were 22 closings in Snowmass Village during the same time period and 10 closings in Woody Creek/Old Snowmass,” he reported.
Aspen-area sellers also appear to be patient and aren’t dropping their prices, Ernemann and Benvenuto said, even when inventory is high and sales are low. That translates to a market that favors neither buyers nor sellers.
As of July 31 this year, 426 Aspen properties had been listed for sale, 16.7 percent higher than the 365 listed during the first seven months of 2015, according to Ernemann’s report.
“We really need some sort of market correction where prices flatten out or a price correction,” Ernemann told The Aspen Times. “But that’s the Aspen conundrum: You always have a vast majority of sellers where there’s not a financial need to sell.”
During the Great Recession, homeowners were more motivated to sell their properties.
“We’re just not seeing the wholesale price reductions like we saw after the recession,” Benvenuto said. “But I’m not seeing price increases, either.”
The median home sale price was $5.1 million through the first six months of the year, compared with $4.4 million for the same period in 2015, according to the Aspen Board of Realtors.
At the same time, this year’s decline in sales is even more curious because Aspen is having a solid year in terms of retail and lodging, Ernemann said.
“We’re very busy, and people are confident, and they’re vacationing in Aspen,” he said. “But I think when you get to that next tier of spending, that’s where it’s different.”
Aspen set a record in July with paid occupancy of 83 percent, according to Stay Aspen Snowmass President Bill Tomcich, while February through July lodging outpaced the same period last year by 1.4 percent. And for the first six months of the year, Aspen’s 65 percent occupancy rate for lodges was the state’s highest among ski towns.
Aspen retailers also enjoyed sales of nearly $344 million from January through July, a 4 percent improvement over last year, city finance records show.
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