Real Estate: Aspen real estate still close to record prices
June 7, 2011
As we approach the midway point of this real estate year, the Aspen real estate market continues to show significant strength. As most of the rest of country plunges into a double dip real estate recession, the Aspen real estate market continues into its second year of steady improvement. Not only is the Aspen market improving in volume terms, but we are seeing some of the best properties trading at prices of $1,500 to $1,800 per square foot, close to the record prices set in 2006 and 2007 just before the market stalled. In fact, if the market continues on its current path, 2011 will likely be the fourth best year for the Aspen-Snowmass real estate market in the past decade. This past week, the Case-Shiller National Housing Index showed that home prices nationwide fell 4.2 percent in the first quarter of this year following a 3.6 percent decline in the fourth quarter of 2010. David Blitzer, chairman of the S&P Housing Index Committee, also said “home prices continue on their downward spiral with no relief in sight.” While the national real estate market continues to decline, the Aspen market is on track to exceed the total sales volume for 2010 by 30-35 percent. The 2010 total sales volume exceeded the 2009 total sales volume (the worst year on record since 2002) by 18 percent. With all this bad news about the national housing market, why is the Aspen real estate market continuing to improve?It’s not just happening in Aspen, but other resort areas are reporting strong sales volumes as well. While Aspen’s overall sales volume is up about 57 percent from its 2009 low, other resort markets such as Hilton Head and Palm Beach are reporting 14 percent to 54 percent increases in volume as well. It appears that buyers put on hold their plans to buy resort real estate, but have resumed buying resort property as the national economy improved and prices have declined.So what’s driving this renewed interest in resort and in particular Aspen real estate? The answer can be summarized in three reasons: demographic migration, supply and demand, and financing. In the next 30 years, 20 percent of the population of North America – roughly 70 million people – is expected to migrate to key core cities, desirable small towns and new growth cities with resort areas being the number one destination. These destinations offer a unique high quality of life for both the younger and older population.This migration started in the mid-1990s as technology made it easier to work from remote areas, paused during the economic downturn of the past three years, and is just beginning to start up again as the national economy improves. Experts studying these trends believe this migration will continue to put downward pressure on suburban real estate values around many major U.S. cities for years to come. At the same time, resort areas and key inner cities, the most desirable places to live, are experiencing strong real estate market recoveries.Aspen is unique because of the tremendous constraint on supply of new housing, the highly desirable life style and high percentage (67 percent) of all cash transactions. Aspen’s real estate market is likely to continue to improve, despite the tough financing environment and weakness in real estate markets around the country. These factors will continue to make Aspen a great long-term real estate play. William Small, JD, CCIM is managing director of Frias Luxury Estates, a division of Frias Properties of Aspen, that specializes in marketing luxury Aspen properties. If you’re interested in receiving his monthly market report, you can reach him at (970) 429-2419 or email him at email@example.com. You can also follow his Aspen real estate analysis by visiting his blog site at WilliamSmall.com.