Crashing Aspen’s real estate party |

Crashing Aspen’s real estate party

Roger Marolt

Getting the straight poop on Aspen real estate from most brokers is impossible. It always boils down to either of two statements memorized for the brokers’ exam: “Let me show you a few houses, it’s unquestionably a buyers market and you have to act quickly.” Or, “List your house with me, it’s certainly a sellers market and you have to act quickly.” The only thing definite is a 6 percent commission. Unable to get at the truth, I contacted my old friend Turner Hicks to shed light on the local real estate market. Turner Hicks is a human contradiction, alive yet so imaginary in his persona. He lives in Woody Creek and sells dirt to pass time. He’s an honest man away from his office, staring down a long, brown bottle’s neck into his favorite truth serum, especially when I’m buying. It was under these circumstances that I recently interviewed him about Aspen real estate:Roger: Do you think owning a house in Aspen is a good investment?Turner: No.R: Ah, could you be more specific?T: You can read as well as I can. The City of Aspen 2005 Cost of Living Index Study revealed that real estate in Aspen has appreciated by only about 2.5 percent annually for the past six years. That’s far below the national average of almost 12 percent per year over the same time period. Those trend lines haven’t inverted since the silver crash. That’s significant, no matter what any ski instructor tells you. R: But, we had some tough years in that period, with the stock market tanking in 2000 and the 9/11 tragedy in 2001.T: So what? Conditions were the same all across the country, you dope. We lagged anyway. The only salient point there is that never before has our real estate market been so inextricably tied to national events. Before recently, we were relatively insulated. R: OK. Getting back to that report you cite; nobody gives it any weight. It’s obvious that our local governments don’t know anything about numbers, finance, or economics. The signs of a booming real estate market are everywhere. Those paltry appreciation figures can’t be correct.T: You’re right. Actual appreciation was likely less than reported. The city simply compared average home sales prices over the years. But, Aspenites are addicted to home improving. Those never-ending upgrades and remodels figure into a rising average for home prices, but their costs are not real appreciation.R: But, how could homes not be appreciating here?T: I’ll get to that, but first I have a confession to make: Back in 2000 I wrote a piece on Aspen real estate and published it under your name. R: You cad!T: Sorry. Anyway, in that piece you, er, I made a case that Aspen real estate was a poor investment for the future. People thought I was out of your mind! I talked then about how Aspen was no longer an unknown quantity, thus the speculative qualities of real estate here were crap. I also talked about how Aspen is becoming more like every other small city with its chain stores, traffic jams, and even the same types of crime emerging. I argued that it was losing its distinctive charm that has always lent itself well to adding value to property. Aspen was no longer setting trends, but began chasing them.R: Has anything changed in that regard?T: No, those tendencies towards conformity continue. Listen to the town’s leaders; the common argument is that we have to do this, that and the other thing to compete with everyone else. And, like everywhere else, we are now designing and building homes that will only exacerbate our sluggishness.R: For example?T: Well, there is a simple axiom in real estate that is always ignored by coffee shop analysts: Land appreciates in value; sticks and stones and even gold-plated bathroom fixtures don’t. Manmade components of real estate lose value with each passing day. Even steadily escalating replacement costs (you know, inflation) are usually not enough to offset the natural deterioration and obsolescence of moss-covered stones, avocado-hued shag carpets, or whatever is “in” now. Back when properties in Aspen were truly appreciating at astronomical rates, houses were relatively inexpensive in comparison with the cost of the land. That trend is completely haywire now. Like modern suburban development, most Aspen properties are comprised of houses built lot line to lot line that cost up to three times as much as the underlying land that they sit on. In this scenario, even if the land appreciates at a brisk 10 percent a year, the entire property only increases one-quarter that much, or 2.5 percent. Factor in normal wear and tear on the buildings, and you can easily end up with a property worth less than it was the year before, even in a strong economy!R: Do you see any other national trends making their way to the mountains?T: Across the country, rising fuel costs may be as large a threat to home values as rising interest rates. Homeowners have experienced drastic increases in the cost of ownership due to skyrocketing heating and cooling bills. That influences what people can afford in housing every bit as much as increases in their monthly mortgage payments. If the current energy spike isn’t temporary, a new trend towards smaller, more efficient homes will render larger homes somewhat outdated. While energy costs won’t affect affluent Aspenites the same way, the evaporation of home equity drying up consumer spending nationally will.R: What about second homes?T: They’ll be the first to go since they are totally discretionary. I think a shift is already occurring and manifesting itself in the popularity of time shares. They are incredibly lousy investments, but people are willing to risk the smaller outlay at this point in the game. At the same time, this temporary manic rush into time shares inflates all local real estate prices to unsustainable levels.R: So, are you predicting a crash, then?T: Well, I will say this: It’s more likely to occur when everyone at the party is intoxicated. Huh, thanks for the beer.Imagine this: Turner Hicks doesn’t even have e-mail. Roger Marolt will relay your comments to him at

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