It’s all just down from Aspen | AspenTimes.com

It’s all just down from Aspen

Roger MaroltAspen, CO Colorado

You can take me anytime now, Lord. I’ve lived long enough to see something more perplexing than the Aspen real estate market.Midvalley real estate has gone berserk! I see scads of new development in El Jebel. I hear the stories about real estate prices doubling every six months In Basalt. Each week, it seems, somebody asks me if I want to go in on an investment condominium in Carbondale. It’s the buzz that started low down in Who-Caresville a decade or so ago. Now, it’s started to grow!The buzz has become so loud that even the most ardent Aspen snob can’t ignore it. I hear it at parties. I hear it in the grocery store. I hear it in the locker room. When the din becomes this constant and intrusive, I don’t think you can properly consider it a buzz anymore. It’s an alarm!Real estate downvalley is about to crash! OK, maybe it’s just a stall warning from an ascent too steep, but a warning nonetheless.First, developers built a championship golf course between Carbondale and Glenwood. That was a bad omen. It’s hot and dry down there, and the all-important question that the developers never asked is, “Where does a duffer go for a drink after playing a round in the middle of nowhere?” The idea that million-dollar homes along the fairway would sell that far away from Aspen was about 15 years ahead of its time, and now that the time is here, it’s certainly nearly past. In the investment world, that much foresight is known as a mistake.More recently, someone built lofts in El Jebel – El Jebel, for Pete’s sake! They aren’t even that lofty at only four stories above the parking lot. The moniker must refer to the prices. The attraction of lofts in the city is that you take the elevator down and are in the middle of the uptown scene. In El Jebel, you take the elevator down and are in between a drive-up bank and a gas station. But there’s nothing to worry about, a spa resort is going in across the highway.These are just minor examples of the midvalley market going exuberantly irrational, though. Now, there is talk of Sunlight Mountain Resort getting a new base village. It’s official; reason in real estate is past the midvalley point!The Florida developers who are planning this upgrade must be flipping swampland. Do they know what they are doing? Last time I looked, Sunlight was a dinky ski area at the top of a mountain with tepid terrain and little room for expansion. You can get enough skiing on the limited terrain in a half day with the current antediluvian lifts. A new high-speed quad lift will only serve to allow people to get tired of it sooner. Forget about what you are going to do in the summer up there. What are you going to do in the afternoons?Now, I don’t mean to pick on Sunlight. I just think that this recent proposal highlights what is askew in this semilocal land frenzy. Sunlight is not a bad ski area. In fact, it is teeming with a charm that we all miss here at the world-class resort. But, that’s the point. Sunlight is not Aspen Highlands or Snowmass Village, where base villages barely work. For lots of obvious reasons, it never can be. So why are they trying?If you look at Sunlight Mountain, the terrain, the distance from a major airport, the winding road leading up to it, there is no way it can work on the scale I have heard bandied about. So, what makes the developer think it will?This is the scary part. The developer believes that this plan will work because they have heard all the same stories and seen all the same statistics about the scorching real estate market that you and I have. They believe the hype because we believe it, and we believe it because they believe it! The reason we think all investments here will work is simply because no real estate play has ever failed in the midvalley (except that subdivision next to the horse stables) in its entire 10-year history of unchecked growth.Everyone has heard stories of old Aspen folks who missed out on owning a piece of it because they didn’t act when it was still affordable. Now, we’re bombarded with anecdotes about Basaltines who triple their money overnight. It is my experience that human beings can endure all kinds of pain, but few can tolerate that of everyone else making a profit. That is the bullet that kills common sense instead of bad deals.Real estate is sold on a bid system. When a piece of property sells, it goes to the person who will pay more for it than any other person in the market at that time. If a townhouse sells for twice as much this year as it did last year, there should be an explanation (even flimsy) as to why. If the only reason that you can come up with is that the neighbor’s house sold for this much last week, it’s time to worry.Midvalley real estate is far more abundant than it was 10 years ago. Interest rates are heading up. The economy is slowing. The national housing market is in the tank. So, why are real estate prices soaring in El Jebel? There is no fundamentally adequate explanation.This downstream boom began when people started looking for the next Aspen. The myth is that it exists 20 miles away. Location! Location! Location! The midvalley is not Aspen’s Far-West End. People didn’t originally choose to live there, they were chased there by Aspen land inflation. The commute from downvalley isn’t that bad, but it’s not that good, either. El Jebel and Basalt aren’t bad little towns, they just aren’t Aspen. That’s not a crime. Far worse for some, it’s an unacknowledged reality.Economics will eventually prove this. When the Aspen market flattens out, the midvalley market will fall, phoenixlike, over the edge.When will the correction occur? That’s easy. The market will turn just after the last person who believes that midvalley real estate can’t possibly decline takes out a loan to invest there and right before every neophyte speculator understands the balance between risk and reward.Roger Marolt believes that if you take the “real’ out of “realty,” you are left wondering about the “Y.” Contact him at roger@maroltllp.com


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