Aspen Real Estate Market & Trends: Winter 2007/2008 By Tim Estin, Aspen RE Broker,www.EstinAspen.com

By EstinAspen.com, New West Unfiltered 12-23-07

The Estin Report - Aspen Real Estate Market and Trends:
Winter 2007/2008:
By Tim Estin | MBA, GRI | Broker Associate | Mason Morse Real Estate - Aspen, testin@masonmorse.com / 970-309-6163, (Updated from original article, Mountain Business Journal, Jan 2, 07)


Executive Summary

According to data from Land Title Guarantee, the Aspen/Snowmass real estate market is slowing, but it is on tract to be the second best year ever in terms of dollar sales volume. According to a Land Title Guarantee’s end of November Report on Pitkin County deeds, total sales were $2.23B for the year through November 2007 versus $2.4B in 2006, a -2% decline.

October and November indicate a sharp fall off of both number of transactions and dollar sales volume: Compared to the same months in 2006, in October ‘07, there was a -37% decrease in dollar sales and -13% drop in transactions; in November ‘07, dollar sales were off -54% and transactions down -36%.

Whether Aspen’s past four year’s of unprecedented high demand, limited inventories and significant price appreciation can be sustained remains to be seen. While the total number of transactions has fallen off in October and November, prices for the year remain strong. Buyers
believe we are in a buyer’s market because the daily national housing news is so bleak; sellers don’t seem troubled because for the most part they’re not forced to sell.

There is a unique self-correcting market mechanism at work in Aspen. Dissatisfied sellers will simply take their property off the market if it doesn’t sell, and that in turn leads to keeping supply in check and prices from falling dramatically.

National events, of course, could ultimately tip the balance here between demand and supply over the next 12 months: credit and debt market problems have led to a reduction in the availability of large mortgages, high oil prices, Iraq/Iran, stock market volatility, recession fears have all combined to create great financial uncertainty. But typically, however, there is a significant lag time for Aspen to feel the effects of outside events.

If history is a guide, even if the Aspen market slows down or flattens, significant price decreases – and specifically ‘deals’ – will be minimal or unlikely except in rare individual circumstances. The average sold to list price is above 95%, and over 70% of transactions are cash. Owners can afford to wait it out.

Buyers, on the other hand, will have more property choices if inventory levels increase. This may be a better opportunity than any other in the past four years for buyers to be selective with more and better product to choose from.

If there is in fact a cooling off trend, it should be regarded as a healthy sign. A return to a more normal, versus hyper, market pace can either be construed “the pause that refreshes’, (like other prior flat Aspen market periods) or “business as usual”. A slowdown is a cyclical interval consistent with Aspen’s history of rapid price appreciation followed by market lulls, but not fall-offs.

This steady step pattern, rather than boom or bust volatility, is representative of Aspen’s long term investment strength.

This time, however, a market lull may be the calm before a long sustained wave of huge demographic and economic trends bearing down on us like a rolling tsunami. These trends will be discussed in the next few pages after the details of present market conditions are listed below.

The Market Facts: Aspen/Snowmass

MLS Data
• 2007 dollar sales volume will be -7% less than 2006
• Total number of transactions will be off -11% over 2006
• The number of listings has held relatively stable since 2006. Demand and supply are in relative balance.

Aspen Appraisal Group Data:

Aspen Single Family Homes:
• For the year, Aspen single family home transactions are expected to be down 26% from (134) sales to (99) sales, while the average number of listings have increased 10% to (154). The total dollar sales volume is expected to drop approximately 15% from last year’s record dollar sales of $2.64B.
• The average Aspen home price is now $6.2M (+14%) from $5.45M in 2006.
• The median, or mid-point, sale price is $5.55M (+30%) from $4.15M in 2006.
Aspen Condos:
• Transactions are off -17%, listings have increased +20%.
• The average price for an Aspen Condo is $1.2M (+9%) in 2007 versus $1.1M in 2006.
• The median price is $1.15M (+18%) versus $975K in 2006.

Aspen Lots:
• The Aspen lot market continues a trend witnessed in 2006 of falling sales and more listings. Sales continue to lag behind a swelling number of listings. There is estimated to be an approximate 2 ½ year supply of lots. A significant factor influencing this is that developers and builders are withdrawing from the market leaving only end user buyers.
• Transactions have fallen -19%, while listings have increased +40% to (63) listings.
• The average lot price has increased +20% to $4.6M from $3.65M in 2006.
• The median lot price is approximately $3.8M
• There is very little undeveloped land in Aspen and much of the increase in lot listings reflect a dearth of quality developable land, and buyer’s balking at high prices for constrained and compromised buildable sites. The product is staying on the market longer.

Snowmass Single Family Homes:
• Transactions are off about -30% for the year, but listings have only increased modestly at 12%. However, dollar sales volume is up +20%.
• The average sale price of a home in Snowmass increased an astounding +50% in the past year from $3.5M in 2006 to $5.5M in 2007.
• The median price increased +30% from $3.1M in 2006 to $4.1M in 2007.
• The huge average sales price increase has been driven by the fact that the houses that are selling are the best and most expensive, while the less desirable are languishing. Whereas in 2005 and 2006, the number of sales exceeded the number of listings reflecting the very heated market, there is now an approximate balance between sales and listings.

Snowmass Condos:
• Transactions are down -7% from 2006 and the number of listings increased 30%. The wildcard is the new Snowmass Base Village. The market for new, well located condo product is very strong in Snowmass, and not as strong for older condo properties.
• The average condo price is $1.2M (+20%) versus $1M in 2006.
• The median price s $950K.

Snowmass Lots:
• Transactions have fallen -45%, to (9) sales this year from (16) in 2006. There are only (7) listings representing approximately 1 year of supply.
• The average lot price has fallen to $2.2M from $2.75M in 2006.
• The median price has fallen from $2.4M in 2006 to $1.8M in 2007
• The lot data really reflects the fact that there are few vacant lots available and those that are available are of less quality and questionable developable (compromised) prospects.

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National and Local/Regional Trends Affecting the Aspen Market

National Trends:

• Baby Boomer Wealth: According to Forbes Magazine, an estimated $30 Billion is expected to transfer from the WW II generation to baby boomers. Combined with
retirement incomes, this generation is easily financially secure enough towards making their vacation/second homes their primary homes. And they are ready to spend now.
• Interest Rates: The Federal Reserve lowered the Fed Funds rate a total of .75% in November and December. Rates are obviously trending downwards and home equity lines and credit card rates will go down as they are based on the Prime Rate which is Fed Funds +3. But more important to the housing market, however, is that lending standards are on the rise, (Jumbo mortgage rates in excess of 6%), while home equity levels are on the decline (the opposite in Aspen), making it much more difficult for buyers to find a lender or maximizing the size of a loan.
• Stock Market: The stock market is down from its year’s highs, but the Dow Jones and S&P are up for the year.
• Job Growth: As of yet, there is no evidence in the employment data that suggests the economy is in the midst of a major meltdown, especially with the release of 2nd & 3rd Quarter Gross Domestic Product (GDP) growth at an annual pace of 3.9%
• Fall of the Dollar to record lows: US properties are now trading at a significant discount (40% compared to five years ago) from a European perspective. Not only has foreign purchasing power increased but from an international viewpoint, Aspen prices aren’t that out of line when compared to London and New York City prices, amongst others.
• New Global Wealth: There has been a huge ratcheting up of global and US wealth accumulation. China, India and Russia are obvious international examples. In the US, the hedge fund industry is remaking the world of wealth.
• Surge of New Money: According to a recent New York Times article, this new money is “reshaping wealthy communities as drastically as did the dot-com boom a decade ago…in less than a decade, hedge funds have created a class of centimillionaires…in Greenwich, Ct. super luxury home sales increased even as the total number of homes sold fell over 15%.”
• Technology and the Footloose Economy: Advances in information technology, communication infrastructure, the emergence of the service economy and the aging demographics have created a “footloose economy”. The economy is no longer bound by “space” and geography. Ten to fifteen years ago, people followed jobs. Now, they move wherever they want and jobs follow to these desirable areas.
• High End Real Estate Resilience: Traditionally, upper end real estate markets tend to hold their own even as the rest of the housing market slows. Wealthy buyers are seemingly buffered by market volatility. An October 2007 article in the NY Times stated, “The very very high end of the communities such as the Bay Area, LA, NYC, Miami and to a lesser degree Chicago, Seattle and Washington that have global appeal have held up much better than rest of the housing market…much of their buying is done with cash and not affected by the global financial turmoil and its impact on the availability of mortgages.”
• Credit Crunch/Recession Possibility: In light of the credit melt-down and a possible recession’s affect on high end real estate, the on-line magazine, Financial Planning, recently wrote, “High Net Worth individuals are vulnerable to changes in their net worth. As "qualified investors" with access to hedge funds, they may have seen their portfolios damaged more seriously in recent months than have standard-issue investors. The larger question is whether the credit crunch will spark a full-blown recession. If it does, even the richest Americans could find their wealth diminished, at which point it will become much clearer how well insulated top real estate markets truly are.”
• Trophy Properties: Everywhere one looks, trophy properties are being snapped up at unbelievable prices.

Regional/Local Trends:

• Fastest Growing Region: According to the Center for the Rocky Mountain West, the Rocky Mtn region (5 state: Idaho, Montana, Utah, Colorado, Wyoming) is the fastest growing area in the country amongst persons ages 40-60 – the classic baby boomers. Also, the ‘echo” generation, children of baby boomers are the next largest population segment flocking to this area, referred to as the “third coast” by demographers.
• Boomers Retire and Head West: There is a huge new retiree population migration. These people are newly retired, aged 55-64, “young elderly, grabbing life with both hands” as one Center for the Rocky Mountain West 2006 study put it “They are couples in good health, with high education and income levels”.
• Second Homes Become Primary Residences: According to a recent study by the Northwest Colorado Council of Governments, increasing numbers of second home owners are making it their permanent home. Second homes are on the decline as more and more owners in Pitkin County, Eagle and Garfield Counties, are taking up residence here year round. “Baby Boomers are just coming into that age bracket -55 to 64 – most likely to purchase second homes. And as they hit their 60’s and 70’s, a huge influx of full-time residents is anticipated”, said the consultant who wrote the study. As this happens, more and more full-timers will add to community life and a maturity of services.
• Local Population Growth Forecasts: According to a recent October 2007 Healthy Mountain Communities: State of the Valley Symposium, the population of Eagle, Garfield and Pitkin Counties combined is expected to increase 20% from 116,500 in 2005 to 138,800 in 2010. By 2025 it will ‘soar’ to 220,000 or 88% more than the current level. Nationally, the growth rate has been 1% annually; the Pitkin County growth rate is 1.4%, Garfield County is 4.5% and Eagle County is 3.2%. The big driver of the Pitkin County economy will be surging demand for second homes for reasons cited above. In the next 20 years, Pitkin County’s population is expected to increase 46%.
• Parents Purchasing College and Resort Properties for their Children: More and more parents are purchasing housing for their children in college and resort towns as a way to defer expensive housing costs for the kids, to use the property as a 2nd home, possibly for retirement, and to take advantage of the potential appreciation.
• Public Lands as Magnet: People are flooding to areas surrounded by public lands – US National Forests, National Parks, BLM - places where ‘open space’, green forests and wilderness appeal prevail. Dominated by recreation and tourism, these lands have become the equivalent of prime waterfront property.
• Exurbia: A huge population migration to “exurbia”, semi-rural areas where affluent Americans are moving in growing numbers, especially to smaller towns of less than 50,000.
• Controlled Growth (Strict Zoning) Fuels Real Estate Wealth: The “environment” has become the key economic asset for these communities. There is a direct economic upside for property values in controlling growth, and this is a huge driver of local real estate values. One of the great ironies of our area is that the unprecedented clamping off of new development fuels higher and higher prices as supply is artificially constrained.
 In Pitkin County, over 85% of the land is publicly owned, another 6% is zoned resource or agricultural (rural and large tracts of land) and an additional 3% is deeded private land trusts or local government open space. Pitkin County has limited private land available for any kind of private development.
 The other counties of the Roaring Fork Valley - Eagle and Garfield Counties - have 79% and 63% publicly owned lands respectively.
• Lack of Speculative Activity: The high price of real estate, strict zoning, lengthy approval process and limited available land has made any kind of development hugely expensive and risky. The economics of the project difficult are difficult to justify. But where new projects have been finally approved and developed, design guidelines have maintained the overall quality of small town living.
• Affordable Housing Shortage: The lack of affordable housing is driving Aspen’s employees further and further downvalley to Glenwood Springs, Rifle and beyond. This detracts from a local community base and ultimately diminishes a thriving and dynamic ‘small-town’ character of Aspen.
• Increasing Traffic: There has not been a City/County consensus to solve the “Entrance to Aspen” problem for thirty years. Meanwhile, traffic in town and on the west side of town during commuting hours gets worse every year. The only through road into Aspen for employees, trucks, slow moving construction vehicles, tourists and second homeowners, Highway 82, is pushed to capacity eroding the overall quality of life. But it’s not even close to big city traffic …yet.

2008 Winter Forecast

For the past 50 years, Aspen has not only been an important place to be seen, but also it’s been an incredibly good and solid investment. Although owning Aspen real estate is primarily a quality of life decision, more and more buyers also see Aspen real estate as part of a solid portfolio diversification plan.

It seems likely that it’ll take longer to market properties and that the unprecedented appreciation levels and hyper-activity of the past 4 years will slow. While the national housing downturn may have a more immediate stabilizing affect on the Aspen market, in the longer term there should be dramatically increasing demand for Aspen and Roaring Fork Valley property based on the significant demographic, socio-economic and local trends cited earlier.

Whether right now Aspen is the land the national housing slump forgot, or sunning itself before a long dark winter, is anyone’s guess. A credit or stock market meltdown, a strengthening dollar, a terrorist strike, huge energy price spikes, a recession and other shocks to the economy certainly could inflict blows to the Aspen real estate market.

If one is concerned about market timing, especially whether it is prudent to buy into a peak, or maybe even a flattening market, please remember this fact: At any point in time, prices here have always been setting new records. So far, this market has rarely – if ever - corrected, but it has ‘paused’ for 1 – 3 years (as example, post 9/11 the market stagnated for about 30 months).

The historical pattern has been that when prices stabilize, it becomes the new base for the next market climb.

In the bigger picture, those who have sat on the sidelines waiting for a ’great deal’ or a market correction have basically spent their lifetime regretting that indecision and procrastination. At any time in the past 50 years, this market has consistently presented ‘sticker shock’ to new buyers. And though history is no indicator of future results, once one gets over the psychological pricing hurdle and plans on at least a 3-5 year horizon, boldness in the Aspen market has almost always been consistently rewarded.
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The statements made in this document represent the opinions of the author and should not be relied upon to make real estate decisions. Information concerning particular real estate opportunities can be requested from Tim Estin at 970.309.6163 or at testin@masonmorse.com. A potential buyer is advised to make an independent investigation of the market and of each property before deciding to purchase. To the extent the statements made herein report facts or conclusions taken from other sources, the information is believed by the author to be reliable. However, the author makes no guarantee concerning the accuracy of the facts and conclusions reported herein.
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Tim Estin Biography

I learned to ski before I could walk, went to elementary school in Aspen, and was a Founding Director of the Tenth Mountain Hut & Trail System* between Aspen and Vail with one of Aspen’s legends, my friend and mentor, Fritz Benedict. I love living in Aspen, I love my work and sharing these passions with others.

After graduating from Colorado College and getting an MBA from Boston University Graduate School of Management, I worked in luxury mountain resort consulting (Sno-Engineering, Inc./Aspen) on major US and Canadian projects and then managed national advertising accounts for Timberland, Boston Whaler, Apollo Computer (acquired by Sun Microsystems) amongst others.

In 2007, I served as the Aspen Board of Realtors liaison to the City of Aspen. Before this, I was the Aspen Board of Realtors liaison for the extensive 2006 Pitkin County Land Use Code (LUC) Rewrite approved in July 2006 after a two year review. I also served as a member of the Pitkin County Land Use Code/Technical Advisory Committee advising the Planning & Zoning Commission and the Pitkin County Board of Commissioners on land use issues. Although theses volunteer positions have involved communicating policy, political issues, code changes, and their consequences to property buyers and sellers and to the Aspen realtor community, I do not represent myself as an expert nor professional in land use issues. As the new Code evolves and amendments or changes are made, it is always my recommendation that clients consult with professionals in their respective fields of expertise to satisfy their property concerns.

I contribute articles and comments on local and regional real estate issues in the Mountain Business Journal, a regional weekly business magazine, and the Aspen Times, Aspen Daily News, Aspen Magazine, and others. This information is the basis of The Estin Report which is updated regularly and can be read and downloaded at www.EstinAspen.com

In my non-work hours, I participate in The Buddy Program (an Aspen School District mentoring program), the International Design Conference/Aspen, the Aspen Institute Ideas Festival and local performing arts organizations.

I have a reputation for approachability, creativity, great loyalty and an unbelievable work ethic. If you, your family and/or friends are looking for unparalleled Aspen/Roaring Fork real estate brokerage service, information and discretion, please call 970.309.6163 or email me: testin@masonmorse.com

**One of the great outcomes of being involved with the beginning of the Tenth Mountain Hut and Trail system was the opportunity for my family to build the Peter Estin Hut in memory of my Dad . He was a former FIS racer and Dartmouth ski team captain, Director of the Ski Schools at Portillo, Chile and Sugarbush, Vt. and a New Yorker magazine cartoonist. In the early 60's, he wrote, "Ski the American Way" considered a ski teaching classic. (See: www.huts.org).

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