Dollar volume of sales drops 42 percent in January and February

By Scott Condon, , March 6, 2008, The Aspen Times

ASPEN — The dollar volume of real estate sales plummeted 42 percent in Pitkin County during the first two months of this year compared to last year, according to an analysis by The Aspen Times.

Real estate sales of all types within the county generated $445.82 million during the first two months of 2007. Sales fell to just $258.7 million for the same period this year, according to deeds recorded with the Pitkin County clerk’s office. The number of real estate transactions dropped 23 percent, from 210 in January and February last year to 160 this year.

 

“This is very similar to past cycles, so it’s not a surprise to me,” said Chuck Frias, managing partner with Frias Properties of Aspen. “It’s no surprise to any of us who have been in the business in Aspen for some time.”

 

A downturn in the local real estate market, as measured by monthly dollar volume, began last June. Frias said he would expect it to last throughout this year. He said cycles and price adjustments are a regular part of the market.

 

However, there are major differences between what is happening in Pitkin County and in most other places in the country. The national mortgage crisis has spurred foreclosures on primary homes, Frias noted. It hasn’t struck resort markets with a high percentage of luxury, second homes.

 

And while real estate values have sunk in many parts of the country, that isn’t the case in Aspen, Frias said. The market is slowing in and around Aspen because buyers are holding out in hopes of getting better deals while sellers are resisting big discounts.

 

“In Aspen, many people sell for convenience,” Frias said. “Many of these people will wait out the cycle.”

 

Once the national economy strengthens and there is a price adjustment in asking prices, Frias expects a return of the strong sales that usually characterize the Aspen market. Meanwhile, real estate won’t appreciate at the 20 to 30 percent annual clip that it has in recent years.

 

Mike Russo, managing partner of Aspen Land and Homes Sotheby’s International Realty, said there has been an overreaction to the slow start to 2008 in Pitkin County and somewhat of a misinterpretation to what is happening.

 

“You have brokers saying the market is in the tank, the prices are declining,” Russo said.

 

Digging deeper reveals that sellers have resisted dropping prices, at least until recently, he said. The asking prices for homes and condominiums, on average, are still 25 percent higher per square foot than what has been paid over the last six to 12 months, Russo said.

 

This year’s slow start looks particularly bad because it is compared to record levels set for January and February in 2007. Last year started off very, very hot. The $253.21 million in sales recorded in January shattered the previous record for that month. February also brought a record.

 

Russo noted that if you compare this January and February to those months in previous years, the outcome isn’t so bleak. Sales volume was higher this January than in 2003, 2004 and 2006, for example.

 

“It’s not the great cause for alarm that everybody thinks,” Russo said.

 

Nevertheless, Frias and Russo didn’t gloss over the drop in transactions or sales volume. It will have a definitive effect on the sizable real estate sales industry in the upper valley, they said.

 

Neither Frias nor Russo were aware of layoffs in support staff in the real estate industry. They said their firms have not cut staff.

 

But Frias said slumping sales will have ripple effects throughout the Roaring Fork Valley economy. “That’s a lot of raw dollars in the community,” he said.

 

Russo said he doesn’t expect to see a record in sales volume this year. He holds out hope for a good year.

 

“It’s too early to tell,” he said. “It’s possible you could still see a year where you’re 5 percent within $2 billion (in annual dollar volume),” he said.

 

That $2 billion barrier was exceeded in 2005-2007. The record was set in 2006 with sales volume of $2.64 billion in Pitkin County.