Glass half full or half empty?
ASPEN REAL ESTATE – “While the environment remains challenging and [the first half of] 2012 have underperformed hopes from the beginning of the year, overall market progress is being made,” wrote Coldwell Banker Mason Morse agent Tim Estin in his State of the Aspen Market report for the first half of 2012. Estin, pointing out that in the last three years the second quarters have been plagued by one or more crises on the national and international levels, calculated that dollar volume in the Aspen to Snowmass Village market was actually off 22 percent in the second quarter compared to the same time period in 2011. Unit sales were up 3 percent. The first half of the year stats sound even worse, according to Estin. Dollar volume was off 25 percent while unit sales were down 7 percent. “The warm weather conditions in many parts of the country, a lack of snow over the winter/spring 2012 in the Aspen area, a sputtering national economy and captive headlines coming out of Europe were factors contributing to the slowdown in Aspen real estate sales,” wrote Estin.
By Catherine Lutz, August 2, 2012 ABJ
The Aspen Business Journal
Thu., August 2, 2012
Aspen Real estate sales down through June, but read the fine print
By Catherine Lutz
ASPEN—Not even the most expensive residential sale transaction in Pitkin County history could put June real estate sales over those of the same month in 2011, according to the latest report from Land Title Guarantee Company.
On June 1, Saudi Prince Bandar’s Hala Ranch and an adjacent property officially sold to hedge fund titan John Paulson for $49 million. The two transactions accounted for one-third of the $147 million dollar volume for the month, which was a 15 decrease from the dollar volume in June 2011.
The gap for the number of properties sold was much smaller: the 64 transactions recorded in June 2012 were just 3 percent off the June 2011 total.
The year 2011 was characterized by high-end home sales; 21 residential properties changed hands for over $10 million. June 2011 saw three of those sales, for a total of $40 million. And the Silvertree hotel and conference center complex in Snowmass Village changed hands in late June 2011 for $42 million. All told, last June was one of the year’s banner months, with dollar volume 50 percent higher than the same month in 2010 and closer to the numbers in the boom year of 2007 than any of the following downturn years.
Indeed, year-to-date dollar volume at the end of June 2011 was up 24 percent over the prior year, and the number of transactions was up 13 percent. By contrast in 2012, the year-to-date dollar volume of $593.6 million is down 16 percent compared to 2011. The 334 transactions thus far represent a 14 percent decrease.
But real estate activity throughout Pitkin County slowed down significantly in the latter half of 2011, and the year ended just half a percent higher than 2010 in dollar volume, but nearly 10 percent higher in transaction volume.
It’s difficult to predict what might happen in the second half of 2012, and signals are mixed. Some say the dark national mood—marked by, among other things, stagnating jobs numbers and concerns over the euro crisis—continues to cast a cloud over the Aspen real estate market, as do some local factors. Others point to bright spots in the local market as signs of good things to come.
Glass half full or half empty?
Two local real estate agents who regularly crunch thousands of numbers to come up with regular reports on the state of the local market have similar cautiously optimistic outlooks on it at this point.
“While much of the national and global economic insecurity persists, 2012 has been a year of relative resilience of the local real estate market,” wrote Andrew Ernemann of BJ Adams and Company in his semi-annual Big Red Book real estate update.
“While the environment remains challenging and [the first half of] 2012 has underperformed hopes from the beginning of the year, overall market progress is being made,” wrote Coldwell Banker Mason Morse agent Tim Estin in his State of the Aspen Market report for the first half of 2012.
Estin, pointing out that in the last three years the second quarters have been plagued by one or more crises on the national and international levels, calculated that dollar volume in the Aspen to Snowmass Village market was actually off 22 percent in the second quarter compared to the same time period in 2011. Unit sales were up 3 percent.
The first half of the year stats sound even worse, according to Estin. Dollar volume was off 25 percent while unit sales were down 7 percent.
“The warm weather conditions in many parts of the country, a lack of snow over the winter/spring 2012 in the Aspen area, a sputtering national economy and captive headlines coming out of Europe were factors contributing to the slowdown in Aspen real estate sales,” wrote Estin.
The lack of high-end sales compared to 2011 and continued pressure on pricing were other factors, Estin argues. The mid-2000s boom years had produced a slew of brand new spec mansions, and the most of the choice ones have now been sold. (Although two $20 million-plus sales, one that closed at the end of July and one expected to close in August, may turn things around in the upper end.) Troubles in some global currency markets might be affecting international buyer interest this year, too.
“But there is also a sense by many that if one doesn’t get into the market now one will have missed quite possibly the best Aspen real estate opportunity in a decade,” he writes. (One could point at Paulson’s purchase of the Starwood properties at half their assessed value as such an opportunity.)
Estin says that market activity in Aspen in the first half of this year most closely mirrors the first half of 2004, except with much fewer sales and a much higher inventory. Real estate prices in the Aspen and Snowmass area have generally reset to somewhere between 30 to 40 percent off of the 2008 market peak.
Ernemann, in his Big Red Book, prefers to break the market down geographically and by category to get at the trends.
For example, while several indicators are down for the broader Aspen market (which in Ernemann’s analyses stretches out to Starwood to the west and North Star to the east) due mainly to the 2011 near sellout of $10 million-plus homes, average price per square foot is actually up for single-family homes, he found. A stable listing inventory, steadier sales discounts and nearly even number of sales all point to an improving real estate market, according to Ernemann.
Positive news is coming out of Snowmass Village, which Ernemann writes has finally found the bottom after years of downward trends. Condo prices have held steady, and overall number of sales and inventory have leveled out, which is establishing new norms.
Ernemann calls Basalt the healthiest real estate area in the upper Roaring Fork Valley, after listing inventory has dropped by 20 percent from last year, and sales and prices have leveled off. “Real estate investors have started returning to Basalt, and with some property sales occurring below replacement cost it feels as though the next direction for real estate in Basalt will be upwards,” Ernemann wrote.
Breaking the market down by category, Ernemann writes that single-family home market trends in the upper valley “have been consistently positive since 2009.” Dollar volume and number of sales have risen until 2012—and Ernemann, like others, blames last year’s slew of ultra-high-end homes for skewing the numbers. Listing inventory levels are generally consistent with last year (except in Basalt), and average sales price discounts are holding steady at 10 percent off asking price and 20 percent off original list price, according to Ernemann’s analysis.
Average price per square foot is one of the better indicators of the direction of local real estate markets, according to Ernemann, and the three local markets are doing different things. In Aspen, the single-family home price per foot is about the same as 2011, around $1,000, even with more lower priced sales. Snowmass Village’s has dropped, but has established a bottom, and Basalt’s is up for the first time in years.
Trends for condos and townhomes are largely similar in the three regions: consistent numbers of sales, declining inventory, and less discounting. In Aspen, dollar volume dropped considerably due primarily to the high-end condo inventory declining.
By far the strongest trend in the upper Roaring Fork Valley is land sales, both Estin and Talyor pointed out. Twenty vacant lots changed hands in the first half of 2012, versus nine during the same period last year, according to Estin. There were five lot sales in June alone—none in June 2011. That people are willing to buy a lot and spend the time and money to build on it is seen by many as great confidence in the local market.
“Typically, when land sales start to pick up, it is an important marker of a market transition, a tipping point,” Estin wrote.
Ernemann studied another positive trend, the narrowing of pricing discounts. When the market dropped in 2008 and 2009, sales prices averaged more than 10 percent below asking prices, and in some places 15 percent. This is compared to an average 4 percent or less discount during the peak of the market in all areas. Now, Ernemann found, the majority of sales include less than a 10 percent discount from asking price, and virtually all are less than 20 percent. Aspen is an exception because it has a lot of sellers not willing to discount their asking prices, but are willing to negotiate toward a final sale.
Estin looks at where the overall market is now compared to its low in 2009. Dollar volume is up 61 percent, and the number of sales is up 81 percent. Meanwhile, inventory has decreased 32 percent.
“All are evidence of a market gradually improving,” Estin wrote. “With the exception of pricing, the [first half of] 2012 is the second-best half-year mark since the recovery began.”
June 2012 transactions at a glance
(Source: Land Title Guarantee Company)
June dollar volume: $147,102,867
June number of transactions: 64
Decrease from June 2011 (dollar volume): -15%
Decrease from June 2011 (transaction volume) -3%
Year-to-date dollar volume: $593,606,078 (-16% decrease)
Year-to-date transactions: 334 (-14% decrease)
June bank sales: 2, $3 million
Average single-family home price: $4,231,643 million (up 3% over 2011)
Median single-family home price: $2,800,000 million (same as 2011)
June fractional sales: 12 (8% decrease from June 2011)
June fractional dollar volume: $5,438,405 million (28% decrease from June 2011)
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