The 2012 Aspen real estate market has drawn to a close. By several measures, it appears to have been a pretty good year. Although all the final numbers are not in, the 2012 market has been the strongest market for Pitkin County real estate since 2007, with the total volume of sales are likely to exceed $1.4 billion, a 10 percent-plus increase over 2011. The market was particularly strong in the fourth quarter as sellers rushed to close deals before the end of the year to avoid the prospect of higher taxes.
The market also saw the first evidence of value appreciation since 2007 with average and median single family home prices increasing a modest 1 percent. In addition, the total inventory of available single-family homes and condos currently for sale declined significantly. With 2012 now behind us, what can we expect for the Aspen-area real estate market in 2013? The only reasonable conclusion from reviewing the 2012 results is that 2013 is likely to be a year of lower inventory and higher prices, particularly for newer properties.
In the summer of 2009, there were roughly 475 condo units and 400 single-family homes on the market for sale just in Aspen alone. Over the past three and a half years, the inventory of condos for sale has declined 66 percent to only 161 units currently for sale; the inventory of Aspen single-family homes has declined 54 percent to only 185 properties. The decline in inventory has been particularly acute among newer properties. The last building boom ended in 2008. Since then, there has been very little new construction of homes or condos. In 2012, there were 16 homes that sold that were built within the past five years. Currently, there are only 19 newer single-family homes on the market, which is roughly a one-year supply. The market for newer condos and townhomes is even thinner. In 2012, there were only five sales of condos and townhomes that were built within the past five years. Currently, there are only nine newer units available for sale. Due to scarcity, it’s very likely that newer properties will demand a price premium going into 2013.
Another interesting aspect of the 2013 market may well be the scarcity of Aspen condos in general for sale. A year ago, the Aspen condo market had a large inventory of available properties with over 300 units for sale, compared to the single-family home market that had less than 250 properties for sale. It appeared that the condo market was lagging the single-family home market and condo prices were under pressure. However, over the past 12 months, the inventory of condo properties for sale has declined 46 percent while the single-family home inventory has declined only 26 percent. At the current absorption rate, there is only an 18-month supply of condos for sale. You would need to go back prior to the beginning of the recession in 2007 to find a lower condo inventory level.
It’s clearer now more than ever that the Aspen real estate market is beginning a new phase where scarcity of inventory and higher prices will be the norm. This new phase likely started at the end of the third quarter of 2012 with the final quarter of 2012 being one of the strongest in terms of overall volume the Aspen market has seen in several years. Due to the law of supply and demand, expect escalating real estate prices overall with the most significant price increases likely among newer homes built within the past five years and well located condos in general. New homes and condos just completing construction are likely to be in the highest demand, and therefore, likely to demand the highest prices per square foot.
William Small, JD, CCIM is managing director of Frias Luxury Estates, a division of Frias Properties of Aspen. Reach him at 970 429-2419 or email at email@example.com.