Lori and William Small

You often hear the phase “canary in a coal mine” used as a metaphor to describe an early warning of things to come. The phrase originates from a practice in the coal mining industry to warn miners of dangerous conditions before the advent of electronic sensing devices. The practice was to carry caged canaries into the mining tunnels to protect miners from dangerous gases such as carbon monoxide. If the concentration of dangerous gas was high, it would kill the canary before killing the miners, therefore acting as an early warning device of sorts.

 In the world of luxury residential real estate, are there any reliable indicators that would warn us of impending danger in the luxury residential markets? A quite reliable one seems to be the direction of the stock market. Historically, the stock market and real estate market have moved in similar directions. Back in the 1920s and 1930s, during the Roaring Twenties and Great Depression, real estate values reached their highest levels in Manhattan in the third quarter of 1929 just as the stock market peaked. After the stock market crash, real estate values declined 67 percent through 1932 while the stock market lost 90 percent of its value over the same period. High-end property values were most closely correlated to the downward move in the stock market. This pattern has repeated itself over the years — particularly in the luxury and resort real estate markets.

It’s often said that weakness in the real estate market can signal the next recession and ultimately a stock market correction. The theory is that as home sales slow, there will be fewer buyers to purchase items related to the housing market which leads to weakness in the overall economy, declining corporate profits and eventually declining stock prices. In the last recession, home prices in many parts of the country started falling in 2006, which led to mortgage defaults that led to the beginning of the banking crisis in 2007 and the 2008 financial crisis. The stock market peaked in October 2007 and fell roughly 50 percent through March 2009.

Unlike primary home markets, luxury and resort home markets seem to slow as or after the stock market starts correcting. In the final quarter of 2007 as the stock market started its decline, the total number and volume of real estate transactions in the Aspen Snowmass market also started a decline. The stock market bottomed in the spring of 2009 and the Aspen Snowmass real estate market bottomed about six months later in the fall of 2009. Again, near the end of November 2015, the stock market peaked followed by an 11 percent decline into the first quarter of 2016 before starting to recover. The local real estate market followed suit with a 42 percent decline in total volume of sales through the first half of 2016 before beginning its recovery.

The stock market continued its upward trend in 2017 and the first three quarters of 2018. The Aspen Snowmass real estate market followed suit turning in strong sales years in both 2017 and 2018. In mid-September 2018, the stock market peaked again before declining roughly 17.5 percent over a three-month period of time before bottoming in mid-December. In similar fashion, Aspen Snowmass experienced a slowdown at the end of 2018 into the first two months of 2019. In this first quarter of 2019, the stock market rose 15 percent putting in one its best first quarter performances in ten years. The local real estate market followed suit with a near doubling of the number of properties going under contract as we approached the end of March into early April.

There are several possible reasons for this correlation between the stock market and the luxury vacation home market. The stock market is one of the primary indicators of the wealth effect which means as stock values increase, stockholders become wealthier and more optimistic and are more likely to make discretionary purchases such as a luxury second or third home. At 54 percent, Pitkin County has one of the highest concentrations of non-resident homeowners in the country. This means that the Aspen Snowmass real estate market is likely to feel the immediate impact of gyrations in the stock market.

So if you want to try to predict what will happen in the luxury real estate market, keep an eye on the stock market as a “canary in the coal mine” as an early indicator of whether the Aspen Snowmass real estate market is likely to become stronger or weaker in the future.


Lori Small is a luxury real estate broker associate with Coldwell Banker Mason Morse; William Small is the founder and CEO of Zenith Realty Advisors LLC, a commercial-investment real estate advisory and investment firm. Lori can be reached at and William can be reached at