Lori and William Small

Lori and William Small

The first-quarter Aspen-Snowmass real estate market results are in for 2020. If you didn’t know that the winter ski season ended abruptly on March 14 when Gov. Jared Polis closed all Colorado ski resorts — and that the world is currently engulfed in the COVID-19 pandemic — then you wouldn’t have evidence of either by looking at the first-quarter statistics.

By all measures, the first three months of 2020 was strong with total sales volume of residential properties up a solid 12% over the first quarter of 2019, and increasing almost 16% over first-quarter 2018. For the first quarter of this year, there were 86 sales transactions compared to the same number in 2019. If this first quarter trend was to have continued through the remainder of 2020, this year’s market would have been on par to be another strong year like 2018 and 2019.

But the COVID-19 pandemic and the resulting national and local economic impact is likely to upset an otherwise strong year for the local real estate market. The extent of the impact is still uncertain, but an early indicator is what’s happening to pending sales. As we enter the early part of April, there are about 28 properties in the Aspen-Snowmass market under contract. Of those, only three were contracts signed after March 14 when the scope of the COVID-19 pandemic was becoming known. All three of those pending contracts are still in contingency periods. Of the remaining 25 pending contracts, all were signed before mid-March and only six are contracts without contingencies. At this same time in 2019, there were 50-54 pending contracts of which most went on to close within 30-60 days later. The lack of new pending contracts in the past 30 days is a potential warning sign that the market is slowing substantially. It also remains to be seen how many of the pending contracts with contingencies will end up closing.

The other dark cloud on the horizon is what’s happening to the national economy and the unfolding global recession. At this time, economists from major investment banks such as Morgan Stanley, Goldman Sachs and others are predicting, on average, that the U.S. economy will shrink in 2020 by 4.8% in the first quarter and 27.5% in the second quarter before rebounding by 13.5% and 12.5% in the third and fourth quarters, if the fight to suppress the COVID-19 pandemic is successful. If this scenario plays out, we could expect anywhere from a 5-12% reduction in the GDP, the primary measure of economic growth, of the U.S economy by early 2021. This would eliminate an unprecedented five to six years of economic growth in just a few months. In addition, the unemployment rate is skyrocketing to levels of potentially 15-20% or more — levels not seen since the Great Depression.

What could all of this mean for the Aspen-Snowmass real estate market over the next year or two? The first likely outcome is a significant drop in the number of transactions and overall volume. If we look back to the 2008-09 Great Recession, the U.S. GDP declined just 2.2% from the first quarter of 2008 to the beginning of third-quarter 2009, when the recession ended. During that period of time, the Aspen-Snowmass real estate market ­experienced a 48% decline in total sales and sales volume. It’s very likely that the local real estate market will repeat that pattern in the next year or two.

The second likely outcome is a decline in values. During the Great Recession, property values declined 25-36% from the market peak at the end of 2007 to the market bottom in the fall of 2009. If the volume of sales declines dramatically as it did during the Great Recession, it’s also likely the market could experience a decline in values on the same scale as we saw during the Great Recession.

A more optimistic view would be that the national economy will rebound more dramatically and quicker once the COVID-19 virus is under control. The federal government, Congress and the Federal Reserve are flooding the economy with unprecedented amounts of stimulus and liquidity for the financial markets. It’s possible that the federal stimulus program, which is estimated to be well in excess of $6 trillion, could blunt a serious economic downturn. Once the stay-at-home orders are lifted, we could see a strong rebound, making this economic coma and its impact short-lived. As people get used to working remotely, the longer-term trend could be favorable for resort real estate markets, like Aspen-Snowmass, as they become more attractive places to live for those seeking an alternative to larger cities.

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 Lori@LoriSmall.com and William can be reached at William.Small@ZenithInvestment.com.