A decade ago, we were experiencing the Great Recession, the worst economic downturn since the Great Depression. The national economy, along with the luxury real estate market, was bottoming. Few buyers at the time were interested in purchasing mega-luxury homes in resort markets. In 24 months, the Aspen-Snowmass market dropped from a $2.4 billion sales volume market to a $950 million market, a decline of 60 percent in overall sales volume. At the time, the thought of a full recovery and prices exceeding the record prices set in 2007-08 seemed an impossible dream. In 2009, few would have predicted the market would recover in such a short period of time and go on to set new records.
But that’s what happened. By 2012, the Aspen-Snowmass real estate market had picked up momentum with $1.4 billion in sales volume, and prices had started to recover. It took three more years for the total volume to break the $2 billion mark. By 2017, the market was consistently averaging an annual sales volume of about $1.9 billion. In downtown Aspen, a good measure of the change in Aspen market values, the market peaked in 2008 with average sales prices for property of around $1,600 per square foot. The market bottomed in 2011-12 when average sales prices sank to $1,000 per square foot. Since then, the market has recovered to the point where in 2019 the average price per square foot was closing in on $1,900, a roughly 19 percent increase over the record set in 2008.
The resurgence of the luxury market in the past decade has happened not only in the Aspen-Snowmass area but across the country in markets popular with high-net-worth buyers. In 2010, the highest-priced home sale in the entire U.S. was $50 million. By comparison in 2019, at least six homes sold for over $100 million. The U.S. market over the past five years has averaged 20 or more home sales over $50 million. In 2019, the highest home sale in the U.S. reached an all-time record of $238 million for a purchase in New York City. In addition, there were five more homes across the country that sold for more than $100 million.
The primary cause of the recovery in global luxury home markets over the past decade has been the growth in wealth worldwide. Wealth-X, an analytics firm that tracks wealth trends, recently reported that since 2009, at the bottom of the Great Recession, through 2019, the number of people worldwide with a net worth of $30 million or more grew roughly 4.7 percent per year from 174,000 to 275,000, a 58 percent increase. This growth in the affluent class corresponds closely with the recovery from the financial crisis, resulting in record growth in the value of global stock markets which was up over 377 percent in the past decade, resulting in a growth in wealth to levels that far exceed what existed prior to the Great Recession.
This increase in wealth has driven up real estate values in markets around the world that cater primarily to wealthy real estate buyers like Aspen-Snowmass. By all indications, this growth in the luxury segment of the real estate market is likely to continue into the next decade. According to the National Association of Realtors over the last decade, the Baby Boom generation has accounted for 50-60 percent of second-home purchases, a record high for any demographic group. Over the next decade, it will likely be the millennial generation, those born between 1980 and 2000, that will continue the demand for luxury homes.
Numbering 83.1 million, the millennial generation is the largest demographic group of all time. The millennial generation has been for the past six years the No. 1 group of homebuyers. The older millennials are now reaching their late 30s and early 40s, and are in the beginning of their largest earning years. In addition, they are expected to inherit over $68 trillion from their parents, who have to this point been the wealthiest generation in U.S. history. The wealth of the millennial generation is likely to set new records in the coming years and should continue to propel demand for luxury real estate in luxury home markets globally, including Aspen-Snowmass. A recession in the next year or two could slow that demand in the short term, but over the long term, the pattern of demand for luxury homes, evident in the past decade, will likely continue into the next decade and beyond.
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.