This past weekend, the Aspen-Snowmass economy began the process of reopening after the nine-week shutdown mandated by the Colorado Gov. Jared Polis and Pitkin County officials due to the COVID-19 pandemic.
We could start to see restaurants opening in Aspen at one-third capacity next week, beginning May 20, and lodges opening to some guests beginning May 28. This effort to reopen the economy is happening all over the country and around the world. Reopening the economy is taking place despite the ever-increasing cases of COVID-19, which as of this writing stood at 1.3 million in the U.S. and 4 million worldwide. Deaths from the virus have now exceeded 80,000 in the U.S. and are projected to reach as much as 3,000 per day by the first of June.
While local and national economies are set to reopen, the official U.S. unemployment rate continues to increase and was reported at 14.7% on Friday; effectively it could be closer to 20% or more. The country’s GDP also declined 4.8 percent in the first quarter and is expected to decline another 25-30% in this year’s second quarter (April through June). As the economy opens back up, and real estate showings start up again, are the real estate markets in the Aspen-Snowmass area as well as the rest of the country about to return to the activity seen before mid-March? Or are we likely to experience a “new normal?”
An early indicator of how the real estate economy in the Aspen and Snowmass area may perform in the post-lockdown COVID-19 era could come from April market activity. April is the first full month since the mid-March closing of the economy. During April there were 17 closings across the Aspen-Snowmass market with a total sales volume of about $70 million. This is a 60% reduction in the number of sales and 33% reduction in the overall sales volume compared with April 2019.
An even more predictive indication of how the market will perform into the summer months is the pending sales number at the end of April. Last spring at the end of April 2019, there were 50 pending sales going into May. Last month ended with only 12 pending sales. This current volume of pending sales is similar to the number of monthly pending sales the market experienced in fall 2008 through summer 2009 during the beginning of the Great Recession. However, it’s likely too early to tell if this is a trend that will continue throughout the summer months or if this is a short aberration directly related to the COVID-19 disruption.
One potentially positive sign for the market might be the significant decline in the number of active listings from January and February to the end of April. Typically, when a real estate market begins to weaken, the available inventory increases significantly. Back in late 2007 in the early stage of the unfolding of the Great Recession, the available listings in the Aspen-Snowmass real estate market started increasing from an average of 574 active listings each month to well over 1,000 by the spring in 2009 when the Great Recession officially ended. At the end of this April, the number of active listings declined 11% from the first of the year to about 440 listings. Since April 1, there have been a recorded number of 63 real estate listings that have expired, been withdrawn or canceled from the local market. New listings during April also were down significantly from an average number of 58 new listings per month to just 19 in April. This is a direct result of the uncertainty surrounding the marketing of residential real estate during a global pandemic. This same pattern is unfolding in many real estate markets across the country. This declining inventory could, for the time being, put a floor under real estate values while buyer activity has declined.
As a result of the COVID-19 pandemic, it’s likely a new normal will emerge for the Aspen-Snowmass real estate market. That new normal is likely to mean significantly fewer sales transactions and lower overall sales volume for the remainder of 2020. It also appears that for the near term, the market will not be flooded with a spike in inventory. The next market phase is a bit cloudy and depends upon how and with what speed the national and global economies recover. If the federal government continues its stimulus programs, the stock market is likely to trend higher, which is generally positive for resort-market real estate.
The COVID-19 outbreak has made many individuals and companies comfortable with working remotely. This is likely to be positive trend for resort areas like ours. In addition, life in urban areas has become difficult for many during this virus crisis and could lead to a national migration from highly dense urban areas to less dense rural areas that again would be positive for resort markets like Aspen-Snowmass. The new normal could be difficult in the near term for the local real estate market, but could look much brighter in the longer term.
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.