The entire world is facing uncharted territory, with so many uncertainties surrounding the pandemic and its full economic impact. There is no way of knowing exactly what the future will bear for the Aspen real estate market.
However, we can reflect on the market data from our last major financial downturn that reached its lowest point in 2008. This trend line can give us some understanding of how the Aspen real estate market reacts in less favorable economic conditions.
Completed Home Sales
Between 2007 and 2008, we saw the number of condo sales decrease by 52% and single-family home sales decrease by 42%. The number of sales stayed depressed until a rebound of real estate activity started to take hold in 2011. One issue that definitely spurred more activity that year was a change in tax policy. On January 1, 2012, the capital gains tax was raised from 15% to 20%, and that encouraged more real estate transactions to close in 2011.
Pricing Per Square Foot
Another thing we can look at is the pricing per square foot. We’ve been fortunate in the past few years to see these numbers reaching all-time highs in Aspen. To grasp how square footage pricing may change in the wake of COVID-19, we can analyze the past data. We can see that the pricing discounts started taking place in 2009 at a -18% discount on single-family homes and a -20% discount on condos. Remember the market contracted, so there were fewer deals taking place for about five years after the drop. Single family home prices hovered around the 18% discount from the 2008 high and condos showed slightly more variability with up to a 35% decrease after four years. The Aspen market came back stronger than ever by 2015 at a record sales price per square foot was established for single family homes and in 2018 the average sales price per square foot for condos was also higher than it had ever been.
What to Expect
Though the situations that caused these market downturns are are vastly different, there are lessons we can learn from studying data from the 2008 mortgage crisis any significant economic downturn. The biggest takeaway is to see that these drops are always temporary and that the market always recovers—even stronger than it was before a major downturn. It may take a handful of years. It may be sooner depending on what happens with COVID-19 as ongoing scientific and medical research reveal more answers and potential solutions.
Real Estate Motivation
It all comes down to motivation for buyers and sellers as our economy begins to open back up. Rebalancing a financial portfolio may lead one client to sell and another to buy. Personal circumstances and life changes (such as marriage, divorce, the addition of children, the loss of a loved one and stock market losses/gains) will keep people engaged in housing choices. Spending more time at home will cause many people to reevaluate their housing needs and priorities.
We have a unique market here given that Aspen and Snowmass are seasonal resort communities with a high percentage of second home owners and vacation property renters. Unlike many metro markets, we are largely dealing with more part-time residents. We may see this pandemic event drive more buyers to secure the Aspen Snowmass vacation home of their dreams. If buyers have been thinking about it for years and years, a reckoning like this often provides a great deal of motivation to put our dreams into motion. I know my personal bucket list has gotten a lot clearer during this time.
Wherever you find yourself on the buying, selling or renting spectrum in Aspen, I am always here to answer your questions and help you achieve your goals.
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Brittanie Rockhill
Aspen Real Estate
brittanierockhill.com
DRE # FA.100019229
