ASPEN—As the Aspen-area real estate market takes a breather from its torrid pace at the end of 2012, some indicators are pointing toward less high-end activity than in the last two years—although it may be too soon to tell.
There were definitely more real estate sales on the lower end of the market in the first two months of 2013 than during the same time period the year before. Dollar volume of real estate sales in January was down 17 percent in Pitkin County, according to the latest report by Land Title Guarantee Company, while the number of sales was up 7 percent compared to January 2012. Of the 28 residential sales, all but one changed hands for less than $5 million, and 12 were under $1 million.
In February, the number of sales was up 20 percent while dollar volume was down 28 percent compared to the same month the prior year, according to Mason Morse broker Tim Estin, whose analysis includes upper Roaring Fork Valley residential properties but excludes fractionals and properties under $250,000. More than half of February sales were for under $1 million.
For the two first months of the year, residential real estate dollar volume is down 28 percent while the number of sales is up 14 percent in the upper valley, according to Estin.
In the near future, only one property over $10 million is currently under contract—a $50 million Wildcat property on 500 acres, according to the MLS (Multiple Listing Service). Four sales between $5 million and $10 million are pending.
But the lack of high-end activity in the first quarter is not necessarily unusual, said Estin, who analyzed high-end sales in the last three years and found only one sale above $10 million in the first quarters of 2012 and 2013 and none in 2010. There were five such sales in the first quarter of 2011, but that was considered an anomaly. Plus, there was such a flurry of sales in December 2012 due to the impending capital gains tax changes that it probably took away from potential January sales.
Looking ahead, however, signs are not too encouraging for much volume in the upper tier of the market.
Construction of new high-end homes has not nearly met the demand for them in the last few years, as the recession essentially halted spec building.
"During the recession the new-built stuff was selling—there were a lot of highly motivated sellers—and there wasn't much being built," said Estin, who analyzed sales over $10 million since 2010 and found that the vast majority were newer properties. That trend slowed down somewhat in 2012, perhaps indicating the depletion of new, high-end inventory.
Even if construction ramps up again this year—which should happen given the clear demand, said Estin, "it will take us more than two or three years to fill the void in new construction. So in two to three years people will still be able to command premium pricing on new-built properties."
Estin found just 17 properties that were built since 2005 currently on the market for over $10 million in the greater Aspen area.
On the other hand, buyers could turn their attention to vacant lots and build their own new dream homes—a trend that was particularly hot in 2012. There were 37 lot sales in the Aspen area last year, up from 11 in 2011, according to data compiled by the Aspen Appraisal Group, a sign of strong desire for new product both by spec builders and end users. And even with all the action on vacant land last year, Aspen still has a three-year supply of vacant lots, according to AAG.
Meanwhile, some sellers are banking on a rising market—perhaps a bit too soon. Estin has found ten instances of Aspen-area properties that were bought during the recession at great discounts and then re-listed recently at much higher prices. Some were remodeled, some have brand new homes, and some haven't changed at all.
"Whether or not they intended to flip so soon, what this suggests is that there are a number of sellers bullish on the market and these are perhaps overconfident ask prices," said Estin.
Time will tell whether the January and February dip in dollar volume is merely a pause after the frenetic activity at the end of last year, or if a different set of trends are emerging for 2013. The latter part of March is typically quite busy for buyers interested in solidifying deals before the end of the ski season, Estin noted, so the picture should become clearer in April and May.
Overall, "I think we can say prices have stabilized but it's harder to say prices have risen," said Estin. "I'm cautiously optimistic, all signs are good indicators, but it's a puzzle January and February were not better months."
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