The incredible pandemic-induced local real estate surge of 2020 was even bigger in 2021. This past 12 months was another record-setting year for residential transactions in the Aspen-Snowmass market, with over $3.6 billion in recorded sales volume.
This was a 12% increase over the previously record-setting year of 2020. Besides the overall sales volume, there was a new record set for overall residential sales transactions of 763. This was a 14% increase over the 668 residential transactions we saw in 2020 and a 70% increase over the average annual number of pre-pandemic residential sales that took place in 2018 and 2019.
The last time we saw this level of residential sales was back in 2005, when the previous record was set at 712 transactions. In terms of valuations, the best indicator of how the overall market values have changed in one year is to look at the median sales price of single-family homes. In 2021, the median sales price of a home in Aspen increased 8.3% to $9.5 million, while in Snowmass that number increased 43.5%, to $5.2 million. Without a doubt, 2021 was an exceptional year for the residential real estate market in the Aspen-Snowmass area.
As we begin the new year of 2022, what market indicators can we look at to try to predict what could happen in the local real estate market for the next 12 months? Perhaps the biggest indicator is the record-low inventory of residential properties that are currently on the market for sale. As we start the new year, there are only 199 active residential listings of all types from Aspen to Snowmass. By comparison, at the end of 2020, there were 330 active listings which represent a decline of roughly 40%. At the beginning of 2020, there were roughly 500 active residential listings. The last time we saw active inventory this low was at the end of 2005 when the number of active listings declined to 233. By comparison, at the bottom of the Aspen-Snowmass real estate market recession in the spring of 2009, the number of active residential listings peaked at almost 1,100. It’s clear that the market pendulum has swung to an extreme seller’s market.
What’s happened in the past to sales volume and the number of transactions when the market pendulum has swung this far in favor of sellers? The last time we saw market characteristics anything like what we’re seeing now was back in the fourth quarter of 2005 through the third quarter of 2006 when the available inventory was very tight but not to the degree we’re seeing now. During the 24-month period following the third quarter of 2006, the available residential inventory for sale started to increase from around 332 to over 1,000 by January 2009. During this 24-month period, the national real estate economy started cooling off from the unprecedented run-up in real estate values from 2002 through 2007 caused by massive mortgage lending brought on by an explosion of mortgage-backed securities on Wall Street. In the fall of 2008, Lehman Brothers collapsed and the mortgage crisis and Great Recession started unfolding.
Leading up to the collapse of Lehman Brothers in 2008, the stock market entered a 17-month bear market that started in October 2007 and ended in March 2009, in which the market lost roughly 50% of its value. During this same period, the inventory of residential properties for sale increased to the record high of 1,072. As the Great Recession took hold, property values in Aspen-Snowmass declined 30-35%, and the number of residential transactions dropped to a 200-per-year average for almost three years. At the same time, the overall sales volume hovered around $1 billion annually for four years.
With the extreme seller’s market we’re experiencing today, how likely is it that a similar scenario could start to unfold in 2022 and subsequent years? Or will the market continue the way it has over the past two years? The answer depends on a number of factors. With the inventory at historic lows and prices at historic highs, it’s hard to imagine that the Aspen-Snowmass market can absorb in 2022 the number of sales and the sales volume we observed in 2020 and 2021. Real estate markets also feed on capital liquidity and low interest rates. On the macro level, the Federal Reserve, the bond market, mortgage market and stock market are all sending signals that interest and mortgage rates are headed higher in 2022 and there will be less investment capital flowing through the financial markets. This is also likely to add a damping effect on the local real estate market.
At the same time, the attraction of living and working remotely from an area like the Roaring Fork Valley is likely to continue for the foreseeable future, creating an ongoing steady demand for residential properties. When you combine these factors, minus the possibility of a black swan macro event, it’s most likely that the 2022 real estate market transaction volume and number of transactions will likely return to levels more common during the last few years before the pandemic took hold in 2020.
Lori and William Small, CCIM are recognized luxury and commercial real estate experts with Coldwell Banker Mason Morse in Aspen. They can be found through their website theSmallsaspen.com or by email at thesmalls@theSmallsaspen.com.