Palm Beach Can Learn Something From Aspen’s Real Estate Boom

(Bloomberg) -- Compared to last year, Aspen’s luxury real estate market had a spectacular September.

New signed contracts for homes from $10 million to $19.99 million were up 800% (nine were signed compared to last September’s one), while new listings in the same price range were up 600% year-over-year, according to a new report by Douglas Elliman.

These numbers come hot on the heels of a booming August (75% year-over-year increase for that price range) and a truly unprecedented July in which a staggering 23 new contracts were signed in that range—a 1,050% year-over-year increase.

“This summer was—the word’s been overused now, but it was unprecedented,” says Andrew Ernemann, a broker at Aspen Snowmass Sotheby’s International Realty. “We went from no activity in April and the early part of May—when I think, at one point, we had a total of 12 contracts in all of Aspen. And then we went to setting records, with over 120 properties under contract.”

But in the midst of this euphoria, there are signs the momentum is fading. Aspen’s September numbers are down 40% from August to September, and the number of new listings also slid 72%, from 39 to 11, which could impact sales volumes in the coming months.

That’s not necessarily bad news.

“I don’t really look at the sharp drop as a negative” says Jonathan Miller, the president and chief executive officer of appraiser Miller Samuel Inc., which  prepared the Elliman report. “It’s self-correcting. You have the pent-up demand aspect, which has been satiated, and now the question mark is how elevated sales will remain going forward, given this new, post-Covid world.”

Considering that Aspen’s real estate market opened in May, nearly a month ahead of comparable real estate markets (in-person showings in New York’s Hamptons were permitted only in mid-June), its slow-but-better-than-average performance could be seen as a bellwether for high net worth markets, including the Hamptons, Palm Beach, Fla., and Greenwich, Conn., all of which had bonanza summers.

“I look at these multiple boutique—or very small luxury—submarkets as [ones that] enjoyed a rapid, sharp burst as they became ‘co-primary’ markets,” Miller says, meaning that houses in vacation destinations are becoming year-round domiciles. “That is what is keeping them substantially above levels from a year ago. Now they’re all plateauing, not unlike most markets, because the demand from the lockdown has been fulfilled.”

“Let’s Go for It”

It’s hard to overstate how quickly Aspen’s market exploded.

“There were two things driving the market this summer,” says Jennifer Banner, a broker with Christie’s International Real Estate Aspen. “One, because of Covid and some of the other things happening around the country, people were looking to get out of the cities and come to a small town where they felt a bit safer.”

“And two, I think we had a large contingent of buyers who’d been sitting on the sidelines, waiting to see if there was a dip in the market,” she explains.

When they saw there wouldn’t be one, Banner continues, “they said: ‘Let’s go for it and make the purchase—maybe I’ll pay more than I hoped, but I’ll be in Aspen.’”

Other brokers agree that’s how it played out. “We weren’t allowed to show property between the first week of March and May 9,” says Galen Bright, of the Aspen real estate broker Setterfield & Bright. “And on May 9, I was surprised with buyers called me, telling me that they wanted to see properties ‘right now.’”

By mid-June, he continues, “It was clear that it was going to be a very busy summer. That was when buyers realized that prices weren’t going to drop.”

A One-Bedroom for $5 Million

The frenzy of home buying extended beyond the traditional Aspen borders, brokers say. “For years, it was all about the core and the West End and then Red Mountain,” says Banner, describing areas that were walkable—or, at the very least, a short drive to downtown Aspen.

“Now we’ve  seen a definite increase in demand in properties that are more out[side]” of town,” Banner says. “McClain Flats, Woody Creek—people looking for more elbow room within striking distance of town. Those numbers are [way] up.”

Unsurprisingly given the pandemic-inspired boost, buyers want houses they can move into immediately.

“Most buyers want turnkey,” says Ernemann. “They’re ready to go and ready to move in. It’s less common for someone to take on a remodel project that can take two-plus years.” 

“We’re seeing it across the board,” says Michael Latousek, a broker with Douglas Elliman. “I sold a $5 million one-bedroom condo before it came to market.”

No More Listings

Now, brokers say, two factors could dent the market: sellers with wild expectations and a lack of new, move-in-ready homes.

“If anything is going to slow the train down, other than seasonality, it’s that the newer inventory is at premium prices,” says Ernemann.

“New listings are definitely now aspirational pricing,” says Latousek. “I’m hearing from sellers they want to put their houses on the market—but they want crazy prices, and I’ve turned down a few listings by saying, ‘This is just too much,’” he continues. “But for me personally, I’m just about out of listings.”

That, Bright says, is his problem, too: “Except for two listings, I think I’ve sold all of mine.”

“I’ve been in contact with a lot of my clients to see if they’d be willing to sell,” he continues. “These people have built incredible homes worth $20 million or $30 million, and buyers are looking for those homes, but people just aren’t interested in selling.”

©2020 Bloomberg L.P.