Aspen prices soar, further limits to development, what are the alternative resorts

Aspen home prices jumped from 10 million to 16 million from 21 to 22.  At the same time the city council has recently increased restrictions on new construction.  How many demolitions/new builds do you think the city will now allow? Hint, the number is much lower than you can imagine.  How will these changes impact not only Aspen but other resort communities?  Are there “replacements” for Aspen?

What was in the data on Aspen’s housing market?

Housing markets all over the U.S. are experiencing inventory shortages, but the drop in Aspen homes for sale is especially dramatic. There were just 37 Aspen single-family homes on the market in April 2022, a 64% drop from 102 in April 2021. At the same time, the average price for Aspen single-family home sales year-to-date is around $15.78 million, up from $10.7 million in 2021.

There have been 39 Aspen home and condo sales over $10 million this year through May 31, roughly 50% more than during the same period last year.

What is in the new proposal from Aspen’s city council to further limit development?

Aspen, like most ski towns in Colorado is basically built out so any new development is redevelopment of existing parcels many times through demolition and a rebuild.  Aspen initially passed a moratorium on demolition and large construction before coming up with their final policy.

The primary policy change is the use of the city’s growth management quota system to limit the number of demolitions and provide criteria for the approval of single-family and duplex residential demolition and redevelopment.

I was floored reading the new ordinance.  I was expecting a reasonable cap, but the new ordinance will limit the number of demolition permits to 6 per year. The new ordinance also addresses affordable housing mitigation for residential development and increases the fee-in-lieu amount developers must pay.  It is no surprise that limiting demolitions to 6 per year will drastically limit the amount of supply available.

What happens to Aspen’s prices?

By further limiting supply, Aspen prices will continue to stay high and likely will go even higher as it is now very difficult to replace an existing house to suit the buyer.  Even with a recession looming the new supply constraints will buffer Aspen real estate more than other locations. Aspen is making national news regarding the tight market,  The Wall Street Journal did a front page article on how high Aspen prices have gotten and how limited supply there is.

What happens to other Colorado ski town real estate?

There is still considerable demand for ski real estate as high net worth buyers look for a “safe haven” to park their money with all the economic uncertainty.  Many of these buyers are not interest rate sensitive as they are buying in cash.  Although there is no direct replacement for Aspen real estate, prospective buyers are seeking out alternatives to Aspen and three Colorado resorts are becoming large beneficiaries of these new buyers.

1. Telluride: Telluride is the closest market to Aspen in terms of size, price point, etc… As buyers are unable to build/buy in Aspen, Telluride is the closest “replacement”.
2. Beaver Creek/Vail: Vail is considerably less expensive than Aspen, yet has the access and high end amenities that many of the buyers require.  Beaver Creek is gated which leads to more exclusivity.
3. Steamboat: Although Steamboat is not on par with the price points of Aspen or Telluride, it has many of the same amenities with a “remoteness” yet easy air access and high end amenities.  It is a value play in ski resorts as you can buy a home close to the resort for 3.5m as opposed to 30 million in Aspen and there is still room to build.  This is attracting many of the buyers priced out of Aspen or Telluride that want the “town” feel.

Summary

With Aspen prices rising so high and future supply basically non existent due to changes in demolition/building permits, prospective buyers are getting priced out and looking for alternatives.  There are three alternatives that are benefiting from the changes in Aspen: Telluride, Vail/Beaver Creek, and Steamboat.  Each of these communities are gaining high net worth buyers that no longer can afford Aspen or can’t find what they want, and they are unable to build it due to the new regulations.

Aspen’s regulations in turn are driving up prices substantially in not only the town of Aspen but in alternative ski resorts like Telluride, Beaver Creek, and Steamboat.  I don’t see this trend abating anytime soon as Aspen prices continue to stay high due to lack of inventory and lack of ability to create any new inventory.

Additional Reading/Resources

1. https://www.aspentimes.com/news/aspen-city-council-moves-forward-with-limits-on-residential-development/
2. https://d3n9y02raazwpg.cloudfront.net/cityofaspen/2e100a1e-8b5c-11ec-972b-0050569183fa-da76106a-2e02-4fe6-bbb2-ae71e53e957b-1655148856.pdf
3. https://www.wsj.com/articles/aspen-real-estate-market-11654174741

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Written by Glen Weinberg, Owner Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine,  The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.

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