In times of economic uncertainty, high net worth individuals focus on safety. From Government securities like 10 year treasuries, to municipal bonds, and gold. There is another trend emerging that Colorado real estate is being placed in the “safe haven” category. What town most closely resembles the “gold standard” in safety?
Why do Investors migrate towards Gold as a “haven”
Safe–haven assets typically perform well during downturns and financial crises when riskier assets underperform. Gold is considered a safe haven because it has acted as a store of value, maintaining its purchasing power.
Gold has three primary characteristics that drive its value
- Rare: you can’t go out and randomly find large quantities of Gold; it is a rare mineral with limited supply
- Desirable: There will always be demand for Gold that can’t be replicated easily. In good times, bad times, and everywhere in between there continues to be a market for gold.
- Long term value: Gold over the long term holds its value
Is there a Colorado town that fits a similar definition of Gold?
I think there is one, Aspen, CO. Aspen real estate has taken off since the coronavirus hit as a “safe haven” for high net worth individuals and looks very similar to Gold in many respects
- Rare: There is almost zero ability to build new inventory in Aspen. Almost all the desirable lots have been long gone and unfortunately you can’t “make” new inventory as the town is bound by national forest which limits any future development. Furthermore, build costs are astronomical which further limits supply.
- Desirable: Aspen is an extremely desirable area to live, visit, recreate, etc.. which will continue to drive demand.
- Long Term Value: Aspen real estate over the long term will hold its value, there will not be a huge influx in supply and demand will stay robust.
Summary
Aspen, Colorado is about as close as you get to the “Gold standard” in real estate. There is only one issue, Aspen real estate is not as easily tradeable as a bar of gold. To sell a 10 million dollar house in Aspen will not happen the same day like it would with a bar of Gold. Long term it is hard to go wrong in a market with such constrained supply and insatiable demand. The runner up to Aspen would be Vail, CO, there is more supply in Vail, but the area is highly desirable from an investment perspective. Look for Aspen along with Vail and many of the Colorado resort communities to some extent to retain their rankings as the “gold standard” in real estate.
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Written by Glen Weinberg, COO/ VP 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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