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ABOR 2023 Market Update with Lawrence Yun and Randy Gold

Yesterday our team attended the Aspen Board of Realtors annual Market Update Luncheon featuring speakers Lawrence Yun, Chief Economist of the National Association of Realtors, and Randy Gold of Aspen Appraisal Group. Both speakers had plenty to offer in terms of how our local and national markets are moving today and what we can expect in the year ahead. Please see below for the notes and most pertinent information as it relates to real estate in the Roaring Fork Valley and what we can expect moving forward.

Lawrence Yun - Chief Economist National Association of Realtors:

- Is a price crash imminent? Prices have not tumbled, but transactions have!

- No job cuts! Still job creation.

- W-2’s and independent contractors 158 million working - far more than 130 million last housing cycle.

- Subprime loans – virtually none and - the ability to pay now included in the qualification process.

- Home builders are much more constrained. Not enough inventory. Still in a housing shortage. Might adjust 5%, but not 30% - housing decline may be short duration given job creation and constrained supply. Much different side-by-side comparison to last downturn.

- Record high number of jobs. More job creation.

- 7% more jobs in Colorado today compared to record high employment pre-Covid.

- Huge desire to come to Pitkin County.

- Inflation is key to mortgage rates. Determined by CPI, prices still rising, but not aggressively. Once inflation comes down, lower interest rates should follow, and more home purchases.

- Rents still rising 9% over last year nationally. Must come down with new inventory. Multi-family housing starts.

- US treasury yield - safest asset in the world. Government guarantees therefore mortgage rates just above 10-year treasurer. Two lines moving together. Normally 1.7% basis points difference between 10-year treasury and 30-year fixed. Mortgage rates should come down by year-end, could hit 5.5%. Rents will come down because of massive construction. Abnormality goes away in treasury vs. mortgage. Some buyers priced out at 7% today.

- Risks and uncertainties: on average a person moves 12 miles from previous home. Now 50 plus miles. Increased office vacancy. Another risk, large national debt. Huge tax on most wealthy.

- 2023 forecasts 11% decrease in unit sales, -2% home sales. Positive in 2024!

Randy Gold - Aspen Appraisal Group:

- Aspirational pricing is a factor in 2022.

- 25% drop in overall dollar volume from $4.6 billion in ’21 to $3.5 billion in ’22 in Pitkin County.

- 1,500 sales in 2021 versus 900 sales in 2022 in Pitkin County

- SF price up 60% in 2022.

- $2.8 million avg. sold price in Pitkin County in 2022.

- Snowmass 50-60% discount to Aspen.

- 2022 - 77% sales were over $10 million, one out of every three sales was over $20 million. Impact of $10-$20 million incredible! $20.745 avg sold price in ’22 and median $14 mill.

- Over 100 billionaires call Aspen home today.

- 132 Placer Lane $55 million December ’22 for Red Mtn. lot.

- Demo permits! Penalize properties that are ripe for demolition or increase the value of vacant lots?

- 2022 TDR for $2.5 mill. Now $1.1 - $1.5 million. Incredible change. Driven by lending, land use changes and fueled by giant market uptick. TDR’s not selling much above $1 mill this year.

- Notable sales:

    1. ‘21 Mountain Chalet for $68 mill.
    2. Hotel Aspen for $32 million.
    3. ‘22 Molly Gibson over $20 mill.
    4. Gorsuch Haus $76 mill. Doronin.
    5. Aspen Athletic Club Building $32 million, two 2,500 sq. ft. penthouses.

- In May notice from assessor - real estate taxes are gonna be ugly. All going to be revalued based on June ‘22. Currently June ‘20. Beware not going to be pretty when getting tax notices!

- Likely very dramatic changes with the land use code ahead. Changes in land use code affect local real estate businesses and the value of the property our clients own. 15,000 is toast - doubtful that will live beyond new regulation. TDR program has preserved more than 10,000 acres of land. Some want to see it sunsetted. Performance standards and demo requirements are more intense. 5,750 is exempt sq. ft don’t have to go through GMQS. May also go away. 4,700 exempt in the basement and garage. That’s also likely to change or go away entirely.

- Finally, three-zone districts unregulated very likely end up with FAR restrictions to control the size of those houses!

- Pay attention and get involved. Changes could occur end of this year!

- Interest rates are not over. Aspen is not immune from what happens nationally. Always track with national recession? Recession? Some kind of recession, shallow and not too much of an adverse impact on our market. Really transitioned already to a much slower local market. How long will it persist?

- We are very synched with DJIA. Are we actually precursors of the next recession? A lot of movers and shakers in the financial world in Aspen Snowmass. On the other hand could be possible that ‘22, ‘23 short blip?

- Forecast for 2023! Generally a slower year than 2022. Aspen houses fewer sales and lower dollar volume. Another strong year for $10 and $20 million plus. Most neighborhoods should see stable or modestly declining values. Snowmass fewer sales and lower dollar volume. 700-900 transactions and dol. vol. of around $2.5 ~ $2.8 compared to $3.2 in ‘22. Would still be 4th biggest year ever.

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