Fourth Quarter Market Report 2023 | Christie's International Real Estate Aspen Snowmass
Fourth Quarter Market Report 2023
Q4 Economic Overview:
In terms of the national economy, 2023 turned out much better than we could have hoped for at the beginning of the year. 23Q3 annualized real GDP growth came in at a stellar 4.9%, while 23Q4 growth is currently forecasted to come in between 1.5-2%. Overall, in the calendar year 2023, GDP growth will likely turn out to be around 2.4%, built on the strength of a strong labor market and solid consumer spending, with a late season assist from rising asset prices in general and the stock market in particular. We very fortunately avoided a recession in 2023, and inflation came down dramatically with help from improved supply chains, increases in the labor force participation rate, and increased legal immigration, as well as the Fed’s painful but necessary rate hikes.
As we look towards 2024, it likely won’t be a year of significant economic growth with fiscal policy contractionary, and bank lending and thus the money supply contracting due to high interest rates. Importantly, consumer spending is likely to pull back because the current very low savings rate is not sustainable and must necessarily rise, and as more than 28 million borrowers have resumed payments on student loans. As an example of the financial stress on some households, the 23Q3 credit card delinquency rate was 8%, up from a low of 4.3% in 21Q3 and at its highest level since 11Q3 when we were extricating ourselves from the housing bust and the unemployment rate was a staggering 9.1%. Similarly, in 23Q3, 7.4% of auto loans transitioned into delinquency, up from their low of 5.0% in 21Q3. Seeing this much credit deterioration with a 3.7% unemployment rate is somewhat troubling.
While the current bull market has been a boon to investors and household retirement accounts, equities are at or above historic P/E ratios, and it’s also an unusual market in that 72% of equities in the S&P 500 have underperformed the index, the highest level since at least 2000. As such, earnings will play a key role in stock market performance in 2024.
Private-equity deal activity dropped from $1.44 trillion in 2022 to $846 billion in 2023, a decline of 41%. In 2021, private-equity deal-making exceeded $2 trillion, so there is plenty of room for growth in 2024, and as interest rates fall, we may start to see rising deal activity and IPOs.
All signs are that the labor market continues to slowly soften. In November, job openings slumped to 8.8 million, from 10.8 million Y-o-Y and a peak of 12.0 million in March 2022. Thus, the number of available jobs/unemployed person fell to a still high 1.4, but down from 1.8 Y-o-Y and a peak of 2.0 in March 2022. Relatedly, the quit rate is now 2.2%, down from 2.7% Y-o-Y and a peak of 3.0 in November 2021.
The December jobs report provided mixed signals, with job creation at a solid 216,000 and unemployment unchanged at a low 3.7%. On the flip side, the labor force participation rate sank to 62.5% from 62.8%, suggesting that either the slowing job market is making job hunting less appealing or the pool of eligible workers is running low. With December wage growth up a strong 0.44% and Y-o-Y wage growth still too strong at 4.1%, the Fed will be keeping a sharp eye on labor markets before they contemplate rate cuts.
If inflation continues to slow and the labor market cools somewhat, the Fed will reward us with rate cuts no later than June, hopefully slightly earlier. However, households and businesses with existing mortgages or business loans have thus far shown little sensitivity to interest rate changes because of their ‘locked-in’ low rates. That works in both directions, and as a result, the expected rate cuts may not be as stimulative as hoped. I suspect that with a little bit of luck, we will see GDP growth somewhere around 1% in 2024, with a reasonable possibility of a mild and shallow recession sometime during the year.
Q4 2023 National Housing Market Overview:
Across the country, active inventories remain incredibly tight, largely due to the unwillingness of existing homeowners to forfeit their low current mortgage rate and venture out into the world of 6-7% mortgages. The last quarter of 2023, at least in terms of the housing market, was particularly tough as rates hovered near 8% for much of the fall while limited inventories kept pushing prices higher. During November, after annualization and seasonal adjustment, 3.82 million existing homes sold, up from a slightly worse 3.79 million in October, and that was the weakest monthly sales activity since August 2010, during the depths of the Housing Bust. With rates now south of their October highs, existing inventory improving, albeit slightly, and new single-family construction approaching pre-Covid peaks, home sales and mortgage applications should rise. However, as a potential warning light, some 45,000 home purchases fell through during November 2023, 16.9% of homes under contract, and the highest rate since recordkeeping commenced in January 2017. The previous record was the April 2020 Covid peak of 16.8%, while pre-Covid the rate was about 12.5%. This rise in cancellations may simply be cases of cold feet, but it could also be an indication that we are approaching the upper limit of many buyers’ finances.
In terms of new construction, a staggering number of new apartments will be brought online in 2024, and that is likely to push vacancy rates still higher and rents down. Add to that high interest rates, and thus high cap rates, and the multifamily market is likely to struggle in 2024. Still, while apartment vacancies hit 5.4% in 23Q4, up from 4.9% Y-o-Y, and near their pandemic peak of 5.5%, they’re not close to the 8% of 2010. By contrast, office vacancies hit 19.6%, surpassing the previous top of 19.3% set in 1986, when building was unstoppable, and 1991, during the S&L crisis induced recession. While builders have stepped up the pace of new home construction with the resolution of many Covid supply chain issues, high interest rates, materials inflation, and higher labor costs mean those homes are more costly to build, and as a result, they are likely to be higher end homes, as builders have limited incentive to build entry-level homes.
In summary, the 2024 housing market will likely start out relatively weak and then improve gradually as the year progresses, especially as the Fed lowers rates and more potential sellers finally step off the sidelines. Importantly, the spread between the 10-year Treasury and the 30-year mortgage should fall because the fear of mortgage re-fi will decline as interest rates decline.
Overall, 2024 is likely to be a year of transition for the housing market, better than 2023, but not by much, and we will probably have to wait until 2025 to see a return to pre-Covid activity levels.
Q3 2023 Colorado Overview:
Unemployment in Colorado is 3.3% as of 11/23, up from last November’s 2.8%, after hitting a peak of 11.6% in 05/20 (for comparison, the pre-pandemic rate was 2.8%) and well below the U.S. national average, making it difficult for Colorado employers to fill positions. Statewide continuing claims for unemployment hit a high of 265,499 for the week ended 5/16/20 (compared to a pre-pandemic level of 20,735) and are now at 32,332 for the week ended 12/30/23, a year ago it was 29,038.
In Pitkin County, the November unemployment rate was 5.0%; a year ago, it was 4.7%, and for comparison, pre-Covid in 11/19, it was 5.7%. While Colorado’s job growth, at 1.1% over the past year, is below the U.S. rate of 1.8%, job growth in the Colorado mountain areas is among the highest in the state.
Statewide, the December 2023 median price of a single-family home of $549,950 was 3.8% higher than December 2022, while the year-over-year average price rose 8.7% to $703,502. In the condo/townhome market, the year-over-year median price gained 3.0% to $424,995, while the average price increased 8.2% to $569,881.
Through December, closed sales across the state are down 19.1%, while new listings are down 16.3%. There are 14,941 active listings statewide at the end of December, down 14.8% compared to December 2022, representing 2.1 months’ supply of inventory. Across the state, the percentage of list price received at sale was 98.1%, the same as last year and down from 98.7% at the end of September 2023, and days-on-market has increased to 62 days, up from 56 days last year, suggesting a market that is slightly weakening but still very strong.
Q4 2023 Aspen Overview:
The median price of a single-family home in Aspen through December 2023 was $12.4 million, a 9% decline compared to the same period of 2022, while the average price declined 13% to $16 million.
Aspen townhomes and condominiums remained very comparable to last year, with a median price of $3.2 million (up less than 1% from last year) and an average price of just over $4.8 million (up 3% from last year). In Snowmass Village, the single-family median price declined 12% to $5.5 million, while the average price dipped about 1% to just under $7.2 million. Snowmass Village townhomes and condominiums saw the largest median price gains in the area, increasing 10% to nearly $1.8 million, although the average price was virtually flat at just over $2.1 million. Across the Aspen/Snowmass Village area, closed sales were up about 12% compared to last year, and overall sales volume rose 2% to nearly $2.4 billion.
The percentage of sold price to original listing price was down about 2% across the area and days on market increased compared to last year except for Snowmass Village single-family homes, where average days on market declined.
Aspen continues to burnish credibility in the ski world with the recent Aspen Mountain Hero terrain expansion, which added 153 acres of new skiing and increased skiable acreage by more than 20 percent, served by a new, high-speed quad chairlift. And Snowmass topped a recent Conde Nast Traveler’s reader’s choice ranking of North American ski resorts, while Aspen Mountain was fifth and Aspen Highlands was 14th. In their report, Conde Nast cited: “Investments in the Snowmass Base Village have turned it into a social hub complete with an ice-skating rink and great dining venues. On-mountain dining options rival what you’d find in Europe.” While many speculated that the luxury home market would suffer in 2023, it clearly did not in Aspen and Snowmass Village, where the top ten home sales of 2023 exceeded $25 million each.
As Pitkin County finalized the 9,250 square foot cap on new home sizes as part of their plan to reduce greenhouse gas emissions, they signaled that 2024 could bring a further reduction to 8,750 square feet. Existing homes that exceed that size limit will become even more desirable as stock remains fixed. While some of the factors that fed the flight out of the cities during the pandemic have faded, such as work-from-home, the overall appeal of the Aspen Snowmass area has not. Dr. Eisenberg comments: “With easing financial conditions, partly the result of rising equity prices, I expect to see more private equity and IPO deals to be consummated in 2024, which should further strengthen the portfolios of potential buyers. I would not be surprised to see 2024 exceed 2023 in terms of record-setting prices in Aspen and Snowmass Village.”
Aspen Single-Family Highlights:
• The median price for a single-family home in Aspen in 2023 was $12.4 million, 9% less than last year’s $13.6 million, while the average sale price of nearly $16.1 million declined 13% from last year.
• There were 81 closed sales in 2023, a 14% increase over last year, but overall dollar volume was up just slightly from last year to just over $1.3 billion. The average sold price per square foot increased 4% to $3,156.
• As of the end of December, there were 92 single-family homes on the market, compared to 78 at the same point last year.
• The most expensive single-family home sold in Aspen in 2023 was $76 million, compared to a $60 million sale last year.
• Days on market increased from 163 to 175, while the percentage of sold price to original listing price declined from 95% last year to 93% this year.
Aspen Condos/Townhomes Highlights:
• Compared to last year, the median price of townhomes and condominiums in Aspen remained almost flat at just under $3.2 million, while the average price rose 3% to just over $4.8 million.
• The number of properties sold declined by 15%, with 98 closed sales in 2023, compared to 115 in 2022. Dollar volume declined by 12%, to almost $473 million and the average price per square foot dipped about 4% to $2,771 per square foot.
• Condominium and townhome inventories stayed flat at 46 units on the market.
• In the Aspen condo/townhome market, the most expensive unit sold in 2023 was for nearly $48 million, well above last year’s highest sale of nearly $26 million.
• The average days on market for condominiums and townhomes through December 2023 was 150 days compared to 98 days for 2022. The percentage of sold price to original list price dropped from 97% last year to 95% this year.
Snowmass Village Single-Family Highlights:
• In Snowmass Village, the 2023 median sale price of a single-family home was $5.5 million, compared to 2022, when the price was nearly $6.3 million, while the average price declined by about 1% to $7.2 million.
• The average price per square foot, however, remained relatively unchanged at $1,581 per square foot.
• Year-over-year closed sales increased from 33 last year to 36 this year, a 9% increase, and that pushed overall dollar volume up 8% to nearly $259 million.
• There were 18 single-family homes for sale in Snowmass Village at the end of December, compared to 20 at the end of last year.
• The most expensive single-family home sold in 2023 in Snowmass Village was $22.4 million, while the highest price in 2022 was $18.3 million.
• The number of days on market for single-family homes in Snowmass Village declined from 180 days last year to 150 days this year, while the percentage of sold price to original list price declined slightly, from 96% last year to 94% this year.
Snowmass Village Condos/Townhomes Highlights:
• Condominium and townhome median prices in Snowmass Village saw meaningful gains compared to last year, with a median price of almost $1.8 million, up 10% from last year. The average price, however, was flat at $2.1 million, while the average price per square foot rose 3% to $1,548.
• Closed sales in 2023 increased to 158 from 114 last year, and overall sales volume rose 39% to nearly $337 million.
• At the end of the year there were just 51 townhome or condominium units on the market in Snowmass Village, compared to 94 last year.
• In the Snowmass Village condo/townhome market, the most expensive property sold in 2023 was $9.0 million, compared to the highest sale price last year of $7.5 million.
• The percentage of sold to original list price rose slightly from 97% to 98%, while the days on market meaningfully rose from 91 to 386.
To read the Full Report with graphs and stats from Aspen to Glenwood Springs: Click here