more signs that aspen has jumped the shark

 yes, some local friends urged me to write something positive BUT they forgot the first rule of journalism ---if it bleeds it leads.  So please, forget those uncrowded ski slopes and beautiful views and let the boo birds out.

In today's paper the Aspen Aspen Music Festival and School announced that they were cutting the philharmonic program and number of students (and teachers etc) due to the housing crisis.  Story below.

No tunes for you

What is next?  Theater Aspen?  The physics institute?  God forbid what if the wait staff for your curated AspenX experience can't find housing.  What then?  

One of our more conservative local pundits also wrote in her weekly column that maybe the new affording housing development shouldn't have parking spaces (or mud rooms or storage spaces).  Cause you know the Aspen X workers can take the bus down valley to the grocery store and hospital and stay out of sight of our 0.001%ers who are going to spend their time not listening to music, physics lectures or seeing a show cause there is no housing.  What does a town look like that has only subsidized housing for workers and vacation homes for people worth more than $100M?  Given the current trend check out Aspen in 2 years to find out.

FYI the music school started in the late 40s.  

Have we jumped the shark?  Who knows but Aspen is getting uglier by the minute.

10 reasons Aspen and roaring fork valley real estate is close to a top

What is your Aspen home worth---whatever someone is willing to pay for it. 

If you bought your home in the past 1.5 years will you be underwater in a 1.5 years.  I think so.  Why?

1.  higher interest rates---when rates go up the cost of a mortgage goes up.  Rates are near all time lows in nominal terms and are currently very negative in real terms (ie lower than inflation).  The most recent inflation numbers were 7.9%---a 40 year high.  Monthly payments on a $1m mortgage at 3% is about $4,200 a month at 6% its about $6k per month and at 8% (where real interest rates would be about 0) you are talking $7.4k per month.  That is a lot more $$$s to come up with every month.   BUT you say Aspen buyers are all cash and they are flush.  Well ok, but if you think the businesses Mr. Rich owns ain't borrowing money or the assets they own won't go down if rates go up well maybe you are the perfect Aspen buyer.

2.  Crypto, NFTs and meme stocks---if these things don't tell you there has been too much money chasing too few assets ---well you also might be the perfect Aspen buyer---but to me it says asset bubble and when rates go up that bubble will get popped (see point 1).

3.  Rational people seriously discussing WWIII.  It's true.  I don't think a world war will be good for asset prices in general and roaring fork valley real estate in particular.  Wars tend to create inflation (see point 1 about higher rates) and living in a really remote location we are likely to get supply chain constrained.  Yes maybe there will be less nuclear fallout in Aspen than the coasts but really if you want a bomb shelter I would suggest a random acre of land anywhere in flyover territory and get a GC to start digging holes and pouring concrete.  Of course there is an acre of land zoned for a hotel at the base of Aspen mountain that just changed hands for $76.25 million if you are interested but maybe $50k for 10 acres in Nebraska makes more sense and you can use some of the $76,000,000 to pay for your shelter and supplies.

4.  Houses going under contract in less than a day.  You might say that is a sign of demand, I would suggest it's a sign of unhealthy demand or maybe even dare I say ......... a mania.

5.  Price increases that bear no resemblance to affordability-earnings.  (see point 8 below)

6.  Covid relocation is a story not a fact.  There has been no significant increase in the school population.  There is a story that people are moving here from the cities now that they don't have to go into the office.  I would suggest that is a 'story' without much basis in fact.  Yes people move here and they also move away from here---if this was true we would see our schools busting at the seems---instead the student body population is largely stable.  And now that Covid has become endemic people are returning to the office---yes you can work from home 2-3 days a week but going into the office is increasingly a requirement and with the private jets falling off the Aspen runway the commute from Aspen isn't always easy.

7.  Second (and 3rd and 4th homes) tend to experience more price volatility.  Home owners want to hold onto their primary homes, not so much their 3rd home.

8.  Supply is increasing---real estate supply takes awhile to come on line in the best of times, and after COVID between worker shortages and supply chain challenges new home supply is taking longer than usual, BUT supply is coming.  Maybe not so much on Red Mountain in Aspen but it is in Snowmass and for sure it's coming to the mid valley.  Homes in the mid valley were changing hands for $350 a square foot 3 years ago and are now flying off the shelf at $800 a foot.  There are 100s of homes being developed in the mid valley to meet that demand, a number of which are being built by first time GCs working without plans.  Do you know anyone whose W2 pay has gone up 130% over the last 3 years or even more as interest rates rise?  To put this simply 3 years ago a family with income of $250k a year could buy a 3500 square foot home in the mid valley for $1.2M, put down $300k and have a $900k mortgage costing them around $4k per month.  Same house today is gonna cost about $3m---they are going to have to put down around $600k and their monthly mortgage is gonna be about $13k per month.  I guess if their earnings have gone from $250k to $600k a year they could swing it---but it didn't.

9.  Aspen real estate is a great place to hide your money if your 'dodgy' (Russian, Chinese, Middle East etc).  That was for sure true---until we saw the Biden administration slap sanctions on Russian Oligarchs.  If the US  is going to freeze bank accounts, grab super yachts and suspend passports why would a home on Red Mountain or Wild Cat ranch be safe.

10.  Asset prices are DOWN.  NASDAQ is in a bear market (down more than 20%) and the S&P is in correction territory (down 13%).  Bitcoin is way under all of its moving averages.  And my favorite way to track new hot money wealth ARKK fund is off a whopping 60+% from its all time high.  Ouch.

Bottom line   If you want to buy a home that has appreciated by 200+% over the past 3 years in a market that is dominated by second and third home buyers (ie speculators) in a mania as rates are going up, supply goes up, demand by primary home owners is unchanged, and asset prices are declining have at it---me I will continue to sit this one out.  And if I had bought a home 5 years ago I would be selling it now---in a couple of years when new owners start wanting to sell their homes  as maintenance and hassle eat into the joy of their Aspen home my guess is the clearing price will be MUCH lower than it is today.

 

10 things i hate about aspen

 Sorry, been away way too long.  Been too busy selling gravirax  to post-- here it goes.

My big prediction at the end of December was that 2022 was going to be the year of anger.  Not a tuff predication given how widely unpopular Joe Biden is while really doing nothing wrong.  I mean, shoot, can you really get that pissed off about suggesting that Medicare cover hearing aids and dentures or paid family leave or even OMG promoting clean energy while the stock market was at near record highs at the end of 2021? (oh yeah, that clean energy that helps reduce global dependence on oil and gas from the USSR is looking like a good strategic move as well).  Well, yeah, guess you can be that pissed at Joe (with our wonderful local Congress Rep Lauren Boebert blaming Joe for killing US service men while he spoke of his son's death due to his service to his country). 

Anyhow, stuff that pisses me off about Aspen:

10.  Calling Tasters to order a pizza at 6 pm and being told 'we are too busy to do take out orders'

9.  having the airport closed twice in a week due to private jets falling off the runway 

8.  Trying to rent Buckhorn cabin on Aspen mountain, and being directed to Aspen X, who told me they could curate an awesome apres ski experience for $18k for 10 people (that includes snowcat down at end of day and champagne and music).  To be fair, you can still rent it out for $200 for the deck and grills, and an additional $50 or 100 for each toboggan ski patrol needs to use to bring food and drink to the deck. But, guess who gets first 'dibs' on the space?

7.  Being told by out of town friends they went to Element 47 and the St. Regis where the dinner was super expensive and pretty much inedible, and they look at me for some kinda explanation, and all I can do is shrug my shoulders and say I haven't eaten anywhere but Home Team in 2 years because I can't afford it

6.  Not being able to find seltzer to buy in our grocery stores---for a year.  Aren't the food supply chain issues supposed to be over?

5.  Flying in and out of Aspen---my wife and son have spent a total of 6 additional nights in various Dallas hotels over two trips due to various flight issues (including the aforementioned private jets off the end of the runway), requiring them both times to be diverted to Grand Junction, and once requiring me to pick them up in GJ 

4.  Bad money---from Hunt to Roman Abramovich to Gorsuch

3.  Speaking of our dear local friend Jeff Gorsuch, he lobbied and pressed the flesh to get the Gorsuch Haus hotel in the lift 1A corridor approved, by the skin of his man fur, by stressing local development and deep local connections.  He just flipped the .95 acre of land that is zoned for his hotel (.95 of an acre for a hotel WTF) that he bought from Aspen Ski Co less than 1 year ago for $10 million.  He sold the land and development rights to a Soviet oligarch for $76.25 million this past week.  So much for local ownership.  I guess Jeff G doesn't mind being two steps away from Ukrainian blood on his hands, and I would say I am going to boycott Gorsuch, BUT I never could afford anything there anyhow.

Picture of Gorsuch Haus with some local feelings being expressed with the ultimate shade being 'go back to Vail'   ohhh my

2.  Aspen Ski Co who charges $2,900 for a Premier season pass.  The same season pass for Squaw, or Vail or Steamboat is between $500 and $1,000.  You would figure with ski co renting out the Buckhorn cabin (sorry 'curating experiences' ) for $18k, having a 'snow beach' with cabanas renting out for $2,200), serving two day old salads in plastic clam shell containers at Gwens --whoops sorry High Alpine for $22 AND being comfortable leaving $66M on the table selling land to Jeff Gorsuch only to wind up with a Soviet as a partner in their building project, they could just maybe see their way to lowering the cost of a season's pass.

              Ski Co Snow beach ($2k)                            Green Acres Snow Beach (no $K's)

1.  The price of everything ---but more than anything real estate.  This is all on one street in Snowmass.

Sold in Jan 2021 for $1438 a square foot---new build awesome views 5.2k feet

Sold in April 2021 for $ 1250 a square foot older build needs work 3.6k feet

Same road (almost impossible building site, great views, 2k square foot house, but its a total scraper asking $6.3m, basically for the land)  scrape it and build less than 5k feet

Or, you could spend the same amount and move to Santa Barbara with views of the ocean and be living in this tomorrow (as opposed to moving into the above scraper in 3-4 years having spent around $11m.)

santa bararbra palace

Am I angry enough for the yah?