housing ---not calling a top but........

 I am going to go all old school economist and talk about ...........supply and demand

Since the pandemic hit about a year ago there seems to have been an exodus from the big cities to lovely places like Aspen.  With all the rich folk leaving the city for lovely rural mountain towns (or at least buying a bolt hole in the mountains to escape the big city lock down) the supply of homes in Aspen has shrunk to nothing while the prices have soared.

First let's take a look at supply.  I have taken a look at the supply and right now there really ain't much of anything.  Leaky homes that haven't been updated in years asking 40% more than they were a year ago.  Housing is what we economists call an inelastic market--its hard to quickly create more housing to meet demand---that said every builder (and even guys who have never built per my last post) is building.  Spec homes are being built at all levels.  New subdivisions are being built down Valley.  In Aspen everything from $45 million spec homes to new affording housing is coming to market.  And in Snowmass Village our neighbor is doing a gut rehab right now with visions of selling their home for more that $1600 a square foot (and more likely $2k a square foot in their dreams).  Those houses will start to hit the market in the next 2 to 5 quarters.

Old people also typically add to supply when they sell their big family home and move to a retirement community or small house, townhome, condo near or in cities where there is better access to services (hospitals) and can walk to restaurants etc.  Older folks didn't do that during the past year of COVID, but there is no reason to think they will continue to live in their 6k square foot home in Westport, Wilmette, Orange county etc.  As COVID burns out there is no reason to think the 75 year olds are going to want to deal with that big old house (or maybe even that vacation home) any more.

Let's move to the demand side of the equation.  

First let me blow up a myth----everyone didn't move from LA, NYC, and Dallas and enroll their children in the Aspen school district.  As a matter of fact let me give you some data

                     School District                    enrollment change from 2019-20 to 2020-21

                    Aspen                                            -3.6%

                    Telluride                                           -2%

                    Steamboat                                        -3%

                    Roaring Fork Valley                         -6%

If there was a massive exodus of families from the big cities to small mountain towns they didn't enroll their kids in the local school.  Maybe they went remote this year, and plan to enroll next year.  Or maybe they will return to the big city.  Either way if you can't commit to enrolling your child in the local school maybe you aren't really thinking about living in the mountains for the long hall.

Another potential source of weakening demand is the bloom coming off the rose of living in a remote area.  Aspen wasn't the only place to see their real estate market go nuts over the past year, places like Martha's Vineyard did as well.  Aspen and the Vineyard are both great places to vacation but when your Porsche breaks down or you need real medical attention you are looking at a life flight to Denver or Boston.  Your child's sporting events require taking a ferry or driving over a pass in the snow, and winters on the vineyard get pretty cold and gray the second year around.

Also offices and business community synergy ain't going away anytime soon.  Travel, internet and networking is all more challenging from remote communities and if you actually want to order in Indian food ---well forget about it.

So do I think the top in mountain community real estate is in place.  Eh maybe not yet, but do I think demand is going to go down and supply is going to go up over the next year---hell yea.  And with rising mortgage rates and tax rates I think my neighbor best get that rehab done ASAP and get it listed because he might find after paying current rehab prices he is losing money when he goes to sell his home.  And what goes up super fast can come down just as fast (or even faster) we saw that in housing in 2008-09 and well GameStop last month.  As for the long term fundamentals there is not a population boom that is creating new demand for housing, nor outside the top 1% has there been much increase in wealth or earnings soooooo as an old school trader (George Soros) once said ----sell it when you can, because if you wait to sell it when you must you are going to hate the price you get.