Given all that is going on with the housing market and the economy at large, 2023 has many real estate investors on the edge of their seats. Fortunately, home buyers can rest assured in knowing that the relatively small, exclusive Aspen, CO, real estate market benefits from perennial investor interest. Read on for insights into what you might reasonably expect looking ahead to this exciting year.
Start with some macro-level context
Anyone interested in the markets knows the 2020s have been off to a rough start. Investors have been thrown numerous curveballs by volatility, economic upheavals, and in some cases, extreme fiscal and monetary policy. Inflation, which has been a common focal point throughout 2022, can be an especially confounding variable in thinking about the real estate market. On the one hand, an inflated cost of building materials and other inputs into housing can drive prices up, while other economic shifts related to inflation can slow the economy and cool the housing market with it.
As the S&P/Case-Schiller U.S. National Home Price index shows, home prices in the U.S. have been rising since early 2012, picking up an especially furious pace of increase around 2020. Looking further back on the chart, you can see that rising home prices over time are the norm, not the exception. However, the price increases of recent years have certainly deviated from a normal rate of change, and so a correction is to be expected sooner or later. Homeowners should not be dismayed by this, as real estate is generally considered a long-term investment. Home buyers will breathe a sigh of relief if they see prices dip, which is likely but not guaranteed in 2023.
Mortgage rates
After years of declining rates that nearly flatlined around 2020, mortgage rates have risen in 2022, as you can see from this Forbes Advisor mortgage rate chart. As of September 2022, the 30-year fixed mortgage rate had climbed over 6%. Compared with the preceding decade, this may seem exceptionally high. However, prior to the 2008 financial crisis, paying 6% or more for a 30-year mortgage was not uncommon, as shown in the Federal Reserve’s long-term mortgage rate chart.
Predicting mortgage rates into the future is challenging, but as with most fluctuating interest rates, the best insight can be gained from following Federal Reserve policy. The Federal Reserve effectively sets the floor for commercial lending rates with the federal funds rate since this rate roughly approximates what banks pay to borrow capital. It is wise to keep an eye on the Fed in 2023, but for now, it is likely that rising mortgage rates will have somewhat of a cooling effect on the real estate market, including in Aspen.
Local market conditions
Aspen has benefitted from the same intensive real estate market interest that many U.S. locales have seen in the booming market since 2020. The cost of living in Aspen, Colorado, is slightly higher than the U.S. generally, but not exorbitant. Aspen is a small city with a population of around 7,000. This is worth noting, as the small size of the market combined with its reputation helps to buoy the property market, even in tough times.
After a couple of years of falling inventory, the state of Colorado has seen a major rebound in active listings throughout 2022. Following the fundamental dynamics of supply and demand, a rise in the inventory of anything is typically associated with a decline in the price level. For potential buyers of Aspen property, this is great news, as skyrocketing prices amid the scorching market that kicked off the 2020s have been challenging for buyers. Especially amid rising mortgage rates, buyers will benefit if prices do not continue to increase as rapidly. In other words, like many U.S. cities, Aspen has been in somewhat of a seller’s market in recent years, and it is likely swinging toward a buyer’s market going into 2023.
Current owners and prospective sellers of Aspen real estate need not worry, however. Of all places in the U.S. to own property, few have the perennial appeal of Aspen. Any upcoming dip in the real estate market is sure to be followed by a hearty rebound, as luxury properties in Aspen are always in demand.
Wild cards
There are certain variables that could cause unexpected moves in the Aspen real estate market. For instance, inflation could ease more rapidly than expected, which could cause the Federal Reserve, in turn, to ease up on interest rates. This would tend to similarly provide relief to mortgage rates, which could again ignite a wave of real estate buying. In addition, the overall U.S. economy could turn out better or worse than expected. Between inflation, interest rates, and other macroeconomic factors, real estate investors are facing an uncertain economy ahead, and that means an uncertain real estate market.
In addition, it is essential to bear in mind that macroeconomic factors do not necessarily have a uniform effect on all local real estate markets. A luxury market such as Aspen could respond more or less favorably than other locales to changes in the economy. As far as Aspen itself, there are few significant variables in the local market that would tend to cause any major volatility. At the end of the day, investors can rest assured that Aspen will remain a highly sought-after market, and at most, they will just have to endure some ups and downs over time.
The bottom line
Regardless of which way the economy turns, houses will be bought and sold in Aspen. The single most important decision you can make in today’s real estate market is to work with the best available realtor. Aspen specialist Ksenia Tyutrina combines experience, insight, and local market knowledge to offer you the best possible guidance through the uncertainty of the Aspen real estate market. Read more about Aspen in Ksenia’s Local’s Guide, and check out her breathtaking luxury listings to see what Aspen has to offer.
