2011 Real Estate Summary

Residential & Commercial
Residential Real Estate
At the close of 2011, it was not yet possible to say that the Teton County Real Estate Market has experienced a year without value erosion since the end of 2008. However, the losses experienced in 2011 appear to be less than has been experienced in previous years. Furthermore, there is evidence that many market segments began to experience value stabilization in mid-2011, but this trend has been less then resolute. Often, a series of positive indicators will occur, only to be contradicted by a motivated seller entering the market and revealing the tenuous nature of the trend. The general theme for the real estate market in 2011 was an increased number of sales transactions (22.92%), but with these transactions occurring at lower price points (average transaction price fell by over 17%). The result of this relationship was that the dollar volume of real estate sold indicated a flat to decreasing trend.

As mentioned, value loss occurred in 2011 (perhaps more in the first two quarter than in the second half of the year). However, as can be expected of a market the size of the Teton County Real Estate Market, the average price points put forth by the aggregated data can be misleading. Observations such as dramatic price drops in the average transaction price of the condominium market or slight increases of the average transaction price of vacant land are more attributable to the year-to-year flux in the type of real estate comprising the inventory of sold property, rather than price trends of component properties in the inventory. To further analyze the most current trends in the Teton County Real Estate Market, the market segments of single-family home sales, vacant homesite sales, and condominium / townhome sales will first be examined without differentiation between the higher-end resort segment of the market and the more moderately priced market segment. Each of these data sets was then allocated between its higher-end and more moderately priced components for further analysis and comparison to data from previous years.

I. Single Family Residences
Reviewing the yearend sales data for detached single-family residences for 2011 as compared to 2010, an increase in the number of sales of 34.5% was noted. However, a decrease in the average transaction price of slightly over 16% negated much of the gains in transaction numbers and dollar volume of sales only increased slightly (less than 5%) as a result.

Allocation Between “Resort / Second Home” and “Local” Market

Historically, the Teton County Market Area has been able to be segmented into its components of homes having their greatest appeal to market participants whose income is largely dependent on the local economy, versus homes that are more likely to appeal to second home purchasers and investors whose wealth is not necessarily tied to the local economy. Examples of the former category would be homes in developments such as Cottonwood Park, Melody Ranch, and the incorporated Jackson area. Examples of the latter area include homes located on the “West Bank” of the Snake River, north of Jackson, and the Teton Village area. The following table allocates the single family home sales between these segments:

Both the locals market and resort market segment posted significant gains in number of transactions. The locals market posted a nearly 55% gain in this measure which, when coupled with an only 5% decrease in average transaction price, resulted in a 39.34% growth in dollar volume of sales. The second home market showed growth in transaction numbers of over 18%. However, as the average price of single-family home transactions for the second home / resort market decreased by nearly 10%, the overall dollar volume of sales for this segment was slightly down (2.63%). Due to the large transaction prices associated with Teton County’s higher-end properties, it is not surprising that the decreases in this market segment outweighed the gains of the local-oriented market, resulting in only a slight increase in dollar volume when considering the market as a whole (un-segmented).
Measures of central tendency (such as average price) can frequently portray an incorrect image of the market, as a few outlying sales have the ability to skew such measures easily. However, the indication provided by the preceding data that property values for single-family residences dropped in 2011 is reasonably accurate. As support for this, it was observed that the average price per square foot of single-family residences between 1,500 and 1,800 square feet in Cottonwood Park was approximately 7% less in 2011 than it was in 2010. While differences in the quality and appeal of the homes being sold make this not a perfect measure, it is a good indication that a loss in value occurred in the local segment for single-family homes. Similar analysis for Rafter J Ranch and Melody Ranch returned respective devaluation numbers of 3% and 14%. As a survey of the higher-end market, Teton Pines Cluster Homes (2,500 to 4,500 square foot resort housing with relatively uniform exterior design guidelines) were analyzed for disparity between 2010 and 2011 sales prices. The observation of two sales from each year provided the indication of value losses ranging from 7.7% to 8.46% per square foot occurred from 2010 to 2011. Notably, the magnitude of value loss that was observed in both segments is far less than that observed in 2009 and implies a leveling trend for home values.

Luxury Home Submarket of the Resort-Orientated Market Segment
Included in the above-discussed resort orientated market segment is the submarket of luxury homes, the most expensive and unique homes of the single-family market. Observation of this value grouping reveals that 27 sales equal to or above $3,000,000 occurred in 2011. This number is similar to the numbers noted in the years of 2000 and 2004 (and only slightly less than the sales numbers for 2005 – 2006). While still less than that of the high-water mark of 2007, the fact that a number in the high twenties was attained this year is a sign of the continued strength of the most expensive value segment of the single-family home market.

** The preceding table is exclusive of the Cabins at Shooting Star, which could arguably be considered single-family residences as opposed to Townhomes (as mentioned above, this would increase the above $3,000,000 price segment to 32 sales in 2010).

II. Single-Family Homesite Sales
Observing year end data for vacant homesites, increases in the three main metrics of number of sales, average transaction price, and dollar volume of sales were noted. While encouraging at first glance, it needs to be understood that these trends were the result of several high-end sales occurring that influenced averages upward. In actuality, comparisons of individual transactions in this market segment show that the vacant land in the locals market experienced a noticeable devaluation from 2010 to 2011, while data for the resort / second home market gave one example of values tracking somewhat level for this segment. Summarizing, despite a slight uptick in the average transaction price that is largely due to a few outlying data points, the single-family homesite market remains one of the more challenged market segments with lack of financing and market participant’s lack of appetite for construction projects being the hypothesized reason for this market dynamic.

Allocation Between “Resort / Second Home” and “Local” Market
As was done with single-family residences, the market for vacant homesites was, for analysis, allocated into its component parts of the “resort” and “local” markets. The following table summarizes this allocation:

From the above data it is noted that the local-oriented segment of the market had slightly less sales in 2011 than in 2010, while the resort segment experienced more sales in 2011 than it did in 2010. Furthermore, the average transaction price of the local market increased by 15.35%, while the average sales price of the resort market increased by 7.55%. As a result, the local-oriented market showed a drop in dollar volume of sales of 7.72%, while the resort / second home market showed and increase in this measure over the 2010 figure by 13.21%. As was the case with the single-family sales data, the small sample size of the sold data has created a situation where trends indicated by average transaction price data are not indicative of the value trend of individual properties. Causes for this measure being skewed include, for the local-oriented market, a drop in the number of smaller homesites during 2011 and the occurrence of one larger-tract sale that was classified as a local market sale – but was ambiguous in that regard. In the second home / resort market, the average price of vacant land was skewed upward as the result of six sales occurring in the Gros Ventre West and North developments, as well as three sales of premier homesites in the Bar BC Ranch Subdivision. The fact that these types of transactions were more prevalent in 2011 than 2010 is positive indication, but the impact on average prices caused by these sales serves to skew value trends. As a more realistic example of value trends in the local-oriented market, it was noted that two lots sold in Melody Ranch Subdivision for less than $200,000 in 2011. In comparison, at the end of 2010, the least expensive Melody Ranch lot listing was in the low $300,000 range. One positive indication for homesite value trends in the local segment of the market is that a floor seems to have been established in the high one hundred to two hundred thousand dollar range. In support of this, it was noted that two lots were purchased in 2011 for less than $150,000 as the result of a motivated / distressed sale, but were then quickly resold in excess of $200,000 each. Due to the varying attributes of homesites in the resort / second home market, it is more difficult to discern value trends for these types of homesites through analysis of sale / re-sale data. That said, the observation of three successive lots sales in the newer filings of the Jackson Hole Golf and Tennis Resort provided the indication of a stable value trend during 2010 and 2011.

III. Condominium and Townhome Market
Observing year end data for attached homes, an increase in the number of transaction of over 13% was noted in comparison to 2010 data. However, this gain came in combination with an over 40% drop in average transaction price, the result of this being a drop in dollar volume of sales of 37.45%. However, as was noted with the other market segments, the dynamics of the market as indicated by the aggregated data should not be confused with the trends for individual unit pricing. More specifically, while value loss did occur in this market segment, a flurry of activity in some lower-priced developments created downward pressure on average price indications, and this effect was enhanced through the closing of nine Shooting Star Cabins in 2010, which were significant in pushing averages upward for that year. As the contracts on the Shooting Star Cabins were negotiated prior to construction (thus prior to 2010), the disparity in average price measures overstates the disparity in price trends between 2010 and 2011.

Allocation Between “Resort / Second Home” and “Local” Market
As was done with single-family residences and homesites, the market for attached homes for analysis, was allocated into its component parts of the “resort” and “local” markets. The following table summarizes this allocation:

Observing the data when allocated by market segment, it is noted that the local-oriented market segment showed an increase of 26%, while the resort / second home market segment stayed essentially level (slight increase of 3.39%). Furthermore, the local-oriented segment of the attached home market reported a drop in average price of 31.37% which, while significant, is less than the 44.17% average price drop noted for the resort/second home market. The result of the drop in average transaction price is that dollar volume of sales decreased for both market segments (21.76% for the local-oriented market and 42.28% for the resort/second home segment). However, it is again noted that the indications provided by average pricing trends are not completely accurate indications of individual unit pricing trends. More specifically, when viewing the data behind the averages, the following was noted when comparing the years of 2010 to 2011 for the condominium / townhouse market in Teton County:

• The 2010 average price indication was benefitted by the closing of nine luxury townhomes at the Shooting Star development, multi-million dollar transactions that were negotiated prior to construction of those units.
• In 2010 there were five sales of less expensive units in the “Old Teton Village” area that is comprised primarily of units dating back to the initial years of development at the Jackson Hole Mountain Resort. In 2011, eleven of these types of units sold, exerting downward pressure on overall averages.
• Six Ponderosa Village Condominium Units (perhaps Teton County’s most affordable market housing development) sold in 2011, whereas none of these units sold in 2010.
• Five High Teton Condominium Units (another of Teton County’s more affordable developments) sold in 2011, as opposed to one such unit in 2010.

In consideration of the preceding data, it can be intuited that the drop in value of individual units in the Teton County condominium and townhouse market is not as dramatic as indicated by the progression of average price indices, and this is, in fact, the case. Examination of sales and re-sales of similar units throughout the time period of 2010 – 2011 provides the indication that values have showed signs of stabilization. The September sale of an Elk Run Condominium in the town of Jackson was noted to be less than 4% below the August 2010 price point of a similar Elk Run unit and over 3.12% greater than the second-most recent sale of Elk Run Condominium (occurring in May of 2011). This trend of a condominium unit selling later in 2011 for more than a similar condominium unit from the same development had sold earlier in 2011 was also replicated in at least one other Jackson attached home development and could optimistically be interpreted as an inflection point in value trend (or at least a noteworthy indication of price stabilization). Similarly, the above-mentioned Ponderosa Village Condominiums were observed to begin 2011 trading at a price point in the $100,000 range, and the last two transactions of 2011 for units in this development were at price points nearly 30% higher than this. It was also noted that the average price of a one-bedroom “Obrien Designed” condominium in the Jackson Hole Racquet Club in 2010 was just over $255,000, and this same measure was $266,000 in 2011. And, while a current listing of a one-bedroom racquet club condominium for only slightly more than this average price provides the indication that it is too early to say that prices are rebounding, signs of stabilization continue to be evident. The condominium hotel market or “condo-tel” market (units that have nightly rentals facilitated by a front desk) has been challenged as of late due to a lack of bank financing availability and lackluster returns from rental of such units. This market continues to be faced with such hurdles and sales prices for non-developer sales was noted to decrease nearly 30% on average from 2010 to 2011. However, some improvement has been noted with 13 units from the developments of Hotel Terra, Snake River Lodge and Spa, and Teton Mountain Lodge closing in 2011, as opposed to 10 units from these developments in 2010. Notably, in both 2010 and 2011 some of these closings were accounted for by purchasers of Hotel Terra units that were presumably completed due to pre-construction contractual obligations. Nevertheless, even with the exclusion of these sales, an increase in condo-tel units was noted (8 in 2010 versus 9 in 2011).