Teton County Real Estate Late Summer 2008 Update

Increasing Inventory With Decrease in Demand Frame a Market Softening

As final deeds are processed from mid-August, it is evident that sales volume in Teton County, Wyoming is considerably behind last year’s pace. Comparing mid-August statistics from this year to the same period as last year, the number of residential property sales (single-family residences, condominium / townhouses, and residential building sites) showed a decrease of over 44%. As a result of this drop, dollar volume of sales decreased over 37%. Despite softer demand, the average price per residential transaction rose 12.81% when comparing the two periods. An increase of this magnitude could potentially be explained by a change in composition of the body of sales and is not necessarily construed as continued trend of price inflation in the Teton County Market Area. Review of sales and re-sales of the same or similar properties over the 2007 to 2008 time period indicates that sellers have, with a few exceptions, been reasonably successful at not selling properties for prices lower than that for which they were purchased. However, the resistance of Teton County property owners to acknowledge a softening in market demand has created a standoff between sellers and buyers, the result of which has been a greatly reduced sales volume.

	2007	2008
Total Residential (Single-Family, Condo,Homesite) Transactions	519	288	-44.51%
Average Price of Transaction	$1,333,913.75	$1,504,774.87	12.81%
Total Sales	$692,301,236.67	$433,375,162.94	-37.40%

The decrease in sales activity has caused a marked increase in the inventory of available homes, attached homes and homesites for sale, with inventory spikes ranging from 22% to 248% depending on the market segment. 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. Due to the necessity of collecting deeds subsequent to their being recorded, this “year to date” analysis reflects a year-to-year comparison of sales through the cut off period of August 15.

Single Family Residences in Teton County Wyoming

Reviewing the year-to-date sales data for detached single-family residences for 2008 as compared to 2007, a decrease in the number of sales (-54.27%) and dollar volume of sales (-52.96%) was noted. The average price single-family home transaction did increase slightly during this period (2.87%). However this increase could be as much from the changing makeup of the sales comprising the body of closed sales rather than home appreciation. Observation of “paired” sales and re-sales of the same or similar properties over the past year provided further evidence of a market slowdown. As an example, the June sale of a home in Cottonwood Park showed only a 2.19% increase in price from its purchase approximately a year earlier. This implies a price growth rate of less than two tenths of a percent a month, whereas previous growth rates during the 2006 – 2007 time period were routinely noted in the 1.5% to 1.75% per month range (18% – 21% per year). Notably, the later into the 2008 that the second sale of a “pairing” took place, the lower the average appreciation rate. This likely indicates that even the modest 2.19% growth observed in the above-discussed Cottonwood comparison was likely the result of the price growth during mid-to-late 2007, with price trending during early 2008 to present being level, at best.

The attached table arrays year-over-year comparisons of single-family home sales by analyzing the time period of January 1 through mid-August.

Observing the attached table and chart (see link above), it is noted that the number of single-family sales that have occurred year to date has decreased 54.27% from the same period the preceding year. Number of sales this low has not been seen in the preceding eight years. However, this loss in numbers was partially offset by an increase in the average transaction price over this period. As a result, total dollar volume of sales has remained greater than that of 2004, but less than that of 2005.

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 homesites between these segments:

Single Family Residential Local Market

	2007	2008
Number	116	57	-50.86%
Average	$914,175.85	$1,135,517.53	24.21%
$ Volume	$106,044,398.75	$64,724,499.00	-38.96%

Single Family Residential Resort/Second Home Market

	2007	2008
Number	83	34	-59.04%
Average	$2,927,211.86	$2,925,147.06	-0.07%
$ Volume	$242,958,584.00	$99,455,000.00	-59.07%

As shown in the previous table, the resort market has shown a slightly greater decline in sales (on a percentage basis) than that of the grouping of sales that have been classified as being pertinent to the local market. This observation somewhat corroborate reports by local Realtors that out-of-town buyers have not been present in great numbers this summer. Having said that, the disparity in sales decrease is less than 9%, which could arguably be indicative of a relatively equal allocation of decrease in the two market segments.

Luxury Home Submarket of the Resort-Orientated Market Segment

Included in the above-discussed resort orientated market segment is the submarket of luxury homes. Observation of high-end reveals that 10 sales equal to or above $3,000,000 had occurred as of mid-August this year. This number is similar to that noted in the years between 2000 and 2004, but less than that of the three immediately-preceding years (which had an average of over twice this year’s tally). The attached table shows year-to-date data for this market from year 2000 through 2008

Homesite Sales in Teton County Wyoming

Observing year-to-date data for vacant homesites similarities with the single-family homesites are noted in that a significant decrease in the number of sales of vacant land has been noted between what occurred year-to-date as of mid-August 2007 and year-to-date 2008. More specifically, vacant land sales decreased in number (-53.45%) and dollar volume (-34.83%). An increase in average sale price (40%) was noted. However, this is the result of a lack of lower-end lot product rather than price inflation. Observation of “paired” sales and re-sales of the same or similar properties provided further evidence of a market slow down. As an example, a lot proximal to the Jackson Hole Golf and Tennis Resort sold in June of 2008 for 5.59% greater than it was purchased for in July of 2007. This modest increase reflects and annual rate of appreciation of 6%, a figure at least three times less than rates of appreciation noted in previous years. The attached table arrays year-over-year comparisons of vacant homesite sales by analyzing the time period of January 1 through mid-August.

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:

Residential Homesite Local Market

	2007	2008
Number	40	16	-60.00%
Average	$569,859.43	$1,001,906.25	75.82%
$ Volume	$22,794,377.20	$16,030,500.00	-29.67%

Residential Homesite Resort/Second Home Market

	2007	2008
Number	76	38	-50.00%
Average	$2,051,605.26	$2,643,342.11	28.84%
$ Volume	$155,922,000.00	$100,447,000.00	-35.58%

As shown in the previous table, the resort market has shown a slightly smaller decline in sales (on a percentage basis) than that of the grouping of sales that have been classified as being pertinent to the local market. This is exactly counter to the trend noted in single-family residences. However, the differential in decrease between the two market segments in only 10 percentage points

and does not point to any significant difference in the market segments when speaking relatively.

Condominium and Townhome Sales in Teton County

Observing year-to-date data for condominiums and townhomes, a decrease in sales volume (number of sales) of approximately 30% is noted. While less than that of the single-family and vacant homesite segments of the market, it is a considerable drop nonetheless. An over 24% increase in average price accompanied the fall of in sales numbers, with this increase in transaction price mitigating the change in dollar volume of sales to only show a 7.21% decrease in that measure. However, it is noteworthy that 37 of the attached home sales included in this year-to-date data were attributable to the post-construction closings on the Hotel Terra Condominium Project. Without these sales, the number of transactions in this market segment would have decreased in the amount of 48.04%, a figure similar to that of the decline of the single-family and vacant homesite market segment. As many of the Hotel Terra purchasers had obligated themselves to the purchase of these units prior to the market acknowledgment of a slow down, it is arguable that the data set which excludes the Hotel Terra sales provides a more accurate interpretation of current market conditions. Observation of “paired” sales and re-sales of the same or similar properties was slightly more ambiguous than single-family homes or vacant land. The comparison of the January 2007 sale of an older Teton Village Condominium to its subsequent sale in May of 2008 showed an annual rate of appreciation of over 20%. Furthermore, an upper-end townhome in the Granite Ridge Area of Teton Village showed an annual rate of appreciation of over 7% when comparing its April 2007 sale to its re-sale in April of 2008. However, when observing the buildup of active attached home inventory (a tend that is discussed in more detail subsequently in this document), these examples of price growth begin to look like anomalies, or at least part of a trend that has ceased as of early-to-mid-2008. Please see attached document for a chart and a graph related to condominium and townhome sales.

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:

Condominium/Townhouse Local Market

	2007	2008
Number	100	62	-38.00%
Average	$480,085.25	$641,500.60	33.62%
$ Volume	$48,008,524.72	$39,773,037.00	-17.15%

Condominium/Townhouse Resort/Second Home Market

	2007	2008
Number	104	81	-22.12%
Average	$1,120,897.62	$1,394,384.28	24.40%
$ Volume	$116,573,352.00	$112,945,126.94	-3.11%

As shown in the previous table, the local market has shown a greater decline in sales (on a percentage basis) than that of the grouping of sales that have been classified as being pertinent to the resort market. This disparity of 16% could be construed as being somewhat significant. However, as previously discussed, the influence of the closing of pre-sales from the Hotel Terra development are likely to have contributed to the masking of true market sentiment.

The Supply Side

When considering the health of a real estate market, it is important to consider available inventory as well as historical demand. In this regard, signs of a market slowdown are evident as well.

The attached table arrays the increase in listed inventory in the major market segments of Teton County. Areas such as the condominium market north of the Town of Jackson or the market segment south of the Snake River Bridge were not specifically addressed due to the inconsistencies typically caused by the limited amounts of data points in these areas. Overall, this analysis shows that, on average, buyers have nearly 90% more inventory to select from when property shopping in Teton County. A general theme with this increase is that the price segment between $1,000,000 and $2,000,000 is showing the greatest increase in inventory, perhaps due to the fact financing of larger or “jumbo” loans is often integral to the purchase of properties in this segment. The advent of more stringent lending guidelines is very likely to have hit this segment of loans the hardest. While this increase in inventory does not necessarily indicate an oversupply in all areas, it is certainly an indicator of a cooling down of the once super-heated market that, in retrospect, likely began subsiding in late-2007. A more detailed analysis of the increase in inventory by property typed is as follows:

Single-Family Homes

An increase of 147 single-family home listings was noted in the major market segments of Teton Village, West Bank (of the Snake River), Gros Ventre Buttes and North of Town, and the combined Town of Jackson / South of Jackson Area. Of these areas, Teton Village has actually faired the most favorably, with a slight decrease in available inventory being shown. The area including Jackson and areas immediately south has shown the greatest increase in inventory. As previously alluded to, the largest increase in inventory is noted in the $1,000,000 to $2,000,000 range. As an example, in August of 2007 a total of 11 homes were available for sale in the West Bank market area in the pricing range of $1,000,000 – $2,000,000. As of the end of August this 2008, there were 28 listings that existed in this market segment. One less discouraging observation is that during the more robust market period of August 2006 through August 2007 there were 41 homes sold in this price segment on the West Bank. The inference being that, when the market regains momentum, inventory is still likely, as of the current time, at reasonable levels compared to historical demand. Conversely, the August 2008 figures for the South of Town market area indicates that 33 single-family homes are listed between $1,000,000 – $2,000,000, with only 23 listings having sold in this market segment during the 12-month period of August 2006 through August 2007. While this is not an astronomical over-supply, it is indicative of current supply being greater than recent annual demand in the Jackson / South Park area, even during its more healthy periods.

Attached Homes (Condominium / Townhomes)

An increase of attached home listings in the amount of 129 units has been noted in the period of August, 2007 through August 2008. This increase was noted in the three market segments of Teton Village, Teton Pines / The Aspens, and the Jackson / South of Jackson. The biggest increase in supply was noted in the more moderately-priced, in-town segment. As an example, in August of 2007, four (4) attached homes were available in the price range of $500,000 or less (exclusive of price restricted products). As of August 2008, this number has grown to 32. The price segment of between $500,000 and $1,000,000 showed a large growth in inventory as well, with this segment of the market showing an inventory growth from 19 units to 55 units over the same period. With the recent addition of new a condominium product and one under construction, Teton Village would be a logical location for a bulge in inventory. In fact this has been the case, with active listings increasing by 38 units from August 2007 to August 2008. Price reductions during this period have been noted. Examining active listings in market segments where transactions were common during 2007, such as Teton Mountain Lodge and Hotel Terra, it is evident price reductions have been applied. Some reductions have brought units in line with previously-obtained pricing levels in Teton Village and, in some cases, asking prices have moved below previous peak sales prices. As an example, a newer condominium in Teton Village is currently listed at a price of approximately $1,325 per square foot, whereas a nearly identical unit had sold for over $1,400 per square foot in early 2008. Additionally, current listings in the Aspens area (approximately four miles south of Teton Village) are less than historic high sales by as much as 20%, providing an indication that a correction has taken place in this market segment. As an example, a one bedroom condominium in the Aspens is currently available for $435,000, with the historic high of a similarly configured unit being over $537,000. As many condominiums in this development have been refurbished to varying degrees, quality and appeal can differ considerably between units, and this comparison is not meant to imply that a devaluation of 19% has occurred. However, examination of additional sales and listing data corroborates that units in this area are now available for price points less than historic highs.

Homesites

As with the single-family and attached home, the inventory of homesites in Teton County has increased when comparing the statistics from August of 2007 to August of 2008. However, perhaps due the limited amount of land in Teton County in general, the increase in this market segment was less pronounced, with a 39 lot increase being noted across the market segments of Teton Village, Gros Ventre Buttes / North of Jackson, and Jackson / South of Jackson. A one lot decrease in inventory was noted in the West Bank market segment and the increase in Teton Village was only in the amount of four lots. The largest increase in inventory was noted in the Gros Ventre Butte / North of Jackson area, where inventory increased from 51 to 75 lots. However, it was noted that approximately 50% of this increase was attributable to two long-time property owners offering previously unreleased lot inventory, which can be interpreted as a somewhat atypical cause of inventory increase. Examining current listing price levels, sellers appear to be, by and large, maintaining asking prices above previous sales prices. An abundance of vacant lots in the Three Creeks golfing community has caused the gap between historical high sales prices and current listings to narrow.

In Summary

The Teton County Real Estate Market had, in recent history, experienced robust growth in sales volume and price. This trend largely continued through 2007, with the onset of recessionary tendencies triggered by what has come to be referred to as the “mortgage crisis” in mid-summer 2007 not causing a significant impact to 2007 numbers. However, review of mid-summer 2008 numbers indicates that a significant market slowdown has settled on the local real estate market. Historically, downturns in the Teton County Real Estate Market have been characterized by sellers being more inclined to not sell properties at discounted prices, with buyers’ resistance to such price points resulting in a drop in sales volume. To date, the current slowdown in Teton County’s Real Estate Market appears to be following this blue print, with aggregate numbers not showing a decrease in average transaction price, while number of sales has suffered in magnitudes approximating 50%. While a limited volume of data precludes the statement of an across-the-board devaluation trend in all areas of Teton County, the mounting inventory and lower demand intuitively imply that some of the price gains accrued in 2007 have eroded. The conversion of this intuition to a documented trend will depend on the number of market participants willing to acknowledge a market softening to facilitate the sale of their property as compared to those whom are prepared to endure marketing periods of uncertain length in the hopes of holding on to previously accrued price gains.

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