Teton County Real Estate Year End Update 2008

Market Correction Apparent, is the “Bottom of the Curve” in Sight?

 

Sales volume in Teton County, Wyoming was considerably less in 2008 than the preceding year. Comparing sales statistics for 2008 to the preceding year, the number of residential property sales (single-family residences, condominium / townhouses, and residential building sites) showed a decrease of nearly 46%. As a result of this drop, dollar volume of sales decreased over 42% for the year. Despite softer demand, the average price per residential transaction rose 6.12% when comparing the two periods. The increase in this measure is due to a change in the composition of the body of sales during 2008 and is not indicative of a 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 does show that some sellers were successful in not selling properties for less than previous purchase prices. However, these market participants now appear to represent the exception rather than the rule, with current listing and pending data leaving no question that a correction has indeed occurred in virtually all market segments (ultra luxury homes being a potential hold out to this statement). What remains a question is whether the Teton County Real Estate Market has experienced the full effects of the current recession or if more devaluation is yet to come.

 

	2007	2008
Total Residential (Single-Family, Condo,Homesite) Transactions	716	388	-45.81%
Average Price of Transaction	$1,513,876	$,1,606,595	6.12%
Total Sales	$1,083,935,017	$623,358,973	-42.49%

 

The decrease in sales activity has caused an increase in the inventory of available homes, attached homes and homesites for sale, with the combined inventory of homesites, single-family residences, and attached homes increasing from 349 listings to 515 listings as of year end. 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.

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 (-48.23%) and dollar volume of sales (-43.14%) was noted. The average price single-family home transaction did increase slightly during this period (9.85%). However, this increase is interpreted to be as much from the changing makeup of the sales comprising the body of closed sales rather than home appreciation. As an example, a home in the West Bank area is currently reported to be selling for approximately 1% less than it was purchased for in mid-summer 2006. Another example of a current market transaction reports a home in the 2,000 square foot range on a fairly typical town lot to be selling for approximately $340 per square foot of living area. The average price per square foot of a sampling of similar homes was shown to be $267 per square foot for the calendar year of 2005 and $380 per square foot for 2006. Similar to the preceding example, this analysis points to a return to 2006 era price points. A third analysis corroborates this view point, when it was noted that current listings of single-family residences in Rafter J Subdivision between 1,500 and 2,100 square feet have an average list price of $432.76. Reducing this number by 10% to account for a 90% of listing sales price target, an estimated sale price per square foot of $390 is estimated for this market segment. Analyses of historical sales in Rafter J Subdivision reveal that the average price per square foot of sales in this market segment was $339 in 2006 and $441 in 2007; implying current price points are similar to that of late 2006 to early 2007. This represents an over 12% value loss from the average sale price of homes in this market segment of $441 in 2007. Additionally, examples of market participant having to sell in accelerated periods of time are noted to have lead to steeply discounted prices, as was noted earlier in the year in the sale of a home in the Aspens which was initially marketed for over $1,200,000 and ultimately sold for more than 30% less than this – less than its 2001 purchase price. The reality for sellers in today’s market is likely to be somewhere closer to the above-described examples of price erosion to 2006 -2007 levels. With the above example of wholesale discount only being pertinent to atypically motivated sales situations. The following table arrays year-over-year comparisons of single-family home sales from 2000 to 2008.

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

 

Observing the preceding table and chart, it is noted that the number of single-family sales that have occurred year to date has decreased 45.83% from the same period the preceding year. Number of sales this low has not been seen in the preceding eight years.

 

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	144	78	-45.83%
Average	$1,000,080	$1,083,491	8.34%
$ Volume	$144,011,553	$84,512,309	-41.32%

 

Single Family Residential Resort/Second Home Market

 

	2007	2008
Number	138	68	-50.72%
Average	$2,857,711	$3,259,779	14.07%
$ Volume	$394,364,184	$221,665,000	-43.79%

 

 

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 year. Having said that, the disparity in sales decrease is less than 5 percentage points, 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 home sales reveals that 25 sales equal to or above $3,000,000 occurred in 2008. This number is greater than sales numbers noted in the years of 2000 and 2004, but less than that of the three immediately-preceding years (which had an average being over 44% greater than 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 market segment are noted in that a significant decrease in the number of sales of vacant land has been noted for 2008 when compared to what transacted in 2007. More specifically, vacant land sales decreased in number (-62.05%) and dollar volume (-61%). An increase in average sale price (2.77%) was noted. However, this is the result of a lack of lower-end lot product rather than price inflation. Similar to single-family homes, there is evidence that value erosion has occurred in the homesite market segment. As an example, there is currently a lot in the Melody Ranch Subdivision that is being marketed at a listing price of $525,000. Were it to be sold in the $500,000 price range it would be at a price point not observed since late 2006 to early 2007. This price point would represent an approximately 17% value loss from the very similar lot sale of 1312 Melody Creek Lane in 2007.

The attached table arrays year-over-year comparisons of vacant homesite sales by analyzing the time period of January 1 through year-end.

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	41	23	-43.90%
Average	$588,592	$843,717	43.35%
$ Volume	$24,132,269	$19,405,500	-19.59%

 

Residential Homesite Resort/Second Home Market

 

	2007	2008
Number	125	40	-68.00%
Average	$2,406,910	$2,683,838	11.51%
$ Volume	$300,863,800	$107,353,500	-64.32%

As shown in the previous table, the resort market has shown a larger 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. Notably this is opposite of the trend noted earlier in the year that was based on mid-August sale data. This market trend can be largely attributed to 12 sales in the Shooting Star Development late last year. With the removal of the Shooting Star sales from the dataset, a more equal decrease in sales volume is seen between the local and resort / second home market segments.

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 33% is noted. While less than that of the single-family and vacant homesite segments of the market, it is a considerable drop nonetheless. A nearly 30% 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 13.67% 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, properties that were placed under contract prior to an acknowledgement of market slow down. Without these sales, the number of transactions in this market segment would have decreased in the amount close to 50%, a figure similar to that of the decline of the single-family and vacant homesite market segment. Examples of recent listings in the attached home segment include a small efficiency condominium in Jackson listed for $312,000 and two Aspens Condominiums listed on either side of $400,000. Were these units to sell for 90% of their list price, the Jackson condominium would imply a value similar to those seen in August and September of 2006. Similarly, the Aspens condominium listings imply a current price point similar to late fall 2006 / early winter 2007. Should the Jackson condominium sell for 90% of asking price it would imply a price approximating 25% less than the historic highs for this development. This level of value loss approximates the highest observed diminution in the Teton County real estate market for the any of the three market classes (single-family, homesite, and condominium / Townhouse). One hypothesis to explain this is that the previous appreciation of this market segment may have been the most benefited by previously-existing lenient lending policies.

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	136	80	-41.18%
Average	$507,140	$645,563	27.29%
$ Volume	$68,971,049	$51,645,037	-25.12%

 

Condominium/Townhouse Resort/Second Home Market

 

	2007	2008
Number	132	99	-25.00%
Average	$1,148,425	$1,401,794	22.06%
$ Volume	$151,592,162	$138,777,627	-8.45%

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 19 percentage points 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 approximately 48% more inventory to select from when property shopping in Teton County. A more detailed analysis of the increase in inventory by property typed is as follows:

Single Family Homes

 

 

An increase of 88 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. The Teton Village area’s increase of active listings from 4 to 14 yielded the largest percentage increase. However, the low numbers of this tally provide a misleading indication when considering that the overall inventory is only 14 homes. The “West Bank” area showed a relatively large 126% increase in inventory. However, as shown in the following table, the current inventory level in this market segment is typically less than one year’s sales volume when averaging in the more robust previous years of the market:

Historical Comparison of West Bank Inventory and Sales

SFR	Active Year End			Historical Annual Sale
	2007	2008		2008	2007	2006	Average	2008 Inventory as % of Avg. 3-Year Demand
West Bank
<$1,000,000	3	6		6	14	19	13.00	46.15%
1 – < 2 Million	7	25		14	46	57	39.00	64.10%
2 – < 3 Million	6	15		12	31	19	20.67	72.58%
3 Million+	18	31		17	30	22	23.00	134.78%

As noted in the preceding table, while inventory has grown in the west bank market area, all segments with the exception of homes over $3,000,000 are showing less than one year’s inventory when considering the average demand over the past three years. Conversely, while the Town and South Park market area showed an increase in overall inventory of 50% (the second lowest increase), this market area lost an estimated 50 active listings to unsuccessful sales attempts (either withdrawn, cancelled, or expired) since August of 2008. This could imply a potential swelling of inventory levels in the Jackson / South Park market area this summer when sellers renew their marketing efforts.

Attached Homes (Condominium / Townhomes)

An increase of attached home listings in the amount of 55 units has been noted between 2007 and 2008. This increase was noted primarily in the market segments of Teton Village 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 October of 2007, two (2) attached homes were available in the price range of $500,000 or less (exclusive of price restricted products). As of January 2009, this number has grown to 20. 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 26 units from the end of 2007 to the end of 2008.

Homesites

As with the single-family and attached home, the inventory of homesites in Teton County has increased when comparing the statistics from 2007 to 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 23 lot increase being noted across the market segments of Teton Village, Gros Ventre Buttes / North of Jackson, and Jackson / South of Jackson. No change in inventory was noted in the West Bank market segment and the increase in Teton Village was only in the amount of three lots.

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-fall 2008 numbers indicates that a significant market slowdown has settled on the local real estate market with year-end price points and active listing data signifying that a price correction has occurred. 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. This pattern was observed through the third quarter of 2008. However, recent transactions and the lowering of listing prices have challenged this historical pattern and diminution in value has been acknowledged by any realistic market participant. Observing current list prices, it is opined that various market segments have lost between 10% and 30%. The attached homes at lower price points appear to be the most affected by this value loss, perhaps due to these units having been previously most benefited by lax lending policies that have since disappeared. The most pressing question at this point is whether or not prices have stabilized at the recently acknowledged price points or if continued erosion will occur.

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