DATA-DRIVEN REPORT FOR THE FIRST NINE MONTHS OF 2009:
The most asked question we have heard this year is: "Has the market bottomed out?" The second most asked question is: "how long before we get back to normal or back to what our property was worth in 2007?" The answers to these questions are not easy. History has shown that it takes at least three positive quarters in a row to signal a change, or to determine the true bottom. In the past, our newsletter has compared time periods year to year. In this report we will continue this comparison method, but we will also take a closer look at the last 10 quarters. This analysis will indicate when our market peaked and where it is today (see graphs below).
What will signal a turn in our market? We look for several indicators; an increase in the number of sales (closings); a decrease in the number of available properties (listings); and leveling off of property values (average and median listing and sale prices). NOTE: This is the second quarter to show signs of improvement. The next quarter however may not exceed the third-quarter number of sales, when we evaluate the number of properties currently under contract.
As we have all heard, the recession is over and the Federal Reserve is ready to raise its prime-lending rate at the first sign the economy is improving. If you are a Buyer and you are not out there looking, the truth is this: you will miss the proverbial boat. In my seventeen years in Jackson Hole, I have never seen such a powerful combination of low interest rates, great available inventory and sincerely motivated Sellers.
Clearing up some Myths. You may have heard that property values are back to 2004-05 levels. While this can be said for a few segments of our market, it should not be taken as a blanket statement. Some segments have lost little ground while other segments have seen a free fall. You may have also read predictions that our market is about to take off again. As mentioned above, historically it takes at least three positive quarters in a row to signal a change. Even if the fourth quarter of 2009 beats our expectations, we probably are not out of the woods yet.
The last time Jackson Hole experienced a downturn in the number of sales was 2001-02. As you will recall, the 911 tragedies coupled with the collapses of the Ernon and Dot.com world fiercely rocked the economy. Back then, prices flattened out but lost little to no value. Unlike today, real estate shoppers could qualify for first-time home loans, vacant land, bridge, and investor loans. Even with that robust lending environment, it still took a full 24 months to see our market return to normal. Today, the lending environment is much different. Even with interest rates at historic lows, qualifying for a loan is much harder. Additionally, selling investment loans to the secondary market can be a real challenge. Investment loans today are considered high risk and will require excellent credit, a substantial equity position, and interest rates much higher than prime. These high-risk loans will certainly affect short-term rental condos, vacant land, and commercial properties from rebounding anytime soon.
Cash is King right now: As mentioned above, lending guidelines have really tightened in the last year. When taking a close look at all sales transactions in 2009, we discovered an eye-opening fact: 50% of all Buyers in 2009 paid cash. Why so many cash Buyers? Savvy Buyers knew their hard-earned cash could guarantee a Seller a closing without relying on the banks to loan them money. What savvy Seller wouldn't take a good, long look at an offer that does not include the wild card financing contingency? After all, cash offers close escrow quickly and easily, while offers requiring financing require 45+ days with several snags along the way. So naturally, Sellers covet cash offers. For foreclosed properties, a cash offer that hits the target price will many times trump a higher-priced offer with a loan. The ability to close has become just as, if not more, important to banks as price. Another interesting fact is the price point of these cash Buyers. NOTE: Out of the 74 cash transactions, 40 were under $1 million. Most of these transactions were for lower-end homes and condos. These investment-driven Buyers are taking advantage of the down market and then placing their purchase in the rental pool until the market returns.
The following will compare the first 9 months of 2008 to the first 9 months of 2009:
The Overall Market experienced a huge drop in number of sales and dollar volume, down 58% and 63% respectively, when compared to the first 9 months of 2008. The average and median sale prices also dropped, down 11% and 33% respectively. The decrease in the median sale price can be attributed directly to the number of sales (or lack there of) above $1 million, down 68%. The hot spot was the Town of Jackson, which attracted over 30% of the Buyers so far this year.
Overall Market Under Contract, as of October 1st, 2009, is down when compared to the same time in 2008. The number of properties under contract is down 17% and the dollar volume is down 63%. The average and median prices of properties under contract are also noticeably down, 44% and 30% respectively.
Overall Inventory of Active Listings has slowed (only up 14%) and the dollar volume is only up 1.5% compared to the first 9 months of 2008. The increased inventory pushed the median asking price down 13% to $1,373,000 and the average asking price down 11% to $2.54 million. This new level of inventory, while high (791 overall listings), is not alarming. Normally we see up to 900+ new listings any given year in Jackson Hole. NOTE: As of October 1, 2009 there was over $2 billion in available inventory, shattering all previous records.
The Upper-end of the Market ($2 million plus) also experienced a big drop in the number of sales, down 68%. Eight of the 26 upper-end sales that closed were for over $5 million (down 33%) and 2 sold for over $10 million (down 60%). Note: While the number of $2 million plus transactions accounted for only 17% of the total number of transactions, they accounted for 45% of the overall dollar volume for the first 9 months of 2009.
Single-Family Home number of sales decreased, as inventory continued to increase. The number of sales and dollar volume are down 42% and 50% respectively. The average and median sale prices are reflecting this drop in sales, down 13% and 23% respectively, when compared to the first 9 months of 2008. The decrease in the median sale price can be attributed directly to the number of sales (or lack there of) above $1 million, down 23%. Single-family homes under contract are a clear indication of our continued slow-down. The number of homes under contract is down 58% and the dollar volume is down 76%. The median asking price for homes under contract has dropped to 2005 levels, down 74% to $954,000. Meanwhile, available inventory of homes for sale continues to climb (up 19%), pushing the median asking price down 12% to $1,650,000 and the average asking price down 9% to $3.05 million. Out of the 333 homes currently for sale, 83 are being offered for under $1 million. That is a 48% increase over the third quarter of 2008. The least expensive home, at this time, is being offered at $399,000 (last year the least expensive was $595,000). This buys you a 1,236 square foot home built in 1978 on a .23-acre lot in Hoback Junction.
Vacant Residential Land sales also decreased, as inventory continues to increase in the first 9 months of 2009. The number of sales was down 50% and the dollar volume was down 72%. The average and median sale price is also reflecting the downturn in this segment, down 44% and 45% respectively. The decrease in the median sale price can be contributed directly to the number of sales (or lack there of) above $1 million, down 59%. The number of vacant land sales over $3 million has been hit the hardest, down 83%, when compared to the first nine months of 2008. Vacant residential lots under contract are also providing a clear indication of our continued slowdown. While the number of lots under contract (a mere five) didn't change from 2008, the dollar volume is down 63%. The last time this small quantity of lots sold in the first 9 months of the year was back in 2003, after the last downturn in our market. Meanwhile, available inventory of lots for sale is only up 6% while the median and average asking prices decreased 15% and 17% respectively. Note: Available inventory for vacant residential land is at a six-year high.
Condo/Townhomes sales continue to decrease, as inventory starts to level off. The number of sales was down 74%, the average sale price decreased 39%, and the median sale price, dropped 56%, when compared to the first 9 months of 2008. The decrease in the median sale price can be attributed directly to the lack of sales above $1 million dollars, down 89%. Meanwhile, available inventory of condo/townhomes for sale was up 14%, matching the level of inventory back in October 2002. This inventory increase only affected the median asking price slightly, down 2% to $684,000, and the average asking price was only down 6% to $1,015,313. Note: Out of 200 condos currently for sale, 132 are being offered for under $1 million dollars. The increase of inventory and drop in asking prices continue to signal a very strong Buyer's market for condo/townhomes. The Hole Report is published semi-annually, with additional email updates for the first and third quarters. While others attempt to report on our market with MLS statistics only (MLS historically tracks 65-70% of the market) we track every single transaction in Teton County. This data-driven report is the most accurate and trusted real estate news source in Teton County Wyoming. This report is produced by our partners in our firm Jackson Hole Real Estate Associates, David Viehman and Devon Viehman. As always please feel free to contact us anytime with questions you may have. With our 25 plus years in the real estate business in the Jackson Hole we have knowledge of the market that very few have. We are confident we can help you make informed decisions whether you are looking to purchase or sell.
Chad and Dianne Budge Owners Associate Brokers Jackson Hole Real Estate Associates LLC
chadbudge@jhreassociates.com or diannebudge@jhreassociates.com
*This third-quarter report is not posted on The Hole Report website. Instead, it is provided exclusively via email, as a service to all our valued customers and clients here at Jackson Hole Real Estate Associates LLC. The data is collected and analyzed quarterly to help you keep up with trends in our market.
*All statistics are supplied by sources that have been deemed reliable but are not guaranteed.
* This report does not go into detail on every segment of the market, but is intended to offer an overview of general market conditions, changes in number of transactions and average sales prices. The values of individual properties will most likely vary from these graphs.
*All statistics quoted in this update are based on sales in the first nine months of 2008 compared to the first nine months of 2009. *Average sale price is the total combined dollar volume divided by the number of sales.
*The word "Overall" in this newsletter refers to all sales in Teton County combined (homes, lots, condos, commercial and ranch). *The term "Market Value" means; the value of a property in terms of what it can be sold for on the open market; current value.
Chad & Dianne Budge Owners / Associate Brokers Jackson Hole Real Estate Associates, LLC Office: 307.733.3436 Fax: 307.733.3483 Chad - 307.413.1364 or chad@jhre.net Dianne - 307.413.1362 or dianne@jhre.net
ZIP Code: 83001 Location Characteristics: Jackson Hole is a valley about 80 miles long and 15 miles wide; Jackson is the major town within the valley. The hole begins six miles south of Yellowstone Park and tapers down to the width of the Snake River at Munger Mountain, south of Jackson. The town was named Jackson Hole in 1894 when the post office was established. Many other holes were named in the intermountain west during the 1800's but few were marked on the maps.
