Buyers Archives - Teton Realty Blog

How many vacant building sites are there? (Really)

November 14, 2019 By Tayson Rockefeller Leave a Comment

I’ve been reading a number of articles lately referencing the impact all of the development in the late 2000s had on Teton Valley. Many of these articles compare today’s potential problems with those of the subdivision development era. Glampgrounds, RV parks, and certainly any further land development have been targets, often for good reason. While I agree that the amount of development that occurred in the late 2000s was extreme, I believe that the perceived impact and comparison to some of these other projects is also extreme, and in many cases exaggerated. I’ve heard numbers from 7000 to 16000 undeveloped building lots in Teton Valley which off the cuff, sounded high to me. So, I decided to investigate.

My first thought was that I would have to find a list of the available subdivisions, add up the number of lots in each, and subtract lots with improvements. This seemed like a daunting task. Fortunately, I learned that Rob Marin, the county’s extremely talented GIS coordinator had already done the heavy lifting. He based his analysis on subdivision lots, which is exactly what I would have done. After all, the purpose of the comparison and root of the problem is indeed subdivision lots. He determined (with a small margin of error) that there are 8,454 subdivision lots in the county, and that 3106 had improvements as of the date of Rob’s study, leaving 5,348 vacant subdivision lots in the county.

***Now might be a great time to read one of my past articles, With so many available building sites, why is it so hard to find what I am looking for?

Admittedly, this sounds like a lot. It is a lot. The question is, and point of my article; is the number of vacant building sites really as detrimental and overwhelming as it appears and is made to sound? Here are a few points from the devil’s advocate, speaking in generalities.

1) Some subdivisions really do, in my opinion, exist in a vacuum. What happens in or with them really doesn’t have very much impact on the rest of the real estate market. Example: Tributary, FKA Huntsman Springs. There are roughly 500 vacant building sites in Tributary. This is almost 10% of the 5,000 vacant building sites mentioned. The same goes for many other large-scale developments such as River Rim Ranch. Could it be construed that these developments are problems in and of themselves? Sure. However, if real estate prices plummeted, or skyrocketed in Tributary, I don’t feel it would have a major impact on the rest of the real estate in Teton Valley.

2) We know that roughly 65% of the available building sites are vacant, or at least have no improvements. There are approximately 300 subdivisions in Teton County. For the sake of making a point, imagine that each of them has roughly 25 lots. Each of those have 8 or 9 houses. A few of those own the neighboring lots. This isn’t the case, but it puts things in perspective.

3) Teton Valley is big. If you start breaking this down by quadrant, for example, the southeast corner of the valley (better known as Victor) doesn’t really have a problem as there are relatively few subdivisions with little to no improvements. Things are much closer to the scenario I outlined in point 2 above, if not better. Yes, I know there’s a counterpoint to every point I’ve made here. Some of the big subdivisions that are mostly vacant are considered to be the biggest part of the problem. The issue isn’t necessarily consistent across the board as mentioned in point 2, and while things are looking pretty good in Driggs and Victor, Tetonia has a huge ratio of some of these subdivisions with very few, or no homes at all. In any case, it is what it is. They are what they are, and they’ll sell when they sell. We can’t take away land from those who invested in a piece of Teton Valley just because we now recognize that things got carried away a decade ago. As a final point, throughout the course of my career, there have always been approximately 500 building sites on the market at any given time. I suspect that isn’t going to change anytime soon, so I’m not particularly worried about extreme changes with respect to value. The key takeaway is that there are a few (several) problem subdivisions out there. However, in most cases they are being farmed, waiting for their moment to become a neighborhood. I believe in responsible growth, and hope we can learn from mistakes relative to oversupply and over-development, but I hope past mistakes don’t prevent Teton Valley from growing responsibly.

Manufactured vs. Modular, What’s the Difference?

October 16, 2019 By Tayson Rockefeller Leave a Comment

With building costs continuing to rise, the popularity (or at least the idea) of prefab homes also continues to grow. As a result, I have seen an increase in interest for land that will accommodate these types of homes. However, there seems to be some confusion as to what “these types” of homes are, and what the differences are between manufactured vs modular homes. This confusion has lead some subdivision homeowners associations disallowing anything but stick-built, and has made it difficult for those interested in anything other than a stick-built home to find suitable land.

I’ll save the difficulties and challenges finding suitable land for another post, but I would like to dive into the differences between these types of homes to help shed some light on the issue. Note that some of this is subject to my own experience and opinion. Also, the terms associated with the different types of homes tends to vary by region.

Manufactured: This can be confusing because a manufactured home is prefabricated just like its modular counterpart. Manufactured homes, however, are built in compliance with FEDERAL HUD manufactured home construction and safety standards. They usually have a metal frame which serves as the floor system, as well as the frame for the transportation system. They then can be set on a permanent foundation, but don’t necessarily have to be. These types of homes have transportation size limitations. This is often where you hear the phrase “double wide”, meaning two finished portions of the house that are put together on one permanent foundation at a later date.

Modular: As defined by the State of Idaho division of building safety, a modular building is any building other than a manufactured home that is entirely or substantially prefabricated or assembled at a place other than the building site. I would personally add: Modular homes have construction standards set by local, as opposed to federal regulation. The easiest and best explanation I have seen is that modular homes cannot be moved. It is feasible that a manufactured home could be split, or picked off its foundation, moved to another foundation and placed or reassembled. (Note that when I say “cannot be moved” I have to be careful here, knowing that even stick built homes can be moved.) Sometimes modular home companies create their own category of homes such as a “phased built” or “systems built” to further differentiate and separate their product from a manufactured home. However, in my opinion, these are one in the same as modular. A modular home doesn’t have to be completed in major sections. It could be completed in wall sections and assembled on a permanent foundation. They would normally be transported on a flatbed trailer as opposed to a trailer integrated with the structure.

For further clarification; in my opinion, the following are all forms of modular homes, all of which would be subject to local building codes and inspections which would later receive a standard certificate of occupancy:

– a tiny home built in a factory or shop and delivered to a permanent foundation that conforms to local building codes and receives inspections similar to those required for stick built homes.

– a home constructed in small sections (such as individual walls) potentially with pre-installed siding, floor systems and precut materials installed on a permanent foundation.

– a “kit” home delivered in panelized sections installed permanent foundation.

RV’s: To make matters more confusing, we are beginning to see a rise in popularity of RV style tiny homes that can later be converted to permanent structures. Again, much of this is all subject to local and federal laws. A company building a custom home classified as an RV with wood siding and residential windows would need to comply with Transportation Department requirements in order to be legally transported, but this type of dwelling (RV) may have challenges in obtaining local zoning approval. For example, RVs can often only be parked in one location for storage, and if they are going to be used as a dwelling, can usually only be done so temporarily. In addition, parking an RV may require a special permit.

Idaho Division of Building Safety information for Tiny Houses, Manufactured Homes, Modular Buildings & Recreational Vehicles can be found HERE.

To be continued: Suitable land for manufactured or mobile homes and RVs.

The Customer ISN’T Always Right!

September 16, 2019 By Tayson Rockefeller Leave a Comment

The customer ISN’T always right!

I was watching a YouTube video about landscaping (DIY purposes) and ran across an interesting video I could relate with titled “When the Customer is Wrong”. It showed me some similarities and perspective with my career and areas of expertise. The example that resonated with me was protecting the client from themselves.

People tend to become emotionally tied to what they are buying or selling. In the case of the landscaper, the homeowner wanted the contractor to remove a pool and install a patio which was cost-prohibitive because of the soil composition. The contractor made the homeowner aware of the potential costs associated, but his emotions pushed him to go forward with the project. The contractor, adamant and concerned with not only the cost but the long-term viability of the project pushed back and ultimately was able to talk to homeowner into filling the area in and creating some natural grass and landscape at a much lower cost ensuring the homeowner that he could later install the patio after they were able to monitor ground movement.

Real estate agents are faced with similar situations. This contractor talked his customer out of investing thousands of dollars into the project of which he was already mobilized and prepared to do. As professionals, we also have to show our customers the long-term ramifications of trying to purchase something that doesn’t fit their needs or that may be a bigger project than their emotions are allowing them to see.

Similarly, and in many cases even more challenging is the razor thin line we balance between with respect to sellers and what they should do. Sellers oftentimes ask for opinions and advice, but don’t always heed that advice. Buyers can be emotionally attached to something they want which is an easy concept to grasp. We all like things that are new and shiny. Sellers, on the other hand, are emotionally attached to something that they have lived in, and shared life experiences in. This is why in so many cases, providing opinions of value can be so sensitive to many homeowners.

A classic approach includes sellers who only recognize, and only explain the great aspects of the home they live in. This is a classic trap for many rookie real estate agents. They are being sold by the homeowner. This can lead to overvaluation and extended days on market which usually equates to buyers expecting to be able to negotiate further. We also have to be careful about how we approach sellers when they receive good offers. What a broker might see and know is a good offer, a seller might view as a terrible offer. Trying to tell someone that a good offer is good can oftentimes lead them to believe that you weren’t working in their best interest, it can be messy.

Personally, I try to find ways to show my customers that I genuinely care about their investment or potential investment. I try not to think about my bottom line as a rule of thumb. The more I want something, the more my emotions can play tricks on my own mind. Working in your client’s best interest, genuinely, usually works itself out. However, it doesn’t mean these awkward situations don’t come up, and it’s a part of a broker’s job to know how to handle and articulate these situations.

Is it a good time to buy?

May 15, 2019 By Tayson Rockefeller Leave a Comment

Any good economist, salesperson, or real estate agent will always tell you up front; “I don’t have a crystal ball.” I don’t view this as a disclosure to cover one’s rear, but more a statement to get you thinking about both sides of an equation. With that, I don’t have a crystal ball, but I am going to do my best to make a recommendation.

Home prices continue to rise, the real estate market is booming, but these cycles don’t last forever. Even in times of recession, history shows us that markets recover, and thrive. I have to remind people that those who purchased a home in 2007 would very likely be in good shape today. We witnessed one of the deepest recessions in American history, yet here we are, 10 years later. If you would have purchased a home in 2007, your interest rate likely would have been somewhere between 6 and 7%. This seems high, but based on the past 50 years, it’s not bad. Sure, there are other equations. Those with an 18% interest rate in the early 80s could have refinanced over time. They also may have experienced a higher rate of appreciation.

Regardless, for the first time in history, rates have been below 5% for nearly 10 years, and this probably won’t last forever. The rate of inflation will likely increase as the strong economy continues, which will result in increasing interest rates to create balance for that rising inflation.

With that, I’m going to run a quick hypothetical. Let’s say you are buying a home and obtaining a loan for $400,000. The interest rates for a 30 year loan today are favorable, in the low 4% range. I’ll use 4.25%. The total cost of the loan, if you didn’t make any additional payments, would be about $708,000 over 30 years. Now, let’s say home values come down. You are able to buy the same home for $350,000 in a few years’ time, but interest rates are 6%. The total cost of the loan is $755,000 in this scenario.

To be fair, the above scenario isn’t totally realistic. Most people don’t own a home for the entire duration of their mortgage. I believe the median tenure living in a home is somewhere around 10 years. If we run the same scenario, and add up the payments over those 10 years, your balance owed at the end of 2030 with the first scenario would be around $300,000 and $280,000 in the second scenario. If you were to take into account the payments you would have made (as opposed to renting) between buying a house now, and if, and when the prices reduce in the future, you would likely be in the same boat. Things would also begin to swing in your favor the longer you own the home.

We don’t know if prices will decrease. We also don’t know if interest rates will rise. For all we know, home prices could come down along with interest rates, or home prices could increase along with interest rates. If trends continue, the latter is more likely to happen. If I run the same scenario with an increased purchase price and a higher interest rate, things get ugly.

We all have our own budget, limits on what we should spend, or even circumstances where it is not the right financial move to invest in a home. Do your best to weigh the pros AND cons. Educate yourself with respect to current interest rates, home prices and values. If it all adds up, then yes, it is my opinion that it is the right time to buy.

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