Teton Realty Blog

Measuring the Value of Land by Price per Acre

November 28, 2021 By Tayson Rockefeller Leave a Comment

I have been meaning to draft this article for quite some time, it is one of those articles that’s relevant in any market. That is, valuing a particular piece of property based on a cost analysis per acre. This is a measure that we will sometimes use when valuing large farm acreages. For us working in the industry, that’s usually where it stops. For others, that methodology trickles down into residential property which in my opinion, is usually not appropriate. I share this opinion with most when discussing values, but usually when customers, be it Buyers or Sellers, start forming their own opinion it’s hard to get them to change their perspective. For Buyers, it’s a way of arguing the value down, and for Sellers the opposite. I’ve heard this a few times…

Anyway. A local analogy I often use as an example is a development between Driggs and Victor. It’s really one large interconnected development with two phases, but it was organized as two separate adjoining developments that share the same rules and regulations. The East half/development comprises 2.5 acre lots and the West half comprises 1 acre lots, but there’s a catch – an important one. The current county density requirement in this area is one home (and guest home if the subdivision allows) per 2.5 acre parcel. The average density of the East development is obviously 2.5 acres. The West development also has an average density of 2.5 acres. Each 1 acre parcel is surrounded by community-owned open space that cannot be developed. Currently on market is a $190,000 1 acre parcel and a 2.5 acre parcel nearby priced at $109,000 per acre. Does that mean that the one acre parcel surrounded by open space is only worth $109,000? Obviously not.

Okay, so the above example is easy to justify. Let’s move across the valley into the Teton View corridor. To keep things fair, we need to keep the area similar. Properties East of State Highway 33 should be valued differently than those West of side of the highway. Let’s compare parcels in developments with no open space, one parcel being 2 acres and another being 5 acres. Am I saying each of these have the same value? No, but they certainly could. What I am saying is that if I were asked to value each of these parcels I wouldn’t even look at the cost per acre (yes, I would look at the overall size) of nearby listings or sales. The important thing to remember here again is that each parcel allows ONE primary home. I could compare 2.5 acre parcels with 5 acre parcels in the primary view corridor all day long and would probably find more 2.5 acre parcels that I would recommend to customers regardless of overall price or price per acre. I’m going to look at budget, proximity from the highway, property features, overall development value and restrictions and of course, the viability of an unobstructed view down the road. In other words, is it conceivable that I would value a 2.5 acre parcel and a 5 acre parcel the same? Absolutely. Does it mean I don’t take the size of a parcel into consideration? No, it does not.

The important thing to understand when determining or justifying the value of any given tract of vacant land is to remember to look at the entire picture. A 2.5 acre parcel overlooking 200 acres of an adjacent development’s open space has tremendous value. Trees, creeks, undulation in terrain, community features and amenities AND size – all of these elements should dictate the value of a parcel. It is not fair or reasonable to value any given property using just one of these metrics.

Time to sell?

October 31, 2021 By Tayson Rockefeller Leave a Comment

I’ll try to keep this article generic so that it is relevant in years to come, but in so many ways much of this information will likely be outdated before we know it. One thing is for sure, this market has had so many unexpected twists and turns that the craziness now seems to be normal, and it probably is normal until the next crazy happens… You know how it goes.

The inspiration for my article was an advertisement I saw on behalf of one of my realtor friends on social media in another area. It was something like looking to sell? It’s a great time to sell! Are you looking to buy? It’s a great time to buy as well! Of course, this could have been handled differently and they could have talked about the low interest rates for buyers and the obvious hot market for sellers but it didn’t really come out that way. From a marketing standpoint, I think it’s difficult to group everybody into one advertisement like this. Generally speaking, buyers buy when they want to buy. It doesn’t matter if it’s a seller’s market and they know it, or if it’s a buyer’s market and the value is easy to justify. I can look back through my career with dozens and dozens of potential buyers that always felt the market was overvalued. They are always going to feel that way. I can also remember buyers that seems to be making an impulse decision that didn’t seem to make sense. Sometimes that worked out, sometimes it didn’t. As always, my job is to provide data, facts, and information. Unless it is overwhelmingly clear I generally won’t answer the question of “Is it a good time to buy?”. Besides, buyers want to make their own decisions, they just want to hear straight information.

But is it a good time to sell? Is it ever a good time to sell? It depends who you ask. Most stock brokers will talk about averaging. Investments tend to increase over time, hang on, hang out and let the world do its thing. Is it a good time to sell if you don’t have anywhere to go? Not really. Is it a good time to sell if you are planning to do so? How about if you have a real estate investment that isn’t providing a great return? How about one that you are tired of maintaining or otherwise don’t need? To those questions, I would probably say, yes. Here again, probably not directly (which I seem to have done here) but I would mention some indicators that would point to the appropriate timing for such a task if it were a consideration. First, foremost and always – supply and demand. There was a weird time in October of 2020 after the craze where all of the land inventory was totally wiped out. While land in some areas has seemed to increase since then, so has the supply. As a result some land listings have stagnated despite the overall market continuing to perform well. Regardless, we saw an enormous bump in land real estate values during that time. On a side note, I’ve said this more times than I can count, land was too cheap for too long and that contributed to what happened in October. Anyway, when inventory gets tight, people tend to spend more. Getting back to the buyer thing, when people decide they want something, they pursue it and buy it. We’re all guilty of it. The starter goes out on your car. You start to have thoughts of the next thing, what’s the next big expense? You start looking at options. At that point, I would say with relative certainty, you’re probably going to buy a new car. If the automotive market seemed to be at a point where inventory was tight and things were more expensive than they should be, would you overspend to buy that car? Probably. A lot of people are looking at real estate right now, and there isn’t much available. We seem to have hit the inventory levels comparable to what we were seeing with land a year ago mentioned above. There’s also some uncertainty in the markets (although there always seems to be) and we only know what we know, now. Getting back to it, is the market going to hold? Are values going to increase? No clue. What I can tell you is that values are high, now. If you’re in that category and you’re planning on selling when the time is right, think about it.

To be clear, I am definitely not sounding any alarms. Most local real estate professionals and those with a close ear to the ground in the financial sector agree that this market still holds steam, and a lot has changed in ways from how the lending market works with protections in place to the clear indications that our little paradise has finally been discovered. Not as many people are “finding” Teton Valley through Jackson, they are traveling and investing here because we are a destination.

Updating your Insurance Policies

September 30, 2021 By Tayson Rockefeller Leave a Comment

One of the tools we use to protect our real estate investments includes insurance policies. The obvious one is your homeowners insurance. With both real estate values and construction costs going crazy, we often overlook the level of protection we have in the event of a catastrophe. If you acquired your home more than a year or two ago, it’s definitely time to revisit this.

Even more overlooked includes title insurance. In fact, many of us don’t even realize that we have a title insurance policy. That’s because title insurance policies are issued once, usually at the time you purchased your property. To reiterate a few of my past articles, title insurance is a form of insurance designed to protect lenders and homeowners from financial loss due to a defect in title. Policies are issued to lenders for the loan amount and owners for the purchase amount. Defects in title can range from errors in the public record to liens on the property and a huge variety of other issues related to your home’s title and its history.

So, if you’ve been issued a policy at the time you purchased your property, why update it? Much like your homeowners insurance policy, we have to establish a value to base the policy. If you are insuring your 800k home for only 400k, you’re only covered up to 400k in the event of an incident. Title insurance works the same way. When a title insurance policy is issued, it’s usually for the original purchase amount. If you purchased your property more than a few years ago, chances are that you’ve seen a significant increase in the value of your property. If a defect is found or if one arises, it’s important to remember that you’re only covered for the original amount of your policy. This can be especially concerning for those improving their properties.

When it comes to updating your homeowners insurance policy, it’s usually just a quick phone call to your insurance provider. In most cases they are aware of the market conditions and can easily make adjustments. Increasing insured amounts is not unusual in markets like these, but it will add to the annual premium cost. Updating your title insurance policy can also be done, but it will sometimes require additional information to justify the increase in value. If you are refinancing the property the appraisal is an easy solution. However, even if you aren’t in the process of refinancing, your property’s assessed value with the county can be enough to increase the limits on your title insurance policy. Similar to your homeowners insurance, this will add to the premium, but remember that title insurance is a one-time expense, so the added premium will only be paid one time. In order to update this you will need to contact the title insurance company that wrote the original policy. If you don’t remember who this was, you can usually reference your deed or contact your real estate agent who should have a record of this for you.

Fall ’21 Market Update

September 27, 2021 By Tayson Rockefeller Leave a Comment

The Teton Valley real estate keeps humming along. A few sectors of the market seem to be cooling off, but nothing earth-shattering.

LAND

The second quarter of 2021 seem to be a high point in the market with 190 land sales, consistent with the huge increase in sales since the real estate craze began in 2020. Total volume was just over 42m with sales prices exceeding list prices in many cases, but averaging 91% of the asking price. Of the 190 sales, just over 10% of them were financed.

The third quarter in 2021 brought newfound inventory, likely due to our newfound average sales price for land of just under $220k in 2021 (YTD) compared with an average sales price of just over $121k in 2020, though that average increased significantly as the year came to a close. Total volume was a touch over 38m. While the average sales price is up and sales prices are holding fairly firm at just 4% under the ask, inventory is also up and the number of sales are down over the last quarter. These are indicators that the increase of supply seems to be providing a sense of relief for buyers. We’ve seen a fair share of price reductions, but this is mostly attributed towards overzealous sellers beginning to understand that the current trajectory of land prices likely isn’t sustainable. Of the 138 sales, almost 14% were financed, a bit of an increase compared with last quarter.

RESIDENTIAL

The residential market continues to exceed expectations, likely due to the low inventory of just 58 active listings at the time of this writing and a dismal 14 new construction offerings. The third quarter of 2021 saw 93 residential sales at the time of this writing with home selling on average between 1 and 2% under the ask, with many selling above. The average sales price per square foot was $428 per square foot during this time which included land, this number is fairly consistent with the cost of construction not including land – the biggest factor when considering the lack of new inventory. Teton County reported about 38 new building permits for residential properties which included garage apartments and remodels. Builders have been turning away work with schedules booking several years in advance, but if you canceled projects because of unexpectedly high building costs have created just a few openings with custom home builders.

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