January ’16 Market Stats
Increasing Rental Rates, Will it Stop?
Increasing Rent Rates, will it stop?
As most of us know, we are seeing major recovery in the real estate and rental market. Note I said recovery, not inflation – yet. Generally speaking, we are recovered to about 2005 levels. Not yet height of the market “boom” prices, but we are still recovering. There is quite a bit of buzz regarding new construction, homes to be built on spec, and even rental complex/apartment construction – mostly based on the assumption that the market will continue to grow and improve (hence the “spec” or “speculation”)
As we know, the key driving factor is demand. The availability of homes for sale in the affordable price range is minimal, and rental supply even worse. With that said, I agree that there is a fairly safe bet for investment potential.
The above said leads me to predictions for the question. My response is – I hope that is slows, or better yet, quickly recovers to reasonable degree, levels off, and stays on par with inflation. We need to remember that there is a fine balance between a return on an investment, and real world effects. The result of too much supply too quickly coupled with National ecenomic factors (which will always be in play) is still all too fresh in my mind. We must also remember who we are in Teton Valley. I believe we will always be the “quiet side of the Tetons” a family oriented community supported by our own tourism, and proximity to Jackson and Idaho Falls. We cannot directly compete with Jackson, and we should not. We have a niche here with semi-resort real estate prices that is still an attractive place for an investor, and/or a resident.
In my opinion, we are competing for a population and commerce, but more so with areas like Alpine, WY or Rexburg, ID. If prices here become unobtainable for most (such as Jackson) the vast majority of those who support us will not be able to afford to live here. This is particularly true with rental rates. In times where supply is dangerously low, the sky’s the limit. This is a perfect opportunity for investors and owners to take advantage of the market – as they should. However, I do caution our community. We need to remember that we must work together to support each other. We still have shoulder seasons. If the cost of living becomes too high for a meal, a service, or a rental, our community will look for alternatives they can afford.
So, here’s to continued growth, recovery, and profitability – in responsible, high quality, Teton Valley Style!
CC&R’s, what you need to know
CC&R’s, short for covenants, conditions, and restrictions are basically written and recorded rules of the neighborhood or subdivision. It’s important that these rules be recorded to make them binding and enforceable. They should also conform to all laws as well as local government regulations and requirements. When it comes down to a dispute with a lot or homeowner, it’s important for the subdivision to have CC&R’s that have been written and recorded correctly.
The purpose for these restrictions is to ensure conformity in a subdivision. Most of the rules are just long winded ways of saying that you have to keep your lawn mowed and weed free. Some developments have stricter rules than others. Some require certain design aspects when constructing a new home, where you can and can’t park a trailer, and so on. For the most part however, the rules are considered to be for the good of the neighborhood.
When working with Buyers, I often have requests to spefically look at lots without these restrictions. Sometimes it’s only because they want to build a house smaller than what they assume most developments would allow. However, based on that example, there are a number of developments that require a minimum of only 900 square feet, which is pretty minimal. Some developments are even along Ski Hill Road surprisingly. When searching for a home or a piece of land based on your special needs prohibited by most restrictions, it’s important to remember that all CC&R’s are not the same. Some are only a few pages long, with very few restrictions. All of the above considered, don’t rule out being in a subdivision if you can help it. Consult with your agent, most experienced agents have an understanding of the general rules in each development. Another way to explore subdivision opportunities is to take a drive around the development. Usually, if all of the homes have trailers on the side of the house or in the driveway, trailers are allowed. If all of the homes have metal roofs, you might find out if a comp shingle roof can be used. Use caution however, this is not a guaranteed way of understanding what is or isn’t allowed.
You might ask yourself how or who to contact with some of these questions. Our brokerage can usually get you an electronic copy of the CC&Rs for free, any time. If we have it on file, we can also send you contact information for the homeowner’s association (HOA) who would ultimately be responsible for enforcing the restrictions.
To conclude, be advised that CC&R’s are not the only way to restrict uses or enforce rules with a property. Even a piece of land or a home that is not located within a subdivision can still carry deed restrictions which works similarly, though I will cover those in another Ask The Expert” column!
I’m thinking about building a “small house” what are my options?
In a way, I manufactured this question. It’s been a huge topic lately. I have interviewed for some local magazine articles, as well as visited with developers, regional planners, etc. I also have quite a few customers with a small house in mind. Various reasons range from lifestyle to budget, not to mention small houses seem to be trendy at the moment. There are tons of plans available online, and a few of the local architects have similar interests, and can design these small homes for a very reasonable price. Also, there are some local companies who are doing some extraordinarily luxurious modular type small houses.
So, what are your options? It depends on a couple of factors, how small is “small”? There are a number of subdivisions and developments within Teton County that have a minimum size requirement of 900 to 1000 square feet. If this is your idea of small, then all it will take is a real estate agent that is well versed in knowing all of the developments or quick to review the CC&R’s for each development. You might be surprised how many lots are available, some even with community water hookups.
How about 400 or 500 square feet? This gets a little more tricky. A few of the older developments used to have very small size requirements such as this, but the restrictions have been amended over the years to require a larger home. Just 10 years ago, small homes weren’t really a thing. We were all building gigantic custom homes, and we didn’t really want to have a 900 square foot home next to our custom 5000 square foot home. I might be exaggerating slightly, but you get the idea.
One obvious workaround is to purchase a lot without any CC&R’s, or that is not in a subdivision. This can get tricky for a variety of reasons. First, these types of lots with “free rein” so to speak are gaining in popularity for those who want to have chickens, don’t like the idea of rules, or a variety of other reasons such as building a smaller home. Because they are gaining in popularity, demand is higher (supply is low to begin with) which is causing inflated prices. For those looking to build a small home because of the budget factor, this is essentially pricing them out. Other things to consider when buying a lot that is not in the subdivision is confirming that you can obtain a building permit for that parcel and checking costs for bringing in power, phone, the ability to hook up to water or sewer, or drill a well, and more. When you buy a lot within a development, it almost always has power and phone to the property, and the ability to hook up to or drill for water. This isn’t always the case with many of these parcels not in a development, which again adds to the cost to bring these utilities to the building site.
Another possible work around, and possibly a way to tick off your neighbors, is to find a development that allows a small guest house, but does not require that you construct the main house first. Obviously, this can cause some friction with the Homeowner’s Associations. Just because the CC&R’s read one way doesn’t mean it was the intent of the developer another way. It can be a sticky situation.
In a nutshell, I would first recommend that you spend some time in a small house, and consider the price difference between building something that conforms with a subdivision’s requirements, versus going all-out miniature. Pulling out your murphy bed everyday for the rest of your life may get old, even though it seems like a good idea today. Closet space, storage, pantry space and laundry areas are all things that are usually reduced in size or forfeited altogether – combine this with ski boots, your new bike, and a Golden Retriever, it gets pretty tight.
On another note, not that we need any new development, but how about amending restrictions on some of these vacant subdivisions to allow for these “small houses”? Food for thought!
