market report Archives - Teton Realty Blog

Since this is technically a blog article and my market updates live in a separate section over at TetonValleyRealty.com, I’m going to treat this market update more like a blog post, just to convey my general feelings and sentiment of the market.

Residential

The residential sector of the market in Teton Valley and surrounding counties (Teton County, Wyoming and Lincoln County, Wyoming) all share similar attributes and challenges, though at different price points.

Dare I call any sector of the residential market “starter homes” (considering the average residential sales price in the Teton regional MLS is well over a million bucks) this sector of the market seems to be accumulating the most days on market and is faced with the greatest challenges. Why? Back to that average sales price. While the average sales price in communities like Teton Valley and Alpine are under 1m, they are still big numbers. Combined with interest rates which remain stubbornly high, we are beginning to see Summer price reductions. In other words, residential listings priced under 1.2m in the bedroom communities or maybe 2m in the Jackson area (which generally excludes the luxury/second home market), are faced with the most difficult sector of the market today. Despite this seemingly grim data for Sellers, inventory is still extremely limited, and opportunities that fit the bill for most consumers are still few and far between.

The luxury market in all sectors (once again, at different price points depending on the micro market) seems to still be churning along, if impacted by nothing other than increasing inventory, primarily due to more builders jumping into the game, or at least focusing on projects of this caliber. Many similar models I have sold for builders have crept up ever so slightly in terms of price, but the market seems to be fairly stable. Summer inventory does seem to be further increasing, which could have a slight impact as the market stabilizes from the short-term yet jarring effects of the Teton pass closing, and the speculation of long-term closure, now behind us.

Condos and townhouses are certainly plentiful, but inventory is slowly being absorbed. While I felt we were at a high point in terms of supply towards the end of last year and into the Spring, it does seem that that market is stabilizing.

Predictions; to summarize, it’s obviously still difficult to see where the general economy takes us with inflation seeming to cool but interest rates remaining stubborn. For those that have been waiting to jump in, the message from many of the lenders in the marketplace has been to jump in now while Sellers in the “starter home” price point are vulnerable, taking advantage of lower interest rates when a refinance is realistic. That sentiment may have been a little premature a year ago, but it does seem that inflation is cooling and rates are likely to soon decrease. The “covid craze” seems to be subsiding, and some sellers appear to be faced with, and accepting reality in that regard. I know that many Buyers are waiting for a correction, but from my perspective, I hear fewer that believe this is soon to happen than those that think it won’t happen anytime soon.

Land

I have long said that the land market seemed to have stabilized towards the end of 2021, with the tremendous gains capped by new inventory and market stabilization. I still see small spikes and valleys in those trends in specific areas, the Teton view corridor is a good example. Ample supply (though unusual in these areas) can reduce overall prices, while limited availability can have the opposite effect, but in an even more dramatic way. Other parcels with some form of unusual feature can also benefit from limited supply, such as industrial zoned land, land without covenants and restrictions, land with interesting terrain, water features, trees or otherwise have all seen greater increases. Some areas, however, have seen greater instances of stabilization or even a slowdown, particularly those that lack any unique aspects or reside in communities with strict guidelines that require more expensive builds.

Construction

As an aside and in line with the last sentence above, construction costs have remained surprisingly resilient to cooling and inflation. While some materials have reduced in cost, others have increased. Subcontractors are showing no signs of slowing down in terms of cost increases, which tells me that there is still plenty of work on the horizon. Many local governments have been inundated with new custom and speculative bills and just like the huge cost increases in terms of construction costs keeping new projects at bay, the difficulty in obtaining building permits, combined with stubborn construction costs has kept new inventory from exploding. It’s frustrating for builders and investors, but it’s probably keeping the market under control at the same time.

I try not to write articles about market statistics. It creates references in time that may not be relevant a year from now, or even a month from now. I am working with a customer as I write this that brought up an article I wrote back in 2012, and how much things have changed. It goes back to using old real estate data to value something today. Appraisers like to use the most recent data possible, and rarely look at anything over a year old. There’s a good reason for that. With the above said, let’s get into it.

What’s Happening? If you are reading this article today, I don’t have to tell you how crazy the real estate market is. If you are reading this article 8 years from now, it’s crazy. Everything is flying off the shelf. To put things into perspective, In 2019 there were 281 land sales throughout Teton Valley. Year-to-date we’ve had 189. This isn’t that crazy. Add in the number of pending transactions and that number jumps to 292 – and August isn’t even over yet. There are over 100 contracts on vacant land out there today. Here’s another one. In 2019 there were 21 sales throughout Teton Valley in excess of $1m. YTD there have been 15, but there are 20 pending sale. I can do this in pretty much every sector of the real estate market.

What Caused This? I think it’s pretty clear that COVID-19 has something to do with it. People flocking to rural America is a conversation I’m almost tired of having. I thought about naming the article in the name of the catalyst – but I’m not even going to go there. This is a touchy subject that has impacted millions of people. Regardless, I’m sure we are in a little bit of a perfect storm. Another thing I’ll hate to admit for future readers sifting through old material, interest rates are at historic lows. Even the interest rates are tied to the pandemic, however. Teton Valley was waiting to be discovered? Yeah, we’ve been saying that for a long time. I wrote an article not long ago about the common comparison of the future of Teton Valley to the next Park City or Sun Valley. In that article, I basically made a claim that we have too much available land and we were quite a ways off from that happening. Now I remember why I don’t make predictions.

What’s Going to Happen? Hey, I just said I don’t want to make predictions. I will provide a few scenarios, however.

Scenario 1: We do become the next big destination. Targhee expands, all of those 3500 building sites throughout the Valley that everyone said would never get purchased are snatched up. Construction goes wild, and commercial expands. Teton Valley becomes as recognizable as Sun Valley.

Scenario 2: All of the bad stuff happening in the world catches up to us, and gets us back into reality. Everyone working from home and moving to Teton Valley realizes that we do have a Winter season, and it is a long one. Inventory levels creep back up and the market stabilizes, or sags.

Scenario 3: We know there is turmoil in the economy, but not all economic downturns impact real estate. After all, most historic data shows that since the 50s or so, we really only had one drop in real estate prices, and that was in 2007. It’s fresh in my mind because that was a big chunk of my career, so that probably always causes me to be conservative or even pessimistic in some fashion or another. Anyway, certain areas of the Valley are changed forever. All of the golf clubs become more exclusive, and the high-end real estate becomes less obtainable. Many of these land purchases remain vacant land, but residential inventory rises over time. Those city dwellers tired of winter adds to that inventory, and the market stabilizes, or at least normalizes. Real estate prices aren’t dramatically affected because construction costs remain high, and much of the land purchased today is redistributed into the market over the next generation. COVID-19 and the Summer of 2020 changes the landscape of Teton Valley forever, and traffic increases with visitors who have finally discovered our beautiful home.

Remember, I don’t make predictions. But if somebody gave me all three of these options, I think this is the one I would probably put my money on.

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