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A longtime valley real estate analyst declared this week “the market has hit bottom.”
While market data in a new report may signal a slow improvement in property sales, any gains are coming out of a deep trough.
In 2009, the number of real estate transactions fell to 223, down from a market peak of 1,122 in 2005 – a drop of 80 percent, according to The Hole Report. The real estate review was started 15 years ago by David Viehman who is now a principal with Jackson Hole Real Estate Associates.
The latest report was released Tuesday and summarizes the 2009 valley real estate market. The dollar volume of property transactions fell from a peak of $1.57 billion in 2007 to $333 million last year, a drop of 79 percent, the report shows.
In the last three quarters there have been signs of life as the number of real estate sales has increased, as have the number of properties under contract, Viehman says. He now prepares the semi-annual report in conjunction with his daughter, Devon Viehman.
In the past two quarters, inventory has decreased, says the report, which is available at jacksonholereport.com.
These changes point to a market that stopped its downward fall in 2009, the Viehmans say. Projecting a significant upswing may be harder.
“How long will we sit at the bottom?” The Hole Report asks. “This is difficult to predict, as the bottom is very soggy right now.”
Other real estate professionals recognize that the market hit a low in 2009 and see some sign of improvement heading into 2010. In October, Jackson Hole News&Guide columnist Jonathan Schechter said the valley real estate market had hit bottom in 2009 and foretold the 80 percent drop in number of sales but said dollar volume might be 66 percent down from its peak.
Clayton Andrews, executive vice president at Sotheby’s International Realty, said the first quarter of 2009 represents the doldrums of the local market. In that period, the real estate sector’s multiple listing service reported that there were an average of fewer than 10 transactions per month, Andrews said.
While the number of transactions has inched up slowly, many of them have come in the category below $1 million, skewing the average home sale price down 30 percent to 35 percent, Andrews said.
Any bottom, however, may have more to do with emotions than numbers.
“It is difficult to determine whether we have hit the bottom of the market, because does the bottom of the market refer to transactions, pricing or confidence?” Andrews asked
Bill Helm, the Teton Board of Realtors president and associate broker for Diane Nodell Real Estate, said members of the real estate community do not report any sort of significant uptick.
“The phrase that I have heard recently is we were bouncing along the bottom,” Helm said Tuesday. “I think that is probably a pretty accurate assessment.”
The number of Realtors licensed through the Teton Board of Realtors decreased from roughly 650 in 2009 to between 550 and 560 in 2010, he said.
Helm, who said the market will likely start to see marked improvement in the latter half of 2010, asserted that confidence is the key factor for real estate. Across the nation and in Jackson Hole, people feel insecure about jobs and the overall performance of the economy. This has left some people sitting on the sidelines, unwilling to spend money on investments that may not perform.
“It is the investment climate in general right now,” Helm said. “It is overall confidence.”
Jackson Hole could benefit from a climb in stock prices as well as controversial six- to eight-figure bonuses in the financial sector, Andrews said. He asserts improvements in the real estate markets in and around New York City, San Francisco and Los Angeles “will ultimately fuel an improvement in the resort markets, but historically we have lagged those markets’ improvements by a few months to a year.”
Viehman and Helm noted that some sellers have dropped their prices to be competitive. Such an attitude is key to moving a property in the current climate. “If you must sell right now, ask your Realtor what they think your property is worth under a cold, hard light, but be prepared to move down as fast as you have to in order to remain competitive,” Viehman said.
Some buyers are still holding cash.
“There is significant money on the sidelines waiting for quality buys, and we have seen some great opportunities present themselves over the course of the year and there will continue to be opportunities for buyers in all price points,” Andrews said.
Lending also has been difficult in the market. Banks are looking at individuals’ access to cash more and their net worth less, and they are loaning a smaller percentage of a properties’ value than in the past, Andrews said.
The Hole Report introduced new Jackson Hole Real Estate Associates commercial property specialist Michael Pruett on Tuesday. Pruett offered sober assessment of commercial property in the valley.
“Currently, the commercial market is very slow,” Pruett wrote.
In 2007, commercial transaction volume was $268 million for 51 sales. In 2009, the volume was $22 million for nine transaction. In that span of time, commercial transaction dollar volume decreased 92 percent, and the number of sales decreased 82 percent.
“Currently, the supply of commercial space exceeds the demand,” Pruett wrote. “Vacancies are up to an 18-year high, causing lease rates to decline and driving commercial prices lower.”
In the condo and single-family home market, Viehman noted that with foreclosure and other distressed properties coming on the market, people may be distracted looking for deals. He said that in 2009 only 6 percent of sales were from distressed property.
“Don’t let the allure of a distressed property blind you from the other opportunities,” The Hole Report states. “The current number of motivated sellers is historic, as are the low interest rates.”