In a recent blog I addressed the question “Are we there yet?” in terms of real estate making it to the bottom of its decline. In this entry I would like to discuss where we are now. It is a similar question but the answer comes from a different perspective.

To explore the answer I would first like to present something on greater real estate market trends, cycles and phases.

In phase one we see numbers of sales increasing but prices are basically flat.
This occurred in Jackson Hole from approximately ’95 to ’98 and is typical for a market where growing supply meets growing demand and other factors in purchasing are stable.

In phase two we see numbers of sales increasing, but prices increasing too. This occurred in Jackson from ’99 to ’04 and it is typical when growing demand exceeds supply. There were a few bumps in this time period for the dot com bust and the 9/11 attacks.

In phase three sales decrease but prices still increase! We saw this during ‘05 and ’06 when demand was still strong, there was very little inventory available and there was lots of wealth in the marketplace competing for the limited housing.

In phase four we see numbers of sales decreasing and prices falling. Does this sound recent and familiar? It was late ’07 through mid ’09. In its extreme it can mean market collapse and we have certainly seen large equity losses though not the Great Depression of the 1930’s.

So back to the question we started with “Where are we now?” Since spring we have seen a slow, and I mean painfully slow, increase in the number of real estate transactions but prices were still falling in the early part of the year. That was the tail end of phase four. The return to beginning of the cycle at phase one now appears to have arrived. MLS statistics show greater numbers of sales and the prices of properties seem to be stabilizing. The transactions that are closing seem to have set a market bottom. The stabilizing of prices is very important but for those sellers who have never admitted to themselves that this is now a buyers market, there may be a price decrease necessary for their listing to get it sold. The last ‘phase one’ lasted about 3 years.

To get to phase two where prices begin to rebound is normally a function of supply and demand. We have a large supply in inventory but fewer contractors around building new homes and ever tightening restrictions on development, so the high supply may not last a long time. We have certainly reduced the demand side of the equation, but there is still a growing population that needs shelter. Technology such as on line meetings, email and satellite links are allowing people to live in more remote locations like Jackson and still be productive in more traditional urban jobs. It will take time and only time will tell!

John Hanlon

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We have all been on one side or the other of that question during long car trips, remember? It seemed like it would never end! That is how this recession feels to me and many others. And this trip is on a very bumpy road with no fuel stops, rest rooms or scenic turnouts.

So, are we there yet? Let’s look at some real estate statistics for clues:
·        In August new listings out-paced sales by nearly 3.5 to 1.
·        At the current rate of selling property it will take over 55 months to sell what is listed today, but that is better than it has been. Last Feb. that number was 177 months! Property is selling over three times faster now.
·        Total inventory of homes is down 6% from the peak just over a year ago but is still large compared with historic levels. (note: those historic levels were so low that demand could not be met and contributed to the steep climb in prices)
·        Total inventory is now at 4815 units (homes, condos, vacant land, commercial) when Star Valley, Teton Valley and Pinedale area listings are included.
·        In Teton County, WY alone there are 650 listed residences.

You may notice that I focus on inventory statistics. It is simply that the supply side of the market now dictates the conditions. Since the inventory is high but nearing stability it is probable that prices are stabilizing now too. So, “Are we there yet?” If not, we are darned close.

Lending rates will likely have an impact on the market at some point. As the Feds spend huge amounts of money and finance debt selling it to investors, both foreign and domestic, inflation will set in and rates will rise. At first this may trigger a land rush to buy before rates rise too high. Then it will slow demand and we will no longer ask if we are there yet, but instead, ask if we can go back.

If you need a map, give me a call.

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