No, I’m Not Dead Yet!
With almost two months since my last post one might wonder if I have assumed room temperature. While I can certainly quash that rumor as I am feeling quite well, it has been a very busy two months. As Mark Twain once said, “The reports of my death are greatly exaggerated.” With a total of 20 agents and employees in our office the job of overseeing the group has grown considerably. At the same time, I continue to manage my own real estate career as the leader of The Schoenfield Team which has been quite busy as well. While countywide sales volume is off from the much brisker pace of a year ago we continue to lead the pack.
My first point is “How significant is the decline in volume?”. For the first half of the year our Great Smoky Mountain Association of Realtors Multiple Listing Service reports that total residential units sold were 1205, significantly below last year’s pace of 1389 for the first half of 2006. This trend is not over yet as this year’s second quarter’s units sold were 614 compared to 707 in the same period in 2006 and 788 during 2005. In Q2 2005 the average selling price of a residential property was $185,949 while in the same quarter of 2006 the average price rose to $212,409. In Q2 2007 however, the average price of a residential unit dropped to $199,956. With the drop in reported sales for Q2 2007 being both in units and average price the total volume reduction is significant, at over 18% when compared to the same period in 2006.
With 4,246 residential properties currently being offered for sale via the MLS my calculation is that at the Q2 2007 anemic sale pace our inventory is equal to 1.73 years. While no where near as severe as some coastal Florida markets this is a real downturn from a couple of years ago when we had much less inventory. Clearly the downturn is very real and it is being felt all across the county. Hardest hit have been the second homes and in particular the ones that we built the most of during the past few years, the very small and very large rental properties. The next question is much harder – “When will the Smoky Mountain real estate market recover?”.
The simple answer is that I just don’t know. I like to think that new construction starts have slowed but I can’t say for sure. Some large developments have postponed new phases of existing projects and others have even stopped building all together. I however continue to see new developments coming up on almost every hillside and the pressure from these new cabins and condominium developments will continue to be felt in the resale market. Another factor is the large number of timeshare properties and the immense number of those units that have been added in the past couple of years. Hotel unit have also been added and more are in the works. All of these add to the supply which we have to digest in order for prices to recover.
What should existing cabin owners do? Make sure that your property competes very well with the other cabins that are on your rental company’s program. I was recently speaking with a couple of owners and they both attributed their continued success to being very well positioned in relation to the other properties on their rental company’s program. Adding features and unique decor touches are just the start of what can be done to make a home more successful in a very competitive rental market. Consider hiring a professional photographer such as Dean Brown 865-228-4672 to make your property much more attractive on the Internet and in print publications.
What about prospective buyers considering the purchase of Sevier County real estate? A stronger buyer’s market has not existed in the 13 years I have been in the Gatlinburg area real estate market. Prices are sharply lower than where they were at the peak 18 months ago and there are real opportunities out there. While we used to only very rarely see foreclosures in second homes and rental chalets or cabins we now have a few of those and have more coming. These properties are priced very aggresively by the bank and can be superb investments. We have proprietary tools which will help you get the best performance possible from your rental cabin. We will be glad to help you find a great home, second home, or commercial property here in the Smokies of East Tennessee – just let us know how we can help!