I spent a good part of yesterday doing some research for a Broker Price Opinion or BPO for a bank that has foreclosed on yet another property here. As a part of my report I reviewed the latest stats for one bedroom cabins. As I have mentioned in an earlier post, this portion of our market was one that saw the most dramatic excesses. Not surprisingly it is now one of the hardest hit segments of our Gatlinburg/Pigeon Forge/Sevierville real estate market.
These very small one bedroom cabins often on postage stamp size lots sold for ridiculous prices as recently as 2006 but the reckoning since then has been very severe indeed. At the height of the insanity many of these 1 bedroom, 1 bath 500 square foot cabins on planned unit development lots sold for over $250,000. In some cases the developments had superb design and amenities but the price/value calculation still never really made sense to me. I chose not to sell these properties even though they were all the rage for a while.
Today is a different matter entirely. There are currently listed in our Great Smoky Mountain Association of Realtors 632 one bedroom residential units for sale in our area which does not include for sale by owners, development offered properties, or those that were listed in our MLS but have now expired. In the past 12 months there have only been 169 of these 1 bedroom units sold. You can see we now have a 3.74 year supply of these homes for sale and the pace continues to slow even further. During the first half of this year area Realtors have only sold 70 of these homes meaning that if that pace continues we are now on a pace of 140 units for 2008. Based on the current 632 unit supply we would then measure our residential inventory at 4.5 years!
Sadly the ONLY use for most of these cabins is as vacation rentals. With only 1 bedroom, no storage, and very small finished area, they aren’t practical for use as long term rentals or residences. With no other use than as a vacation rental this oversupply will continue for some time to come and I’m talking about many YEARS.
The moral of this story? NEVER purchase a rental cabin without a view as that is THE most important feature that affects its ability to rent and its saleability. Also, if you are looking to purchase a Smoky Mountain cabin now you have an incredible opportunity. I have recommended a price of $110,000 for the cabin I was researching today for the unhappy bank owner and they are in a state of shock that we are at that level. This is exactly HALF of the price that the former owner had been asking as they tried to resell the property. They in fact paid $191,900 for this cabin on 3/10/2006 and the bank made an 80/20 package loan for 100% of the purchase price. Doesn’t really take a rocket scientist to see where this was headed…
We saw this mess coming several years ago and now nearly half of all of our business comes from the real estate foreclosure connections that we have been developing for the past 4 years. If you want honest advice regarding buying or selling real estate here in the Gatlinburg area, please contact us, The Schoenfield Team, at 865-436-0444 or by email.