Comparative Analysis of Land Sales for 2005, 2006, and 2007
As I've written in previous posts regarding residential sales in La Plata County, 2005 has been considered the banner year and the high benchmark from which to compare other years. I've just completed a very thorough review of: (1) all vacant land sales; (2) in the county; (3) for each of the three years mentioned; (4) for closings that occurred between January 1 and December 15 of each year respectively. My seat-of-the-pants sense of the land market over the last three years is that it has been down significantly. The facts proved that theory to be true, but I did find some interesting little quirks in the market as well.
Let's start with some of the basics. In 2005 there were 473 sales; in 2006 there were 371 sales; and in 2007 there were 245 sales. That represents a drop in the number of units sold of 48.2%. The sales volume however, didn't track in quite the same degree. In 2005 sales volume was $99.5 million; in 2006 the sales volume was $99.9 million; and in 2007 it was only $79.2 million. That is a drop of 20.34% from ’05 through ’07 compared to the 48% drop in number of units sold. The biggest change was in the number of million-dollar plus properties that sold. In the year 2005, there was $20.9 million worth sold; in the year 2006 that number jumped to $22.8 million; and in 2007 that high-end market sold properties worth $28.2 million. Another number that surprised me a little bit, was that the median price actually increased in each of the three years. In 2005 the median price was $128,000; in 2006 the median price jumped to $170,000; and in 2007 it jumped again to $189,900. That represented a 48.36% increase in the median price.
As I've mentioned earlier, the (DOM) number of days on the market property is available is usually a pretty good reflection of the condition of the market. If the days on the market is increasing, that would generally mean the market is slowing down and becoming more of a buyers market. If days on the market is decreasing, that would mean the market is strengthening and would become more of a seller's market. No big surprise here. Average days on the market in the year 2005, was 242 days. Average days on the market in 2006, rose to 261 days. And in the year 2007, it jumped all the way to 317 days. That's an increase in days on the market of 30.9%.
A second market indicator is the “sales to list price ratio”. Just as a reminder, that percentage is computed using the final sales price compared to the last listed price of a property. So if a property was listed at $100,000 and it sold for $96,000, then the sales to list price ratio would be 96%. In a falling market we would expect to see the sales to list price ratio declining and the opposite would be occurring if the market was strengthening. The stats I have accumulated do show a falling market, but not as drastic as I would have expected. Sellers are negotiating more…but not by much. In the year 2005, the ratio was 94.5%. In the year 2006 it dropped a bit to 93.54%. In 2007 it dropped again to 92.03%. That is a 2.64% decline in that ratio; not a hugely significant change but certainly one that would be somewhat reflective of the market conditions.
One of the other indicators that I track is the number of sales that were for all-cash; that is the purchaser did not get a loan using the property as collateral. Some of these people may have used home-equity loans or other property as collateral because as a general rule land loans carry a higher interest rate. Consequently, I put a bit more emphasis on that figure for residential sales than I do for vacant land sales. In the year 2005, 228 transactions sold for cash; in the year 2006 the number dropped to 173 transactions; and in 2007 it dropped to 113; that is less than half the number from 2005. However, the interesting figure to look at is that the number of transactions for cash as a percentage of the total transactions in each of the years has stayed very constant. 48.2% in the year 2005; 46.63% in the year 2006; and 46.12% of all the transactions in the year 2007 were all cash transactions.
While it is very clear the land sales volume is down over the last three years I was a bit surprised to see that the dollar volume actually increased in 2006. The increasing number of days on market is a reflection of fewer and fewer buyers looking for land and not so much an abundance of inventory. To some extent, I believe that is reflective of the fact that you can buy a used home for less per square foot than you can build. This analysis has been pretty much done based on the total land sales for each year with little differentiation paid to various market segments. My study, however, did break down every sale into five different categories based on the sales price. The results of that analysis, together with my Excel spreadsheets will be the subject of my next blog.
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Sunday, December 16, 2007
Thursday, December 06, 2007
Durango Comparative Market Update $200,000 to $499,999.
Who last week I blogged about residential sales in the price range of $500,000-$1,000,000. This week I want to talk about homes selling between $200,000 and $499,999. As you know my goal is to give you an accurate picture of the real estate market not necessarily a rosy picture of pure optimism. While last week's data is pretty optimistic, this week's data is not quite so good.
All of my sales figures were taken from the Durango Area Association of Realtors MLS and I used January 1 through December 3rd for each of the last three years as my data collection dates. I did an analysis of Durango in-town homes for each of those three years as well as rural homes not within the city limits of either Durango, Bayfield, or Ignacio. Residential units consisted of: freestanding homes, condos or townhomes, as well as mobile or modular homes.
Let's start with the Durango in-town home sales. In the year 2005, there were 253 homes sold. In the year 2006 that number dropped to 195 homes and in 2007 that number bumped up slightly to 198 homes. From ’05 to ‘07 that would be a decline of 21% in the number of units sold. Interestingly, days on the market, dropped from 234 days in 2005 to only 151 days in 2007. Generally, if the market were going bad days on the market would increase not decrease. What percent of the ask price a property sells for is also a good indicator of what's going on in the market. Generally in a bad market sellers are willing to negotiate quite a bit more. Three year period from 05 through December of 07 that ratio is only changed slightly from 98.96% to 97.85%. I pulled some additional numbers you can review by looking at this spreadsheet below.
The La Plata County rural homes sales from $200,000 to $500,000 are where we've really seen the big change in our real estate market in Durango. In 2005, 415 units sold and that number dropped to 308 units in 2006. Sales dropped again to only 245 units in the year 2007. That is a decrease of 40.96% over that three-year period of time. The number of days on the market has stayed pretty steady, going from 148 days to 138 days and then back up a little bit to 142 days in ’07. Other important statistics can be seen in the spreadsheet.
What kind of conclusions or observations can be drawn from these figures?
It is very clear that the number of units sold in this price range is down fairly significantly since 2005.
The in-town market is stronger than the rural market as indicated by the better days on market figure and the number of units sold statistic.
Durango area sellers do not negotiate very much on their sales price which can be clearly seen by the sales price to list price percentage figures.
The decline in country units sold from ’05 to ‘06 was 25.78% but the decline from ’06 to ‘07 was only 20.45%, a slight improvement. When you review the figures for the in-town units, the decline from 2005 through 2006 was 22.92% while the change from 2006 to 2007 was actually an increase of 1.54%. This may show that the market has already bottomed out for in-town homes and is on the way back up. It's a little hard to tell, but it is possible that the rural properties could bottom out in 2008 and begin their recovery as well.
All of that said, I think a person needs to look hard at the fact that investing in the Durango area is still a good solid venture. The median price of a home, whether you are buying in the city or in the county, has increased from the year 2005 to the year 2007. We are not seeing the actual declines in market value like you see in Greeley or Aurora or other cities across the nation. I've talked about this previously, and it is important to acknowledge that the subprime mortgage market is just not a factor in Durango real estate. Check out one of my previous blogs that indicated that through September of 2007 only five properties had gone all the way through the sale process as part of a foreclosure in our county this year. It's pretty easy to agree that that figure is so small that it is of no importance here.
Even though prices are not falling, just in the last two weeks interest rates have come down one half percent which is a significant reduction in a monthly payment. He still have sellers who want to sell and this might what you hear in the national media, there are loans out there available to our clients. I would be happy to hook you up with one of our great loan officers who can take you through the process. The rental market is still very strong in Durango and Bayfield and this may be a good time to buy a rental property in the $200,000 to $300,000 price range. With a good down payment these can be made the pencil.
All of my sales figures were taken from the Durango Area Association of Realtors MLS and I used January 1 through December 3rd for each of the last three years as my data collection dates. I did an analysis of Durango in-town homes for each of those three years as well as rural homes not within the city limits of either Durango, Bayfield, or Ignacio. Residential units consisted of: freestanding homes, condos or townhomes, as well as mobile or modular homes.
Let's start with the Durango in-town home sales. In the year 2005, there were 253 homes sold. In the year 2006 that number dropped to 195 homes and in 2007 that number bumped up slightly to 198 homes. From ’05 to ‘07 that would be a decline of 21% in the number of units sold. Interestingly, days on the market, dropped from 234 days in 2005 to only 151 days in 2007. Generally, if the market were going bad days on the market would increase not decrease. What percent of the ask price a property sells for is also a good indicator of what's going on in the market. Generally in a bad market sellers are willing to negotiate quite a bit more. Three year period from 05 through December of 07 that ratio is only changed slightly from 98.96% to 97.85%. I pulled some additional numbers you can review by looking at this spreadsheet below.
The La Plata County rural homes sales from $200,000 to $500,000 are where we've really seen the big change in our real estate market in Durango. In 2005, 415 units sold and that number dropped to 308 units in 2006. Sales dropped again to only 245 units in the year 2007. That is a decrease of 40.96% over that three-year period of time. The number of days on the market has stayed pretty steady, going from 148 days to 138 days and then back up a little bit to 142 days in ’07. Other important statistics can be seen in the spreadsheet.
What kind of conclusions or observations can be drawn from these figures?
It is very clear that the number of units sold in this price range is down fairly significantly since 2005.
The in-town market is stronger than the rural market as indicated by the better days on market figure and the number of units sold statistic.
Durango area sellers do not negotiate very much on their sales price which can be clearly seen by the sales price to list price percentage figures.
The decline in country units sold from ’05 to ‘06 was 25.78% but the decline from ’06 to ‘07 was only 20.45%, a slight improvement. When you review the figures for the in-town units, the decline from 2005 through 2006 was 22.92% while the change from 2006 to 2007 was actually an increase of 1.54%. This may show that the market has already bottomed out for in-town homes and is on the way back up. It's a little hard to tell, but it is possible that the rural properties could bottom out in 2008 and begin their recovery as well.
All of that said, I think a person needs to look hard at the fact that investing in the Durango area is still a good solid venture. The median price of a home, whether you are buying in the city or in the county, has increased from the year 2005 to the year 2007. We are not seeing the actual declines in market value like you see in Greeley or Aurora or other cities across the nation. I've talked about this previously, and it is important to acknowledge that the subprime mortgage market is just not a factor in Durango real estate. Check out one of my previous blogs that indicated that through September of 2007 only five properties had gone all the way through the sale process as part of a foreclosure in our county this year. It's pretty easy to agree that that figure is so small that it is of no importance here.
Even though prices are not falling, just in the last two weeks interest rates have come down one half percent which is a significant reduction in a monthly payment. He still have sellers who want to sell and this might what you hear in the national media, there are loans out there available to our clients. I would be happy to hook you up with one of our great loan officers who can take you through the process. The rental market is still very strong in Durango and Bayfield and this may be a good time to buy a rental property in the $200,000 to $300,000 price range. With a good down payment these can be made the pencil.
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