Durango, Colorado Land Sales- Part 2

Comparative Analysis of Land Sales for 2005, 2006 and 2007
Analysis by Price Ranges

My previous analysis on the Durango real estate market, was done based on all types of land sales as one group differentiated only by the year of sale. Now we will look at five different price bands to see if we can locate particular market niches and market trends of interest. Where the market is strong and where it is weak. Here are the five price categories: from $0-$199,999; from $200,000-$299,999; from $300,000-$499,999; from $500,000-$999,999; and $1 million plus. All figures are from January 1 through December 15th of each year respectively. To view the Excel spreadsheets that I prepared in order to do this analysis, click here to be taken to a private portion of my website.

From $0 to $199,999
This price range would be considered entry-level in La Plata County and as such, has had the largest change from 2005 to 2007. In 2005 there were 325 units sold compared to 218 units in 2006 then all the way down to 133 in 2007. That represents a decline of 59% from ‘05 through ’07. In spite of the decline in number of units sold, the median price rose. In 2005, the median price was $72,100; in 2006 it rose to $98,750; and in the year 2007 it was $100,000. That represents an increase of 38.7% over the three-year time period. The days on market (DOM) number that I track went from 181 days in 2005 to 286 days in the year 2007. That's a change that would be expected in a softer market. Lastly the number of sales that were all-cash stayed fairly steady; with 47% of all sales in 2005 closing for all-cash while in 2007 it dropped slightly to 44%. We did not see much of a change in the sales to list price ratio either going from 96% in 2005 to just 94% in 2007.

From $200,000 to $299,999
This price range would not be considered an entry-level price, but just like that price range, these properties saw a significant decline in the number of units sold during 2007. In 2005 to 2007, the number of units sold declined from 78 units, to 61 units, to 41 units. That represents a decline of 47.44% over the three-year time period. Sales to list price ratio did not change much going from 94.75% in 2005 to 94.45% in 2007. Unlike the entry-level land, the median price in this price category went from $235,000 in 2005 up to $250,000 in 2006 and then down slightly to $245,000 in the year 2007. That is actually an increase of 4.26% from ‘07 over ‘05. Number of days on the market however still showed a softening market with the year 2005 having 288 average days on the market; 2006 having 328 days on the market and for 2007 it was 340 days on the market. The percent of sales that were for all-cash dropped from 50% in the year 2005 to just 41% in the year 2007.

From $300,000 to $499,999
This price range remained quite strong during the three-year period when compared to the first 2 price bands. In 2005, 39 units were sold; in 2006, 57 units were sold; and in 2007, 38 units were sold. You can see that the real drop was from 2006 to 2007… not from 2005 to 2007. As the price range of a property increases, it appears that the sales to list price ratio decreases. That is, the higher the price the more the seller is willing to negotiate. In this price range, sellers received 93.78% of their asking price in the year 2005. In the year 2006 they received 95.83% of their asking price. And in the year 2007 they received 93.97% of the asking price. Unlike the previous two price categories, the median price dropped in each year. In the year 2005 the median price was $362,500. In the year 2006, the median price dropped to $358,000. And in the year 2007 the median price declined one more time to $354,950. That represents an overall decrease of just over 2%. The number of days on the market fluctuated from 376 in the year 2005; 305 days on the market in the year 2006; and then up again to 370 days on the market in the year 2007. Over the three-year period that was only a 1.6% change.

From $500,000 to $999,999
The last two price ranges are clearly upper end in nature. The oddity that we saw in the last price range carries through to this one as well: 2006 was the peak sales year, not 2005. The year 2005 saw 22 of these upper end sales; in 2006 it jumped to 25 units; and in 2007 it declines to 18. The 2007 sales figure represents a decline of 28% from the year 2006 but only 18% from the year 2005. Median price shows the same anomaly in that 2006 was the high point for that criteria. The median price in 2006 was $623,750. It then rose to $700,000 the following year (an increase of 12%). Through 2007 it dropped again to $$642,500….a figure still above the ’06 median price. Since the sample size is not huge, it is a bit tough to say a trend exists, but days on market dropped significantly from 700 day in ’05 to 456 days in ’06 and leveled out at 466 days on the market in ’07. Lastly, the number of all cash transactions was pretty steady, staying between 45% and 52%.

Over $1,000,000
Clearly this is the very upper end of the Durango real estate market in land sales. Although the number of units sold is not huge, the actual total sold dollar volume is more in this category than all the previous categories discussed. This is clearly a stronger market and goes along with the residential sales figures of the high-end homes that we discussed in this blog previously. In 2005, 9 parcels sold for more than one million dollars. In 2006, there was a slight increase to 10 units. But in 2007 it increased to 15 units. That is a 66% increase from 2005 through 2007. Hot as mentioned earlier, the higher end parcels of land tend to have the price negotiated a bit more. The sales to list price ratio in this price band was 91% in 2005; 88% in the year 2006; and 88% in the year 2007. These are clearly the lowest percentages of all of the price bands. Continuing the anomaly of 2006 being the good year, median price in the year 2005 was $1,475,000. In the year 2006 it increased 22% to $1,800,000. In 2007 it dropped to $1,375,000 a 6.7% decrease from 2005. Days on the market dropped significantly from 2005 to 2007. In 2005 it took 359 days to sell property in this price range while in 2007 it declined to only 216 days. That is a drop of 39%. A rather interesting figure is the number of sales for all cash in this price range. In 2005, 70% of all transactions were cash. In 2006, the percentage dropped to 60. And in 2007 53% of the transactions were for all-cash. That figure was certainly a surprise to me because I would not have expected the priciest property to also be the properties for which cash was paid the most often.

Observations
This blog article is intended to give you the series of facts about the various price ranges of land sales here in the Durango area. These statistics are a part of my effort to keep you fully informed of the Durango real estate market. However, I think it would be helpful for me to pass on to you the trends or market conditions that I think might be most helpful to you. That will be my next blog right truly analyze and give you some of my conclusions on the state of the Durango real estate land market over the last three years.

Durango Area Land Sales '05 thru '07

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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