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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