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About one month ago I blogged about the number of new listings on the market in comparison to sold properties. The statistics from March 6th to the previous 30 days indicated there were 902 new listings and 152 properties sold. A month later, the numbers show a similar trend with slightly fewer new listings on the market, but less real estate sold as well.

The ratio of new listings to sold one month ago was about 5.67. This month the ratio takes a slight turn for the worse at 6.58. This creates a very attractive market for buyers with the surplus of inventory on the market. With the increased number of foreclosures and short sales within Sevier County, some non-foreclosed owners are drastically dropping prices in order to compete with the bank owned properties. On the other hand, many overnight cabin rental owners are fairly affluent and can weather the storm by maintaining more stable prices. The largest market effected with foreclosures has been Planned Unit Developments (PUD’s).

They were developed at the very height of the real estate boom in order to create inventory for the high level of demand. Builders and developers simply could not build enough cabins. With all of the hoopla of buying investment cabins during the 2004 to 2006 period, buyers were drastically overpaying for properties in relation to the rental income a property could produce. Buyers were not looking at cabins as an investment with respect to rental revenues, but with the hope of appreciation. Several of the PUD’s offered 0% down financing and quoted high projected rental incomes. Some of these developments like Black Bear Ridge and Hidden Springs are now flooded with “For Sale” signs – many being bank owned cabins.

The owners with zero money down and no equity in the property simply walked away and let the properties go into foreclosure. This is very unfortunate for those who did put down a substantial amount of money and now see the values on the decline. One particular case is a 6 bedroom, 6.5 bath cabin in Black Bear Ridge selling furnished and new for $770,000 in 2006. This cabin recently sold for $365,000 as a bank foreclosure. Well less than $85 per square foot. The market has went from one extreme to another. Some properties I feel are undervalued now in the PUD’s based on their potential rental income. Still, I am hesitant because there are other foreclosures sure to come on the market in these developments and one must wonder where is the absolute rock bottom?