For the last several years our market has experienced depressed prices in overnight rental cabins, in large part due to the high number of foreclosures and short sale. The distressed properties dominated the market and drove prices of other rental cabins down (if they were able to even sell in the first place). These factors caused building of rental cabins to a near stand still. It didn’t make financial sense to builders (or investors) to build because the cost to purchase land and construct a cabin was considerably higher than the cost to buy a quality distressed rental cabin.
During 2013 foreclosures and short sales have decreased significantly. In the past years, it was common to have well over 100 cabin foreclosures/short sales active on the market. Currently, there are less than 50 (with many of them not being desirable properties). The shortage of distressed properties has caused prices of cabins to increase slightly. This is going to, and to a certain extent already has, opened up a market for new construction cabins. Cost of land has yet to see the price increases cabins have, and in many circumstances land is trending lower in cost. There is an abundance of land for sale and the buyer market is nowhere near absorbing the inventory.
To give a general idea, there are 2,547 land parcels currently for sale in our MLS. In 2012 there were 344 land sales within our MLS. At the rate of sales from 2012 it would take nearly 7.5 years to clean out the current inventory of land listings if no other properties came available for sale within that time frame! In 2011, there were 230 total land sales, while 2010 ended up with 305 pieces of land being sold. In comparison, 2006 had 975 tracts of land sold (and this figure was only from mid-March to the end of 2006 due to our MLS system upgrade only tracking statistics since March 2006).The land sales are less than one-third of what they had been in the past. The demand is nowhere near meeting the supply of land for sale. The stagnant sales of land has caused many sellers struggling to sell their property at all and if they do sell it the price is typically at a large discount. This is where opportunities exist.
I have purchased an acre lot in Wild Briar for $15,000 that originally sold for $100,000. My wife and I also purchased a foreclosure lot in The Enclave at Cove Mountain for $49,000 that had originally sold for a whopping $550,000. These aren’t typical situations when one pays 9% to 15% of what the property originally sold for, but it does occur occasionally in our market. It is more typical and somewhat common to find land that is selling for half what it once did at the peak of the market. There have been and likely will be very good opportunities to purchase land for low prices in high end neighborhoods where the cabins/homes sell for quite high prices. Being able to purchase the land significantly less obviously gives an advantage when building in comparison to other cabin owners that paid substantially more for their lot (or lot & cabin package).
Although it isn’t widespread yet, there is a sprinkling of new construction going on in the area. This is taking advantage of the low priced land and filling a gap in the market for quality cabins with the new features/amenities people desire. This is especially evident in the large 8+ bedroom cabins with new construction either completed or underway on lots within Wild Briar, Parkside Resort, and Pinnacle View among others.
Talking with several contractors, they seem to be extremely busy. Whether it be a new build or remodel/repairs of an existing cabin. In addition to slight increase in new construction, the recent fires in Black Bear Ridge Resort destroying dozens of cabins will have an impact on the cabin market. The owners are going to reinvest their money, with it often staying in our area purchasing an existing cabin rental or considering building a new cabin.
There are still opportunities to purchase existing cabins at good deals. They just aren’t as plentiful as they have been in the past.
Click for a list of Gatlinburg and Pigeon Forge area cabin foreclosures.
If you have any questions or need anything please don’t hesitate to comment or contact me.
Jay Fradd
Smoky Mountain Real Estate Corporation
Cell:(865)809-8600
Toll Free:(800)832-1115
Office:(865)277-8115
Fax:(614)635-1395(Ufax)
239 East Parkway
Gatlinburg, TN 37738
TN Real Estate License #313792
www.WearsValleyHomes.com