As 2016 approached an end, it seemed like just about everyone I knew was happy to kiss this one good bye. We came off an awful 2015/16 ski season, the after-effects of which were hard on local businesses and outdoor enthusiasts alike. The fall brought lots of sadness to the Mad River Valley, and the ongoing drama of the presidential race did little to calm people’s nerves. From a purely real estate perspective, however, 2016 was a barn-burner, and there seems to be little on the horizon to indicate 2017 will be any different.
As the presidential campaign came to a close, the stock market rallied into uncharted territory, with most major indices hitting all time highs, before flattening into an early 2017 slump. I’ve said it before and I’ll say it again, when the bulls run on Wall Street, good things follow in real estate, and we are riding the coat-tails of the second longest bull market in history. There is a natural tendency for investors to go conservative following a big run, and real estate has returned to top dog status as the best place to put your money in the long run. While median home prices nationally have returned to pre-crash levels, housing starts are half what they were in 2005 and foreclosures are at a 17 year low, easing fears that this is just another growing bubble waiting to pop. Combine this with a national glut in inventory, you have the makings of the perfect place to park your money as the outlook for Wall Street is a little less cheerie for 2017. Optimism is the most significant driver in any market, and real estate is no different.
And why is this important for us? While the perception by many here in the Mad River Valley is that the real estate market remains somewhat status quo, the numbers don’t lie. A year ago in this same column I wrote that the condo market (along with land) was the most significant low-light in an otherwise reasonably good year in real estate. One year later, condo sales are up 17%, even if the median has dipped a little from last years $150,500.
On the residential scene, 2015 saw us treading in high water, as median home prices paced the benchmark $300,000 point for the first time since 2008. While residential sales volume actually dipped in 2016, the inventory for residential properties is at a 7-year low, which indicates that the national glut has spread to the Mad River Valley Real Estate Market, and you need not be an economist to understand the effect of supply and demand. The headwind created by this glut explains the lower volume of residential sales, and portends higher prices and more enthusiastic buying in the months to come. Additionally, the 12 properties under contract as the calendar turned to 2017 show that timing may be the only significant detractor in an otherwise rosie look back at residential volume for 2016. The buyers have returned to the Mad River Valley Real Estate Market.
Land remains the troubled child as sales volume is steady, but uninspired. The numbers show that it is really remains a buyers market. Marketing times are robust at 264 days and inventory burgeoning at 76 parcels currently available. With more hitting the market each year than selling, the supply side is troubling for those who have land to move in a market that is otherwise beginning to favor sellers.
Lack of consistency in the data makes it a challenge to analyze a segment of the market where subjectivity remains the biggest factor for purchasers. Since land requires significant resources to develop, buyers of land are generally more picky than that of the typical home purchaser, whose budget tends to determine the concessions they will make to fit and feature. Not so for the typical land purchaser, who is well healed, patient, and willing to wait for the right deal. Still, there are wonderful deals available for the frugal and community minded, and this is something to consider as the median price of residential real estate starts to climb . If you don’t require a huge view, and relish an affordable, private site, there are numerous options available with 32 parcels currently available in the Mad river Valley for under $100,000.
And for all these reasons, I see big things on the horizon for landowners looking to sell in 2017. The 100,000 foot view of 2017 shows all the pieces falling into place for a run on land – lower residential inventory and higher median sales prices, movement in the condo market (which represents the return of second home buyers) and good value on land based on poor sales performance year over year during a long positive run on wall street. When things are going well, it seems good news is always on the horizon, and the horizon is rosie for 2017. After a wild five year return to the top for residential real estate sales, land sales are the next piece in the complicated real estate puzzle to fall into place.
So, with dreary residential sales numbers in the rear view mirror, medians on the rise and inventory dropping to an eight year low in the Mad River Valley Real Estate Market, maybe 2017 is the year we will finally stop talking about the crash and start taking a positive look out the window. There’s a nice view out there on the horizon, and you might just miss it if you’re looking backwards.