Real estate transactions are on the rise in the Wood River Valley, but home prices are not. Many in the industry are wondering if the market has hit bottom, and if so, how long it could stay there.
An uptick in commercial leasing and sales reported last week by commercial agents indicates that business activity could be increasing in the valley after a four-year lull.
County Assessor Valdi Pace reported that real estate transactions in Blaine County increased from 237 during the first half of 2011 to 363 during the same period this year, an increase of 35 percent.
A memo sent by Ketchum real estate appraiser Patty Lentz, based on an analysis of multiple listing service sales data, provides more detail.
"The residential market is showing strong signs of recovery in almost all areas," wrote Lentz, with $69 million in market sales during the first half of the year, compared with $36 million last year, an increase of more than 90 percent.
And fewer of those transactions are of short sales or foreclosed properties than last year, Lentz said.
"Distressed sales made up 43 percent of our residential market last year and are down to 35 percent this year," she wrote.
The MLS information regarding actual home sale prices, used by Lentz and others in the real estate industry, is considered proprietary information and kept by the Sun Valley Board of Realtors, but anecdotal evidence suggests that it is still very much a buyers' market.
Real estate agent Tom Drougas, who has been in the business since 1974, said a two-acre lot on the Big Wood River in Golden Eagle subdivision, five miles south of Ketchum, that would have gone for some $2 million several years ago, has languished on the market for two years at $600,000.
"Places closer to the Sun Valley Resort have fared better than listings in the outlying areas," Drougas said, but noted that some of the most prime in-town land has also seen a big drop in price.
Drougas said a lot in the Fairways area in Sun Valley, listed before the real estate crash for $3.4 million, recently sold for $1.75 million, a drop of almost 50 percent. Lentz said such radical drops in price are probably motivating the increase in sales.
"I believe one reason that we have seen more activity in 'market' sales is that sellers have become more realistic about their asking prices and this has spurred buyers to get off the proverbial fence," Lentz wrote.
Buyers can find good deals in the valley, especially if they have cash to buy on a short sale—properties that have been foreclosed on by banks and are being sold for less than the mortgaged value. Real estate agent Sheila Liermann sold in April for $190,000 cash an older three-bedroom house owned by a bank on a spacious corner lot in old Hailey, with a large shop and outbuilding. The same house sold in 2004 for $495,000, and almost sold again in 2007 for more than $500,000.
"Cash rules in some cases," Liermann said.
She said that this year she's negotiating fewer short sales than last summer, an indication to her that the housing market may be stabilizing somewhat.
"There's less inventory," said Liermann, who has seen houses in the south Hailey neighborhood of Woodside sell for one-third the price that they were listed at during the real estate boom, which ended in 2008.
Longtime real estate broker Bill Norris said he noticed that home prices continue to drop in the valley, due in part to the fact that home sellers are becoming more realistic about asking prices.
"I don't know if we're nearing bedrock [bottom of the market], but we have to be getting near to it," he said.
Norris said residential properties are holding their value better in the downtown Ketchum core, compared to north of town and in Elkhorn.
Veteran broker Mike McCann described the summer season as "better than the last four years," saying that his company's 17 real estate agents had 40 showings last week, with one, Dick Fenton, putting a house under contract.
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"Few people out there can afford a second home these days and many are just trying to hold onto their first one," McCann said. "The days of speculation are over. Now sales are about home use."
McCann said buyers can find homes at less than replacement costs "by a wide margin" at many places in the valley. He said what speculation remains in the valley seems to be taking place in Hailey and Bellevue.
Commercial market rebounding
Commercial real estate agents Matt Bogue and Paul Kenny said commercial sales have increased across the board in the valley over last year, in retail, office and industrial sectors, but that the number of leases has remained flat.
"In 2012, we've had increased activity from new business versus more relocations and expansions last year," they wrote in a report.
Bogue said commercial rents dropped 20-30 percent across the board several years ago, with some rents dropping as much as 50 percent, but that the rents are showing signs of stabilizing this summer.
Bogue said renters with small offices that closed up shop a few years ago and moved into home offices to save money are coming back into the market at a time when rents are more affordable.
Commercial leasing agent Matt Engel said he's starting to see more activity in office and retail-space leasing in properties that he inverntoried in Hailey, with a drop in inventory from 90,000 square feet to about 70,000 square feet in the past two years.
"Office space has been the weakest because there's so much out there," Engel said. "Retail has held its value the most."
Engel said a new office building on River Street in Hailey has remained completely vacant since it was completed four years ago, while others in town are filling up because owners are willing to negotiate with renters on lease agreements.
"There is a ton of negotiation going on," he said. "Many landlords are interested in keeping their buildings fully occupied. If you look around there's going to be a deal out there [for renters]."
Title company executive Darryl Fauth said the appearance of a lack of inventory could be deceiving, due to a "shadow inventory" of foreclosed homes that banks are withholding purposefully from the market.
Fauth has for two years reported to the Idaho Mountain Express that foreclosures are mounting at a rate of one per day.
"Nobody really knows how many bank-owned properties there are out there that are not on the market," Fauth said. "Real estate agents are calling me to find out who to contact in order to buy a house that neighbors know has been foreclosed. All I can do is give them the name of the bank."
Sun Valley Board of Realtors President Jed Gray said he believes the shadow inventory is real and that banks are intentionally trying not to flood the market, which would drive home prices down even further. Gray said he hopes banks will bring more of these foreclosed and vacant homes onto the open market, especially at the lower end of the market, to cater to qualified buyers.
"At this point in time, there seems to be demand ahead of the inventory," Gray said.
Gray said that overall there's been an upswing in the mid-priced market, but that the very high end of the real estate market has lagged behind most during the recession, due to unknown tax consequences of the upcoming presidential election.
"We don't know what our taxes are going to be," he said. "I think there is a tremendous amount of money waiting on the sidelines."
Tony Evans: tevans@mtexpress.com
Real estate agent Mike McCann talks with a client at the Thunder Spring development in Ketchum. Photo by David N. Seelig
