Recent land sales in Sevier County have been sluggish to say the least. No matter the area - Gatlinburg, Pigeon Forge, Wears Valley, Sevierville, or any other area of Sevier County sales have been few and far between. There is an abundance of land on the market, but very few buyers willing to pony up the cash to invest in land. Normally this would create a situation where there is a buyers market and driving down prices. Although prices of land within the MLS have lowered, they are nowhere near in proportion to cabin and residential homes.
My speculation for the reasoning behind this stems from cabins becoming low enough priced now to become a wise investment with several cabins offering positive cash flow opportunities with 20% down. With the residential properties there is a need - people have to live somewhere and buyers are bargain shopping. Also, the price of residential homes lowering has made them more lucrative as long-term rentals. Land, on the other hand, offers no monthly income in most cases, so it can be a substantial drain on an individual's cash position as reserves.
At this time, a lot of people are holding cash as the stock markets are faced with turmoil - along with the strengthening of the dollar recently. Although, I do feel the value of the dollar will be decreasing in the future as the Federal Reserve has been utilizing quite a bit of "quantitative easing" and increasing the monetary base. Once the banks utilize (either invest or lend) the money they received from the bailout packages, that money gets turned into the money supply as it gets put into circulation. I believe the long term result from this will be inflation - caused by the over compensation and manipulation of the markets in the current asset and commodity deflation.
So why are the number of land sales so low and why haven't prices of land dropped substantially in the area? That is a difficult question to answer. Without a doubt, those who are actually purchasing land (which is a relatively few number) are searching for bargains from distressed sellers or properties at absolute auctions. For example, I just purchased 5.55 acres of rolling pasture land in New Center for $40,000 at absolute auction. The property was part of the Denison Farm, a 130 acre tract subdivided into 25 parcels. I would estimate if the auction occurred two years ago, the land would have sold for double the price I paid. So, it is not necessarily that prices are not decreasing, however the number of buyers has dropped off the map, and those willing to buy are only purchasing when they are able to find a real bargain.
I do believe that land soared to some overvalued prices in the 2005 to 2007 time frame, so a correction is necessary. The problem currently is that sellers seem to be holding strong on their prices and have not lowered them enough to entice the buyers searching for property. Many owners of land are able to do this as they "wait out the storm", but I would think some people would be forced to lower their prices to free up cash for other ventures, especially those who have substantial equity in the land or have it paid for.
To give you an idea of the market for land I researched the land sales in Sevier County through our GSMAR (Great Smoky Mountains Association of Realtors) over the past 30 days (covering the time frame of November 5th to December 5th. There were a whopping 10 total land sales in Sevier County during this time. Of these sales, nine out of ten were priced at $69,900 or less. There were:
- Two sales in the Boyds Creek Area (side by side lots selling for $36,250 each)
- One sale in Gatlinburg for $19,850
- Three sales in Pigeon Forge (two of them on Bales Way for $20,000 each and a 6 acre tract on McCarter Hollow, next to Dollywood, selling for $137,000)
- Two sales in Seymour - one 13+ acre foreclosure tract selling for $32,000 and a lot in Majestic Meadows selling for $59,900.
- Two sales in Wears Valley - for $69,900 and $38,200 respectively.
The thing I noticed is the vast majority of these lots are residential building lots instead of land being bought for cabins. Perhaps two of the ten sales were for overnight rental cabins (one in Wears Valley and the lot in Gatlinburg) . In the past, this segment of the market was a much greater proportion. The purchasing of land to build a cabin has lowered dramatically as new cabin builds have been extremely sluggish - and justifiably so.
To give you a point of reference, there are currently 2,186 (Two thousand one hundred and eighty six!) parcels of land within Sevier County currently for sale within the GSMAR. At the rate of 10 sales per month (equating to 120 sales per year) it would take over 18 years to cleanse the market - and that is assuming that no other properties come up for sale which is obviously not going to happen. There has been an over abundance of land for sale compared to the number of sales for a while in Sevier County, but nothing approaching the 18 year figure.
I do find it odd that prices have not been lowered significantly by sellers yet, but I would think it is on the way. Land selling at absolute auction have been going for much less than in the past and developments such as The Summit On Bluff Mountain ran an extraordinary amount of advertising when they slashed their prices substantially (in some cases up to 50% off their original price) at the end of October. I believe it is just a matter of time before many more sellers begin to lower their listing prices to meet the demands of buyers. There are always owners that have their land listed that do not NEED to sell, so they just may sit tight until the market recovers, but not everyone has the luxury of being in that position.
So to summarize, it is a buyers market, but the vast majority of prices of listed properties are still high. While there can be bargains found, many people seem to be waiting for prices to lower and indicators of the economy recovering in order to purchase land for the building of new homes. If you are looking to buy land I would be happy to search out the current bargains or locate distressed sellers who need to sell and have the ability to accept an offer substantially less than their asking price. And there is always the option of just waiting until the land prices lower as I would predict in a lot of circumstances. Property on a creek or river is still in high demand and with so little waterfront property available, I think those properties will hold their value well.
