After the Boom
For those who value a rewarding lifestyle and healthy, livable communities—and want to invest in property here—the Tetons may be a better bet now than ever.
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When Wall Street began its nosedive in autumn 2008, the decline of property values in Jackson and Teton Valley was already underway. As the financial crisis spread, the local real estate market went into free fall. More than three years later, communities on both sides of Teton Pass have entered a new economic reality.
How bad is it? There’s good news and bad news.
First, the bad news: High unemployment, a glut of undeveloped properties and vacation homes, and a recent tsunami of foreclosures. The statistics are sobering. (See “A Tale of Two Valleys,” page 43.) Prospective buyers can be forgiven for asking whether buying a home or living in the Tetons makes sense.
The good news: Yes, it still does make sense. Residents, retirees, and vacationers who consider purchasing property in the Tetons may find there is no time like the present to do so.
Photo: Sandy Mason
HOW DID WE GET HERE?
Some of the damage was certainly self-induced, especially in Teton Valley. Elected officials, reluctant to tread on local landowners’ private-property rights, rarely rejected development proposals during the speculative feeding frenzy. The worst of the damage was done after a loophole-filled Planned Unit Development (PUD) ordinance was adopted by Teton County, Idaho, in 2004, when more than 3,000 new lots were created in just two years. A seemingly endless number of new properties were carved from agricultural land. Prices continued to climb until early 2008. As demand ebbed, soon plummeting as financial panic set in, new construction virtually ceased. This scenario has left many “distressed” or “zombie” subdivisions—developments that are largely deserted. This massive oversupply undoubtedly exacerbated the scale of the collapse.
The land-use geography of Jackson Hole is nearly the opposite of Teton Valley’s, with relatively little land available for private ownership. Community-supported planning during the 1990s restricted residential development and rural densities, adding fuel to the fire beneath an already overheated real-estate market.
Speculation and limited supply drove prices to surreal levels, forcing many service and construction workers—as well as professionals and second-home buyers—to seek cheaper property in neighboring towns, including across the state line.
Though the supply-and-demand equation differed from that in Idaho, the bubble burst just the same. As values dropped and speculative building crashed, employment in Jackson also took a dive.
The downturn hurt not just building tradesmen, but a variety of professional service providers including landscapers, architects, Realtors, and financial planning firms, according to Jackson Mayor Mark Barron. Some 2,000 people lost their jobs, creating economic hardship throughout the area.
“It affected us across the board,” he says. “Those people were making good money and investing it in our community.”
Contrasting Geography, Shared Pain: A Tale of Two Valleys
TETON COUNTY, WYOMING
Land in private ownership: 76,800 acres (only 3% of total county area)
Undeveloped private lands (residential): < 10,000 acres
Drop in construction jobs from 2009 to 2010: 25%
Town & county building permits, 2000: > 600
Building permits in 2010: < 200 (< 100 were residential, lowest level in decades)
Unemployment in 2007: 2.2%
Unemployment in 2010: 8.2%
Source: Jackson Hole Compass (2011), State of Wyoming
2007 median home sales price: $1.8 million
Property value drop from 2007 peak: about 30% (losses vary from 15 to 50%)
Residential sales in 2007 under $300,000: 0
Residential sales in 2011 under $300,000: 45
Increased volume of sales 2010-2011: 26%
Sources: The Hole Report, Teton Realty Today, Jackson Hole Real Estate
TETON COUNTY, IDAHO
Land in private ownership: 190,000 acres (66% of total county area)
New lots recorded 2000–2010: > 6,000
Lots in subdivisions: about 10,000, of which roughly 7,800 are unimproved
County building permits issued in 2006: 390
County building permits issued in 2011: 50 (just 7 of which were for single-family homes)
Unemployment in 2007: 1.6%
Unemployment in 2010: 7.9%
Source: Teton County GIS, Planning and Building Department
Foreclosures, 2009–2010: > $250,000,000
Source: Valley Advocates for Responsible Development (VARD)
Median home price: Peaked at > $350,000 in 2008, is now < $200,000
Median lot price: Peaked in 2008 at $200,000; in 2010 it was $50,000; prices re-bounded slightly in 2011
Increased volume of sales 2010–2011: 21%
Source: Sage Realty in Driggs, MLS
If one can look beyond the immediate pain, there’s a silver lining to be found in the post-boom Tetons. In Jackson, where the notion of affordable housing a few years back seemed an oxymoron, Barron believes the drop in housing prices may be the most positive outcome of this difficult time. Hopefully, such a reduction will slow the exodus of the working class and help preserve the fabric of the town’s culture.
“We are seeing people come back from Teton Valley and Alpine [Wyoming]. Housing costs are approaching the cost of [subsidized] deed-restricted housing,” the mayor says. Another bright spot for prospective homeowners on either side of the Tetons is historically low borrowing costs (see sidebar, above).
Encouragingly, real estate now appears poised for a steady recovery. Chad Budge, an associate broker with Jackson Hole Real Estate, says the Jackson realty market “hit bottom in most categories” last year and will start an upward trend in 2012. “We’ll see slow, continued appreciation for the next three to four years,” Budge says.
Interestingly, he notes that more than half of Jackson Hole property and home sales in 2011 were cash transactions. “That tells me that better than half [of buyers] are investors,” Budge says.
On the Idaho side of the border, 2011 figures indicate that home sales have also bottomed out. Buyers have increasingly snatched up excessive inventory resulting from bank foreclosures and short sales.
Ken Dunn, owner and broker with Sage Realty in Driggs, says that buyers he’s seeing are people who “want to be here, or want a place here.”
That’s a good thing compared to the “irrational exuberance” of the boom, Dunn believes. He expects modest but sustained appreciation in home prices, beginning in 2014.
“As people become more comfortable with their economic status, we’ll see more people moving to the valley,” Dunn says. “We live in a great place. That hasn’t changed.”
While the land glut in Teton Valley remains a major concern, there is one consolation to all those undeveloped subdivisions: Imagine a landscape of full ones. Since many have no infrastructure in place, the problem exists more on paper than on the landscape, for the moment. Besides, without broader economic development, the boom’s inefficient, uncontrolled growth was unsustainable.
According to well-documented research by the Sonoran Institute, a non-profit dedicated to rural planning in the western U.S., even well-planned residential development rarely pays for itself. Given development rates at the height of the frenzy, county budget shortfalls were projected to become critical, as community service costs outstripped building and tax revenues.
For years, the beep-beep-beep of heavy equipment, as well as contentious public debate, was ubiquitous. Too much money could potentially be made, and community battles over growth and property rights became openly hostile.
“During the boom years, the valley sort of lost its soul,” says Teton County Idaho Commissioner Kathy Rinaldi, one of an all-Democratic slate of county leaders elected in 2008. “It was like I didn’t recognize the place anymore.”
County planning administrator Angie Rutherford says the current economic lull is essentially “a free-market moratorium” on development, and a great opportunity to “find ways that farmers can hang onto the value of their land without turning the valley into sprawl.”
Developers have been encouraged by county leaders to renegotiate development agreements in order to mitigate impact on the landscape, reduce lot inventory, and increase value. Undeveloped subdivisions may also be vacated altogether on a voluntary basis.
A new comprehensive plan for Teton Valley is in the works, incorporating broad community input and lessons from the bust. Failure to address the flooded land market could undermine efforts to redevelop the valley’s towns and keep land prices depressed for a generation.
Although some landowners remain adamantly opposed to any zoning that restricts development potential, local leaders remain hopeful of consensus, since most citizens consistently cite common values of rural character, beautiful scenery, and thriving towns when asked about their vision for the future.
“We’ve bridged some gaps,” says Rinaldi. “We went through it together and it affected everybody.”