November Gatlinburg Residential Sales Up 61% But...

When was the last time that you saw a gain of 61% NOT being accepted as totally good news? That is however exactly the situation we have when analyzing the preliminary Gatlinburg area residential real estate sales results for November 2009 as reported by our Great Smoky Mountain Association of Realtors.

The reason why is simple - We are comparing to an EXTREMELY weak period a year ago. In fact, November 2008 was THE low point for residential sales in our Gatlinburg area real estate market going back MANY years with a total of only 67 total units sold. By comparison, the 108 sales reported for November 2009 is way up but nowhere near recent month's totals. To be sure, November is usually a pretty soft month and we will no doubt have additional sales reported over the next couple of weeks. October 2009 unit sales finished at a very respectable 143 but my guess is that November 2009 will likely finish at only around 120-125. This is an okay number but still makes November 2009 one of the lower sold volume months of this year.

Two Local Banks on Troubled Bank List

With over 550 US banks on federal regulator's Troubled Bank List, it isn't surprising that some of our local Sevier County banks are also on the list. Both of my favorite banks that we routinely recommend, Mountain National Bank and Tennessee State Bank are the institutions that have this dubious honor. In both cases, the reason for their inclusion is in large part the significant number of cabin and commercial development loans that have defaulted since the Gatlinburg area real estate bubble burst in 2007. When money was easy and the demand appeared to be insatiable, many banks were green lighting nearly every developer who had a desire to build cabins, condos, and almost any other vacation home option. In fact, very few of our local banks declined to participate in this foolishness that led to the significant over-development of our Smoky Mountain community.

With development money now harder to obtain by would-be buyers and prices having declined most of these johnny come lately developers have ground to a halt and fortunately the banks have now ceased lending for new projects. Unfortunately, this is much akin to shutting the barn door after the horse has left the barn because the damage has already been done. In some developments fraud appears to be involved and homes in the most obvious cases are selling at only around 50 cents on the dollar. In fact, many foreclosures (where no apparent fraud exists but significant over exuberance was present) are now selling for only about half of what they did at the peak of the market in 2005-2006.

While I am not anticipating the failure of either of my favorite local banks there is an important lesson to be learned here. When everyone is trying to enter a market it is a good time to be exiting. Conversely, when the panic and apprehension are the highest is the time to be brave and find a way in. This is exactly the situation that we have now. With November's volume up significantly from last year's frighteningly low level we are now set to have FIVE consecutive months of positive comparisons to last year's residential sales volume. Of course, we are comparing to a very weak period so we had BETTER be showing gains or many more realtors would be out of work. Generally volume has to increase before prices can so this is a VERY good sign. With interest rates at all time lows this may indeed be a great time to invest in Gatlinburg area real estate.

The Gatlinburg Real Estate Market Isn't THIS Bad!!

(photo by Karen Schoenfield)

Actually we have had an excellent year but I did spend two hours late this afternoon working at our Sevierville Food City grocery store as a bag boy (okay, bag man?). The reason I as well as several other local business people did this was to raise money for United Way of Sevier County. We were bagging for tips and raised a lot of money for this charitable cause. After working from 4pm until 6pm today I must admit that I appreciate much more the hard work that the grocery store employees perform. I'm quite certain that my injury prone lower back will be complaining tomorrow but it was in an odd sort of way more than a little fun. Good cause, good people, and good results - what more could you ask for??

I'm SO Glad I Don't Live in FL, CA, AZ, or NV!!

The latest foreclosure and delinquent loan rate information for the country as provided by the Mortgage Banker Association or MBA is out and unfortunately it isn't good. Overall, 14.41% of ALL U.S. mortgage loans are either at least one payment delinquent or are already in foreclosure. This is a new record that exceeds any value recorded since the quarterly MBA report was first delivered in 1972. Another way of looking at this is that 1 in 7 mortgages are in at least some form of delinquency. Of course, a 1 month delinquent mortgage loan is quite different from a 90+ day overdue mortgage loan but that rate is at record heights as well. Almost 5% of all residential mortgage loans nationwide are in a 90+ day delinquent situation.

As usual, the worst offenders are the states that had the largest run-up in prices during the housing bubble of the first half of the decade. Florida, California, Arizona, and Nevada top the list for delinquent loans and foreclosures with 43% of all new foreclosures started being from one of these four states. In fact, 25% of all Florida loans were delinquent or in foreclosure as of the end of the third quarter. While the pace of delinquencies is challenging here in the Smoky Mountains at least we aren't that bad off. If you are looking to buy a Gatlinburg, Pigeon Forge, or Sevierville cabin, chalet, or residence however there are lots of opportunities. For a free list of all foreclosure and short sale properties listed by any area firm just click here. For free professional advice regarding purchasing or selling Gatlinburg area real estate please contact us!

It Could Be Worse, You Could Be Trying to Sell a Condo!

Although our Gatlinburg area real estate market is improving, there are still certain sectors of the market that are absolutely miserable. Large residences and condos have some of the worst stats according to the Great Smoky Mountain Association of Realtors MLS database. There have only been 80 condo sales in the last 12 months but there are 399 units currently listed for sale. This calculates to a 4.9875 YEAR supply of unsold condos based on the pace of sales during the last year. In case this weren't tough enough, there are new condominium developments coming on line. Additionally, there are also a good number of foreclosures coming onto the market (I myself have two new condo foreclosure units that will be priced within the next 30 days or so).

Here is my analysis of our Smoky Mountain real estate market by segments:

To get a clearer copy (if you really want to see it??) of this table please click here. If you are attempting to sell real estate in Sevier County it is a challenging time indeed. If you are trying to sell a condo unit or a residential property over $500,000 "May the force be with you!".

When Your Best Client is Also Your Worst Client

Having seen the current foreclosure mess looming on the horizon several years ago I took steps to get into the REO (bank owned) end of the real estate market way back in 2003. One of my first big clients was a national government/private company who was displeased with their current local agent. Obviously a large account like the this has been a major source of business for us. In fact, in 2009 they have been the owner of 44 of the 92 properties that we have sold or have under contract to sell. There is no arguing that this seller hasn't been a huge part of our success this year.

The other side of this is that big organizations can be very difficult to work with. They have reduced the commission rate to the listing agent from 3 to 2.5%. This wouldn't be so bad if we didn't have to front thousands of dollars of expenses that can take 90 days (or more) to be reimbursed. Additionally, they change our sales rep contact regularly meaning that as soon as we learn how a particular individual likes to work they are replaced by someone whom we have never worked with. Because every person has their own preferred style and paper flow pattern this creates a perpetual learning curve that we suffer through. Also, the mounds of paperwork that these super sellers require are daunting as is the general bureaucracy. Finally, because of the pace of foreclosures we have had title issues with 4 different properties recently. On 3 of the 4 we actually listed, got contracts, and were proceeding to closing just to find out that the foreclosure wasn't done properly. More precisely, it wasn't done at all meaning that our client didn't actually own the property that we had successfully marketed. The error was only discovered when the buyer's title company's search of the courthouse records came up lacking. You can imagine that everyone in the non-transaction is irritated including the buyer, the selling agent, the title company, and your humble correspondent who all walk away shaking their heads and muttering.

In case it sounds like I'm whining I really don't mean to. It is just frustrating when your largest client is also your most difficult one. If you haven't seen my photo just take my word for it - I am thoroughly bald and this client is at least part of the reason for my being follically challenged. I AM grateful for the business, but I do wish that they would get their act together a little better. Of course, they are probably saying the same thing about me!

If you are looking for foreclosures, we have them - Just ask the bald guy!!

Yet Another Way to Look at Our Gatlinburg Real Estate Market

While we have seen a moderate increase in sales recently our Gatlinburg area real estate market is still decidedly slanted in favor of buyers, not the sellers. I have begun describing our market by comparing it to a southern community grocery store when a rare winter storm is forecast. Because we don't get much snow here in the valleys of the East Tennessee Smokies when a snow storm is imminent we jump into a sort of crisis mode. At the weather forecast's first mention of snow or ice, grocery stores go into high gear as almost everyone heads out to stock up on staples such as bread, milk, etc. so that they won't risk going without. Keep in mind that snows here in Sevier County rarely linger for more than a day or two before they melt but that doesn't matter. Even with every employee working and every cash register lane open the lines quickly form. I have seen my local Food City store here in Sevierville have 12 lanes open each lane 8 or more people deep. Everyone is frustrated because they are stuck in line but yet they feel that have to bring home the items in their buggy so they wait and inch closer to the overworked cashier.

Our current real estate market is very much like the winter storm imminent grocery store scene. Sellers all want to get to a closing (the cashier) so that they can get on with their life. Because there are not enough closings to handle the large number of near desperate sellers lines form which equates to long days on market for the sellers.

Now imagine that you are in that painfully long line at the grocery store inching your way forward. Just as you get close to the cashier, someone breaks in line in front of you, and quickly checks out while you wait and grit your teeth. Being a rather nice and forgiving person, you don't say much or reach out and slug them. You simply settle back and realize that although your departure has been delayed you are still next in line and should be leaving soon with your bread and milk. Now picture that the same thing happens again and again. Each time you get close to the cashier some other desperate customer jumps in front of you and the cashier rings up their purchase. After a few delays because of these rude customers you finally speak up and tell the next person that there will be no more breaking in line - You've been patiently waiting your turn and they will have to wait theirs.

Now back to our Smoky Mountain real estate market. The people that break in line and get to the cashier are the sellers who are super motivated and are willing to sell their properties at terms that are exceedingly attractive to the buyers. These are primarily bank-owned foreclosure properties and other motivated sellers who are more concerned with a prompt sale than they are hurting the feelings of those that they broke line in front of. Because each aggressively priced property will jump to the front of the line and get sold, it is possible that properties that aren't well priced will spend a VERY long time in line waiting to get to that cashier (closing).

This is exactly what is happening in our Sevier County real estate market (and many others around the nation) right now. Only the most motivated sellers are having much success and the rest of the sellers in the marketplace are simply waiting in line while a constant parade of "line breakers" continues to jump in front of them. The only way out of this hellish scenario is either to decide you don't have to get to the cashier and leave your groceries at the market or to become rude like the other sellers and set your price so low that nobody else will be able to jump in front of you. While neither of these choices is particularly attractive they are the only options that sellers in our second home market currently have. Sellers, if you don't want to give your properties away you may have to put them back on the shelf and decide that you don't really have to sell right now. That is precisely what I and a lot of other potential sellers of Gatlinburg area real estate have decided to do. We will wait until the snow forecast is past and the balance between cashiers and shoppers is more evenly balanced.

If on the other you are a potential buyer you will LOVE the current second home real estate market is like. Get ready to snag a real bargain from a desperate seller who can't wait in line any longer. For professional real estate advice regardless of the weather conditions please contact us.

A Little More Light from the End of the Tunnel?

And now for a little good news! October sales transactions should all be reported by now. Even without any additional sales October is shaping up to be the best month all year when this year's monthly sales are compared to the year ago totals. We are now reporting 131 sales of Gatlinburg area properties sold during the month of October. This also helps to make the argument that our market may be ready to move up instead of down price wise as volume almost always turns before prices do. The monthly volume trend chart is quite impressive.

In another glimmer of hope, Sevier County foreclosures dropped in October to a more "normal" 91 units. In any other universe 91 new foreclosures would NOT be looked at as an improvement but given the hyper pace of foreclosures in our Smoky Mountain real estate market anything under 100 a month is an improvement and sounds attractive. Here's a link to the monthly foreclosure chart for all of you visual folks.

While there are no guarantees of just what the future may hold these small developments are encouraging. If the pace of foreclosures continues to drop we will likely see prices start upward. Now really may be the time to pick up a bargain on a Gatlinburg/Pigeon Forge/Sevierville real estate bargain. On the other hand I don't think that I would sell any property right now unless I just didn't have a choice. Seems like almost every sale is at a fire sale type price but hopefully that will change soon.

Are The Smoky Mountains Recession Friendly?

It was recently announced that 9 million Great Smoky Mountain National Park visitors spent $800million during the past year which is the most of any US National Park. My first thought is that the nearly $90 per person spending is pretty good given that we are in the middle of a very difficult recession.

We have however seen this before. The Gatlinburg area has always fared well during this sort of economic environment. During challenging times, families considering cost cutting still choose to have their vacation trips but they often do it in a more affordable fashion. People who usually take a week long vacation to the beach may choose instead to enjoy a 3 or 4 day trip to the mountains for several reasons. The fact is that the long weekend or 4 day trip to the Gatlinburg area is more affordable than the beach for a number of reasons:

For travelers from most of the Eastern United States (and much of the US population in general) the drive to the Smokies is no more than a day's drive. This eliminates the expense of the airline tickets, the rental car, and the higher priced entertainment found at the beach. To be sure some of Sevier County's entertainment is rather pricey. A family's day of recreation at Dollywood is no cheap date at $53.65 per adult ticket and $42.45 for a child's ticket. Add to this expensive food options and the additional spending opportunities of a day at the park and you have an expensive day indeed. Not surprisingly the visitor count at Dollywood IS down somewhat this year. On the other hand affordable Smoky Mountain restaurants, lodging options, and entertainment venues are having a good year because they represent excellent value.

The Great Smoky Mountain National Park is still absolutely free to visit which is a real bargain. As I often say, "Free is my FAVORITE price!" This is the same sort of success that our community has enjoyed during other recessionary times due to the affordability.

If you are looking for an affordable vacation option nothing represents a better value than a log cabin or a chalet in the mountains. If you are looking for a real estate bargain we can show you some excellent values there too. No they aren't free, but with our current "Buyer Friendly" market you may never see a better opportunity. For a current inventory of foreclosures (ours and other area firms listings too) please click here.

And the Streak is Still Intact!

For the fourth month in a row our Great Smoky Mountain Associatioon of Realtors had more residential real estate sales than we did during the equivalent month in 2008. Keep in mind that the end of 2008 was a very bleak period indeed and we have only passed last year's total by a single unit sale as of today. The 116 Gatlinburg area residential real estate sales that have already been reported as of November 3rd will likely finish around 120-125 units as more sales are reported over the next couple of weeks by real estate agents from our Smoky Mountain community.

What does this mean you ask? It does look like we have begun to turn the corner at least for volume and that has to happen before prices can begin to increase. While we won't likely exceed 2008's full year volume it does appear that we will do so for the latter half of the year. Although nobody can say for sure when prices will start to go up we appear to be setting the stage for that to occur. Here is my report for October's sales but if you want to see a clearer version that will be regularly updated with the updated values click here.

New Wal-Mart in Gatlinburg??

Not really, but I did wonder what this Wal-Mart driver was thinking when he tried to come down Ski Mountain Rd. through Chalet Village. Don't know if he was relying on a GPS unit that was malfunctioning but you just can't get a semi trailer down (or up) the mountain through the hairpin curve. Sadly, this happened yesterday too - You have to wonder if someone stole the "No 18 Wheelers" sign that is supposed to be at the base of Ski Mountain. This driver was really caught between a rock and a hard place. The rock was some of our famous Rocky Top and the hard place was this power pole.

What does this have to do with Gatlinburg real estate you ask? Very little really but it was quite funny in a sad sort of way...

3.87 Years Supply of Cabins??

Yes, it's a fact. The number of log and log look (cabin construction) homes currently offered for sale in our Sevier County residential real estate market is equal to nearly 4 years. This calculation is based on the number of transactions during the period 10/1/2008 to 9/30/2009. The pace of sales is slowly improving and homes are being purchased each month so this number will hopefully continue to improve.

For non log or log look (residential) properties the market is significantly better with the current supply equal to only 2.27 years. The overall Gatlinburg area real estate market continues to be driven primarily by foreclosures and prices are still very tough on sellers. While this is an improvement over where we were a few months ago a balanced market is considered to be a 6 month supply which we are obviously well above.

Although 5 of the 15 properties that we listed this month are already pending sales, these 10 recently listed homes are not yet sold. Some are so ugly that only their mother could love them but where some people see ugly others see opportunity!

Why do Banks "Give Away" Foreclosure Properties?

The number of new home foreclosures monthly continues to be roughly equal to the number of Sevier County residential sales each month. Many of these sales are at ridiculously low prices - Levels not seen in many years. When a client of mine who is attempting to sell his own (non-foreclosure) property asked why the banks were pricing so aggressively, I decided that the answer might be something that readers of this Gatlinburg real estate blog might also be interested in.

Basically, foreclosure units are distressed properties owned by banks that are highly motivated to sell for several reasons. As has often been said, the LAST thing the bank wishes to do is to actually end up with the house. Banks are in the business of lending, and they are restricted from doing that while they own the non-performing asset. In fact, the bank is penalized by the regulators severely until the property is liquidated. Additionally, the bank knows that an unoccupied home doesn't fare well and that time is NOT on their side as to the condition of their asset. Next, most of these properties are no longer furnished which makes them less attractive to buyers who can find non-foreclosure properties that still are furnished and extensively decorated. Finally, foreclosure properties are sold without disclosure - What you see is what you get and the bank makes NO statements or guarantees of condition. Buyers therefore expect (and often get) excellent bargains on these foreclosed Gatlinburg area homes.

For all of these reasons, the banks price these foreclosure properties VERY aggressively. When the banks tell us that they want a price that should sell the property within 60 days (or less) this requires a very aggressive price. We sometimes get the price that we suggest but often the bank refuses to acknowledge the serious haircut that they will have to accept. When this happens the properties don't sell until the banks grudgingly lower the price to the near giveaway levels that are required for a timely sale. Frequently, the value of these cabins and chalets is only about HALF of what they sold for at the market peak which we experienced during 2006-2007. If you are considering purchasing an investment property or a wonderful residence in our Smoky Mountains you have an unprecedented opportunity to cash in on the current situation. Please contact us if you would like to take advantage of this situation.

It's Official, Three Positive Months in a Row!

Before July 2009, our Gatlinburg area real estate market had not enjoyed a single positive year to year comparison for any month since September of 2006. For the months of July, August, and September we have however had positive comparisons to every one of the same months during 2008. I will admit that the months we are comparing to were very dark indeed but even slower months were suffered through during the first few months of this year. Here is a chart of our Smoky Mountain real estate market showing that we may now finally be on the mend:



For a clearer chart in a PDF format please click here. For those that might prefer our normal chart layout you can view that here:


Either way you look at it the last three months have, if only slightly, bettered the same months from a year ago. We hope to see this trend continue because increasing residential real estate unit volume means increasing prices are likely headed our way. If you have been waiting for the perfect opportunity to purchase property here in the Smokies of East Tennessee at prices not seen for several years, this is an excellent time to get serious!