INVENTORY , INTEREST RATES, AND INVESTMENT
On the verge of a busy summer selling season, Western Home Journal’s Sabina Dana Plassé sat down with Jackson Hole real estate agents including John Resor of The Clear Creek Group/TCCG Real Estate, Mack Mendenhall, an associate broker of Jackson Hole Real Estate Associates, and Jake Kilgrow of the Realty Group of Jackson Hole in the comforts of a cabin at Shooting Star. The discussion centered on the notion that creativity and decisiveness in the real estate game can result in some promising opportunities for buyers and sellers in a market where the interest rates are being watched carefully, buyers are looking beyond the beauty, and sellers are wondering about the window of opportunity. As one of the nation’s most desirable places to live, the Jackson Hole real estate market still has deals, but they are growing scarce. Yet the agents agree, with a little creativity, opportunities exist. Here’s what the insiders have to say.
WHAT IS THE CURRENT REAL ESTATE CLIMATE IN JACKSON HOLE AND THE SURROUNDING A FOR BOTH BUYERS AND SELLERS?
JAKE KILGROW: The current real estate sales climate for Jackson Hole is strong with all categories of the market trading consistently. Currently, buyers are faced with limited inventories and strong demand for properties, which has positioned the sellers favorably. We’re also starting to see upward pressure on pricing as a result of the limited inventory and strong demand.
JOHN RESOR: We had a house at Shooting Star that closed for $10.25 million, which was well over $1,500 per square foot. It had languished on the market for several months and then within two days, it had two offers.
MACK MENDENHALL: Overall, I would characterize today’s real estate market as robust. With inventory at 27-year lows, we are seeing demand outpace supply, which is leading to higher prices and a very competitive climate. The natural progression of the market has created an environment where people who previously could not afford a house are back in the market due to a friendly lending environment and low interest rates. Buyers are coming in more educated, but there are still cash offers with escalation clauses that state ‘I will raise my offer in increments of x until the ceiling of y.’ The competitive market can lead to a bidding war, and often a property is sold before it hits market. And that’s the local’s market.
The burden is on the agent to educate the buyer to be ready. If they want to sleep on a decision, it’s often too late.
IS THE CLIMATE FOR AFFORDABLE HOUSING LOOKING UP?
MM: I think ‘affordable’ is a hard word to use in Jackson. There are still values for many buyers and with interest rates at today’s levels, there are still opportunities that are less expensive than renting. We also have a rental shortage that is a struggle for all levels of people in our community—small business owners are struggling to keep staff and many are turning to purchasing rental units so they can offer it as a perk to their employees. They create job security with their staff, and they make a great investment. Even Jackson Hole Mountain Resort is using this model on a larger scale by building housing for their employees.
JK: The climate is changing and certainly looking up for the free market real estate but workforce housing continues to be a major challenge for Jackson Hole. Much of the free market housing is too expensive for many working families, individuals, and professionals to afford so voters and elected officials have made it a goal to locally house 65 percent of our workforce. This housing is primarily paid through development requirements for new construction and/or SPET tax that voters elect. It’s controversial for sure, but most would agree a very important component for a healthy and diverse community.
JR: One thing we have started working on is called ‘employment-based housing,’ where there’s no cap on how much money you can make or what your assets are. The only requirement is that on resale, you sell it to another employment-based person who lives in Teton County and will use the home as their primary residence. It does bring your resale value down, maybe 20 percent. There are doctors and other professionals who can’t afford to live in Jackson, so this is for them—the professionals, managers, and other critical employees. However, it’s turning into the barbell problem. You have the super expensive and then the income-restricted housing, and people in the middle get left out. Affordable housing is another category. Here we have Categories I through V, and Category V goes for about $390,000. When getting our master plan approved, we told the county that the three categories they had weren’t enough, because when, for example, two teachers got married, they made too much money to quality for the then highest category, Category III. So we convinced the county to add Categories IV and V. In addition to 25 deed-restricted employee rentals, we developed 13 affordable homes—five Category Vs, four Category IVs and four Category Is. The Category Is were in partnership with Habitat for Humanity. We contributed the land, did the site work, and let Habitat use our architectural plans. The homes were designed by Paul Bertelli and Logan Leachman of JLF & Associates. These 13 homes sold out in less than two weeks.
The Clear Creek Group/TCCG Realty
HOW ABOUT THE SPEC MARKET?
MM: This is a very dynamic portion of our market right now. Many forward-thinking developers bought up as much land as they could over the last three years and are now completing homes with perfect timing in an increasing market. As such, the margins for continuing this trend are waning as vacant land values have appreciated too fast for a spec builder to capitalize. In many cases, the price on vacant land right now really only works for an end-user. In varying segments of the market many buyers are struggling to find the property that best suits their needs so they are buying 20- to 30-year old homes on beautiful lots and tearing them down because it’s less expensive than trying to remodel.
JK: We’re at a phase in our market right now where buyers are purchasing existing properties because of their ideal locations. There are virtually fragments of undeveloped building sites that remain within areas that many would consider prime locations. This is particularly evident within the areas of the West Bank, Teton Pines, Town of Jackson, and Teton Village.
WHO’S BUYING? IS IT MORE THAN RETIREES?
MM: This model has changed dramatically over the past 10 years. While there are still many retirees looking for a summer haven from the heat of Florida, Arizona, and Texas, we’ve seen a much younger demographic realize real estate is a smart, long-term investment. I’ve had many clients under 40 buy their first homes in Jackson and this investment model drifts through the older generations in the family and then their parents also decide to buy here.
JK: I would say the largest concentration of new buyers is from New York, Connecticut, California, and Texas. We certainly see buyers from all over the world but the bulk of our buyers are typically from these areas of the country.
JR: At Shooting Star, we’re getting a lot of young buyers, and by young, I mean probably between 45 and 55, but who have young families. We were asked why we didn’t have a junior golf membership.
BUT IT’S NOT A FIRST HOME? THESE ARE ALL SECOND HOMES?
JK: For most of our buyers this is a second or third home. While some of our clients are looking to relocate permanently, many are still busy with careers and families. The strategy for many buyers is to get a foothold in the market now with the endgame of Jackson Hole being the ultimate retirement location.
MM: That’s very common—at first. Many higher net worth families buy a vacation home here with the intent of slowly spending more and more time in Jackson—then they quickly realize this is a perfect year-round home. Once they see the high caliber of our school system and that these facilities are all nearly brand new—that’s often the tipping point to stay full-time. Our infrastructure allows many owners to work 100 percent remotely in Jackson. Why vacation in a location where you can live?
JR: Direct air service brings good clients. Maybe this is their second home, and they think down the road four or five years, they may make the move to put their kids in a better environment. Or, some wait until their kids are in college to move here full-time.
“Many higher net worth families buy a vacation home here with the intent of slowly spending more and more time in Jackson—then they quickly realize it’s the perfect year-round base.”
-MACK MENDENHALL | GRAHAM FAUPEL & ASSOCIATES
IS THE TAX INCENTIVE A BIG REASON PEOPLE LOOK IN JACKSON?
MM: The high net worth individual is enticed by the tax benefits of Wyoming residency—not to mention the lifestyle benefits of Jackson Hole. Many have made a decision to move their entire companies and families here as a result. The sense of community, philanthropy, and economic sustainability make this a particularly unique environment. There are networking events structured around young individuals tapping into the resources of our population. A typical start-up would normally never get to meet and brainstorm with former CEOs of Fortune 500 companies. So, if you’re a young entrepreneur trying to get started, Jackson is a perfect environment to garner advice from knowledgeable, experienced, and successful people.
MAYBE FIND AN ANGEL INVESTOR? IS THAT HAPPENING HERE?
MM: I have clients specifically coming here for the philanthropic angle. These individuals have realized their financial goals and now want to relocate to an environment in which they can share with the next generation. These types of people often have the need to always be doing—even when they retire—they want to volunteer, donate, and teach. Jackson offers the perfect environment for this. “Pitch Day” hosted by Silicon Couloir is a perfect example of investors and entrepreneurs being matched up through a community non-profit.
JR: I think they are looking for different types of business.
HOW IS THE COMMERCIAL REAL ESTATE MARKET PERFORMING?
MM: It’s always ‘available’ (chuckles), but it can mean scouring resources to find the opportunity. Commercial in Jackson is a unique challenge of its own. It’s important that the end-user really analyze what their product is to find the correct property for them to capitalize on that. We’re exponentially limited by our zoning and overall building options that many commercial tenants will settle for a location without doing their homework and they can suffer. I think in the next 10 years we will see an increase of mixed-use buildings offering more options to small business and restaurants.
“Most people don’t buy on their first trip to Jackson. They have to come here and decide, ‘This is the place I want to be.’”
-JOHN RESOR | THE CLEAR CREEK GROUP / TCCG REALTY
RANCHES CONSIDERED TO BE HERITAGE PROPERTIES ARE BEING DIVIDED AND SOLD, OR NEWER GENERATIONS ARE GAINING OWNERSHIP. IS THAT SOMETHING YOU DEAL WITH OFTEN?
MM: I don’t feel like there is much of the dividing going on. There are certainly ranches that are being sold that have already divided into parcels, but we are seeing buyers wanting to take on the entire ranch as well—take over one active rancher’s vision as a homestead and convert it to a legacy property within his own family. Due to the property values increasing, much of the active ranch lands are worth more than a working ranch can support—it’s the romance of these properties that attracts a buyer who wants to be a part of that lifestyle but has the resources to pay today’s value.
Realty Group of Jackson Hole
YOU SAY THERE’S A LACK OF INVENTORY. WHAT ABOUT SPEC HOMES—IS THERE ACTIVITY IN THE SPEC MARKET?
JK: Going into the correction we didn’t have a lot of newer homes for sale. Additionally after the credit stopped flowing to speculation builders, we saw a further decline of available inventory. As a result we have seen a huge surge in land sales because buyers looking for architecturally significant homes just weren’t finding properties to their specifications.
THERE IS AN EFFORT TO REDEVELOP OLDER DEVELOPMENTS. HOW IS THIS IMPACTING THE MARKET?
MM: I think in-town has charged back in to the main stream of desirability. I know there are a handful of original owners downsizing from the West Bank and moving into town for the walkability to things. We’ve seen buyers with no budget select town so they could walk to the Farmer’s Market, and they could walk to the Snake River Grill.
JR: There was a big sale in town.
JK: As downtown sees continued redevelopment, there have emerged a few multi-use properties with commercial on the ground level and light office and residential on the middle and top floors. I personally would love to see more of this type of mixed-use development where you have a place to live and work without necessarily needing a car to access your daily needs.
MM: We see a lot of people from places like New York who are already used to walking everywhere and want that still. Pearl at Jackson is a good example of the perfect concept. I think there would be a huge demand for that product again if it were available today.
JK: The town of Jackson has always been a popular place to live with its pedestrian-friendly streets, proximity to town amenities, and its virtually direct access to forest lands for skiing, hiking, running, and mountain biking.
DO YOU HAVE TO EDUCATE YOUR BUYERS ABOUT AREAS AND ACTIVITIES?
JK: For most buyers new to the valley, there is a period of discovery where they figure out what area of the valley they really like and how that organizes with relationship to their lives. For instance, someone who is really focused on skiing might want to be closer to the ski resort but originally thought they would love to be north of Jackson where you can find the big Teton views.
MM: Typically only as it relates to view and proximity to a desired amenity. They want to ski, but also want a big view. They don’t realize that a great north-of-town Teton view may require a 30-minute commute to the resort. Then it’s educating them on the corresponding budget. If you want West Bank, that’s a certain price point. And if they want West Bank and a view of the river, then they can add a comma to that price point.
JR: Most people don’t buy on their first trip to Jackson. They have to come here and decide, ‘This is the place I want to be.’ They may be looking at Vail or Sun Valley, but ultimately I see people coming two or three times before they decide they want to buy.
JK: Sometimes you meet clients who would like to rent before they buy but I would say more often than not they have already made the decision to buy rather than rent.
“We are in a phase now where people are going to start buying properties because of location, and will either do extensive renovations or just start from scratch.”.
-JAKE KILGROW | REALTY GROUP OF JACKSON HOLE
JACKSON HOLE HAS BEEN SEEING RECORD NUMBERS OF VISITORS. HOW IS THAT AFFECTING THE REAL ESTATE MARKET?
MM: We were seeing averages before of roughly 3 million visitors/year, and then it spiked to over 4 million. Of course, Jackson Hole Mountain Resort being named the best ski resort in North America was a large reason for this. Jackson Hole made many top 10 lists in the U.S. from friendliest to best wealth protection—many things came together over the past year to create this perfect marketing period for tourism and with the addition of new commercial flights it’s only been getting easier for people to access this area. Without a doubt, when travelers to our area increase, we see the market activity increase.
