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BOOM & BUST
Real Estate Cycles Then and Now
Basking in the glory of historically resilient real estate values, the Sun Valley-Ketchum market that began during the pioneer ranching and gold rush days has nonetheless still experienced a few Western boom and bust cycles. We dug through 40 years of real estate coverage in order to capture a picture of where we are—and where we’ve come from.
Sun Valley’s first land boom occurred after the visit of Count Felix Schaffgotsch, who wired Union Pacific chairman Averell Harriman that he had found THE mountain. Harriman purchased the 3,888-acre Brass Ranch for $39,000 cash—considered too good to pass up, it was only $10.03 per acre. Seventy-eight years later, the average list price per acre in Sun Valley and Ketchum is $1.43 million and $2.44 million respectively.
Sun Valley’s first big real estate boom, fueled in part by condominium development under the direction of then-owner Bill Janss, is described in later years as a “frantic tax-driven and inflation-hedge.” By 1982, it had already gone bust.
Less than 10 years later, a second boom hits the area, shocking locals with the magnitude of price increases—with total real estate sold posting $86 million in 1988, up 41% from the $61 million in 1987 (Sun Valley Magazine, Winter/Spring 1989, “The Great Land Rush” by Lori Scott Stewart).
As Sherry Daech of McCann Daech Fenton Realtors explains, riverfront land demands a premium and cites the trend of buyers who are paying cash—ALL cash—for properties. She adds, “We have seen river properties re-selling for several times their initial offering price. People are paying up for older houses that don’t suit them and either remodeling them or tearing them down just for the land.”
Unprecedented price increases create a bit of a feeding frenzy. A 1989 Sun Valley Magazine article uses the example of “a 5,000-sq.ft. cabin on the river with views of Baldy that was selling for $1,500,000 last year is back on the market this year for $2,500,000.”
Speculation continues about development moving down the Valley (especially as it relates to Harry Rinker’s “much talked about private golf club on Golden Eagle Ranch”), although locals are relieved to know that Mid Valley development has slowed somewhat and a golf course development “won’t be on the approximately 300-acres north of Deer Creek as previously rumored. That piece of land went to Bob Brennan because in Idaho, where money isn’t everything, finding the right buyer still matters. And Deer Creek Ranch is rumored to have been sold to an unnamed buyer who apparently has no plans to develop it.” (from Sun Valley Magazine, Summer 1989, “Real Estate: Where do we go from here?” by Lori Scott Stewart).
A run up on real estate takes land prices and single-family home sales to new heights. Termed the “real estate bubble,” it bursts in 2007 in conjunction with the global financial crisis. It is the first real boom to hit the Mid Valley and sees a number of new highs including the highest average price per square foot and price per acre numbers ever recorded in the Valley. The volume of properties listed at the height of the market is more than $450 million and the average list price per acre for vacant land in Ketchum, which is at an ultra premium, is a mind-blowing $3.94 million per acre.
The Mid Valley experiences some of the largest growth with the average price per square foot of single-family homes rising to about $520/ sq.ft., which represents a 77% increase over just 5 years prior (when the average list price was just $293/ sq.ft.). Riverfront properties continue to sell at premiums far and above these numbers.
The real estate run up during these years also sees some larger homes being built. The average total square foot livable space of a home in Ketchum rises 145% to 3,468 square feet (versus just 1,410 square feet 10 years earlier in 1996).
The market begins to rebound from the 2007 bust, with total real estate sold posting $315 million in 2012 (not including farm and ranch properties, which bring the total to nearly $335 million—up more than $88 million over 2011 for a 36%-plus increase over the previous year. Perhaps even more significant, the average days on the market for vacant land drops from a depressing 989 days (2.7 years) to 379 in 2012, indicating that some speculative buying might be entering the marketplace.
Will the next rise in real estate reflect another boom / bust cycle or have we learned our lesson from the gold rush days? Only time will tell.
All data, unless otherwise noted, courtesy the Sawtooth Board of Realtors.