Resort Land Giveaway: Ogden Valley Lots

I was asked to do some research for a client today and I thought I would share some of my findings. The client inquired about residential land prices and where they have trended over the last few years. It looks like this question can be best answered with a chart....queue chart please:

To get a good bearing on comparisons I divided the sale price by the acreage and plotted them in a scatter chart.  Keep in mind that lots vary quite a bit in quality, and given such, the $/acre comparison is probably the best way to measure the trend in values.  View lots will still be at the top end of the spectrum while awkward lots will always be at the bottom.

The chart shows a couple interesting things.  First, you can see the "froth" in prices during the peak bubble time of 2006/2007.  Then as the market crashes there is virtually no sales of land.  Finally, in the last year we see sales increase in a cluster that is approximately 75% below the market peaks several years ago. 

Why such a slaughter in land prices?  Unlike homes, residential land is not a utility asset.  There has to be a home sitting on it in order for it to be useful and generate rental income or be used for occupancy.  Therefore, when the bubble burst and the market was deluged with excess homes, lots for building became totally unnecessary as homes could be purchased for less than construction costs. 

Today we see that land is selling again at rock bottom prices. Despite the fact that demand for new housing is very weak, construction costs have come down significantly and that entices some to build.  Prices have waned to such a degree now that buyers can even afford to hold lots and build later.

Look for land prices to increase substantially as demand for housing increases in the coming years.