Remember the real estate heydays of five years ago, when new homes were being built in new subdivisions seemingly everywhere in and around Traverse City? It looks like the “dog days for dirt” are coming to an end; realtors say sales of vacant land in subdivisions are back, as buyers find themselves priced out of existing homes in downtown Traverse City.
“Recently there has been this upsurge in new construction as buyers are feeling more confident in the stability of the real estate market,” confirms Bob Brick of Re/Max Bayshore Properties.
The numbers tell the story of a turnaround underway. So far this year, 171 vacant lots have been sold in Grand Traverse County. In 2010, less than half that many had sold.
For years, subdivisions were developed and demand was there to fill them with new homes at low interest rates (think Cinnamon Ridge, South Creek, Lone Tree, Black Bear Farms, Morgan Farms, Stoneridge, Arbor Grove Verndale, and many more). But when the economic collapse of 2008 came quickly, sales stopped almost completely and many developers defaulted and lost their properties to banks.
Judy Porter of Coldwell Banker Schmidt, who has sold more than 400 vacant parcels in the past several years, says “nobody expected the collapse to be that bad,” and that it lasted longer due to a number of reasons.
“Banks got tight on lending and wanted to see 25-30 percent down, construction loans became difficult or impossible, and those who were used to moving into new homes every 2-5 years had to stay put because their values hadn’t come up to what they paid for their homes,” she says. “Now you’re seeing a lack of inventory of existing homes -- especially affordable ones in town -- so new construction is coming back.”
Both Brick and Porter say what’s hottest now are those subdivisions closest to the schools and amenities of downtown Traverse City. Downtown homes have witnessed an unprecedented surge in values in the past eighteen months; many are selling well above asking price. As a result, home buyers attempt to find value on the outskirts. Porter points out that Traverse City is unique – in most areas, home values in the city center are lower, with prices rising the farther away from town.
The demand and gradually shrinking supply will soon lead to something we haven’t seen for five years – new subdivisions being developed. Though they were cautious to tip their hands by being too specific prior to local planning commission approvals, several engineers and realtors did confirm that plans are underway to develop more than one subdivision close to town.
According to the Traverse Area Association of Realtors, 1264 vacant lots remain for sale in Grand Traverse County alone, prompting Brick to caution those moving too quickly.
“I know there are projects in the works, but the oversupply of existing lots makes this development [and the] new lot absorption rate very risky. We need to have a very stable, confident economy to take the risk of…being able to sell lots fast enough to stay ahead of the costs to hold.”