Where When How Summer 2012 : Page 160

LIST 000 , 9 9 5 $ T ED A Finding Bottom »»» LAST ISSUE WE TOOK A LOOK AT THE HIGH END OF THE PROVO REAL ES-TATE MARKET – single family homes and condos that were listed for over US$1M and sold since January 1, 2009. The outcome of that analysis was that the high-end of the real estate market had hit recovery. This issue, we analyze the performance of single family homes, condos and townhomes on Provo that were listed for under US$1M on the Turks and Caicos Real Estate Association (TCREA) Multiple Listing Service (MLS) and sold in two time periods, January 1, 2009 to December 31, 2010 and January 1, 2011 to May 15, 2012. From the chart (bottom right) we can determine that expectations were still lofty in the 2009 – 2010 timeframe as owners adopted a wait and see attitude. Properties were listed high and the sale to asking price ratio was quite low at 27%; almost as though the magnitude of the sub-prime mortgage debacle that occurred in September 2008 had not sunk-in or trickled down to Provo as yet. The average number of sales per month in this period was quite low at 2.6 units but the average sale price was higher than it is currently at $474,907. High expec-tations by sellers combined with the virtual absence of buyers for overpriced assets brought the real estate market to an almost grinding halt. Capital markets tightened. Even-tually, owners savaged by the recession but fortunate enough to have equity in their properties were forced to accept a fraction of peak sale prices (if there were no other fi-nancing alternatives available). In the period January 1, 2011 to May 15, 2012 we have seen an increase in the aver-age number of sales from the market low of 2.6 units per month in 2009 and 2010 to 6.1 units per month currently. It is not surprising that the average sale price decreased to $394,387 from $474,907 as the market struggled to find its bottom. The ratio of the sale to asking prices increased to 82% in 2011 and 2012 as vendors adopted a realistic position on the depth of the recession and moved towards more achievable list prices -the market breathes a sigh of relief and shows signs of approaching the recovery stage of the economic cycle. It is difficult to say if we have seen the bottom of the mid to low segment of the real estate market here on Provo because of the shadow inventory of foreclosures that are being held by local financial institutions and trust companies. Unlike the high-end of the Provo real estate market which consists predominantly of foreign investors with a high equity position, the mid to low end of the single family, condo and townhouse mar-ket is a mixed bag with a larger proportion of owners with little or no equity in their properties. As foreclosures trickle through the legal system and banking bureaucracies, investors seeking a bargain come to the re-alization that even the properties in foreclo-sure can only be sold by court order. However, the courts look favorably upon the mortgagors’ positions in the transactions making it difficult for the mortgagees to make ~ STORY BY RICHARD SANKAR ~ 160 • • • • • SUMMER 2012 “Where When How -Turks & Caicos Islands”

Real Estate & Development: Finding Bottom

Richard Sankar

LAST ISSUE WE TOOK A LOOK AT THE HIGH END OF THE PROVO REAL ESTATE MARKET – single family homes and condos that were listed for over US$1M and sold since January 1, 2009. The outcome of that analysis was that the high-end of the real estate market had hit recovery. This issue, we analyze the performance of single family homes, condos and townhomes on Provo that were listed for under US$1M on the Turks and Caicos Real Estate Association (TCREA) Multiple Listing Service (MLS) and sold in two time periods, January 1, 2009 to December 31, 2010 and January 1, 2011 to May 15, 2012. From the chart (bottom right) we can determine that expectations were still lofty in the 2009 – 2010 timeframe as owners adopted a wait and see attitude. Properties were listed high and the sale to asking price ratio was quite low at 27%; almost as though the magnitude of the sub-prime mortgage debacle that occurred in September 2008 had not sunk-in or trickled down to Provo as yet. The average number of sales per month in this period was quite low at 2.6 units but the average sale price was higher than it is currently at $474,907. High expectations by sellers combined with the virtual absence of buyers for overpriced assets brought the real estate market to an almost grinding halt. Capital markets tightened. Eventually, owners savaged by the recession but fortunate enough to have equity in their properties were forced to accept a fraction of peak sale prices (if there were no other financing alternatives available). In the period January 1, 2011 to May 15, 2012 we have seen an increase in the average number of sales from the market low of 2. 6 units per month in 2009 and 2010 to 6.1 units per month currently. It is not surprising that the average sale price decreased to $394,387 from $474,907 as the market struggled to find its bottom. The ratio of the sale to asking prices increased to 82% in 2011 and 2012 as vendors adopted a realistic position on the depth of the recession and moved towards more achievable list prices - the market breathes a sigh of relief and shows signs of approaching the recovery stage of the economic cycle. It is difficult to say if we have seen the bottom of the mid to low segment of the real estate market here on Provo because of the shadow inventory of foreclosures that are being held by local financial institutions and trust companies. Unlike the high-end of the Provo real estate market which consists predominantly of foreign investors with a high equity position, the mid to low end of the single family, condo and townhouse market is a mixed bag with a larger proportion of owners with little or no equity in their properties. As foreclosures trickle through the legal system and banking bureaucracies, investors seeking a bargain come to the realization that even the properties in foreclosure can only be sold by court order. However, the courts look favorably upon the mortgagors’ positions in the transactions making it difficult for the mortgagees to make Unilateral decisions regarding the price that they can accept for a distressed property – this perhaps is the saving grace for this portion of the market. The long-term outlook for this real estate asset class segment is a prolonged bottom. One factor that could easily change this outlook is the return of the construction industry to Provo. There are several projects on the horizon that may give a boost to the real estate market over the next twelve to eighteen months. Richard Sankar Co-founder/Broker Tropical Paradise Realty www.tprealty.com richard@tprealty.com 649-231-6211 Candidate for a master’s of science in Real Estate Development, Nova Southeastern University

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