Log Cabin Blog

Over the last two years, the real estate market in the Smokies has experienced its first significant downward price adjustment since the early 1940’s. This real estate market has historically been one of stability showing moderate, consistent growth unlike so many markets whose growth curves look like a roller coaster with rapid increases followed by precipitance drops. When the national real estate market has shown general weakness, this market has maintained its viability longer than average and when a general recovery has occurred, this market is among the first to demonstrate that recovery.

 About the time I was getting established in real estate in the early 1990’s, nightly rental cabin sales were becoming a significant factor in this market. By the mid 1990’s, we were in a boom in cabin sales which lasted through 2005.  More than any other factor, over development, not national or local economic conditions, led to the recent downward price adjustment. From an investment perspective, the vast majority of this over building was developments that were designed to maximize the developer’s profits not to satisfy the desires of vacationers to the Smokies. Consequently, from 2000 to 2005, a glut of marginal quality nightly rental cabins flooded the market resulting in slower sales and, ultimately, lower overall prices. Fortunately, economic reality and significantly increased requirements by local planning commissions have stemmed this tide of ill considered development.     

All indications are that nightly rental cabin prices in the Smokies bottomed in the last quarter of 2008 and will begin a gradual recovery in 2009. In analyzing sales figures from their peak in the beginning of 2006 to the present, it appears that overall asking prices have decreased, on average 12% to 15%. Coupling this with an additional 3%

gap between asking price and sales price over pre 2007 levels, the net average price reduction is in the 15% to 18% range.

Especially for a perspective buyer whose major motivation is investment, the preceding information coupled with the facts I’ll present in my following blog, “Cabin Incomes for 2008” and extremely favorable mortgage rates indicate the environment is prime for a judicious cabin purchase.