Home prices appear to be settling in the Smokies

[Collin Hays]

My worst fear in the Smokies is that we would have a real estate values meltdown similar to 2008-2011.  Fortunately, we don't have a financial crisis, and it appears that home prices are stabilizing, though well off of their 2021-22 highs.

I think this is healthy.  I am still very bullish on investing in the Smokies, but the idea that you could buy something with 10 or 20 percent down and immediately start cash flowing was, looking back, a pretty narrow window of time.  

I look at my own first purchase in the Smokies back in 2005. A lovely cabin on a trout stream that I probably paid too much for - $240,000 then.  I think gross rents that first year or two were under $20,000.  But our thought process in buying it was "if the rents will just pay the mortgage, it's still a good investment long term."  

That turned out to be true.  Other people paid off the asset, and now it's worth conservatively $600,000 (though I'd never sell it for that).  And of course, we've enjoyed many years of positive cash flow.  Including our down payment, we've probably spent $150K of our own money on that property for upgrades, renovations, repairs, and maintenance.  So our $150K is now worth $600K, plus all the income that helped pay for college for my kids, etc.

If investors have the right expectations, now is a really good time to be getting in.

[John Underwood]

If you go back and look at 2008 prices in any market there has been steady growth over time and we would all love to buy at 2008 prices or the pre 2008 peak prices.