3 Navigating the Real Estate Market and Building a Home in Sheridan: Costs and Perspectives w/ Landon Johnston

This episode's discussion revolves around the real estate market and construction costs in the Sheridan area. We highlight the correlation between market demand and real estate prices, with an emphasis on the perspective of buyers. The rising prices have made it difficult for long-time residents to justify the increased costs, while newcomers from areas with higher living expenses find the prices reasonable. The podcast also touches on the demographics of Sheridan, including the high percentage of retirees in the population. The cost of construction is discussed, stating that Sheridan's construction costs are average compared to other places in the United States. The conversation concludes by emphasizing the importance of considering current prices and trends when making decisions about buying or building in the area. Drew and Landon express their desire for growth in the community, acknowledging the positives and negatives associated with increasing real estate prices and population influx.

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Transcript

So what were you just talking about, Landon? You got an email from a client about yeah, they so the client was wondering about basically the cost of construction in the area and how it correlates with the market and why the market is what it is. So we thought maybe this would be a good thing to talk about. And I know Drew, drew is the expert here, so we'll talk to Drew.

He's the real estate guru. What, in your opinion, is, if you had to nutshell, in a nutshell, describe the Sheridan real estate market and the construction and how all that correlates in a nutshell, what does that look like? Well, one thing that I would say that's really important is the perspective of the person. I'll give you an example.

Our real estate is fairly expensive. Cost to build is fairly expensive, and especially so if you were born and raised in Sheridan, right? Because our prices have come up a lot. We used to be able to buy land here in the neighborhood, the surrounding neighborhoods of, say, even as low as 45,000 a lot in the exact same neighborhood.

Now you're finding lots for 200,000. So that's in a matter of about five or six years. So it's gone way up.

Why do you think that is? Well, real estate is a supply and demand thing. The demand goes down, the prices go down. Demand goes up, the prices go up.

People realize when they're selling a piece of land, the value of it based off of how things have been selling around them. And as long as things are selling, people will keep getting what they ask. And what they ask always goes up in price.

Well, I got 200,000 for this lot, and I've successfully sold it that style lot for, say, ten times. Now we're going to bump the prices up to 225. Well, people keep buying them, and the next year, maybe they're 250 and people are still buying them.

So that's the way real estate prices work. If nobody's buying them, the prices are going to come down, period. Right.

Well, the question then is, who is buying them? So that's the thing. If somebody grows up here and they've seen this increase in real estate prices, then they're going to hold off on what they're paying. They're like, I just can't justify this.

I could have bought this exact same lot for 45,000 just a couple of years ago, and now it's 200,000 or 200 plus. So who's buying it? The people that are buying it are people who did not see that increase. They're coming from out of town.

And the places that they're coming from, that's an average or even affordable lot price from where they're coming from. Right. And it is what it is.

There's nothing they can it's not like there's a what am I getting at here? People who see that increase, like you said, are disgusted by they can't justify paying ten times what it was. But other people, it's like, oh, this is what it is. This is what it costs here.

They haven't seen that. They don't have a point of reference. I pay attention to real estate markets all around the United States in areas that I think are cool, right? And I've seen areas like, for example, you buy a lot in Florida.

You can buy empty lot on the beach for a couple of million bucks, starting right, empty lot. And if that's what you're coming from, say you currently have a beach house in Florida for, say, $10 million, and you come here and you find this nice mountain view lot for 200,000. You're like, I want ten of them.

Exactly. Like I said, people coming from other places that maybe the cost of living is lower, maybe the wages are lower from where they're coming from. There's places that are less expensive and cheaper to live than Sheridan.

And so then they come here and they see this, and they're like, It's too expensive. We just can't seem to make anything work. You know, what happens is those people need to either get something that they're not excited about, meaning downsizing, or getting less not getting as much what they want.

Yeah, they're not getting settled for less, or they actually don't end up moving here. In my opinion, that's not a good thing. Growth is good, and when prices are really high, basically what happens is it dictates who can move here.

And if, say, the jobs are paying, let's just pretend the jobs are low paying. There's no rentals available. So people either have to buy or build, and they have to take on a job that pays less.

And maybe they are coming here to get away from their current situation. But all their family lives in that place too. So now they're leaving their family.

They may have gotten an upgrade on their political scene or however they think of things. So there's positives and negatives, but sometimes the negatives can outweigh the positives, all starting with the cost of real estate. Well, I can't afford to build, and I can't afford to buy, so now I have to rent.

And I didn't really want to rent, and I found this job, but really, the job doesn't pay as much as I had wanted. Multiple sacrifices just to do it, let alone be happy with what they have or truly fulfill their vision that they're going for. Yeah, so that would be like, the average person.

Right. Then there's a lot of people who are above average, and they can do more of what they want to do. They're like, I love sheridan, and I'm more than happy to pay 200,000 for a lot.

And there's enough of those above average people to keep prices high. And they want to move here because of the lifestyle. We have more freedom than a lot of places.

We never got locked down during COVID and we have an extremely conservative government. Yeah. Low taxes.

So we attract those types of people, and the ones who can afford it are the ones who move here. And there's enough of them to keep those prices up. Yeah.

I've also heard, too, this is a demographic from 2020 that 63% of the population. I'm speaking for Sheridan County alone, not for Wyoming in general, but for Sheridan County alone. 63% of the people are retirees.

Yeah. Isn't that nuts? Yeah, it is. It just blew my mind.

And that's why everyone's driving so slow around here. Now I figured it out. Driving me nuts.

We touched on sort of what the market looks like, why the land is priced the way it is and all that. Let's talk about the flip side of the coin and building, the cost of building, and then tying these two together to come up with an overall price. Let's say there's a Tom, Dick or Harry out in the middle of nowhere, and they want to move to Wyoming.

They want to buy some land, and they want to build a house. What are they looking at? What's your insight on the construction costs? Yeah, so when you look at construction costs across the United States, our construction costs are not higher than a lot of places. I would say we're about average.

Even when you look at, let's say, a bigger city with these big track home builders, they're actually building the same cost we are. $300 a square foot is our average. Every once in a while, we can get just a little less than that, but on average, we're about $300.

It's not too often that we're above $400 a square foot. And if you start looking at all these other places, I have friends who live in Washington, and there's track home builders building these starter homes that are about as cheap as you can get, and they're $300 a square foot. They're on a tiny lot, the finishes are as low as possible, and they're $300 a square foot.

And so I think ultimately what has happened is all the prices across the board, all the way across the United States, have gone up so much because of inflation and everything, that it can be really intimidating to be like now I need to build this house. Or in order to build this house, it's going to cost me $800,000 or, say, a million dollars, when, in my opinion, it's really only worth $600,000. Speaking for the customer, right? That can be a really hard pill to swallow, and sometimes it can scare people away.

So it's all about that perspective thing, though. I mean, if you're coming from an area where costs are higher than $800 or a million dollars for your above starter level home, but nothing super extravagant is going to get you. That's going to be about in that range.

Well, everything's relative. Like you mentioned, the guy who's coming from a $2 million for an empty piece of chunk beach in Florida or whatever, he'll buy a whole bunch of lots out here for $200 all day long. But I know personally, for me, it's difficult to look at the construction costs now because it was not even two years ago.

I built my own personal house, and everything was like everything was like 30% cheaper. The land was cheaper, the materials were cheaper. They were kind of on the rise with the whole COVID scenario, and that was just because of a lack of supply, but everything was lower.

And then you take a few years prior to that, and it was way cheaper, night and day difference. And now I look at the same exact materials, the same quality, everything nowadays, and it's just like and that's coming from that's just my own perspective. So I can see particularly with people who live there their whole lives, whether it's land cost or product cost, it's a hard pill to swallow.

Nobody wants to pay more if they know it was what it was once, whatever. But you could think of it that way, or you could think of it this way, that we've already seen it go up this much, and how much more is it going to go up here? So do we buy now before it continues to go up? And actually, this is a really good investment. Right.

You want to buy when prices are as low as they're going to be. And as a rule of thumb, there's corrections in the market, but as a rule of thumb, the best time to buy is right now. Yeah.

Because if you look, historically, real estate has always gone up. Like I said, there's times when there's a correction and it dips, but you've got to time that, right. And no one can truly time.

I mean, yeah, I'd like to meet the guy who can predict that. Oh, yeah, right. Me too.

Right. And befriend him. And so when you think of it that way, you're like, well, so I spent a million dollars this year on my house.

If I wait five years, it's going to be 2 million to build or whatever. Yeah, that's one of my favorites. I've heard this from multiple people.

Well, we're just not sure if we want to build at this time. We're going to wait till construction costs go down. It's like, well, you'll never build then, if that's what you're waiting for.

What I would want to do in that case, because I've heard that actually myself, too. It's like what I want to say is you're never going to build if that's what you're going to wait for you're never going to build. Exactly.

In our position, we have to guide a person, but we also have to just like we said on other podcasts, is you have to guide people but you also have to be tactful. I mean, you don't want to offend people and people can be pushed away if you're too frank. Right? But you also have to let them know that well, I think it's person to person too.

I mean, a huge role in my job is a huge part of my role, I should say, is sort of feeling out how that person is. Some people like it when you're just frank with them. And some people you need to beat around the bush a little bit more and that's fine.

It's all about that particular relationship. But as a valid point though, you do need to tell people like, hey, I know this sucks and I understand that you're coming from this place and it's different there, but this is how it's been for years. This is the trend that we see and this is what it costs.

Let's work together to try and figure out how we can make your vision fulfilled with that in mind. You know, something that I just thought of was when there's a certain place like Sheridan, sheridan is an interesting place because people are coming here to get away from what they currently are in. I was talking to somebody not too long ago and they live in Bozeman.

Bozeman. I like Bozeman, but it's just gotten too busy for them. They're like, you know what? Yeah, it really blew up.

Yeah, Bozeman is bozeman is a really nice place and it's expensive. It's probably more expensive than Sheridan, but it's so busy and they weren't used to that, right? So now they're like, we're kind of thinking about going somewhere else and we love Sheridan and where we're in Bozeman, things are a little more expensive. So it's a pretty good trade off.

It's a similar surroundings but smaller town. And we have the money to spend on, say, a million dollar house to get what we want. Right.

So there's enough of those types of people that are leaving their more expensive places to come to a smaller place and they have the money to spend and they're willing to spend it. And real estate is a supply and demand priced product, if you want to call it a product, which then keeps the market hot here and it's just going to keep being that way. Yeah, truly.

I believe, and I think this is a combination of many different things. I know you and I have talked about this before. It seems like Sheridan is right on the cusp of just exploding.

Just a big boom in the last, say, 24 months. It's had a big spike in people moving into the state. I think this is all post COVID would probably be one of the leading factors but in that post COVID, it's also what else is going on from the places that they're coming from, whether the land costs are just getting astronomical over there or like you said, it's a point of relativity.

They see a $2 million lot in Florida versus here. Everything just seems way cheaper. But how do you feel about that? What do you think about all these outsiders taking over our state? Man well, obviously, as a builder and real estate professional, I want people to move here, right? I want people to move here.

The risk you have when a city grows, the risk you have is you get people who are of different nature than you're used to or of different political standing, or they have different expectations. We see trends of attitudes, right? Yeah, absolutely. I hate to say this out loud, but we can almost pick out where a person's from, depending on how they act.

100%. That's very true. And I don't think that's, like, a unique thing either.

I think everyone out there, wherever you live, whether it's Alabama or Minnesota or Washington state, you can pick out someone and kind of put them in a little bit of a regional box, if you will. And sometimes it's a good thing and sometimes it's not. Sometimes they're so far different and so far disconnected from how our area is.

They might not end up being happy here, but other times it's like, you know what? This attitude or this mentality is better than I see some of the people. Better, as in I don't really know that there's better or worse, but this mentality or this attitude has a lot of benefits, and maybe it applies to what I'm going after, contributes to who we are already. Or hey, this is the type of neighborhood or these are the type of people I want to retire near or have my kids grow up and be around or whatever.

Yeah, absolutely. We see all different types with being a builder, where a lot of times on one of the first lines of what would you say? Contact for newcomers. Right.

And sometimes you get people who have, like, a high they could be maybe even demanding, like, oh, we need this and we need that. And other times, there's just the opposite, where people are like, you know what? I moved here to get away from everything. Yeah.

They don't want that busy life anymore. Yeah. And they don't have any expectations of anyone.

They're like, I want a house, I want land, and just get me away from everything. Then there's the types that they're real straightforward and kind of rough on the edges. Right.

And then there's the other types that come in and they say they're, like, the nicest people you've ever met. Right. And by those definitions, I'm sure there's a lot of people even listening who are like, you know what? I know people like that.

And I can picture exactly where they're from. Yeah, absolutely. Here's a common one, and this is kind of a goofy variable that plays into this.

Well, my family is from here, but we actually used to live in Sheridan or vice versa. So it seems like sometimes you run into the type of people where they're not from here, they haven't lived here, but they know how it is and so they kind of just seamlessly just slide in. I like those people personally.

It seems like they come here and they already get it. They already understand kind of how it is. Well, one of the challenges living in a small town that people are moving to is people I would say people in a small town who grew up in a small town have a hard time with change and so it's hard to accept people for what they came from.

I think the natural thing to do is say, well, we don't really want that type of person here. We hear that a lot. It's like, well, we don't want that type of person here.

We want to stay the same. We want our community to remain as it always has. Right.

I can understand that perspective, for sure. But I also do think that there's a lot of things wrong with staying the same. I have my own beliefs with religious and political things.

But as the city itself. Not talking about either of those other two. Let's say we never built our trail systems that we haven't shared, or say we never did the river rehab stuff, or say we never built new, nice buildings.

Say we never tore down old crusty buildings, or let's say you can only preserve it to a point. Right? Yeah. And I'm not against preservation.

But all I'm saying is that if everything always stayed the same and the same people ran everything, the US. Government is set up for change. It's meant to be that way.

Because when you have the same leaders, the same laws, the same building, the same people moving in, a community cannot thrive. Right. Well, there's no growth.

There's no growth. And if there's no growth yeah. And you could grow from within, but it's not going to be sustainable.

Right, but I just like the same I think you told me this one time, if you're not growing, you're dying. Right? Yeah, I believe that. But I guess ultimately that was a long answer to your question, but how do I feel about people moving in? Yeah, I like people moving in.

Yeah, me too. So you talked a little bit about that now is the right time to buy here. Can you discuss a little bit about a buyer's market versus seller's market? Yeah.

So if you were to talk about a buyer's and seller's market right now we're kind of in the middle. We're not in a seller's market and we're not really in a buyer's market. It's a pretty zeroed out and that's not really the right terminology, but we're kind of a flat market where people are selling things super quickly that are priced correctly.

Some of the things are not selling quickly right now because we've just come out of this huge uptick in prices and so they're still priced too high because they wanted X amount of dollars, which was probably overpriced in the first place and they were getting it before and now the market has slowed down some and so those overpriced houses and properties aren't moving as quickly, but somebody prices their house correctly and it's selling instantly and sometimes even getting multiple offers and getting bid up. Which begs to question, hey, maybe I should have listed it for a little bit more, right? When it goes quickly. Yeah, that's always in a person's head.

The challenge with that thought is it could have been just simply the right person at the right time. Yeah, that's true. I love this house and I have the money to pay for it and so that happens too.

I recently showed a lot to a guy and he walked out on it and asked a few questions and he said I want it, period. That's just the way things go sometimes it was the right fit. I don't really know.

Obviously, real estate is supply and demand. And what causes a buyer's market and a seller's market, or more like the definition of it is if the houses that are on the market are selling more than if all the houses are selling in less than six months, then that's a seller's market and if it takes longer, then it's a buyer's market. That's by definition, by definition, honestly, I would need to check because I actually haven't checked recently.

I think we're still in a seller's market, if I was to say. But it's not as much as it was before. You'd get multiple offers within immediately for it was crazy.

We're screaming give me a tent, I'll move into it. Now there's people literally living in campers. Yeah, I know of a specific spot right now that the RV park is full of permanent tenants.

They move their camper in and well, this is where we're living. Yeah, I mean that's much better than tents, right? Yeah, that's true. Just to be clear, we don't have any tents in the area.

It was an exaggeration. But the point is that with that sellers market and the recent peak that we had in pricing is because there was such an extremely high demand for anything, hence the prices were high and now that demand has chilled out a little bit and so people, they're still kind of holding these houses on a higher price but realizing that they're not moving. So the prices are starting to drop.

Yeah. So what is the demand in this area for single family homes, multifamily homes, full on apartments? I would say that the most people that you could affect that's what's in the highest demand, and the lower the price, you get the biggest customer base you would have. So let's just use the example.

If the average house price was 170,000, which it's not, it's a lot more than that. It's over 300,000. It used to be, yeah.

It wasn't that long ago. At one point, it was 178,000. And I remember that.

But if that was the case, you could pretty much get a buyer any day of the week. Right now, say the average price goes up to 300,000, and the interest rates jump up to seven or 8%, all of a sudden, you don't have any buyers who can buy it. And that's just the average.

Now, the thing is, the reason the word average is important is because most houses, there's a way higher number of houses that are in that 300 range than in the one to $2 million range. So that brings the average way down. Now, there's a ton of houses out there and a ton of buyers that are spending one or two or three or more million.

But when the average home price goes up and the interest rates go up, it means there's less qualified buyers. So what do people do? They one, they live in a camper, in an RV park, or two, they rent. And Sheridan.

The occupancy rate in Sheridan is like 98%. And one of the things that we're actually wanting to do is build apartments for people, because people need to hire here. There's a huge demand for employees, and they apply, and they go to look for a place to live, and they can't get anywhere.

There's no houses in their price range, which hurts the companies, too well. We can't even hire anybody. We only have a place to we can't really offer them a place to live.

Yeah, it's a big issue. Now, I know of a company specifically, I was just talking to one of the owners, actually, he was the previous owner of this company. He said, I can hire 30 people right now.

He said, I'm actually overpaying for contract labor just to keep my company going. So he can hire 30 people on the spot right now. Where are they going to live? Yeah, these people are manufacturing job, so it's a good paying job, but it's not a high end paying job.

It's a job that anybody looking for work could get into and do it, learn how to do it. It's more of a manufacturing type physical, good career starter or like a boot up. Yeah.

Not a starter job, I wouldn't say, but definitely a good, solid job that you could make your career right. And he said, People apply, and they start looking for place. There's nowhere to live.

I said, well, how can I help that? I mean, if I built apartments and had them for lease, would people he's like people would rent them in a heartbeat. That's one of the things that I plan on doing is filling that void of this high demand or high need of more affordable housing. We're not actually going after the Section eight.

We're we're not interested. Affordable housing is sort of a buzword that people will maybe wrinkle their nose at and they worry about their own investments. But you're getting at just not particularly a single family home, not Section Eight, sort of in that middle ground.

The average Joe cost. Yeah. Twelve, maybe $1,500 a month.

Right. But nice. Right.

Working a working person or anybody working could afford it. We're not looking to add to the government type assisted housing. Right.

Yeah. That's interesting. We got any more time? Yeah, we'll say five minutes.

Okay. I was just wondering if you wanted to talk a little bit about location and how that affects property prices. Yeah.

So another thing that really drives the price of land, too, is the location. It is. There's a section of town that's new and upcoming where the land is actually fairly affordable because they want it to grow.

You can move into these old neighborhoods where it's fairly affordable because everything is outdated. Right. The original section of Old Sheridan, I guess you could call right.

Or perhaps even Cluttered, too. It's just a lot of stuff going on. A lot of stuff going on.

Lots are small, houses are old, and it'd be like a fix and flip type area that's a lot more affordable. And then you get in the outskirts of town where you got the two and five acre lots or the golf communities, and then you really jump in price. So everybody who's ever done anything in real estate knows the first three rules of real estate, right? Location, location, location.

And the benefit of buying a nice piece of property in a good, say, golf community is you look back on the home prices and see how they have gone. And as long as the area is nice and maintained and has good views and some of these things that are important to real estate, the value keeps going up. Yeah.

It doesn't stop going up. Yeah. And so from an investment perspective, I always think of real estate as an investment.

Even if the plan is not to sell it, you're like, oh, no, I'm hanging onto this place forever. At some point it's going to be sold. Right.

And so why not think of it as an investment? I think that's one of the most important aspects of looking when looking for real estate is this going to be a good return on my investment. I'm going to spend, say, like my example earlier, 200,000 on this lot today, but in ten years, it's going to be worth whatever, 500,000 or whatever. It's going to be worth more than it is today.

And if you buy in an area where it's cheap, say you buy a lot for 70,000, the same amount of time, it might. Only be worth, whatever, 100,000 when the good location lot has over doubled. That right.

Yeah, that's true. So basically the appreciation will be, say, more exponential or it'll increase quicker in the better location. Like they're both are going to appreciate a lower quality lot versus higher quality, but the higher quality ones appreciate quicker.

So we were getting in. Yeah. And part of the reason for that is the people who can afford a nicer lot and a nicer building, they can also afford to hang on to it.

So when a downturn does happen, they're like, well, I'm just not going to sell because it's not worth selling right now. And the people who can't quite afford their house, maybe they're strapped at 300,000 and then they see a downturn and the homeowners lose their job and next thing you know, you see a foreclosure popping up. Well, excuse me, the challenge with foreclosures is now that just decreased values in that neighborhood, not just that house.

Yeah. It affects the neighbors, too. And so you go into a neighborhood that's nice or okay, but not like not top notch or whatever, you'll see higher fluctuations in prices, which takes the average down.

Right, yeah. And then also reflects as not as good investment. Right.

So in the shared an area and we can end up with this. Would you say that sort of the baseline and prices we talked earlier about how prices have increased over the last few years and then the relativity between the prices here and then what people are coming from. Would you say that because of the this is obviously a factor, but I'd like your insight more on it because of the mountain views, because of the beauty that Wyoming has, particularly in the Sheridan area in the Bighorn basin.

How does that affect the overall baseline in land prices? To further on that question, is it they were cheaper prior to this COVID scenario or say cheaper five years ago because they weren't fully realized and now people are moving out of state and they have become more realized and so there's a higher demand. So my opinion is that obviously Sheridan has always been just as beautiful as it is today. The Bighorn Mountains and everything that we have to offer here.

Well, during COVID people became mobile. Like people were traveling all over the place. Right.

Camper sales were through the roof, so people were traveling all over, which then makes the average person aware of what's out there right. Before they are kind of stuck in a bubble and they didn't have a reason to go anywhere. And then they leave and they're like, all this is in America.

We can go to Sheridan, Wyoming, and still work off our laptop and have front row seats to the Bighorn Mountains. We can jump on our side by side on the weekend and buz up in the mountain, or we can go fly fishing on the rivers there's this whole aspect of life that people didn't even realize was available to them because you get stuck in a rut and pretty soon you don't know of anything around you. So all that being said, people have started to realize about they started to find Sheridan just recently.

Obviously go back to the supply and demand thing. They find out about it. Oh, we want to live here.

We're coming from Austin, Texas. Moving from whatever. Seattle, Washington, Colorado.

People are moving from all over the place. A lot of times those places are actually more expensive. And so they're willing to pay the price to live here, to have their freedoms, to get away from their current situations.

Right. Or even downsizing too. I noticed that's a pretty common one.

A lot of people are actually looking to downsize and retire. And so they might pay the same amount of money in one state, they'll pay the same amount of money and share it in for a smaller home. And they're fine with that because they're going to retire.

They're downsizing anyway. But I just noticed that that was sort of a common one, is going back to that demographic of 63% of the people in Sheridan County are looking to retire. Right.

When you retire, you typically will downsize, go to a one level smaller is better, less maintenance, and retire close to conveniences. The retired people aren't generally buying big ranches out in the middle of nowhere. Right.

And Sheridan is a smaller community. So everything is just a bump hop and a skip away. Everything's two minutes away.

Yeah, but if you're trying to retire in whatever, a different area and you got to go to get groceries, you have to drive 45 minutes.

Ya know, that's just a part of the attraction.

Ok well, we are nearly out of time.

Here we are, off we go.

Yea so umm, we talked about the real estate market right. Kinda the supply and demand, a little bit about interest rates, how it affects the custom home building process, a buyers and sellers market and then location.

So where can people find us?

You can find us in sheridan

In the bighorn mountains, come looking.

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