Sellers have dropped their prices as low as $565,000 for 2 BR, 2 Bath units in McCloud, yet the properties are not moving. In 2005, there were 20 sales in McCloud, this year so far, there have been just 4. Last year an original unit sold for an high as $630,000. Why aren't the units below $600,000 that are in good condition selling?

This is not a simple case of supply and demand, where you can just drop the price and demand will increase. That might work for many consumer goods and services, but it's not the case in a high-end resort market. Overall, the demand for properties in our village is elastic. Few people buy here because they need to, they buy here because they want to. Buyers can defer purchases if they wish because they are not being made out of necessity.

So, the sellers of McCloud condos can drop their prices if they like, but if the demand is not there the properties are not going to sell until the price drops low enough that a speculator will step in to scoop up the property. Based on the recent sales pattern in the past 24 months, I feel that prices would have to drop below $500,000 before the speculators will start picking up these condos.

What does this mean to anyone who owns a condo in McCloud or any other complex with an oversupply of inventory and a shortage of demand? All the advertising in the world won't increase the demand. And with interest rates up significantly in the past year, buyers who are not paying all cash are feeling the pinch. The pent-up demand for McCloud condos was satisfied in 2004-05 when buyers rushed into the market after the lawsuit was settled. Sellers who put their condos up for sale in 2006 were late to the party.

I anticipate that we will see 4 to 8 sales in McCloud from September to the end of the year based on the historical demand curve.  With 3 McClouds going into escrow in September alone, it's clear that buyers who have waited for a big price drop will miss out as only a small price decrease of about 5% has occurred.  Don't hesitate if the McCloud condo in the location you want comes on the market.  Write an offer at the price you think is fair and negotiate, you've nothing to lose and you might just get the condo you want at a reasonable price and be well positioned for the next upturn in a year or two. 

I recommend that you hold onto your condo and rent it out either long term or short term to generate some additional income. After the market settles in 2007 or 2008, demand will increase and you will be able to get a good price for your condo. Dropping the price down to where only a speculator would buy it most likely won't be economically advantageous in the long run.