I haven’t said it until now, but … it appears the bottom of the market is behind us. I say that with some apprehension because I have no crystal ball. However, there’s just too much evidence suggesting a market turnaround in South Lake Tahoe. Here are some quick snippets.

• There are currently 157 homes in escrow. Twelve months ago there were 84. Demand has clearly increased.
• There are currently 210 homes actively listed for sale. Twelve months ago there were 300. Supply has clearly decreased.
• I had clients ask to see property two weekends ago. They sent me a property list on a Wednesday. Of the four properties they could see, three of them were in escrow by Thursday evening. The fourth had an offer on it.
• Historically, home sales spike during the summer in Tahoe. If homes are selling so quickly now, what will the market be like in a couple months? With ski season finished and summer yet to come, May is supposed to be the slow season for Tahoe real estate.
• Most telling, however … properties I would never expect to sell are going into escrow regularly. This means prices are increasing.

It’s been dizzying being in real estate the last couple months. Homes priced close to market value never remain for sale more than a few days. It seems every property has multiple offers. And value is hard to track because sale prices are turning so quickly.

Market turnaround will be slowed by foreclosures and increasing interest rates. However, interest rates should rise slowly, and their rise may cause even more urgency amongst buyers to get a good rate. As for foreclosures, evidence suggests bank-owned properties will soon no longer drive the market, but that they will ride the market up with everyone else. Whatever the market depressor may be, it appears that supply and demand economics will prove stronger than any them.

Obviously, home prices are still low in South Lake Tahoe, which makes it a great time to buy a second home, investment property, or primary residence. The perfect time to buy appears to be four to five months ago, but the window of opportunity hasn’t closed. It’s time to make a trip to Tahoe.

The Tahoe real estate market does not follow the national market.

While discussing the state of the Tahoe real estate market last month, I was presented the argument that the number of home sales are down over the last several years. Surprisingly, this is a statistic I did not track, so I went to work in the MLS and started mining data. When finished, even I was shocked at the results.

When I compiled these figures we were only through half of 2010, so I totaled the number of home sales for the first half of each year as far back as the MLS had record. I was amazed to find that sales are up 45% over last year, and homes are selling at the same pace they were in 2003! These numbers also suggest the correction in the real estate market may be in the rearview. The middle point between the peak – 347 – and the trough – 148 – is 248, which nearly matches this year’s total of 239. Furthermore, over these eight periods, the average number of sales is 228, which also nearly matches this year’s total of 239. Home sales bounced up, fell down, and are now at the midpoint. This midpoint is accurate as 2010 Tahoe home sales were unaffected by homebuyer tax credits because our resort market hardly sells primary residences, which were the only sales providing tax credits. The Tahoe real estate market does not follow the national market.

In addition to my recent findings, median home sale price has remained level in South Lake Tahoe since January 2009* (see graph below). Year-over-year inventory continues to decrease. Based on supply vs. demand (previous sales versus our current supply of homes), our market still favors buyers but only slightly. Our market will reach a technical, numbers-based balance within months. It may have already attained an actual balance.

Our market does not follow the national market. Our buyers represent a unique subset of buyers who seek to purchase vacation homes. They have more financial power than almost any other group of buyers in the nation. They were not affected by the downturn in the economy like the average U.S. citizen. They could have purchased at any point during the real estate downturn, but they sat on the fence waiting for the bottom. Now that it appears to be here, they are purchasing Tahoe homes in droves – at the same pace of 2003. What’s the old saying? Those who purchase when no one else will are those who will become rich.

Drew Kondo received his Bachelor’s of Mathematics from UT-Austin in 2001 and now sells real estate on the Tahoe south and east shores. To contact him, call 530.545.1831 or email drew@southtahoehouses.com.

* When comparing my median sale price statistics to those of other sources, it must be understood that I present median sale price for individual months and only incorporate sales from that month. This provides the most accurate representation of what occurred in that month. Other organizations offering real estate data often squeeze sales from the previous twelve months into a single month. This flattens data and makes it easier to interpret, but it also fails to represent what actually occurred in any given month.

Here is a word from Tahoe mortgage broker, Norm Hansen, on the future of interest rates:

Rates are still at an all-time low … but … we expect some changes in the 2nd quarter.

I have reported on the effective job the federal government has been doing in keeping rates low by buying mortgage backed securities … to the tune of $1.25 trillion.

That $1.25 trillion runs out at the end of March 2010 … which means if the other markets do not pick up the difference in purchasing, then rates will most likely increase. To what extent, we do not know. We do know the goverment is aware that these low rates have had a very positive impact on recovery and are sensitive to it. We await word if there will be further participation and/or impact from the goverment.

If you are rate sensitive to a refinance or a new purchase, a call to action may be prudent. As always, we like to take a positive approach … but this is something we do see on the horizon.

Norm Hansen
AmWest Mortgage
775.586.1130
nhansen@gbis.com

As the holder of a bachelor’s in mathematics, I mine for a lot of real estate statistics. The following numbers present a good reflection of what’s happening in the South Lake Tahoe real estate market. Since January 2009, median sale price has leveled. The bottom of the market is near.

The market as a whole has 9.1 months supply of inventory. A balanced market is traditionally defined by 5 to 7 months supply of inventory. Because we have a greater suppy than this, we are still in a buyer’s market. However, we are approaching balance. If the market is divided into price bands, some segments have reached balance and have even entered into a seller’s market. In the $0-$200,000 price band, only 2.0 month’s supply of inventory remain. In the $200,000-$300,000 price band, 4.5 month’s supply of inventory exists. These numbers suggest there is a seller’s market in these price bands, which is the case. Lower priced properties are seeing multiple offers and are often selling for more than their list price. If you are seeking a property in this price band, now is probably the time to buyer. The market bottom for these properties may already be in our rearview. A surplus of inventory in the higher price bands suggest that nicer homes will continue to lose value.

It’s almost summer here in South Lake Tahoe, and while the temps aren’t too hot with this recent cold front, the real estate market is scorching. We haven’t seen buyer activity like this in years. I’ve seen several properties receive multiple, competing offers. They are oftentimes selling for more than list price. Things are getting crazy here and many of us real estate professionals are putting in long hours in order to keep up.

At the moment, there are 94 homes in escrow in South Lake Tahoe (We hit 100 last Friday.) We haven’t seen this many homes in escrow since July 2005, which was a month before the peak of the market. See the tables below for more statistics.

Our overall inventory is shrinking as well. Currently, there are 381 single-family residences for sale. Last year there were 414. The year before, 522. In May 2006, there were 424. With Tahoe homes reaching affordable prices and buyer confidence increasing, look for these trends to continue.

Speaking of prices, home prices have leveled off since the start of the year. I’ve checked the homes currently in escrow, and median sale price will continue to hold steady for at least the next couple months. Perhaps we are at the bottom of the market?? Statistics are increasingly pointing in that direction. A balanced market is traditionally defined by 5 to 7 months of inventory on the market. At 6.1 months of inventory, we have already reached that point in the under-$300,000 price band. We are quickly approaching that point in the $300,000-$400,000 price band. As inventory continues to decrease and sales increase, the statistics should catch up and begin to truly reflect how busy our market is.

A couple caveats …

Ninety-four homes in escrow today can’t be compared to 94 homes in escrow a few years ago. The reason for this is short sales. Short sales typically take longer to close than a normal escrow. Thus, with some homes sitting in escrow for long periods of time, this inflates the total. That said, however, only 15 short sale homes went into escrow over 45 days ago. Subtract these from our total and the 79 remaining homes in escrow still hasn’t been matched since September 2005, which was virtually the peak of the market.

In addition to this, the traditional definition of a balanced market, 5 to 7 months of inventory, may not apply in this market. Previous markets have not been affected by foreclosures like this. A new wave of foreclosures could drive prices down further. On the other hand, prices have leveled off for the last half year. And no one can argue that our shrinking inventory is a good sign of rebound.

All that said, now might be THE time to buy in South Lake Tahoe. And with another amazing Tahoe summer approaching, what better a time to come and start shopping!

Seventy homes are in escrow here in South Lake Tahoe. It hasn’t been since September 2005 that we’ve seen that many homes pending. Over the last few years, a lot of people have been waiting for the right time to buy. It seems that many think that time is now. I’m really beginning to agree with them. Here are a few good reasons why it may be time to buy:

1. Interest Rates Will Go Up

Interest rates are low these days. They have no where to go but up and with inflation skyrocketing, the Federal Open Market Committee has a lot of incentive to raise rates. When this happens mortgage rates will increase, which means homebuyers’ dollars won’t go as far. Assume you can afford a $400,000 home with today’s rates. If interest rates increase by a single point, you’ll then be able to afford a $368,000 home. That single point will sap you of 8% of your buying power!

2. The Market Can’t Down Cycle Forever, Especially in Tahoe

The South Lake Tahoe housing market has seen a 25% correction since August 2005. Can prices really drop much further? I have no crystal ball, but we will eventually hit the bottom. With a limited supply of homes in the Lake Tahoe basin and an ever-increasing demand, we should hit bottom before many other areas.

3. It Is Better to Buy in a Buyer’s Market!

Those who are waiting for the market to hit rock bottom before buying are doing themselves a disservice. Buying a home isn’t only about getting the best deal possible. It’s about finding a home you can truly enjoy living in. With the number of homes on today’s market, you should be able to find what you want when it comes to location, condition, and quality. Finding that special home on tomorrow’s market could be much more difficult.

4. It’s a Home, Not a Stock

You’re buying something you will live in. Unlike a stock, bond, or commodity, your home will have utility. You’ll grow attached to it. And if you hold onto your home for a while, it’s pretty much guaranteed to increase in value.