Its Always Fun When We Hear From a reader about South Lake Tahoe.
(LAKE TAHOE REAL ESTATE BLOG) We got this email from one of our readers this some time ago. It's a good example of both how our blog attracts readers who participate, and our interactions with them. We thought it might be nice to share it with you.
Below is what came to us. Our response to it follows thereafter. We hope you find it of interest.
Rich / Gary,
I've been watching Tahoe real estate for some years (since the 70's, when I lived and worked in SLT). I really like your blog and keep in on my RSS feed. Very helpful. We're approaching retirement age and will probably buy a 2nd home up there when the market finds its bottom.
Today you note: "And prices, while some $35,000 lower on average than they were last year at this time, appear to be near bottom."
As I try to understand how we got ourselves into this financial mess, I'm becoming less convinced that we are "near bottom."
Just today the NY Times reported:
...the median prices for houses posted their steepest monthly drop in four decades, according to reports released Tuesday.
Sales of existing homes declined 8.6 percent last month, to a seasonally adjusted rate of 4.49 million, according to the National Association of Realtors. The median price of a home plunged 13 percent from October to November, to $181,300 from $208,000 a year ago. That was the lowest price since February 2004.
Lawrence Yun, chief economist of the National Association of Realtors, said that 45 percent of all home sales were so-called “distressed sales,” meaning that the sellers faced foreclosure, or they were forced to sell their home for less than the value of the mortgage.
The numbers released Tuesday show that the housing market, which is at the center of America’s financial crisis, is displaying no signs of a quick recovery.
“They’re about as god-awful as they can get,” said Robert Barbera, chief economist at ITG. “This is pretty breathtaking stuff.”
The Commerce Department also reported that new home sales dropped to a seasonally adjusted annual rate of 407,000 in November, from a downwardly revised rate of 419,000 in October.
Housing values have plummeted since the peak of the market in July 2006, when the median home price in America was $230,200.
But the housing bubble burst, sales declined, credit dried up and a flood of foreclosed homes hit the market, a toxic combination of events which pulled median prices down 21 percent to their November levels.
“It’s probably the largest price drop since the Great Depression,” Mr. Yun said. “There needs to be some measure to counter this pessimism. Without housing market stabilization, it’ll be very difficult for the economy to recover.”
I'm an eternal optimist, but I gotta say - I don't think we're anywhere near the bottom. There are no fundamentals in place to propel a housing/economic turnaround, or indicate a bottom. Over HALF of all Las Vegas homes are now worth less than their mortgage value (!). I've learned that Tahoe trends tend to amplify the national markets. When the national markets heat up, Tahoe explodes. When the markets slow, Tahoe gets even slower - recall the early-mid 90s when some SLT values dropped nearly 40% from their prior highs. I'm surprised that Tahoe continues to do as well as it has in recent months. But I think this is an aberration, and I think we're going to see another 15 to 20% drop in SLT values over the next couple years. In fact, I'll bet you lunch on it.
Keep up the excellent statistical work.
--
John,
Thanks much for the good words...
With regard to your music bg, are you aware of ours? That's a great teaser to talk further, or meet some time...
Read the New York Times article you cite below about 6am this morning... (its that NY Times app on our iPhone... can't put it down!)
Truth is SLT is different; a destination resort with real estate values driven by second home buyers; it does not fluctuate as much as the national numbers; it never does, which makes sense. RE numbers in national reports includes resorts, but it is not "of" resorts.
Incidentially, second home buyers make up for about 65% of our homeowners. Characteristically they are overqualified financially, in their '50's, are empty nesters and lack urgency when buying. Primarily they are buying "lifestyle", where investment sense is important, but nevertheless a subset of an emotional, life affirming choice.
As such, resort "dirt" is normally of greater value when compared to the "dirt" that homes in general sit on throughout the rest of the country. Add into that a market where supply is seriously controlled by federally mandated environmental growth restrictions, that is a winter-summer season destination, and one has a situation, a real estate-trend anomaly if you will, where relevant comparisons to any other real estate markets are very few.
It's also important to point out that principal to the national decline in home values are distressed home sales: foreclosures and short sales. The article you mention here indicates that 45% of all home sales in November were distressed sales.
Yes foreclosed, bank owned properties are fundamentally at the root of national home value declines, but here in SLT, CA we have less than half the national average of that kind of activity, and on the NV side of the SLT real estate market there is significantly less than that.
The fact that we are less affected by foreclosue-drain on home values, again, is due to SLT being a resort, second home market with a greater percentage of financially solvent homeowners than the country at large.
At last check, less than 25% of homes sold in SLT this year were in foreclosure. Most are at the entry segment of our market, many have been undervalued by banks wanting nothing more than to "move them off their books", and as such they are contributive to what declines in values we have seen.
The median sold price today is what it is: $390,000. It has repeated said same for at least a quarter now.
The national median sold price as found in the article is $220,400, or some 43.4% less than that of South Lake Tahoe, CA. (This, perhaps as much as, or more than anything else, affirmms that the market up here is different.)
Since Memorial Day, the SLT, CA median sold prices have been:
Jun 17: $388,000
Aug 26: $379,500
Oct 15: $390,000
Nov 11: $390,000
It was $379,500 on August 26th. Truth is it has gone up $10K since then, as has demand. (I couldn't believe it myself, and crunched those numbers time and time again trying to prove them wrong.)
Our market high was a median sold price of $460,000 in 2006. This is a decline in general value of $60,000, or 15.2%.
With regard to your "lunch bet", we are not in the business of predicting where the market will be in two years. We think, and the general consensus throughout the real estate community up here is we'll be past where we are now by then.
That is anyone's guess, however. If your assumptions are correct, that would mean a median price of about $300K. Slightly less than where we were in 2003.
Personally, as professional agents, we have no cling to whereever the market might be, other than reporting it truthfully. The market is not bad, nor is it good, it is just what it is.
What we do know is there is great value, and opportunity in the market at present, which is now coupled with a meaningful interest rate that is becoming more of an incentive with each passing month. This is evidenced by the increases recently seen in the number of monthly sales since October.
As for what the market did in the '90s, lets look at this: in SLT, CA since the 1970s, each decade has been marked by a plateau, or flat period of some 6 to 8 years where home values changed very little. Much of the early 90's was one of these flat periods.
You may have seen a 40% decline in the early to mid 90's, I wasn't here, but our managment who was did not see nor experience said same, so they say.
Thanks again for taking the time to chat w us, and we're available anytime for further market... or music talk.
richard
;)
;)
