The South Lake Tahoe Buyers Report (a/o Feb 6, 2008)

It's a Buyers Market here in South Lake Tahoe, and a Good One at That!

(LAKE TAHOE REAL ESTATE BLOG) Not all homes on the South Lake Tahoe real estate market are good buying opportunities right now. But Many are. There are also favorable trends and conditions for Buyers to be aware of.

Buyers also should be aware of the national real estate news, which are general trends and conditions across the country. But know this; all real estate is local. Which means that all national news data likely does not apply here. In fact, some of our market conditions are better, and some loosely follow national trends.

After most major national real estate news reports, we usually follow up with a comparison article about market conditions here on this blog. (See examples here, and here, and here.)

Buying opportunities are normally influenced by a number of factors. Here’s a summary of the key buying factors as they relate to your South Lake Tahoe real estate market.

 INTEREST RATES :
Mortgage interest rates are attractive at present, some believe exceptionally so.
The national average is found in the chart in our right sidebar.

• As of today it is 5.49%. We have seen it as low as 5.25% from some lenders.
• Check with your preferred Mortgage Broker to see what your rate might be.
• We also recommended the following area mortgage brokers:
• Guild Mortgage: (ask for Chris Probert)
• AmWest Mortgage: (ask for Bronwyn Leeper)
• JP Morgan Chase. (ask for Steve Peterson)

 INVENTORY : (a look at “time” on the market)
The length of time that a home has been on the market might indicate opportunity. It addresses a Seller’s motivation. The general rule of thumb being the longer a home has been on the market, the more likely a seller to consider a greater reduced price. That is often true here in South Lake Tahoe, but not always. Some sellers are keenly motivated, some are defiantly not.

It is also important to understand that “time” on the market data comes from our multiple listing service (MLS). It is indicated as “DOM” (days on market). While most often the DOM data is true, it can also be manipulated. Here’s how: when a new agent gets an old listing, it is possible, if not likely, that the DOM data will start anew. A recent example is the MLS showed a house sold in 90 days... that had been on the market for 5.5 years! (It was the 4th time the house had been listed, and the second agent that listed it.)

It is also important to know the average number of days it takes to sell a house in a particular market.  A sale in 90 days may be slow in some real estate markets, but it is fast here.

The key to knowing which is a motivated Seller and one who is not, and the accuracy of DOM data, and the average time of market performance is through a real estate agent who has earned your trust. (This blog is very much in the earn trust business.)

We thought it might be helpful to look at time on the market to help determine opportunity through the following charts:

The chart above indicates an overview of how long the current South LakeTahoe inventory of homes has been on the market:

• There are 413 homes on the market in South Lake Tahoe, CA
• The average number of days it takes for a house to sell is 158.
• More than half of the homes have been on the market longer than that.
• 177 homes have been on the market much longer than that.

The chart above indicates how long homes have been on the market in South Lake Tahoe... by price range.

• There may be a good buying opportunity in the homes that have been on the market for 180 days or more.
• 58 homes priced between $300,000 and $499,999 have been on the market a long time (more sales occur here than any other price range).
• There is an increasing percentage of buying opportunities from $800,000 and above.

  NODS NOTS & REOS :
The chart here indicates the number of homes in foreclosure, those up for trustee auction and bank owned properties for sale.

NOD’s:
These are homes in foreclosure (NOD stands for “notice of default”).

• We don’t like these because it signals a family in distress.
• It is our hope that every one of these get out of foreclosure asap.
• There are 136 of these at present.

NOTs:
These are homes that are up for auction (NOT stands for “notice of trustee” sale)

• A NOT is put up for bid at the local courthouse.
• The sale price is the exact amount that is owed on the property.
• Only multiple bids can raise the price over what is owed.
• If the property is not sold here, it becomes a bank owned REO and is normally put back on the market.
• There are 42 of these at present.

REOs:
These are homes that are bank owned and are for sale (REO stands for “real estate owned”)

• Every REO has the potential of being a good buying opportunity.
• REOS’ usually sell near or at list price, but not always.
• Sometimes the price can be less than what was owed to the bank.
• In negotiations, a buyer is dealing with an unemotional seller who wants to get the property “off their books.”
• There are 64 of these at present.

 PRICE :
Without discussion with a real estate agent who has earned your trust, it is difficult to determine if a house is a great buy or not. Most of the time, it's not possible by looking at the price alone. This is even more true when looking at homes online or in print.  And it is especially true if one is not an expert on current market trends and conditions.

Some homes are priced right from the get-go. In fact 34% of all 2007 sales sold within 90 days within 95% of list price. All were priced right, which is substantiated by they sold, and sold quickly.

It takes discussion, study and trust to distinguish what is priced right on the market from that which is not. Sometimes it’s even a leap of faith after that (which is what trust often is). Time on market alone can not give you a complete picture. What does is a thorough evaluation of the market and any particular properties of interest (see an example of our property evaluation here).

Are We at the Bottom Yet?
That’s a good question. Lets take a look at the facts... via a few charts, of course.

The chart above shows various looks at changes in the median sold prices by quarter from Jan 1, 2006 to Feb 1, 2008.

• Each date includes the median sold price at intervals of 365, 180, 90 and 30 days prior to the date of entry.
• It also indicates the median price change by quarter for the last two years.
• We have seen is an average decline of $35,000 (7.6%) in the last 4 quarters.
• The median sold price in the last 180 days is $402,250, a 12.3% decline from all of 2006.
• If one were to average every one of the 16 numbers above, it is $442,950 (they range from $385,000 to $535,000).
• This is not a huge decline, when put into the context of news-driven perception about a "bad" housing market.
• What's important about this chart is, rather than showing a rapid retreat to an unheard of  market bottom, it shows a gradual, slight decline over the last 2 years.

The chart above looks at South Lake Tahoe median sold prices from year to year.

• There was a 25% increase in the median sold price in South Lake Tahoe rom 2004 to 2005.
• There was virtually no increase in 2006.
• There was a 7.6% median sold price decrease in 2007.
• If one purchased a home here in 2004 or before, after factoring in the declines in 2007, there is still a median price increase of at least 17+% in value since then.
• The Tahoe Keys (our most upscale neighborhood) skews market data upward by an average of 4% since 2004.

 THE MARKET CURVE : (A Look at the Top and the Bottom of the Market)
We wanted to add this to The Buyers Report because it is so true. It also addresses the risk of trying to out-think that point where a real estate market (or the stock market, for that matter) changes. It is an exercise that very much can cost you money. Here's why:

The chart above indicates the normal real estate market cycle:

• All markets go up, then back down.
• The point of change, or where every market cycle reverses direction is always the "top" or the "bottom".

The market bottom, or top, is first an assumption, which is later followed by statistical fact.

• There is never a market-wide consensus among Buyers and Sellers as to where the top, or bottom is... especially when it's happening.
• The top or bottom of a market can only be seen in after-the-fact data... after the change has already occurred.

What drives market change is supply and demand.

• In a real estate market, that exact point of neutrality between a buyers market and a sellers market is 6 months of inventory.
• The  "X"  on the chart above is that exact point of 6 months of inventory.
• The  "Y" side is a Buyers market (less than 6 months of inventory).
• The   "Z"  side is a Sellers market. (more than 6 months of inventory).

A Buying Exercise to prove a point:
An offer made on the "buy" side of the market will buy a house for less than the same offer if it is made on the "sell" side of the market.

• Lets assume that a particular house reaches "X" on the chart above and it is $500,000.
• Lets also accept that it's impossible for one to predict market bottom before the fact.
• So we make an offer on the house for $450,000 at "Y" on the chart above, while it is still a Buyers market.
• If the house has been on the market for some time, or if the Seller is particularly motivated, he will likely accept the offer (Sellers are doing that right now here in South Lake Tahoe).
• If that same offer for the same money is made at "Z" on the chart above, after the market has shifted to a Sellers market, the Seller is far more likely to not accept the offer and negotiate higher.
• In this case the house sells for $475,000, which is reasonable to assume.
• It also will cost the Buyer $25,000 more... because they waited too long to find the ever elusive market bottom.

 ABOUT SQUARE FT. VALUE :
Here's a few things to be aware of about using price per square foot here in South Lake Tahoe:

• use it as a guide only.
• a smaller house always has a higher square foot value when compared to a larger house.
• any view property, and especially one of the lake, always has a higher square foot value.
• homes that have been recently remodeled, or are in excellent condition always have a higher square foot value.
• a house with a garage will have a higher square foot value than one that does not.
• houses in some neighborhoods will have a higher square foot value than those in others.
• similar location, condition, size, view and year built must be used when comparing one property to another.
• call a real estate agent you trust to help you with this.

 Summary :
There are four types of buying opportunities to look for:

• 1. homes that are priced right (we like this one best)
• 2. homes in foreclosure (we like this one least because this represents the likelihood that a family is in distress, and we’d like to help every one of them we can to get out of it.)
• 3. homes in a trustee sale
• 4. homes owned by a bank that are for sale (REO’s, and most every one of these has the potential of being a great buying opportunity.)

About a third of our market represents a good buying opportunity. And there’s always a few that are a great opportunity. The rest, well... you know.

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