While looking for Tahoe homes you’ve probably seen the recent news articles and social media posts saying a wide range of things. Some say the real estate market is cooling. Others say the market is still hot. So which one is it?
First, you have to understand that real estate is local. Yes, there are national trends that occur when the economy flattens or the stock market gets hot. But other than those national issues the real estate market is unique and different in every community in the county.
The California Association of Realtors just released their 2023 Market Forecast data, and our team was there in person and has the full info for you. Click HERE to read the market forecast detailed info with charts and graphs.
So how is the market in Tahoe right now? And what does it mean for sellers and buyers?
CURRENT MARKET SNAPSHOT
What really is driving the current market? In 2020 and 2021 there were multiple factors, but the main ones were the fact a lot of people are able to work from home now and can live anywhere, and a lot of folks want to get out of the big cities. Just the idea that they have a quiet home in the mountains to retreat to is a huge factor for most buyers right now. Of course, historically low interest rates didn’t hurt either.
But then we saw that high demand lessen as 2022 headed into summer and fall. The prices fell a little, and the number of sales dropped dramatically. This coincided with the Fed raising interest rates.
Lets take a quick look into the current numbers to show what’s really going on right now. We will focus on Residential listings on the South Shore, since it is the largest market in Tahoe. This includes single family homes & condos. The written information in this blog is as of 4/8/2023. But the graphs shown are live and will update as each month passes. For current up-to-date info we always recommend giving Our Team a call or sending us a message.
51 ACTIVE LISTINGS
That’s right, 51 active listings. After a record low of 59 in February 2022, we saw a normal Summer uptick in new listings which peaked in July at 218 (still lower than normal average in July). But then the number of new listings began to crash in Fall and we have seen continued drops every month since August 2022. We are now officially below the previous record low.
In the “normal” market, we would see the number of homes for sale reach a low point in February and then start to pick back up around March or April when things start to ramp up for summer. As you can see the number of available listings has not increased the past couple months. The large amount of snow we have is most likely keeping people from wanting to list their properties for sale. Most homes you cant even see from the road or driveway due to 10ft or more of snow berms. The hope with Agents is that as the snow begins to melt with warmer temps on Easter, we will start to get more listings soon after.
14 PENDING LISTINGS
Out of the 65 total listings, 14 already have accepted offers and are pending sale (aka “in escrow”). That means 22% of the listed Tahoe homes are already in escrow. Just look at the chart below that shows how many listings went pending within each month. In April 2020 we saw the previous lowest pending number of 21 properties, which we have now beaten. Then from June 2020 through October 2020 (once the stay at home orders were lifted) we had the highest number of pending listings than any other time in our recorded history.
We are currently at record low numbers of pending listings. Most of this has to do with the lack of new inventory.
Based on calls Our Team have received from potential buyers there is still a lot of interest out there. Most of them are waiting to see if prices or interest rates will drop. But we have seen an uptick in investors looking to buy due to prices softening a little with long term rental income still very high. We have an entire page dedicated to investor purchases/sales in Lake Tahoe with links to multiple articles, for more information click on the link below:
PURCHASING INVESTMENT PROPERTY IN LAKE TAHOE
31 CLOSED SALES
One stat we keep close eye on is comparing the new listing numbers with the pending and closed sales. This gives us the best view on how healthy the market is and lets us know how many pending sales are actually closing vs how many cancel. If the total active listing numbers are up, but pending and closed sales are down, that shows a potential declining market. If pending sales are much higher than closed sales, then we know quite a few are dropping out of escrow and not closing.
Remember, closed sales lag behind pending sales data by 30 to 45 days. As you can see the closed sales remained flat over the summer months, following what the pending numbers were. With the fall and winter months showing lower pending numbers.
In January 2023 we hit a record low number of closed sales of only 20 for the entire month. This was mostly due to the heavy snowfall we saw in January, which caused delays in inspections and other escrow related things. Thankfully we have seen those numbers go up in February and March.
WHAT ABOUT PRICES?
Ok, now we know how many listings there are, how many are pending sale, and how many have sold already. But what everyone really wants to know is “Are Tahoe homes prices going up?”. Short answer… not right nol.
The statistical average sales price shows that prices had been steady and somewhat flat from September 2019 till July 2020 at around $475,000. That was right at the previous high price set back before the recession in 2007. So we had fully recovered back to pre-recession prices by the time COVID hit.
Then beginning in July 2020, when Tahoe reopened after the COVID shut down, prices shot up dramatically. As of the end of December 2022 the average sales price is at $685,000. That is a slight drop from last month, and about equal to the September 2022 average sales price.
It was a little surprising, but not totally unexpected, to see prices stay flat over winter. Many thought they would drop dramatically as demand dropped and interest rates rose. But one thing that kept the average sales price around $690k was the historic low inventory numbers we have seen this winter.
Experts in housing economics and statistical analysis had told us earlier this year that they anticipated the housing market would settle late 2022 and most likely have a slight decline into 2023. So far this appears close to what is happening.
CLICK HERE to view our new blog about the California Real Estate Market Forecast including data from professional economists.
KIND OF LIKE A CRYSTAL BALL
While we obviously don’t have a real crystal ball that can tell us the future, we do have a pretty good forecasting tool. The Tahoe real estate market has almost always shadowed the Bay Area real estate market by about 6 to 9 months. This is mainly due to the fact that 70% of property owners and buyers in Tahoe are from the Bay Area.
Sometimes our market lines up with theirs a little closer, such as last year when we were only behind by about 1 month most of the time. This year has followed along with that pattern as well, being more between 1 month and 3 months behind the Bay Area market.
So… what is happening in the Bay Area right now?
The Bay Area has seen a slow down and drop in sales price in late 2022, just like we have. They also peaked in May and have seen their average sales price drop since then. Their pending sales have also started to increase toward the end of summer and they have seen fewer price reductions since June.
If you drill down to specific areas in the Bay Area, and take out the super high price point neighborhoods, you will see the market there is really picking back up after a slight slow down from spring and early summer.
What this tells us is we should see our Tahoe market continue to pick up for the next few months, potentially being strong into and during the winter months. But as always… time will tell.
Here is a link to our special blog on the Bay Area Crystal Ball.
WHAT DOES ALL THIS MEAN FOR YOU?
Now you have all the data, the history, and a picture of what’s happening in the real estate market right now. But what does this really mean for you? Well, that depends on if you are a buyer or seller and what your specific situation is.
LOOKING TO BUY RIGHT NOW
For buyers who are looking to by as soon as possible, you will need to make sure you are ready to go before looking at homes. This means you will need a pre-approval letter from a lender and have written proof that you have the purchase funds. Our Team can assist you in finding a local lender who can get you a pre-approval letter within just a few hours. The proof of funds needs to show you have the cash on hand for the down payment and closing costs. If you are purchasing with all cash (no loan) then all that is needed is the proof of funds.
Interest rates have gone up this past year, and may go up a little more over the next few months. So locking in at a good rate with a trusted mortgage lender is more important than ever. If you don’t have one yet we can refer you to a few trusted local lenders. Once you have your pre-approval and proof of funds, it’s time to start looking at homes. We can register you up to receive automatic email notifications for properties that fit your exact criteria, just give us a call or send us a message to get started.
With the limited number of listings currently available, it may take a few trips to Tahoe before you find the right place. Instead of having to drive up every week, we can go to the property for you and do a Preview/Review, a detailed walkthrough video of the property. Our videos make is seem like you are there walking through the home with us. We point out any visible flaws, damage, positive aspects, interesting features, neighborhood characteristics, and so on.
When you find the right place, it’s time to put in an offer. The strategy for an offer will depend on many things. If the house has only been on the market for a week or two, we recommend being aggressive on the offer price. If it’s been available for over 2 weeks then you may be able to submit a less aggressive offer. Average time on the market are currently around 70 days, so don’t expect to get any home for a lot lower than the asking price unless it’s been sitting on the market for around 2 months.
We also have a few special secret “tricks” up our sleeves to help our clients position their offers to have the best possible chance to get accepted. One “trick” is asking the seller to buy down your loan to get a better rate. This is explained in our article “Loan Buy-Downs in Purchase Negotiations” and is a very handy tool for buyers to get much more favorable terms on their loan. Give us a call today to get more info.
LOOKING TO BUY IN THE NEAR FUTURE
What if you aren’t really sure if you are ready to buy in Tahoe right now? What will the market be like in a few months? While we don’t have an actual crystal ball, we can let you know what usually happens in the market throughout the year.
In a normal year, we historically see the number of buyers slow down toward the end of September and sales slow by the end of October. Then the market stays flat during the winter and picks up again around May. This year does appear to be back to a “normal” market year, so I anticipate the market staying fairly flat over winter.
Since prices have dropped a little but mainly staying flat, you may get a lower price if you wait. But with interest rates going up you will be paying more in monthly payments even with a slightly lower purchase price. Buyers who waited since spring have seen interest rates almost double, and will now pay almost $1000 more per month on a purchase of $600,000 with 80% down (based on data from local lender). Same purchase price, but much higher monthly cost.
The good thing about the market shift is buyers are more in control with offers and negotiations. Now you can offer lower than asking price (on most properties if they have been on market for at least over 14 days). Sellers are much more likely to accept an offer with an FHA first time homebuyer loan, contingency to sell buyers current home, and other contingencies and terms.
LOOKING TO SELL
Since prices have been going down a bit, the benefit of selling now vs waiting is pretty obvious. You will sell for more money now vs a few months from now (based on current market trends). Right now, if a property is listed right and the property is in good condition, properties are selling within a few weeks of being listed. But the average time on market before receiving an offer is getting longer, currently close to 55 days. So sellers must be patient and listing agents are setting longer listing terms to accommodate this added marketing time.
During winter we see fewer homes on the market which means sellers have less competition. You have to deal with people walking thru the snow into your home, and need to keep the driveway and walkways clear of snow for showings. We have some local snow removal companies that we have worked with and highly recommend that cost around $100 to $200 per snow clearing (depending on size of driveway and if there are any stairs to clear).
You do need to be very reasonable with pricing. We can give you an estimated value for your property, tell you if your desired sales price is attainable, and let you know what to expect for your specific situation. Usually we recommend listing just under market value to make your home stand out from the rest which may be a little higher priced. List lower to start so you aren’t chasing the market after getting no offers and few showings for a month.
WHAT PROPERTIES ARE IN HIGH DEMAND RIGHT NOW?
With the massive increase in buyers looking to leave the city and move to Tahoe full or part time, there are a few different specific features that are in the most demand. All Tahoe homes are unique, but the following features are key for many of the buyers we have worked with recently.
Many buyer want a larger home with a large yard in a quiet neighborhood. Two features that are almost a necessity right now are a good home office and high speed internet. So even if you don’t have a specific room that is currently used as a home office, before listing your home for sale it would be beneficial to set up a room as a home office just so when buyers see it in person (or video) they can see it. They mostly want a house that has been recently updated and usually won’t be interested in anything that needs a lot of repairs or looks like it is stuck in the 80s or 90s.
For investors, most are going to be looking for a home that fits the needs of most local renters… 3 bedrooms, 2 bathrooms, a garage, close to bus routes, fenced yard (most locals have dogs). We have seen an uptick in demand for rentals that have been remodeled inside. These properties are getting quite a bit more per month vs the properties in “original” condition. The bottom line will be the deciding factor for investor buyers since they mainly care about return on investment and potential annual income from the property.
If your home needs a little “refreshing” or has some defects that should be addresses, our office offers the perfect tool for you. Compass Concierge is a program that can help your home get an upgrade with repairs and staging, which will help it sell for more money.
But don’t fret if your property doesn’t fit any of the styles or features mentioned above. You might not have multiple offers on your home, but if priced right it will sell.
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