Hello from Winter Wonderland! The early and heavy snow we received in both December and January has held up really well and the blizzard we saw this week put us over the top. We have an enormous amount of snow, and I expect that we will be skiing through May and maybe into June!
I wanted to write up a quick market update to show what the market did through the end of 2022. Here are the stats and my thoughts:
If you have read my updates in the past, you know that I use Tahoe Donner as the representative sample for the Truckee and North Tahoe market. On December 31st 2022, there were 24 active single family homes listings, compared with 6 active listing on December 31st the previous year. This is still a very tight inventory, considering there are over 5200 homes in TD.
I look at market trends broken down by quarters, and not years. That can help give a more accurate picture of what is happening now, versus what has been happening on average for the past year. So here is my breakdown of Q4 2022 vs Q4 2021:
First, here are sold comps for Q4 2021. There were 52 single family homes sold in Tahoe Donner that quarter, and the average price was $1,354,615.
Next, here is Q4 for 2022
As you can see, the average price fell fairly significantly, from $1,354,615 to $1,162,895, a decrease of over 15% across the different price ranges of homes. In addition, the average days on market jumped from 15 days in Q4 2021 to 53 days in Q4 2022. That's a big change!
Now let's look at how condos did during those same time periods. Here are the comps for condo in TD sold in Q4 of 2021:
And here are the comps for Q4 of 2022:
For condos, the average sale price fell from $568,916 to $472,200 between Q4 2021 and Q4 2022, that is a 17% decrease.
Finally, let's have a look at vacant lots sold in Q4 2021
And then in Q4 2022:
Vacant lots on average are selling for 11% less than they were in Q4 2021.
So what is causing prices to fall, and how far will they fall? Let's have a look at that.
Our market is highly influenced by the economy in the Bay Area. When Bay Area residents feel good about their finances, our market strengthens. And since the Bay Area is so tech centered, one can check the Nasdaq for an easy indication of this economic strength. This chart of the Nasdaq from Jan 1 2022 to Dec 31st, 2022.
As you can see, the Nasdaq was down almost 32% in 2022. That is huge, and that alone would have a big impact on our market. But when you look at interest rates, you can see the profound impact these two influences have.
The 52 week range of interest rates were from just over 3% to over 7%! And even though many buyers are paying cash, MOST buyers are still getting loans, and their buying power has been significantly diminished by interest rates.
Last, I want to mention the trends of working from home. The amount of people working from home peaked in mid 2020, and has been decreasing ever since. And while there are still a lot of people working remotely in our area, that number continues to drop, further decreasing demand for housing in both the rental market and homes for sale.
So the market is down from a year ago, now what? The short answer is that nobody knows for sure. The incredible ski season we are having will be tempered with the beating that some homes are going to take in the massive amount of snow that we have. I would bet that we see a lot of homes for sale this summer that are not designed will for the deep snow. Bad rooflines and driveways will be the primary culprits, and there will be a lot of maintenance needed this summer. But well designed homes and going to be fine, and Truckee and North Tahoe will always be a desirable area to live and visit. My guess is that inventory will remain relatively tight this year. I also would bet that the spring listing season starts late, and becomes the summer listing season. With just the snow we have on the ground now and in the short term forecast, I expect we will still have snow on the ground in many parts of Truckee and North Tahoe into June. So I expect that we will start to see inventory pick up in June in July through September, and that we might get a modest rebound in price trajectory.
If you are looking to buy or sell, feel free to reach out to me any time to discuss how I can help. Thanks, and enjoy the snow!
The snow is melting, the birds are chirping, and the real estate market is still on fire. The first quarter of 2022 showed that buyer demand is running strong, and that owners are holding onto their homes, for now. For anyone following this blog, you will know that a part of this just our yearly pattern. Inventory generally bottoms in February or March, and inventory starts picking up in April, or at least new listings do. Currently in Tahoe Donner, my preferred bellwether for the Truckee Tahoe Market, the number of active listings is 15 single family homes, out of just over 6000 completed homes in that neighborhood. And out of those 15 homes, the median asking price is $1,449,000 and only 3 of them are under one million.
Here is a breakdown of how the sale prices of Q1 2022 compared with Q1 2021, again, using Tahoe Donner as our subject area:
Let’s start with the 3 bed, 2 bath homes with 2 car garages:
There were 5 sales in this category in Q1 this year, compared with 12 the year before. The decrease is clearly explained by low inventory. But the average prices are up by 30% year over year. There is one notable listing that I want to share that is really incredible. It is 14169 Glacier View Rd. It is a 3 bed 2 bath 2 car garage home built in 1980, at 1474 square feet with a steep uphill driveway. It does not appear to have ever been remodeled. It was listed for $849,000, and sold in 4 days for $1,175,000 to a buyer who got a loan. This is 38% above asking price!!! It should be noted that the buyers were represented by an out of area agent, and may not have been made aware of the hazards of steep driveways and future salability of homes with that issue. Here is the link to that sale if you would like to have a look- https://tsierra.paragonrels.com/CollabLink/?id=7e66b8e3-5b71-464a-8eed-3275e081b2fa&forMlsId=TSIERRA
Next, lets look at the 3 bed 2.5 bath homes with 2 car garages:
There were 7 of these sold, compared with the same number in Q1 of 2021, but the average sale price was up by 14% year over year.
Lastly, lets look at the 4 bed 3 bath homes with 2 car garages:
There were 5 sales in this category this quarter, compared with the same number in 2021. This year the average sale price was up by 28%.
The biggest change underlying the market in the last 12 months has got to be interest rates. They have been quietly creeping up, but up they are, and considerably!
Per Freddie Mac, rates as of March 31st are averaging 4.67% for a 30 year fixed loan, compared with 3.18% for the same week last year. For buyers that are getting loans, which is still the majority of sales in our area, this translates to significantly less buying power. And yet sale prices continue to skyrocket. At some point, there has got to be some affect of this trend in mortgage rates. And if there is a negative force on prices this year, I think it will be from this. But we aren’t seeing it reflected in demand just yet.
This winter, extreme buyer demand has continued to push prices sharply upward. We are now starting to see the beginning of our spring listing season. It will be interesting to see if owners that have been thinking of selling, start to consider these new lending rates and what effect they will have on future buyer demand. If sellers are reading the tea leaves, we may see a heavier than usual listing season. In my opinion, this would be good for our market. The effects of covid, work from home, and inflation have lit a fire under the market for the last 2 years. And while work from home, and most certainly inflation will continue to fuel the market, there will finally be a check on them in the form of mortgage rates. We will have to wait and see how strong of a balancing force that will be. I’ll be back with another update after Q2, but in the mean time feel free to reach out with any questions you may have. Enjoy the spring, the weather here in the mountains has really been incredible!
Happy New Year!
I hope this finds you healthy and prosperous. It is time again to write a quick update on our local real estate market. I'm sure it won't surprise you to know that the trajectory of this market continues to be sharply upward. As I have done in my past updates, I will again break the market down by categories, and focus on Tahoe Donner, which is an excellent bellwether for the broader market. This comparison is for October 1 to December 31, versus the same timeframe for 2020. The spoiler is that 3 bedroom 2 bath homes are up 21%, 3 bedroom 2.5 bath homes are also up 21%, and 4 bedroom 3 bath homes are up 24%.
Now lets have a look at what those sale numbers look like, starting with 3 bed 2 bath homes in TD:
For this category, there were 13 sales during this time frame in 2021, compared to 33 during the same period in 2020. This is simply explained, there was very little inventory. There were lots of buyers, and very few sellers.
Now lets have a look at the 3 bed 2.5 baths in TD:
There were 15 sales in this category in Oct-Dec 2021, compared to 22 the year before.
Lastly, lets look at the 4 bed 3 baths in TD:
We saw 4 closings in this category in Oct-Dec 2021, compared with 8 in that period in 2020.
For the 32 sales in these three categories in this specific time period in 2021, 13 of them were cash sales and 19 of them had conventional or jumbo loans.
Thoughts on demand and affordability
Looking back at 2021, a few factors contributed to the strong demand even at these higher prices. Through most of the year, it seemed clear that interest rates were on the rise and would probably continue to be in the foreseeable future. Also, the stock market continued its bullish run. The S&P 500 was up over 26% in 2021, after a very strong year in 2020. So investors that were in the market had more money to put toward real estate if they wanted to have something they could enjoy with their families. Finally, inflation really lit a match under the real estate market last year. Inflation brings an expectation that salaries will increase, and owning real estate or other hard assets is a solid hedge for inflation. Combine this with the fact that there is a significant under supply of homes, not only nationally but locally as well, and you have a recipe for prices going straight up.
So where does that leave us now? Well, rates are expected to keep increasing.
Additionally, our supply of potential new homes is very limited by available land. The amount of vacant lots in finite. Even though there are some more areas that can be developed, there is local pushback to increasing the population without proper preparation. Anyone that has tried to drive from Truckee to Palisades Tahoe (Formerly Squaw Valley) or Northstar on a Saturday morning understands that Truckee and North Tahoe are not ready to sharply increase the amount of homes, condos and hotels. Infrastructure is already lagging behind our capacity to sleep people in the area.
Lastly, many workers continue to be able to work from home. We are seeing more and more remote workers choose Truckee and North Tahoe for the amazing lifestyle that it provides.
Allison James Estates and Homes
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