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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