I attended the National Association of Realtors annual convention and do so most every year to participate and take note of the trends effecting the economy and the housing market so that we can be on the cutting edge of our industry. I have had the pleasure serving the NAR on its Resort and Second Home Committee for the past several years and will be serving as the Vice Chair and Chair (god willing) during the next two years.

Here's the latest from the economists and prognosticators:

Transition and the Economy-

The news to report is mixed, much was relayed on the transition of government, everyone agreed we needed change and we got change.

There was a great deal of discussion on the economy naturally and on the GSEs (Gov't sponsored enterprises) now transitioning to GOEs (Gov't owned Enterprise) as the Bail out, stimulus bill are being rolled out.

Help is on the way in the credit sector, whether you like it or not (the plan), there will be relief from debt, consolidations, modifications, buy downs and general affordable credit made available to the those who need it the most, our home owners that are under water!

Regulations will be put in place to monitor the bail out process and the financial institutions that will be receiving the funds to distribute to"qualified" home owners.

Defaults, delinquent loans and Foreclosures are still on the increase as a result of the sub prime and variable interest rates loan that have become unaffordable for many, often times equaling more than the homes are worth said Chairman Lockhart of the FHFA Agency.

The interesting dynamic at play however, is that in many areas in the country, the buyers including first home buyers and investors, are coming into the market place in substantial numbers, as a result of the attractive declining prices that foreclosures, short sales and distressed sale have brought to the real estate market.

We have a future-Slightly hazy...

Dr Yun, NARs Chief Economist, forecasts that the "recessionary like" economy will see some relief by the 3rd and 4th qtrs of 2009 fueled by the influx of funds from the monetary markets not only to the housing sector but also the manufacturing, energy and green job development.

On the longer term forecast he was optimistic that the housing market would see increased demand based on the growing population and immigrations and the shortage of new development, supply and demand. Other factors he noted included the international and overall demand for our "recent attractively priced" housing and the opportunity for a secure and decent "roi", pressure to diversify ones portfolio (that which left of it) including commercial and industrial property.

Opportunity knocks and the Local Market-

70 million baby boomers, first time homebuyers, internationals and investors are still poised to buy an affordable home, lifestyle and investment property but have been cautiously waiting on the opportunity and the market.

Real Estate in comparison to other investment platforms such as the stock market, has fared far better, historically has continued to draw good appreciation and most of all...can be enjoyed!

Our resort realestate market has survived the turbulent ride better than much of California and many other markets that overbuilt propelled by the insatiable demand of the investment market.

The Lake Tahoe basin has some built in supply factors, inherent with the slow growth environmental policies which helped insulate the area to some extent.

That said however the market has seen a decline in median home price of approx 20% over the past 2.5 years driven by the foreclosures, short sales and motivated sellers.

The good news is that inventory is down (as compared to the past year) 10% approx and pending a sales are up by over 20%.

As long as the interest rates and the flow of money holds, I'm forecasting a continued increase in pending sales and closed escrows, even in this beleaguered economy.

Real Estate represents a sound investment at this time.

I'll send you Dr Yun's report as soon as it is out, however I've attached the International home buyer's profile for your review as it is a dynamic at play in our market.

Happy Thanksgiving to you and yours.

Best Wishes,

Deb Howard
Deb Howard & Company
Lake Tahoe's Real Estate Resource
866-542-2912 toll free
530-542-8657 fax
deb@realtordeb.com
www.realtordeb.com
3599 Lake Tahoe Blvd. Ste A
South Lake Tahoe, CA 96150

We’ve seen some more activity in the South Lake Tahoe foreclosure market. Ten foreclosure properties went into escrow here within the last 13 days! There are 3 new foreclosure listings. The most interesting of these is at 2188 Pinewood Drive. It’s a huge 2,915 square foot home that was built in 2004. With a $435,000 list price, there’s an incredible bidding war going on for that property. Expect it to close well above list price.

It’s a busy Friday, so that’s all for now! I hope all you guys have a great weekend. If you want information on upcoming foreclosures, call me at (530) 545-1831.

There’s been a bit of a buzz in the South Lake Tahoe real estate community. Have we hit the bottom of the market? Possibly. Check out the median sale prices over the last seven months. It looks like we hit bottom in June and have been heading up in the following months. Additionally, the median list price of homes in escrow right now is $437,000. I’d expect that number to drop to about $412,000 because our sale-price-to-list-price ratio on the year is 94.23%. These numbers fall in line with the theory that we have hit the bottom of the market.

What do I think? I’m skeptical. I wish I remembered enough from my college stats class to back this up, but I don’t think enough homes have sold over a long enough period of time to claim that the market’s downward trend has come to a halt. I’ll be happy when we sell off some more of this oversupply of homes.

Speaking of, South Lake Tahoe’s supply of homes did dwindle some at the turn of the month when seventy listings expired. Only thirteen of those listings are back on the market. With less competition amongst listings, now isn’t a bad time to list.

Other notable activity in September occurred in the South Lake Tahoe foreclosure market. Of the 28 single-family residences that sold in September, 7 of them were foreclosures (25%). At the turn of the month, there were 12 foreclosures in escrow and 15 short sales in escrow. We’re seeing a lot of distressed sales. It’s no wonder that banks are folding on a daily basis.

Only 3 condos sold in the last month. However, some buyers were thinking about the upcoming ski season. An unusually high 6 condos went into escrow.

Four lots went into escrow last month and only two sold. It’s been very slow in the dirt market.

I’d love to hear your comments on any of this. I will update a few numbers as some agents haven’t been able to input their September sales in the MLS yet.

* For the sake of statistical integrity, my absorption rates are no longer considering sales for the last year. They are now calculated using sales for the last 90 days. For more information on why I decided on the change, e-mail me at drew@southtahoehouses.com.

As I’ve mentioned in previous articles, there’s been a theory proposed by a few South Lake Tahoe real estate agents, myself included, that home prices haven’t dropped as much as the statistics show. Perhaps there’s been more activity in the lower price bands. After all, it’s been much tougher to get a jumbo loan this last year. Additionally, the majority of foreclosure and other distressed sales have occurred in the lower price bands.

If there actually was more activity in the lower price bands, this could skew the all-important median sale price. I did a little data mining recently to see if in fact the theory was true.

What affects median sale price more than anything? Square footage. So I decided to break sales up into two categories – homes up to 2,000 square feet and homes above 2,000 square feet. If speculation was correct, we’d see an abnormally large amount of homes sold below 2,000 square feet in the last year. See the table below for the results I found. Percentages in parentheses represent the decline since the previous year.

As you can see, the results of my data mining actually show the opposite of what was speculated. If speculation was correct, there wouldn’t have been such a big drop in sales of homes up to 2,000 square feet. Moreover, the decline in median price would have been greater in higher priced homes. Instead the opposite occurred.

When it comes to South Lake Tahoe real estate, the median sale price continues to stand as one of the most accurate indicators of the state of the market.

There’s been lots and lots of activity in the foreclosure market over the last two weeks! Three homes from the last list went into escrow. There are 7 additions to the list so that we now have 22 foreclosures.

Probably the most interesting of these additions is 1731 Chippewa St. It is surrounded by vacant lots – some unbuildable, the rest likely to remain vacant. The home itself is huge and has a good floorplan. At $144 per square foot, it’s a great buy.

There were 6 price reductions amongst foreclosures in the last two weeks. 602 Wintoon Dr. is priced incredibly after a $20,000 price drop. It won’t be on the next foreclosure list. The homes on Janet, San Francisco, and Colusa are getting there too. I love the home at 967 Colusa. It’s a 2003 construction with a pave-stone driveway. Knotty-pine trim is used throughout. The entire upstairs ceiling is knotty-pine. It has work to do but could once again be an amazing home.

As usual, I have more information on properties that will become foreclosures. However, I don’t feel at liberty to publish this information on the internet. If you are interested in those properties or the ones on this list, call me at (530) 545-1831.

More excellent information from Norm Hansen at AmWest Mortgage:

From: Norm Hansen
      Thursday, September 18, 2008 10:04 AM

Deb,

In these times of financial stress the question as to availability of financing for consumer homes looms large.

In short…it is there, it is plentiful, and the rates are excellent.

30 year fixed = 6.125% no points (was 5.875% last week).

FHA primary to 97%

FHA “Buy and Fix” = 102%

Jumbos…(forget the new hybrid Jumbo…Norm’s advice).

We have a Jumbo product that is a 5/1 @ 5.375%.

When the conventional Jumbo market comes back within 5 years then switch to a 30 year.

Here’s the bottom line:

Most all conforming loans go through Fannie and Freddie. Which by the way were once government agencies that became private Government Sponsored Enterprises (GSEs). The government is assuring their liquidity. Here’s how it works: Fannie buys the loans from the lenders/banks/wholesalers that made them to consumers...they then create mortgage bonds based on the flow of these loans and sell those bonds to investors to create more cash to fund new loans…eventually the bonds come due and the buyer of those bonds needs to be paid…those funds comes from selling new bonds…a circle.

The government is guaranteeing the payment of those maturing bonds and/or interest payments on them because selling new bonds has been a little slow (investor confidence).

It worked well because the markets got the ‘warm fuzzies’ started buying mortgage bonds…that reduced the rates…and is keeping cash flowing…for now.

The future requires investor confidence to continue buying mortgage bonds. Investors (each of us) are finicky…we can be fooled once…but normally not the second time.

That said…the banks/lenders/wholesalers are selling/originating only good quality loans…to use your words…real people with real income and good credit scores (traditionally the best saleable mortgage). This will keep a good flow of cash.

With stronger underwriting guidelines and Wall Street not offering CDOs and their hybrid MBS (collateral debt offerings and mortgage backed securities…where all the risk was and created the crises) it means the best buy (highest yields)…even better than some treasuries are Mortgage Bonds.

Regards,

Norm

Norm Hansen
Managing Partner
AmWest Mortgage
                                                                      
norm@amwesthomeloans.com 
212 Elks Point Road, Suite 448 /PO Box 12300                                                                      
Zephyr Cove, NV 89448                        
775-586-1130 Tel.
775-586-1140 Fax.

I wanted to share this with all of our readers.  It's an email I received yesterday from a friend at AmWest Home Loans.

From: Norm Hansen - amwesthomeloans.com
 
      Thursday, September 18, 2008 2:30 PM

Deb,

This is a good read…it comes from our advisors back east…

In a bid to ease the credit crunch and restore a sense of calm in the financial markets, the Federal Reserve authorized a $180 billion expansion of its swap lines with other world central banks.  The funds, which will be provided by the Federal Reserve, can be injected into money markets through overnight and term loans.  Stocks are liking this news so far and this is pressuring Bonds.

Something to think about - The Fed is attempting to be savvy and creative in its ways to help the financial system get back on track.  However, there is simply no one who can draw upon past experience to find answers here.  This situation is historic...and we are living through it.  It is almost comical to hear the utter stupidity that comes out of the mouths of some of the politicians who are paraded in front of the cameras...I can't help but think that we actually elected these people.   

There is a lot of panic out there.  People are very worried about their life savings.  Is money in the bank safe?  How about if it is in a life insurance policy?  How about in bonds?  Unfortunately the answer is no, no, no.  Yesterday, the panic reached a level that caused such a demand on Treasuries, that the total return of some short-term paper went negative.  That's right...the premium paid was higher than the return provided by the yield.  So keeping your cash under the mattress is better than an investment in some Treasuries, and apparently safer than the financial market. Suddenly, guess what may become the most attractive way to protect your money?  Think about it...you can touch it, get a tax break, live in it too.  Yes, Real Estate is starting to look pretty good, especially since it has become more reasonable priced.

South Lake Tahoe real estate saw a lot of activity in the higher price bands during August. This pushed the median sales price for single family residences to $443,750 for the month and $399,000 for the last 90 days. We are still seeing a market decline, however. In the last two weeks there have been 71 price reductions amongst the market’s ~500 single-family residences. Our month’s supply of inventory in all price bands also reflects a buyer’s market (greater than 7 months).

Speaking of activity in higher price bands, I mentioned in a previous post that many question if the decline in median sale price has truly represented the decline in home values. Perhaps the median has moved so much because there has been more activity in the lower price bands. I’ve almost finished looking at numbers that will provide some enlightening answers. Look for a post about this in the next week.

As for now, I’ll finish this up with some foreclosure, condo, and lot numbers. There were 4 foreclosure sales in August, 3 homes and one condo. Thus, foreclosures only made up 10.5% of home and condo sales. They are not dominating the market as they are in other parts of the country. There were 4 condo sales in South Lake Tahoe for August, and 4 condo sales.

There are 14 foreclosure properties in South Lake Tahoe today. Four homes are new since I last published it two weeks ago. I’m surprised that only two foreclosures went into escrow since the last list. In that same time frame, 32 homes & condos went into escrow. That’s a lot for South Lake Tahoe, so it’s not like buyers have slowed down at all.

A couple properties stand out on this list. 602 Wintoon Dr. was reduced $30,000 a couple days ago and is an incredible buy. 3549 Morton Dr. was listed yesterday. It’s on 3/4 of an acre and backs to the South Upper Truckee River.

As usual, I have more information on properties that will become foreclosures. However, I don’t feel at liberty to publish this information on the internet. If you are interested in those properties or the ones on this list, call me at (530) 545-1831.

South Shore Lake Tahoe

The dog days of summer are upon us! We are ramping up for increased real estate activity on Tahoe’s South Shore which almost always grows progressively through the start of summer and until the end of October. The Tahoe Fall season has become a popular time for our tourist guests to visit us and I expect we’ll see this seasonal trend again this year.

Though things are far from typical…it certainly hasn’t been “business as usual” for us in the past few years. With the unprecedented run up of prices from 2001 to early 2006, followed by an unprecedented down turn in the market since, we have been hard at work keeping up with the changing dynamics in the market.

But what a difference a year makes (or 2-3)
 
At this time in 2007 we were recovering from a horrific firestorm that destroyed 250 homes and structures in South Tahoe. Much more damaging than the physical destruction, was emotional devastation and toll on the many families affected by the fire. As small communities are known for, we pulled together and rallied around the fire survivors, opened our doors and hearts and started the healing.

Today many of the families are returning to their “new and improved” custom homes or have simply moved on with other housing options. There are still the scars that remain but the “Angora Hills” area, once a lunarscape, is now a bustling sea of construction and positive energy focused on renewal.

Mind you this area’s redevelopment is somewhat of an anomaly given the current state of housing market and the economic downturn and it makes this active construction scene a bit surreal. 

What do the numbers look like since the down turn in the realestate market?

For most of us with our ear to the ground in this industry, we knew that the market couldn’t sustain the continued upwards climb in pricing; there wasn’t an interest rate low enough to offset the high prices and certainly our incomes weren’t growing at the pace of inflation let alone housing prices.

 Although the market came to an abrupt halt in October of 2005 the statistics (see attached) show the median home price of “homes sold” climbing until May of 2006 to an all time high of ~$486,000. Since then home prices have slowly and steadily declined at almost 1% per month to give us an overall decline in price since the peak in May 06 of 21% or $399,000 for the same home sold at the time of this writing.

Unintended Consequences and Help is on the way?

No one wants to see their home prices dropping and the terrible consequences it can have on equity (what’s left of it for so many).
However, it is a market place condition that must be observed. We have so little control as consumers and even the lawmakers with the billions of dollars they are pumping into the credit and financial markets seem to have had little immediate impact. But we are hopeful the government assistance with GSEs will shore up the shaky credit markets and provide options to the hundreds of thousands who are facing upside down pricing to mortgage scenarios.

Some Good News with a touch of reality!

The bright news is that due to the new levels of affordability (pricing), buyers are coming back in to the market place, this not just perceived but rather real. Here’s the new trend information that I have observed:

Since January of 2008 we have seen, on an average, the year over year pending sales numbers increasing and have continued to do so for over 7 months.  Certainly in our office we are up over 20% in pending and closed sales from this time last year.

While the number of sales are picking up, comparing it to the early 2000’s, there is nothing to brag about. That said, it is a very good indicator that buyers, who have waited out the market, are returning. What is attracting the buyers back in to the market is the lure of a great bargain; short sales, foreclosures and “killer deals”, and there are plenty to be had, even in our resort market.

Having waited for the right time to buy these investors are interested in value first and foremost…so, pricing is key negotiating point in current transactions. Having a great negotiator on your side is critical. Ultimately, it takes a win – win to put a sale together and a knowledgeable team to close them (even more important these days).

Forecast for the next year-
 
If the economy can remain relatively stable along with interest rates I believe we’ll see the housing market emerge as one of the growing markets again.

Resort real estate is an interesting barometer of the economy. Tahoe real estate is generally viewed as a “luxury lifestyle” purchase but in recent years with an aging baby boomer population (a key target demographic), our market has become a safe “investment” option for those that have money to shelter and invest. The returns are great not only in the financial ROI sense, but in the quality of life department too. With the 1031 tax rules in place and the conversion rules of your investment property into your primary (which have recently undergone some changes, check with your accountant) many are converting heir vacation rentals into their retirement homes and/ or moving to Tahoe and telecommuting.

While I do see prices continuing to settle, certainly until the foreclosures and distressed sellers are out of the inventory, I believe we are near or at the bottom of the market in terms of bargain pricing. No doubt the next few months will tell the story, and we’ll keep you posted of course.

For more information email us at deb@realtordeb.com
Or call us toll free 1-866-542-2912

It is our pleasure to earn and retain your business!
We wish you and yours a fabulous fall season and hope your summer was all you wanted it to be, with plenty of Tahoe time!

Best Wishes

Deb Howard
Broker/Owner
NV/CA
3599 Lake Tahoe Blvd. Ste.A
South Lake Tahoe, CA 96150
deb@realtordeb.com