Timing the Bottom.docx (81.26 kb)

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1) Prices decline!
The Lake Tahoe South Shore California market has experienced a continued decline in prices since May of 2006. The decline from the peak is about 18.5 % per the South Tahoe Assoc of Realtors (STAOR) (end of Feb stats) for sfd homes. This is paltry compared to the statewide average of reported price declines of 50% as per the CA Assoc. of Realtors (C.A.R.) (as of early Mar).

The price declines in the South Shore market place have lessened to a 8.4% decline this past month as compared to the previous month and is verging on a lessening of the decline trend. We look for any bright news.  The decline while not a steep as many other markets, is attributable to the toxic loans that have generated foreclosure san short sales, yes even in our resort market trend.
 
2) Sales Increase!
Finally a ray of bright news in this dismal economy, albeit a small up tick we have experienced an increase in sale year over year of 5.5% increase in homes sold (same geographic range of south shore California, STAR reporting area). Median home price is just under $400,000.00. The market below median drives the sales units, the moderate range market above $500,000.00 is maintaining its unit sold (year over year) but the high end " luxury" market (above $1M) has suffered a 50% decline in units sold , but has experienced only modest declines in price.
 
3) Time to buy? Pending sales are up dramatically
The Impact of low prices and low interest rates is bringing out the buyers. But to move your property today it must be priced at or below the competition in order to get the attention and the offer. Pending sales have been increasing (year over year) for the past 12 month cycle and has finally translated into an increase (modest) in sales.
Interestingly the stats indicate that while distressed sales (foreclosures and short sales) make up a minority of the listing inventory, it dominates the pending and sold units of the past year.
 
4) Supply and Demand-
We have approx. 400 sfd units (inventory) on the market which has been tracking slightly less than previous periods (year over year). This is an indicator that the serious sellers are on the market and that the inventory is starting to move. However the absorption rate, units available "supply"  and units in escrow "demand”, is still high at about 10 months and 15 months for units on the market vs sold units in Feb. per STAR stats. As the distressed inventory decreases the prices will stop dropping.
 
5) When is the market correction going to end and the turn around begin?-
What are the factors that will create a balanced market (something we in the industry look forward to)?  Is it off in the foreseeable future and will it be affected by the number of buyers entering the market?
If the attraction of the low prices (we're back at early 2005 and late 2004 pricing at the time of this writing) continues to drive the market.
Polishing off my crystal ball ... I anticipate a market turn around this fall and here's why.
a) Supply and demand is driving the inventory increase in sales and I anticipate this will continue exponentially though summer, which is typically our peak months.
b) As buyers recognize the investment value as well as the intrinsic benefits of property owners, particularly in the Lake Tahoe area, the sales will increase, fueled by the fact that the,
c) Values are hovering below the cost of construction and,
d) The cost of homeownership rivals rent payments and rental roi, gross multipliers and cap rates make sense.
e) They ain't making any more...Thank you TRPA, buildable land is in scarcity and will continue to be so due to the environmental constraints. A goal everyone has here in Lake Tahoe.
 
6) Stimulus Plan- is it stimulating?
At the time of this writing, the flow of money is just entering the pipeline. Credit available to the banks who in turn will lend to consumers to remedy the sins of the sub-prime through mortgage mods and new purchase money, is critical to stopping the escalation of foreclosures and short sales. Hopefully the impact will be to keep homeowners in their homes and attract new homeowners into the home buying market. The key piece is of course creating homeowners with realistic payments and purchase prices.
The tax credit is also attractive, and many states have their own tax credits too.
For more information on this go to my web site at www.realtordeb.com and see the home page articles and links.
 
Look forward to hearing from you with any questions or comments.
Here's to a healthy economy and real estate market.
 
 
 
Best Wishes,
Deb Howard
NV/CA Broker Owner CRS, RSPS, EPRO
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

Here's the latest stats for the current period as compared with year over year stats.
 
1) We have seen 1 year of "year over year" increases in pending sales and
 
2) we are finally we are seeing the units solds category increase (year over year).
The prices have undeniably declined at approx 20-25% since the peak in May of 2006-
Will they go lower, perhaps some, probable. But we are near or at the bottom of this market cycle as demonstrated by the increases in pending and closed escrows.

3) Inventory has stayed relatively stable, another good sign of recovery as we have no new development to effect the supply and demand ratios. I won't go so far as to thank TRPA for their building restrictions, but at this juncture it is a good dynamic (certainly the environmental consideration is a good thing).
 
I'm hearing from investor/ buyers that they are looking to real estate to diversify their ( diminished albeit) financial portfolio and real estate is becoming once again the preferred vehicle; enjoyment of use, income and deductibility.
 
I would encourage investors and buyers to consider their long term life style investment, family enjoyment and I hope they will consider Lake Tahoe Rea Estate.
 

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

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.

I saw on the local news last night, that single family home sales in nearby Reno were up some 24% over last Year.  After a 13% price correction, I can understand why.  Home sales are up in many locations across the country after an 18 month decline.  With interest rates still low it just makes sense to buy at these prices.  Experts that I've seen on the financial tv networks say that in past housing price declines the bottom is vee shaped and prices tend to rebound quite dramatically.  Let's hope so. 

Originally Posted by Deb Howard
on 6/9/2008 11:16:31 AM

While Tahoe has been a popular destination of International visitors and investors historically, it is becoming ever more so based on a few things that I have observed
in addition to my notes on the NAR DC visits;

1) globalization and immediate access to information expanding the exposure of our resort market to the international market,
2) access to resorts (you can get here from there)
3) Desirability of 4 seasons resort,
4) As said earlier - Values! safe investment, enjoyment, weather and good exchange rates are driving a lot of new interest.

The move up market of existing foreign investors is another market we are experiencing.
Antidotally I have a couple who are from Singapore who are looking to upgrade from a vacation income property they already own here in Tahoe to another larger grander property to retire to 6 month out of the year. (check on guest/foreign homeowner visitor visas, another good topic to investigate). Water, views, floor plan to accommodate entertaining their friends from around the world and located in a safe or gated community are their top criteria. They also bring with them a whole host of friends and family that will join them in investing in Tahoe.
More to follow.

Deb Howard