South Lake Tahoe Real Estate Blog

5 Reasons to Buy a Home in 2011

5 Reasons to Buy a Home in 2011
Michele Lerner, author of Homebuying: Tough Times, First Time, Any Time, offers reasons why real estate is likely to improve in 2011. Here are five reasons she thinks consumers should consider a home purchase next year:▪ Mortgage rates will stay low. Even with rates climbing – maybe to as high as 6 percent by 2012 – they are still well below where they have been historically.
▪ Tax cuts could help. Extending the tax cuts could encourage a more rapid recovery for the economy.
▪ Americans want to be home owners. A recent Fannie Mae survey showed that Americans still believe a home is a safe and desirable investment.
▪ Builders are about to begin building. Home builders have been sitting on the sidelines. This year, they think pent-up demand will create an appetite for new homes.
▪ Homes are shrinking. Homes are getting smaller, which has made them more affordable.

Source: Investopedia, Michele Lerner (12/24/2010)

Good News For The Real Estate Market

In a news article on Realtor.org there was an interesting article about the pending home sales index. Realtor.org is the National Association of Realtors webisite.

Pending home sales rose again in November, with the broad trend over the past five months indicating a gradual recovery into 2011, according to the NATIONAL ASSOCIATION OF REALTORS ® .

The Pending Home Sales Index,a forward-looking indicator, rose 3.5 percent to 92.2 based on contracts signed in November from a downwardly revised 89.1 in October. The index is 5.0 percent below a reading of 97.0 in November 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said historically high housing affordability is boosting sales activity. “In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market,” he said. “But further gains are needed to reach normal levels of sales activity.”

The PHSI in the Northeast increased 1.8 percent to 72.6 in November but is 6.2 percent below November 2009. In the Midwest the index declined 4.2 percent in November to 78.3 and is 7.7 percent below a year ago. Pending home sales in the South slipped 1.8 percent to an index of 91.4 and are 7.2 percent below November 2009. In the West the index jumped 18.2 percent to 123.3 and is 0.4 percent above a year ago.

“If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume,” Yun said. “Credit remains tight, but if lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy.”
The 30-year fixed-rate mortgage is forecast to rise gradually to 5.3 percent around the end of 2011; at the same time, unemployment should drop to 9.2 percent.

For perspective, Yun said that the U.S. has added 27 million people over the past 10 years. “However, the number of jobs is roughly the same as it was in 2000 when existing-home sales totaled 5.2 million, which appears to be a sustainable figure given the current level of employment,” he explained. “All the indicator trends are pointing to a gradual housing recovery,” Yun said. “Home price prospects will vary depending largely upon local job market conditions. The national median home price, however, is expected to remain stable even with a continuing flow of distressed properties coming onto the market, as long as there is a steady demand of financially healthy home buyers.”

Existing-home sales are projected to rise about 8 percent to 5.2 million in 2011 from 4.8 million in 2010, with an additional gain of 4 percent in 2012. The median existing-home price could rise 0.6 percent to $173,700 in 2011 from $172,700 in 2010, which was essentially unchanged from 2009.

“As we gradually work off the excess housing inventory, supply levels will eventually come more in-line with historic averages, and could allow home prices to rise modestly in the range of 2 to 3 percent in 2012,” Yun said.
New-home sales are estimated to rise 24 percent to 392,000 in 2011, but would remain well below historic averages, while housing starts are forecast to rise 21 percent to 716,000.

Yun sees Gross Domestic Product growing 2.5 percent in 2011, and the Consumer Price Index rising 2.3 percent.

Yun discusses the latest PHSI reading in a 5-minute video.

Source: NAR

Lake Tahoe Nevada or Lake Tahoe California?

Lake Tahoe is a very unique Lake which is located on the state line that divides California and Nevada. There are advantages and disadvantages to owning real estate on either side of the state line. Linda Granger of Chase International wrote a great article explaining these differences.

California or Nevada?

As a real estate professional I am frequently asked, “Is it true that if I am going to buy a second home at Lake Tahoe, I should buy in Nevada as opposed to California? Is it really less expensive?” Of course, this question makes sense as my market area, Lake Tahoe, is both in Nevada and California. Whenever I have attempted my intensive research consisting mainly of asking this question of other agents, or friends at the gym or over a glass of wine, I usually come up feeling as ‘gray’ about the answer as I did going into the research project. It appears that everyone has ‘heard’ this or that, but no one is really sure. It is for this reason that I have decided to actually research the subject through experts, including conversations with CPA’s and attorneys that practice on both the Nevada and California sides of the lake.

Now, if you speak with a real estate agent on the Nevada side of Lake Tahoe, I guarantee that they will be able to sell you on all the financial benefits of purchasing in their marketplace as well as the fantastic amenities and the fact that the Nevada side of the lake gets less snow and more sun…they may even drop a few names of big dogs that own homes in their world. But if you speak with a real estate agent on the California side of Lake Tahoe, they will probably be able to sell you on the fact that owners on the California side of the lake have access to charming old-Tahoe towns and neighborhoods on both the North and West shores, have easy access to some of the greatest ski resorts in the country, and oh…did i mention those California girls?

Regardless, you are in the right place. Yes, I am a California girl and for me, once a Californian, always a Californian. However, the great news is that I also have real estate partners on the Nevada side of Lake Tahoe, so hopefully the information below will not be slanted and will really help you decide between California and Nevada.

Let’s start with a quick summary, and then if you would like more details on each state, click on these links for more summarized information about California Tax Benefits & Nevada Tax Benefits.

California vs. Nevada

Property taxes in NV are county specific.
Washoe County assesses property taxes every 5 years, but currently they are several years behind in that process
There is no personal income tax in the state of Nevada. This can be a good thing, especially for retirees from CA who can bring their retirement incomes with them if they become residents. This is the main difference. It’s like getting a 10% raise for living across the state line. Residency is considered to be a minimum of 183 days a year. Some Californians/Nevadans fudge on this and maintain homes in both states but claim NV as their primary residence and vote/register vehicles/bank etc. in NV.
Generally, if you buy a $1,000,000 house in CA, your tax bill will be about $1000/month, while in Douglas County the property tax on a $1,000,000 house is +/- $3500 per year. Assuming an 8% annual increase in Douglas County, it will take 9 years for the Douglas County tax to equal the CA tax, and property taxes are usually just one of several considerations in the equation. The most important thing, of course, is for the client to decide what the most important factors are in his personal equation .
In California, property tax is reassessed upon transfer at approximately 1.25% of sales price.
In Douglas County, NV, including the Carson Valley and Tahoe’s East Shore, taxes tend to be significantly lower than in Washoe County, NV, which includes Incline Village and Reno. In recent years the Washoe County rates have become very controversial as they’ve approached those of California.
Douglas County property tax bills cannot be calculated from the “Total Assessed Value” posted on the Assessor’s website. Among the subjective considerations are view, age of the property and Special Taxes. Sewer is the biggest component of Special Taxes – that’s generally where a property is hooked up directly to county sewer rather than being part of a General Improvement District. Those Special Taxes are billed as part of the prop tax bill. GID members pay for water, sewer and snow removal separately at roughly $135/month. The newer the improvements the higher the property tax bill. View is also a subjective element – in the case of two seemingly identical homes, the one with the better view usually has higher taxes.
Several years ago the Nevada legislature capped annual increases at 3% for primary residence. I called the Douglas County Treasurer and confirmed that the increase for second homes and rentals (non owner occupied properties) can be up to 8% in the county.
As a resident, there is no state income tax if you earn your money in Nevada or if you have passive income, even if it comes from California. If you are a resident of Nevada and are employed in California you will be taxed by California.
My experience has shown me that if it is a primary home as opposed to a second home or investment home, then the tax advantages can be more substantial. If it is a second home and you already live in California than the difference is minimized UNLESS you plan to retire in that home. If this is the case, then in an attempt to protect your assets Nevada may be a better option.
Another point to consider is that the median price of homes in Nevada is greater than that in California if you compare Incline Village (2009 median price was $915,000) to Tahoe City ($530,000) and Truckee ($538,000). So…while it may be less expensive on an annual basis, there is a cost to that…price upon entering the market.

Businesses in California vs. Nevada

A San Diego Business Law Firm created this article comparing owning a business in California or Nevada.

A limited liability company, better known as “LLC”, is a flexible business entity. It gives you the asset protection characteristics of a corporation, but with less formality. From a tax perspective, the LLC is taxed most often as a partnership. This avoids the double taxation issues that arise with a traditional corporation.

After deciding to form an LLC, the next issue is picking the state in which to do the formation. For people living in California, there is a temptation to form the entity in Nevada. Why? Well, it usually comes down to tax issues. California taxes everything including a LLC. Nevada, on the other hand, provides a much better tax situation.

So, when we ask about the merits of a California versus Nevada LLC, the answer is Nevada is the best jurisdiction to pick, right? It might appear so at first glance, but there are problems with this approach. You will often read that you can form a business entity in any state you desire. This is true, but you probably should not.

Let’s assume I live in Tahoe City, CA and have a business idea. I decide to go ahead and form a Nevada LLC. Once created, I launch my business in Tahoe City, CA. I open an office in my home. I meet with clients in the office. I take calls in Tahoe City, CA. I receive orders in Tahoe City, CA. Basically, all the business activities are taking place in Tahoe City, CA.

This is a common scenario, but problematic. Since the day-to-day activities of my business are taking place in Tahoe City, CA, California state agencies are going to view me as a California business. This means I will have to register with the Secretary of State as a foreign LLC since my entity is based in Nevada. I will also have to pay California state taxes and other fees.

The end result of all of this is that I end up paying all the fees I would have by originally forming the LLC in California. On top of that, I will also be paying all the Nevada fees. Given this scenario, the benefits of using a Nevada LLC are lost and I actually end up in a worse situation.

Most books and websites discussing the creation of business entities are painfully inadequate. Make sure you understand the complete picture before choosing where to originate your LLC or any other business entity.

CBS News put on a great video about the differences between California & Nevada when it comes to running a business. Click here to view video.

South Tahoe Real Estate Review for November 2010

With 38 single family homes (excluding condos) sold on the South Lake Tahoe MLS in November, buyer activity continued to remain somewhat active for this time of year. Home prices seem like they are trying to stabilize as well. The average price per square foot has been bouncing around in the low $200’s over the last few months as follows:

November 2010 price per square foot-$212
October 2010 price per square foot-$201
September 2010 price per square foot-$219
August 2010 price per square foot- $207

Distress sales still seem to be dominating the real estate market in South Tahoe. Out of the 38 homes sold in November, 12 were bank owned foreclosures and 8 were short sales. 20 of the 38 homes sold (53%) were distress sales. The average price per square foot for the bank owned foreclosures was $174 and the average price per square foot for the short sales was $210. The foreclosures had an average sales price of $312,000 and a median sales price of $227,500. The short sales had an average sales price of $383,750 and a median sales price of $397,500.

South Lake Tahoe Home Sales Statistics

There were 38 single family homes sold in November 2010, down from 42 in November 2009.
There were 20 distress sales in November 2010, up from 15 in November 2009 and up from 15 in October 2010.
The Median sales price was $291,250, down from $297,000 in October and down from $322,000 in November 2009.
The average sales price was $362,934, up from $357,263 in October and down from $410,355 in November 2009.
The average days on the market was 131 and the median days on the market was 91.
The average price per square foot was $212, up from $201 in October and down from $227 in November 2009.
The percentage of distress sales was 53%, up from 33% in October and up from 36% in November 2009.

The current inventory levels have also slightly improved to a more stable level. The total number of single family listings on the South Lake Tahoe MLS has stayed at 443, but the number of pending sales has gone up from 87 to 95. Currently there are 338 active homes on the market and 95 homes that are in escrow. 22% of the homes listed on the South Tahoe MLS are currently under contract. Of the 95 homes that are in escrow, 21 are bank owned foreclosure and 42 are short sales. 66% of the homes under contract are distress sales, this is down from 71% in October.

Another interesting point is that there have been a lot more multiple offer situations than there has been in a while. Last week I wrote four different offers for four different clients. Three of the four properties that I wrote offers on ended up having multiple offers in on them.

December is going to be a great month to plan a trip to Lake Tahoe to both look at properties and hit the slopes. There are some great deals currently on the market on both short sales and foreclosures. There are also new listings coming on the South Lake Tahoe MLS Daily. The record snow that fell in November has enabled most ski resorts to open from top to bottom for some great early skiing and boarding. Heavenly Ski Resort has over 4000 acres of skiing and boarding open now which is about 85% of the mountain. Make sure to give me a call on my cell phone at (530) 416-2625 to set up an appointment to look at some homes!

South Tahoe Real Estate Statistics

South Lake Tahoe MLS statistics as of November 17, 2010

The following statistics are for Residential (single family and condo/town homes) located in the City and County areas of South Lake Tahoe:

The total number of listings on the South Lake Tahoe MLS is 511 (78 of the homes are listed by Chase=15.3% of the inventory).
412 of the listings are active (still available) 42 of the active listings are short sales and 31 are bank owned listings. Only 17.7% of the active inventory is distress sales.
99 of the listings are in escrow. 50 of the current houses in escrow are short sales and 25 are bank owned. 75.8% of the current escrows are distress sales.
The 99 escrows represent 19.4 % of the total inventory in escrow.

Breakdown by price range of the 99 escrows

Under $200,000 21 properties
$201-$300,000 37 properties
$301-$400,000 16 properties
$401-$500,000 9 properties
$501-$600,000 3 properties
$601-$700,000 5 properties
$701-$800,000 3 properties
$801-$999,000 4 properties
Over 1 million 1 property

So far this year there have been 495 single family homes and condos sold in the South Lake Tahoe MLS.

145 of the properties sold were bank owned foreclosures (29.3%)
81 of the properties sold were short sales (16.4%)

There are currently 80 single family homes and condos listed in the Tahoe Keys area. 68 of the properties are active, and 12 of the properties are in escrow. The current Tahoe Keys inventory includes 8 bank owned properties and 7 short sales. There have been 58 properties sold in the Tahoe Keys so far this year. 8 of the sold homes were foreclosures and 6 of the homes were short sales.

Thank You To My Wonderful Clients!

I wanted to take the time to thank all of the wonderful clients that I have worked with this summer. Although I spent a lot more time at the office than I did at the beach, I had a great summer making many lasting relationships. This has been the busiest year that I have had since I have been a Real Estate Agent in South Lake Tahoe. Out of the 8 offices and 200+ agents here at Chase International, I was able to sell more homes last quarter than anyone else. Great clients and hard work goes a long way.

I hope that all of you who purchased homes in South Lake Tahoe are able to enjoy this amazing place as much as I do! Thanks Again!