South Lake Tahoe Real Estate Blog

Real Estate in South Lake Tahoe, 2009 Is The Time to Buy!

When you ask someone what they think about the real estate market, most people have only negative comments and feelings. I think the reason for this is all of the negative information that the media beats into our heads every day.

One statistic that caught my attention was that “one in ten homeowners is either in default or in foreclosure.” To most people that statistic sounds very bad, but is it? That statistic also means that 9 out of 10 homeowners are able to make their payments. What would you think if 1 out of 10 homeowners were poised to take advantage of the current buyers market and invest in more real estate? Sounds like good news, but it is not a doom and gloom gut wrenching ten o’clock news story

I began investing in real estate in South Lake Tahoe about 8 years ago. I was really into it. I would read investing books, articles, and talk to other investors as much as I could. I remember reading a book about a real estate investor who purchased hundreds of houses in Phoenix Arizona during the tough real estate market in the early 1980’s. I remember this well because our market was going up and up, and it was difficult for someone like me to be able to buy a bunch of properties. I thought to my self “I will never have the opportunity to buy in a buyers market like the rich investors I read about.” Boy was I wrong!

When the market started declining I thought it was terrible. I had been building spec houses and buying lots as fast as I could. I ended up loosing on the last couple of specs when the market really began to slip. I was just happy to dump them when I did. After that I was ready to change my investment plans and to adapt to the market. The buyers market that I thought I would never see was developing, and I am ready. Are you ready?

It is now a buyers market, but why are buyers still sitting on the fence? Buyers were willing to over pay in 2005 using risky sub-prime loans, but are now scared to buy when the timing could not be any better!

Here is the reason why there are “fence sitters” in a buyers market.

Fear- Buyers are scared of paying too much for a home. This makes sense, but where was the fear during the peak of the market?
Competition- It is human nature to want something that someone else has. I see it with my kids all the time. Sometimes the only reason you want a cirtain thing is so the competitor can not have it, or you just want to win the battle. I notice this when there are multiple offers on a property. A lot of times buyers will end up paying more for a property just to win. In a buyers market there is not a lot of buyer competition, so there is no sense of urgency for buyers to get off of the fence.
Lack of Knowledge about local markets – This is especially true for real estate in South Lake Tahoe. South Lake Tahoe is mostly a second home market, and is more stable than other areas. We have a lot of out of area buyers who don’t realize that our market is not as bad as most others. In 2008 foreclosures only accounted for 26% of sold homes in South Lake Tahoe. The national average was about 40%.

Why is 2009 the year to buy Real Estate in South Lake Tahoe?

NAR expects existing home sales to rise 6% to 5.3 million
NAR’s affordability index is expected to rise and stay around 128 in 2009. This means that households earning the national median income have 128% of the income needed to buy the national median-priced house.
The inventory of homes for sale in South Lake Tahoe is good, for now. There are still motivated sellers, foreclosures, and other great properties to choose from. As buyers get off of the fence, the inventory will shrink, and you may not find exactly what you are looking for.
Interest rates- Interest rates are historically low, and a 1% rise in interest rates can equal as much cost as a 10% increase in the sales price!
It is impossible to time the market- The buyers who are sitting on the sidelines waiting for the bottom will not see it until it is too late. Inventories will be lower, prices will be higher, and buyer competition will be back.

As long as buyers are looking to invest for the long term, now is the time to buy. The market has gone down, it is a buyers market, and historically the market has always gone back up!

To view the South Lake Tahoe MLS

For more information about South Lake Tahoe Real Estate please call Brent and Jill Johnson Today!

South Lake Tahoe Real Estate Review for 2008

In December 2008 there were 26 single family homes reported sold on the South Lake Tahoe MLS. This was a 16% decrease in sales compared to the 31 solds in November. Out of the 25 sold homes, 6 were foreclosures and 3 were short sales.

The December sold statistics are as follows

26 sold single family homes
Average sales price $523,490
Median sales price $412,450
Average days on market 204
Lowest priced sale $220,000
Highest priced sale $1,890,000
Total Volume $13,610,750

Click on the following link to view the statistical charts.

december-statistical-chart

In December there were only 18 houses that went into escrow. Out of the 18 homes, 8 were foreclosures, and 4 were short sales.

Foreclosures in South Lake Tahoe May Be Effected by Policy Changes

Fannie Mae has launched pilot projects in Phoenix and Orlando intended to reduce foreclosures by pre-approving short sales, agreeing on a price and the loss it will take prior to a deal even being made. It is hoped the program will improve the popularity of short sales among real estate agents.

Property professionals initially had welcomed short sales but soon found the process to be a frustrating one-due to squabbling about the sale price and slow approval times by the mortgage companies-that often ended with no sale at all.

“Short sales have received such a bad reputation among real-estate agents that, as a portion of the overall mortgage market, they have gone down,” says Tom Popik of the research firm Campbell Communications, whose November survey of realty practitioners found that agents had to wait as long as 8.1 weeks to receive a response from the lender on a short sale. That was nearly double the 4.5 weeks the process took earlier in the year.

Fannie Mae’s pilot will focus on homes that are listed at less than the mortgage balance and carry a Fannie Mae-backed loan serviced by Countrywide Financial Corp.
If it proves successful, the concept could be expanded to other geographical areas and additional lenders. There are concerns, in the meantime, about the program’s success, with real estate agents noting that property prices could decline before the pre-approval is issued.

I think that Fannie Mae is making the right decistion to negotiate short sales over foreclosures. The foreclosure process takes time, and time is money. Foreclosure is also expensive for the lenders, the more money that the lenders loose, the worse the effect will be on the lending market.

Short sales are also a better option for the homeowner. Although a short sale does adversely affect credit, it is not as bad as loosing your home to foreclosure.

I think that Fannie Mae will find this trial policy to be effective and will soon spread it across the country. Other lenders will follow Fannies lead. They would be crazy not to. This will in effect reduce the amount of foreclosures in South Lake Tahoe. With more homes in South Lake Tahoe being sold as short sales, agents will also need to adapt and gain confidence in short sale transactions

Source: The Wall Street Journal, Nick Timiraos (01/09/09)

For more information about South Lake Tahoe Real Estate, Short Sales and Foreclosures in South Lake Tahoe, or houses on the South Lake Tahoe MLS, contact Brent or Jill Johnson.

South Lake Tahoe Real Estate May be Affected by Low Interest Rates

Mortgage Rates Continue Falling to Record Lows
For the fourth consecutive week, mortgage rates have fallen to all-time lows. The 30-year mortgage rates averaged 5.01 percent this week, which is a drop from last week’s 5.1 percent. Last year at this time, rates averaged 5.87 percent.

“Interest rates for 30-year fixed-rate mortgages fell for the 10th week … due in part to the Federal Reserve’s recent purchases of mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae,” says Freddie Mac Chief Economist Frank Nothaft.

Other rates also dropped for the week:

15-year fixed rates: dropped to 4.62 percent from 4.83 percent last week. Last year at this time 15-year mortgage rates averaged 5.43 percent.
5-year hybrid adjustable-rate mortgages averaged 5.49 percent, a drop from 5.57 percent last week.

The only slight increase in rates this week was in 1-year ARMs, which were 4.95 percent, up from 4.85 percent last week. Overall, 1-year ARMs were still down for the year from last year’s 5.37 percent.

Freddie Mac began tracking rates in 1971.

Source: The Wall Street Journal, Amy Hoak (1/09/09)

Interest rates are a very important factor to consider when timing a real estate purchase. When purchasing a $300,000 home with a $250,000 30 year fixed loan at 5.01% including tax and PMI, the payment would be $1708.17 and the total of all payments would be $614,939.65. The same scenario with a 6% interest rate would raise your payment $155.29 to $1863.46 and raise your total payments to $670,845. There are a lot of buyers looking at homes in South Lake Tahoe right now that are trying to time the bottom of the market. When rates rise to 6% it will be like paying $55,906 more for a $300,000 home using a 30 year fixed rate loan.

I think that these low interest rates will stimulate the South Lake Tahoe Real Estate market. However it is still important to buy undervalued properties from motivated sellers or foreclosures in order to offset any future declines in the market.

For more information about South Lake Tahoe Real Estate, loans, or houses on the South Lake Tahoe MLS, contact Brent or Jill Johnson.

South Lake Tahoe Real Estate Statistics Charts

Here are the 2008 statistics for all residential Real Estate in the Lake Tahoe Basin.

Single family homes experienced a 36% decrease in total volume from $895,457,919 in 2007 to $568,841,387 in 2008.

Sales volume on Condos fell 41% from $146,563,395 in 2007 to $86,808,980 in 2008.

This data represents the entire Lake Tahoe area. To view a chart of the statistics, click on the link below.

2008-end-of-year-stats-tahoe2

To view a chart of the statistics broken down by area, click on the link below.

2008-year-end-price-banding-charts1

To view all South Lake Tahoe Real Estate click on the following link.

South Lake Tahoe MLS

South Lake Tahoe Real Estate Statistics for 2008

The South Lake Tahoe Real Estate market was kept alive in 2008 by bargain hunters taking advantage of foreclosures, short sales, motivated sellers, and low interest rates. Although we are still considered to be in a declining Real Estate Market, investors seem to think that it is safer and less volatile that the stock market. Investors were not the only buyers taking advantage of the lower prices. First time home buyers that have good credit and proof of income were finding that they could now get much more for their money compared to previous years.

According to the South Lake Tahoe MLS the total number of homes sold only dipped about 5% from 373 in 2007 to 355 in 2008.

The Average price fell about 13% from $570,378 in 2007 to $493,461 in 2008.

The Median price fell about 8% from $440,000 in 2007 to $405,000 in 2008.

The total price volume of houses sold fell almost 18% from $212,751,075 in 2007 to $175,178,602 in 2008.

To view the 2008 statistics by area click on the following link

area-market-survey-by-area_2009-01-07_11031