2022 Lake Tahoe Real Estate Market Report
With so many online sources for real estate and mortgage news, it is easy to get confused about what is happening in the real estate market in Lake Tahoe.
In some ways, articles are very short-sighted when they raise the alarm of interest rates rising above 5%. Since the 1970's, interest rates have averaged just under 8%. People forget that the FED reduced the prime rate to almost zero at the onset of the pandemic in 2020.
It is true that an increase in the rate by just 1% can change a house payment on a $500,000 purchase from $2147 per month to $2398. Since lenders determine the monthly limit a buyer can pay based on their income, many buyers have had to find lesser expensive properties or come up with a higher down payment.
We began 2022 with an historically low number of homes for sale. The pandemic had already driven huge demand in 2021 as more people were able to work from home, and chose the Tahoe lifestyle over the congestion of the city.
There are 7.7 million people in the Bay Area and only a small amount of homes available in the Lake Tahoe basin in any given year. This ensures that regardless of what is happening in other parts of the country, the demand will always challenge our limited supply.
Affordability, however, became a factor as we moved into the Spring of 2022. Home values surged 15% year over year, because of the limited inventory. Normal markets carry at least 6 months of inventory. In January of 2022, the number of homes available and the number of sales that occurred that month were equal.
By May of 2022, we were seeing a slowing in multiple offers and inventory began to grow. Today, this number is what we would expect to see in the years preceding the pandemic. The absorption rate still shows a supply of only three months.
The short-sightedness continues when pundits keep comparing sales activity to 2021, which was an unprecedented year. When we compare sales activity during the summer of 2022, it tracks to the Lake Tahoe real estate market as we have always known it.
During the period of low inventory, many lots that were on the market for years finally sold. We also saw commercial real estate find eager investors who recognize the growth potential of this region.
To compare what is happening today to 2008, borders on what some might call ‘fake news.’ That bubble burst because of how easy it was for buyers to qualify for loans in the years leading up to it. Today, the underwriting process is probably more stringent than it has ever been.
Of course, we are seeing price reductions in homes that were put on the market back when buyers were in a frenzy to find available homes. While values are stabilizing, and are still predicted to grow 5 or 10%, we don’t expect a full blow correction like we saw in 2008.
The days of making offers and waiving inspections are over. Homes are still selling at 95-100% of asking price, and well-priced homes are selling quickly. In this sense, we can say we have shifted away from an extreme seller’s market. We haven’t moved into a buyer’s market though.
The challenge in buying a home in Lake Tahoe is affordability. Entry level prices in all markets resemble median prices from just a few years ago. Homes in Lake Tahoe are priced similarly to Bay Area homes. Those selling their Bay Area home to live full time in the Tahoe Basin are finding an easier time accessing the price point.
According to Redfin, the median price for a home in Truckee is now at $1.1 million with days on market at 24. In more normal years, days on market hovered between 40-60 days. Buyers are still buying.
The median price for a home in Northstar is at $1.5 million, with 17 days on market. For all of Lake Tahoe, the median price is at $977K and homes are selling within 17 days.
Contact me today to learn more about the diverse communities within the Lake Tahoe and Truckee area. It is an excellent time to list your property or to get pre-approval and start looking for your dream retreat at Lake Tahoe.