Q3 2022 Lake Tahoe Market Report
The Lake Tahoe market report for the 3rd quarter 2022 saw a year over year sales decrease of 23% in North Lake Tahoe and Truckee. Some regions are reacting with price reductions, while other areas are still competitive.
On the west shore of Lake Tahoe, we had 36 sales in Q3, compared to 43 sales in 2021 and 100 sales in 2020. The median price has adjusted downward for the first time and was at $1.1 million, compared to the median price of $1.3 million in Q3 of 2021.
For comparison, the third quarter of 2019 had a median sale price of $730K, and this grew to $784K in 2020. This number normally increases in smaller increments each year. The sales numbers of 2021 will probably go down as a record high for the region. The downward trend is more of a correction after the huge demand that drove up prices in 2021.
Both buyers and sellers are unsure of the current market conditions. Buyers may be waiting for better interest rates, while sellers too, may not want to sell and re-enter the market at a higher interest rate.
Real estate market activity is a combination of three factors: interest rates, income and inventory. We might expect to see an over abundance of inventory when demand slows, but that is not the case. There are still more buyers than available housing in California. This makes this market highly unusual.
Affordability will always slow the market, and income levels haven’t changed. When this is matched with higher borrowing costs or interest rates and rising home prices, many buyers are hesitant or unable to move forward. While current interest rates have moved above 7%, the historical average interest rate over 50 years is 7.8%.
Many buyers compare today’s interest rate to the last 2 years, forgetting that the FED reduced rates to almost 0 during the pandemic to stimulate the economy.
The downward trend in median prices is the direct result of how affordability always kicks in to cool rising home values. In some cases, sellers are offering incentives of a 2-1 buydown to help lower the buyer’s upfront borrowing costs. Rather than reduce the sale price, they can pay down a 7% rate so the buyer can have payments based on a 5% rate the first year and a 6% rate the second year.
In the 3rd year, the buyer will have payments at whatever rate they locked. For those waiting for interest rates to come down, they can always refinance in the 2nd or 3rd year. While many have waited out 2022 to see if rates would come down, they missed out on the 4, 5 and 6% interest rates.
While inventory did start to climb again in the 2nd quarter of 2022, it has slowed down and actually is beginning to decline. As of September across the US, the number of listings was 42.6% lower than the pre-pandemic numbers between 2017 to 2019 .
In terms of home prices, Skylar Olsen, chief economist at Zillow believes prices are likely to remain stagnant or rise in 2023. The senior economist at NAR also agrees. This is because supply is also limited.
In the first week of November, we will hear if the FED will increase rates. The inflation report for September was lower than the summer, but still high. Today’s rates in the mid 7’s may just be how mortgage companies are preparing for an increase.
Overall, it is still a good time to buy as prices have stabilized. There are also buyer incentives that can help reduce your borrowing costs. This applies to sellers too. They can still get top dollar and find buyer incentives for their new purchase.
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