As we finish off the first quarter, we are working hard preparing to send out our quarterly market report. Make sure to reach out if you want to be included! Meanwhile, everyone is wondering if the recent rise in the real estate market is just a bubble that is preparing to burst. Although new and existing home sales declined in February (for reasons I will explain below) and mortgage rates have risen to nearly 5%, housing prices are up 12.9% and inventory is down 15.3% from February of 2021.
So is this a rise that will soon crash similar to what we experienced in 2007? Not likely and here’s why…first being that regulators and lending institutions learned crucial lessons from making credit readily available for those who could not afford it. As anyone involved in the real estate industry is painfully aware, loans are much more difficult to acquire than ever before, helping to ensure stability in the market. The rise in real estate prior to the previous crash was driven by the unsupported increases in home values due mostly to unscrupulous lending practices.
The rise we are seeing in real estate prices lately has a much more straightforward explanation of a major imbalance between supply and demand. This normally is corrected by an increase in supply which eventually outnumbers demand and causes a drop in prices. This mismatch is not likely to balance out any time soon as we are experiencing a severe shortage in the labor workforce, supply-chain issues from COVID, international trade wars, and land shortages in desired areas.
So back to the issue of why the recent drop in the amount of home sales? The rise in mortgage rates, increase in housing prices, and all-time shortage of listings has caused many prospective buyers to call it quits for now. Understandably so but we are unlikely to see much of a market correction related to this, especially in our market where land shortage is a permanent issue with 78% of the land in the basin owned by the US forest service, coupled with the likely permanent increase in the work-from-home population. Demand is simply too high while supply is too low.
Locally we had 2 new condos and 1 new home come onto the market this week. We currently have 11 active condos ranging from $399,000 to $1,750,000 for our listing at 600 #50 Hwy 50, in the lakefront gated community of Pinewild; the median condo price is $780,000. We currently only have 22 active homes on the East Shore ranging $1,295,000 to $35,000,000 with the median price of $3,097,500.
Year to Date Local East Shore Lake Tahoe, Nevada Stats:
- Total Sales YTD: Condos: 32 | Homes: 28
- The Median Sales Price: Condos: $677,500 | Homes: $1,562,000
- Number of sales over $1 million: Condos: 6 = 19% | Homes: 24 = 86%
- The highest priced sale: Condos: $5,665,500 (Tahoe Beach Club) | Homes: $32,000,000
- Median Price Per Square Foot: Condos: $561.25 | Homes: $586.23
- Median Days on the Market: Condos: 82 | Homes: 104
We will be mailing out our in-depth market update for the first quarter of 2022 next week. If you would like to be included please reply with your current address and I’ll add you to my mailing list.
If you have anything you want to share with our community please let us know so that it can be included in future newsletters. We at the Zager Group are honored to continue to serve our community and are available if you have any questions or if we can provide you with any services, please feel free to reach out anytime. Thank you for the opportunity to serve you and for your continued trust and support!
Thank you!
Craig Zager & The Zager Group