Summer 2022 Lake Tahoe Market Report
As we move into Summer 2022 at Lake Tahoe, the real estate market is decidedly slower than 2021. However when we look at the 5 year sales picture, home sales and inventory are beginning to match to normal levels. We hear conflicting information about real estate bubbles and a market correction in the US, however, the factors influencing Lake Tahoe’s 2022 real estate market are unique to the time.
Lake Tahoe Real Estate Market Information
According to an article in Fortune, of the 40 markets expected to see price adjustments, none are in California. Redfin, a real estate aggregator and excellent source of real estate market information, shows the median price for Lake Tahoe at $1.2 million, up 36.7% from last year.
The price per square foot is at $604, up 6.3% from last year. Just for comparison, the statewide price per square foot is at $385. In Lake Tahoe, the average home sells for 3% over asking, while entry level or hot properties can sell 8% over asking price, going pending in 6 days.
Lake Tahoe vs. US Real Estate Market
Overall, US home prices are up 37% over last year. Moody’s Analytics has determined that house prices are overvalued by 20.9%. Lake Tahoe will always have limited inventory because of the demand for vacation homes. The Bay Area is our feeder market and has a population of 7.7 million people.
In May, we began the month with only 237 single family homes for sale. While this is higher than the 74 listings available as we began 2022, it is still a small number of available homes for sale compared to the demand.
We are seeing a handful of price reductions, but we are not seeing a full blown correction like the corrections that occurred during 2002 and 2008. The biggest factor slowing home sales is affordability. This is a measure of local income levels and whether it can support home prices. The income level again, is largely based on the Bay Area buyer. Many have traded homes with equity in the Bay Area for a full-time residence at Lake Tahoe.
Lack of Inventory
In Lake Tahoe, inventory levels are slowly beginning to rise. The lack of inventory is not just a condition at Lake Tahoe. According to Freddie Mac, the US housing market would need more than 3 million homes to meet the demand of would-be homebuyers. Realtor.com sees the growth of median price nationally to $425K as a factor of this lack of supply. We might describe it as a lack of affordable inventory.
NAR stated that despite mortgage rates rising over 5%, US home prices still rose 15% in April 2022, and they expect prices to rise 5% by the end of 2022. They further stated that the rise in home prices, along with interest rates rising from 2.9 in 2021 to well over 5% in 2022 has reduced affordability by 29%. These are factors that make the 2022 real estate market different from what was happening during the mortgage crises of 2008. Back then, there was an oversupply of houses suddenly hitting the market.
2008 was a condition of people easily getting mortgages on homes, even if they didn't qualify. The mortgage industry since then has tightened up the underwriting process.
A Return to Normal
There has been a contraction in home sales and mortgage applications, but in Lake Tahoe the numbers are starting to resemble the normal 5 year picture. Year over year, the numbers are down, but 2021 was a banner year, unlike any other we have seen before. This was driven largely by the shelter in place migrations of people wanting a better quality of life.
Logan Mohtashami of HousingWire, views 2021 as when the historically low levels of inventory reached during the pandemic gave homebuyers little choice but to bid up prices. “If we're going to return to a healthy housing market,” Mohtashami stated, “we need to see national inventory rise to a range between 1.52 million and 1.93 million units. According to the same Fortune article, the National Association of Realtors’ latest reading had inventory at only 1.03 million units.
As less buyers are able to qualify for a mortgage based on higher sales prices, the markets will slow. In Lake Tahoe, we are seeing a slowing of sales year over year. The correction at Lake Tahoe is more of a return to normal. I am very bullish on the Lake Tahoe real estate market. Contact me today for a list of available properties or for a free property analysis of your home.