A South Lake Tahoe Homeowners Dilemma: Are You Willing to Bet $12,147 a Month that Your Overpriced Home Will Sell?

August 9th, 2008 categories: For Sellers, Lake Tahoe NV Statistics, Lake Tahoe Real Estate, Stateline, NV

South Lake Tahoe Real Estate Home Sales: Losing money is not winning.A sober question for sober times in Stateline, NV. (There’s still good money to be made… if the price is right.)

Well, we realize the headline is sensational. But it could be a lot more sensational. But first lets qualify what we mean by a $12,147 monthly bet. Then we’ll see if we’re actually being conservative… even while being guilty of crafting attention getting headlines, like the news media does, at the same time.

At the beginning of this year, the median sold price on the Stateline, NV side of the South Lake Tahoe real estate market was $706,250.  It is now $620,000. (Glenbrook and Lakefront homes not included.)

This amounts to a median sold price decline of $86,250 so far this year. Or $12,147 a month, and counting, to date.

Just for drill, lets also look at the median sold price at the end of 2006, which was a year after both the national and the South Lake Tahoe real estate market changed. The 2006, median sold price was $835,000.

From then to now, this represents a median sold price decline of $215,000. Or $11,256 a month.

So yes, using the larger monthly decline number of $12,147 is more than $11,256, but the point is one is constantly losing money when we put our house on the market for sale at a price that exceeds reality.

The chart below tracks median sold prices on the Stateline, NV side of South Lake Tahoe since April of 2007, when we first started reporting such statistics on this blog.
South Lake Tahoe Real Estate Sales: Stateline, NV Median Sold Prices

What’s notable here is the rather steady decline of the 180-day median sold price. This is the number to gauge market performance (a year is too long, 9-months is not enough).

As an aside, here’s how one tells a house is overpriced:

  • it is seldom shown,
  • there are no offers,
  • it has been on the market more than 90 days.

 

When this happens, it is time to reduce price.

Unfortunately though, when a seller does reduce price of an overpriced listing, it is normally not enough. Usually they only reduce it to where they should have listed it in the first place. But a real estate market like the one we have in this country has further declined.

This then is a game, a really risky one, an expensive one, of catch up. And it will stay that way until the seller becomes willing to get ahead of, not behind the market.

What led us to this rather simple take on the market is a recent comment by a seller. The comment was “I’m getting $1,000 a month in rent now, and I’m in now hurry to sell.”  This was in response to us recommending that he drop his price… to help prevent him from losing more money.

Here’s the reality of the situation:

The seller, who owns his home outright, listed his house in the fall of 2005. He talked to us about it. We showed him all the numbers which indicated a listing price between $575,000 and $599,000. That was not what he wanted to hear.

He listed with another agent, a good one, instead for $699,000. It was later reduced to $679,000. It was on the market for 242 days, then was withdrawn.

The Seller listed with yet another agent, this time for $629,000. It was later reduced a few times to $549,000. It was on the market for 415 days, then was withdrawn.

It’s listed now for $479,000, and has been on the market for 119 days. There are very few showings, no offers, and the market has continued to decline.  It has met all of the criteria necessary to seriously consider, then reduce price.

Seller is getting $12,000 in annual rental income, but he is losing much more than that by keeping his house “off”, not realistically on the market.

It’s important to note that the value of a particular house does not necessarily follow overall market gains or declines. Some lose more, or gain more depending on the specifics of a particular house.

As for the seller in the example here, it’s impossible to know the true value of his property until the market accepts it. We do know this, it is not $479,000.

It’s also certainly possible that the home has not lost the full $86,250 that the market has declined since January of this year. It could be half that. But the point is even half of the decline is still 4 times more than what the seller is getting for rent.

(Even if the house sold for $379,000, still a significant profit for the seller, the income from investing that amount at a 5% annual return is almost twice more than the monthly rent.)

Here’s another way of saying it: that $12,000 of rental income this seller is getting this year has cost him between $43,125 and $86,250 in value so far this year at the same time. And the beat goes on.

And every month that this continues in the current market reality could be costing him… well, $12,147 more. I’m glad we’re not making that bet.

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This entry was posted on Saturday, August 9th, 2008 at 4:15 pm and is filed under For Sellers, Lake Tahoe NV Statistics, Lake Tahoe Real Estate, Stateline, NV. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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