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Why South Lake Tahoe Home Values do not decline as much one might think.

January 8th, 2009 categories: For Buyers, For Sellers, Foreclosures, Lake Tahoe Real Estate, South Lake Tahoe Statistics, South Lake Tahoe, CA

South Lake Tahoe is a resort… with limited growth… and fewer foreclosures.

Here at the beginning of a new year, with 2008 real estate data now complete, it makes sense that this is a good time to again explore South Lake Tahoe home values.

Perhaps the most significant new contributing factor that affected South Lake Tahoe home values in 2008 was the emergence of foreclosures as a subset of our market.

In fact foreclosed homes (or REO’s or bank owned properties) constituted 20% of all 2008 South Lake Tahoe single family home sales (70 out of 354 sales).

To best look at 2008 foreclosures, we thought you might appreciate a series of short, quickly readable, to-the-point posts, rather than one lengthy article that covers all aspects of this market phenomenon.

As a basis for this study, lets first take a look at some of the key reasons why South Lake Tahoe home values are higher than one might think, and why they do not decline, or fluctuate as much as the rest of the country at large.

South Lake Tahoe is a second home resort market.

It does not make sense to apply predictions in national home values to a resort market.
Though general trends may be the same in a resort as they are nationally, such as a “buyers” market or a “sellers” market, there are significant differences in the characteristics of second home buyers, and the demographics of second home owners than those of the national sample.

South Lake Tahoe has meaningful growth restrictions that limit supply.

We have a federally mandated environmental control agency that limits construction. Primarily, it has to do with lake clarity.
It is far easier to remodel, or tear-town and rebuild on an existing home footprint than it is to purchase a lot and build a new home.
As such supply remains rather constant from year to year (see chart in post here), and the possibility that new development could ever glut the market is nonexistent.

South Lake Tahoe has significantly fewer foreclosures than the nation.

According to the National Association of REALTORS, some 45% of national home sales are distressed properties. Often foreclosures make up 50% or more of sales in particular markets. (here)
There are some 25% to 30% less foreclosures in South Lake Tahoe than the nation at any given time in the last year. (Article forthcoming in this series about the effect of foreclosures on South Lake Tahoe home values.)

South Lake Tahoe Sellers are Second Home Owners.

One of the key characteristics of the second home owner is they are overqualified financially.
Some 65% of all South Lake Tahoe home owners do not live here.
This means that generally our Sellers are not as financially vulnerable as homeowners who need to sell may be across the country.

The Bottom Line:

Another way of looking at these key market factors is that national predictions of an additional decline of up to 20% or more in home values will likely not happen here.
An attachment that such national predictions will eventually come to pass here will also likely be the difference between a buyer taking advantage of the current favorable market conditions and buying “smart”, or not ever owning a piece of South Lake Tahoe at all.