At the end of 2016 we predicted that 2017 looked to be a very strong year, in terms of appreciation and selling homes.  We were not disappointed.  We continue to be plagued with low inventory and we don’t project that to change in the near future. Let’s look at single-family home sales for all of 2016 vs 2017:

 

 

Units Sold

 

 

Volume of Sales

 

 

 

2016

2017

% change

2016

2017

% change

Tahoe Donner

263

278

5.7%

$176,414,204

$202,930,440

15.03%

Truckee

613

641

4.57%

$622,060,092

$660,984,851

6.26%

North/West Lake

328

346

5.49%

$312,561,139

$350,295,761

12.07%

All MLS

1,104

1,160

5.07%

$1,085,103,931

$1,167,829,876

7.62%

 

As you can see, a lot of positive gains in all areas.  We feel confident that the relatively meager gains around the number of units sold was due to lack of properties to buy rather than lack of growth of demand (also contributing to the appreciation).  While not broken out above, the truly remarkable trend in 2017 was the tightening of the $1mm-$2mm market, in which the number of sales grew by 23.81% (for the entire MLS area) and the standing inventory dropped 24.05% (from 1/1/17 to 1/1/18).

 

Prices also continue to ramp up, when you compare Average/Median price changes for 2016 versus 2017:

 

 

Average Price

 

 

Median Price

 

 

 

2016

2017

% change

2016

2017

% change

Tahoe Donner

$670,779

$729,965

8.82%

$605,000

$675,750

11.69%

Truckee

$1,019,770

$1,031,177

1.12%

$619,900

$670,000

8.08%

North/West Lake

$952,930

$1,012,415

6.42%

$590,000

$650,000

10.17%

All MLS

$985,480

$1,009,471

2.43%

$619,706

$672,000

8.44%

 

This looks like the strongest appreciation we have seen since the downturn, and we are the closest we have been to peak values in most market segments.  

The other side of the market is the available inventory, which will favor continued strength in the market. 

 

 

1/1/17

1/1/18

% change

Pending as of 1/22/18

Tahoe Donner

27

33

22.22%

20

Truckee

107

95

-11.21%

46

North/West Lake

88

78

-11.36%

25

All MLS

269

226

-15.99%

82

 

In general, we appear to be poised for another strong year of sales and appreciation.  The inventory is lower than last year (although Tahoe Donner shows over 20% more, when comparing the first to the first, it only represents a difference of 6 listings and as of the 22nd, we have already turned that around and we are at 4 listings, or 13%, below last year) and the buyer activity and confidence appear very strong.  In general, we gauge how hot the market is now by how many months of standing inventory there are (years’ worth of sales/12= absorption per month, inventory/absorption per month=Months of inventory).  Around 6-8 months of inventory is neutral, above that is a buyer’s market, below is a seller’s market and when you get below 3 months of inventory, you start to see significant appreciation numbers.  The MLS, at the beginning of the year, was at 2.34 months of inventory, the hottest market right now appears to be Tahoe Donner at 1.42 months of inventory at the beginning of the year.  Things to watch out for this year:

 

  • Interest rates:  will probably continue to rise, which should keep the demand strong.  If it is not a rapid change (more than 1% in less than 6 weeks), it should continue to maintain or increase the strength of the market.  This is mostly because it incentivizes people to buy now rather than wait until later.  Current expectation is that we will go up something close to .75%-1% over the year.
  • Geo-political climate: there are so many variables here that there are a lot of ways this could go.  The good news is that while it has been somewhat unpredictable for about 1 year, it does not appear to have negatively impacted the market yet, so... fingers crossed!
  • Weather: clearly our winter has been anemic so far and we rely on people coming up to the area (and enjoying themselves) to drive demand, not to mention water supply, perception, etc...
  • Spring Pricing Behavior: it typically happens, in a low inventory/high demand market, that listing agents and sellers over anticipate the motivation of buyers (or underestimate the elasticity of pricing in housing);  i.e., a buyer who lost out on a $600,000 house in Q1, will likely pay a little more for the same or similar house in the spring (1% or $606,000), but not likely significantly more (5%+ or $630,000+).  Too many overpriced listings tend to cool the market, as there are already many homes coming on, so perceived scarcity by the average buyer goes way down. 

 

While this is a broad overview, all real estate is hyper-local.  If you have specific questions about a section of the market or what to expect from this coming year, please don’t hesitate to reach out!