It looks like an interesting year ahead in 2007 for the Incline Village real estate market. Affectionately called “The Riviera of Lake Tahoe”, this cozy community on the north east shore is a standout when it comes to short, medium and long term real estate investing. Why are prices continuing to move up here while the rest of America stumbles?
To get an insight into why Incline Village real estate continues to show solid upward gains while the most of the country is licking their wounds, we need to analyze the current inventory for sale, the asking and sale prices for the past three years and the trends that are occurring. Bear in mind that there is a finite supply of homes and condos with virtually no raw land left for development and an increasing demand by the 40 to 70 crowd looking for their slice of heaven in the nicest community at Lake Tahoe.
It is important to look at not just median sale prices but also median asking prices over a long period of time so we can see trends in the market’s direction. So, stick with me and follow the dates and numbers.
The median asking price for single family residences in Incline Village reached a peak the last week of April 2005 at $2,300,000. This number declined to a low of $1,495,000 the second week of May 2006 and has crept steadily upward to its present level of $1,895,000 in late January 2007. The median asking price number is valuable when looked at in conjunction with the median sale prices over the same length of time.
Here are the median sale prices for houses for each of the last three years:
2004 -$865,750 2005 – $1,110,000 2006 – $1,150,000
While the median sale price has ratcheted steadily upwards during the past three years the median asking price rose sharply during the seller’s market of 2005, retreated a bit in the buyer’s market of 2006 and is now starting to creep upwards again. What this tells me is that the mentality of the sellers in Incline Village is one of optimism. Most of the property owners in Incline Village are relatively affluent and can afford to hold onto and enjoy their property through any perceived softness in the market. While the fact that some buyers are sitting on the sidelines is evidenced by the decline in unit sales versus 2005, prices are remaining firm as evidenced by both the median asking and sold prices over the past three years.
Most people who buy property in Incline Village and other high-end resort communities do so because they want to, not because they have to. Most sellers sell because they want to, not because they have to. It creates a market where properties generally sell slower, but at a higher percentage of the final asking price than most other places in the country.
Another key factor is that virtually all of the homeowners in high-end resort communities make their money somewhere else. The prices of the properties bear no relation to local incomes unlike the typical residential real estate market. The prices for properties for sale in Incline Village reflect what an affluent person is willing to pay for any particular property.
We must also keep in mind that the level of sales in units in 2005 was an anomaly since it was by far the biggest year ever in the history of real estate sales for Incline Village and Crystal Bay. When comparing annual sales totals it is better to look at the time period from 2000 through 2005 and compare the average annual totals of unit sales versus 2006 to get a more accurate reading. When one looks at the long-term statistical data we can see that even though sales in units in 2006 are approximately 30% below the average annual totals for the previous five years, the dollar value of the properties being sold is still extraordinarily high and this value is moving upward steadily over the long haul.
When the median asking price for single-family homes was $2,300,000 back in April 2005 we had only 107 houses for sale in the entire community. At the present time there are 157 single-family homes for sale in Incline Village, an increase in the inventory of almost 50% versus April 2005. The fact that we have so much more inventory on the market then at the same time two years ago and yet actual closed sale prices continue on a slow upward path tells me that no price decline of any significance across the board will be taking place anytime soon. Individual properties, depending on the motivation of the seller may provide special values for a particular buyer. But in my opinion, there’s not going to be a general price decline among single-family homes in our market because there is so much intrinsic value in owning land in Incline Village.
When we take a look at the condo market the numbers are even more dramatic in favor of local market strength over the long term. The median sale price of condos for the past three years is as follows:
2004 – $405,000 2005 – $485,000 2006 – $580,000.
The median asking price for condos topped out at a staggeringly high $725,000 during the fourth week of April 2005 when there were only 55 condos for sale in all of Incline Village and Crystal Bay. The median asking price in this category bottomed out so far at $555,000 the first week of January 2007 and has now crept up slightly to $559,000. This is to be expected after the overall median price of condo sales rose an unsustainable 43% in just two years and the inventory jumped all the way from 55 units up to our present total of 126 condos currently on the market.
It is actually a testament to the strength of our local market that the median price of condos did not decline when the inventory increased so dramatically during the past two years. What this shows is the intrinsic value of owning property in Incline Village and all of the rights and benefits that you receive such as access to the private beaches, discounts at the golf course and rec center, specials at the ski area and most importantly of all the phenomenal quality of life that we get to enjoy here.
In summary, I do not anticipate that the number of unit sales will increase dramatically in 2007 versus 2006 although that would be a pleasant surprise. My crystal ball tells me that the median price for houses in 2007 should remain close to or slightly above the median price for 2006.
I feel that the median price for condos in Incline Village and Crystal Bay, due to the excess of inventory in relation to 2005 and the median asking price trend will result in strength for the quality properties that are within walking distance to the Lake and weakness for the lesser properties that are in lower demand locations. There will always be exceptions to this as individual complexes may have a shortage or excess of supply from time to time during the year. It is very hard to generalize about the condo market in Incline Village since each complex has its own unique attributes. Prospective buyers looking for property in Incline Village, Lake Tahoe and other mountain resort communities tend to prefer high quality interiors and locations that make him feel like they are truly away from civilization and up in the mountains.
Copyright 2007 Don Kanare – All rights reserved.