Home sales at Lake Tahoe are down 20 percent over last year at this time. But the median sales price inched up 2 percent, continuing a trend that has sustained upward pricing momentum since 2013, when overall home values began rebounding from recession-era pricing.
While that might signal that the market is in for a correction, we’ve seen similar numbers at the lake in past years without a drop in value. The mid-year numbers in 2014, for example, looked a lot like today. Sales were down 18 percent from the year before, but the median sales price was up 3 percent. Prices might have been expected to cool, but on the contrary, the median sales price shot up 13 percent the following year, and 2016 was a banner year, with home values and the pace of sales up over previous years.
Tahoe is largely a vacation home destination, a place where buyers don’t need to buy and sellers, often, don’t need to sell. Yet somehow, homes continue to change hands here, often for multi-million dollar price tags.
Notable, this year, was Mark Zuckerberg’s purchase of the Brushwood Estate, a sprawling Westshore lakefront that closed for $37 million in January ($2.5 million under asking), and came on the heels of the Facebook founder’s purchase of the adjacent lakefront estate the month before for $22 million (originally listed in 2017 at $32 million).
Is the Luxury Market Recession-Proof?
No real estate investment is entirely recession proof. But some weather market downturns better than others. And that’s been true for some luxury markets across the country, including Tahoe, where environmental controls constrict supply.
Tahoe’s luxury market (homes priced over $1 million), saw record high median sales prices while the overall housing market was in the trough. In 2011-12, for example, the median price of a luxury home in Tahoe/Truckee hit a high of $1.8 million. At Lake Tahoe’s North and Westshore, the median price of luxury homes similarly climbed to more than $2.5 million that year.
Call it the scarcity driver. It’s a big lake (72 miles in circumference). But there are only so many feet of lakefront to go around, and scarcity in any market keeps prices high. When the stock market is volatile, and the economy is weak, real estate remains an attractive long-term investment.
The other driver on the Nevada side of the lake for many buyers is taxes. As a broker in both California & Nevada, I’ve seen this firsthand. When Gavin Newsom even mentions new taxes, my phone starts ringing. And buyers who have sufficient assets to worry about protecting them, typically can afford luxury homes.
With no state income tax, no inheritance tax, and favorable tax treatment for some business entities, Nevada has lured buyers in a position to take advantage of its hospitable tax climate.
Incline Village, for example, saw the median price of luxury homes increase to over $2 million in 2009, while home prices in the rest of the state were sinking into the mud:
This year, so far, the median sales price of a luxury home Incline Village is $1.5 million, on par with the rest of Tahoe/Truckee, which is just under $1.6 million.
So where are we headed?
If I could tell you that with absolute certainty, I’d probably be sitting in one of those lakefront homes instead of selling them. What I do know is that there’s lots of talk about a correction in the overall market. For homes that are worth about $1 million or less, strategic pricing will become more important in the year to come.
In an appreciating market, sellers can aim high, knowing that the market will eventually catch up with them. That strategy won’t work in a market that’s flat or headed for a correction, and it often leaves a seller chasing the right price with the effect being that the home becomes stale on the market and sometimes fetches less than it would have if priced correctly from the start.
The Institute for Luxury Home Marketing notes in their mid-year report that today's luxury buyers are down-sizing and showing a preference for quality and intangible lifestyle enhancements that promote "a feeling of wellness" over square footage and fancy finishes. Some high-end properties might require renovations to fetch top dollar, and for those truly unique older gems, an auction might provide the best accelerated marketing plan.
Every property is unique, of course, and much depends on your goals as a seller. For a personal consultation or a micro-data report on your neighborhood, please email me, or give me a call ~ Jackie 775.391.9443