Lake Tahoe Real Estate Market News
Sales numbers for real estate transactions definitely cooled in 2022. Several aggressive rate hikes by the FED almost doubled mortgage interest rates from the year prior. Many homebuyers are under the impression that home values will drop significantly in 2023. However, a lack of supply is keeping values relatively stable.
While sales were down year over year in all markets, the median price in Lake Tahoe still rose 5%.
According to NAR, home sales at the current sales pace has reduced inventory levels to a 2.9-month supply. In November, this number was at 3.3 months. It may seem like inventory rose compared to the highly competitive market of 2021, where this figure was reduced to 1.7 months. Until inventory levels reach a 5 and 6 month level however, we are technically still in a seller’s market.
Throughout January, interest rates fell consistently. As of January 31, 2023, the current average 30-year fixed-mortgage rate was at 6.45%, falling 2 basis points from the prior week. Buyers may not realize that the current prime rate is at 7.75%. Mortgage companies are responding to a lack of demand by offering more competitive rates, and buyers are responding.
The best indicator of what markets expect for 2023 is the recent stock market rally on Wall Street. Prior to the FED confirming only a .25-point hike yesterday, the market had already become highly optimistic. Many investors are confident that the FEDs de-inflationary rate hikes may be coming to an end soon.
Nasdaq had its best January performance since 2001 with a gain of 10.7%. Many are unaware of how bad the stock market really was in 2022. It was the 7th worst bear market since 1929, plunging 33.1% in 2022. Savvy investors are picking up the worst selling stocks of last year.
It is important to note that the Lake Tahoe market has a 7.7 million feeder market of Bay Area buyers. Many work in the Silicon Valley and are paid in stock options. This may be good news for the luxury real estate sector at Lake Tahoe.
The recent FED rate hike puts their rate in the 4.5% to 4.75% range. Generally, mortgage rates are 3% higher. As inflation numbers cool, the FED is signaling that they may back off with their rate hikes. Their goal is to get inflation to 2% and it is still at 6.5%, down from June’s high of 9.1%.
In addition to optimism in the stock market, many buyers are coming to the realization that a 6% interest rate isn’t so bad. Mortgage applications in January were up 7%. Looking at interest rates over the last 30 years, the average rate was is at 7.7%. Going back to 2000, rates were at 8.54% and today’s rate matches to rates that preceded the 2008 crash.
To keep things in perspective, the FED reduced their rate to almost 0% following the financial crisis of 2008 and during the pandemic. While buyers enjoyed lower rates over the last 4 years, this was also a factor of what drove inflation and home prices higher. Those days of lower interest rates may be over.
“It seems we have already reached the bottom of the low home sales activity,” says Nadia Evangelou, senior economist and director of forecasting for the NAR. “And with mortgage rates stabilizing near 6%, we expect the housing market to turn around in 2023 … and rebound in 2024.”
With the epic ski season we are enjoying at Lake Tahoe, and buyers becoming more comfortable with higher borrowing costs, we expect to see sales activity begin to pick up. While demand may never reach the levels fueled by the pandemic and the ability to work remotely, many expect 2023 to outperform 2022.
There is a pent-up demand for a limited amount of available homes at Lake Tahoe. If you are thinking of buying your mountain retreat, this may be a great time to move forward.
Contact Wendy Poore 530-363-0318 or Julie Weed 530-363-0413 today for more information on the real estate market at Lake Tahoe and for a list of available homes for sale.