Lake Tahoe Experts

(LAKE TAHOE REAL ESTATE BLOG) I want very much to thank one of the people who attended our real estate seminar at Lake Tahoe Community College last Saturday for inspiring this post. Lets call her “Maggie”, and she had an excellent question about a recent article having to do with the national housing market.

To us, the main thing about this article is the assumptions in it are general, and do not apply everywhere, even in California or Florida. The article's point of view is based on the relationship of US per capita income and US median home prices. This may have bearing on some real estate markets across the country, but it certainly has no bearing on ours.

Articles like this can, and do, produce a poor public perception of the real estate market with folks who do not distinguish the differences from one real estate market reality to another, and who may not be as familiar with some of the lexicon of our profession.

 Here’s what’s in the article : (read it here)

• The opening sentence says its bad news, and then really bad news if you own a home in California or southern Florida.

• The article says that the source of the bad news is recent data published on Zillow.com.

• It further states that “the really bad news is that, even after a year of misery and falling prices, homes in many of these regions still aren't cheap.”

• And then it states, which is the point of the article that houses “remain wildly overvalued compared to average personal incomes.”

• The article says that Median Prices of homes in California peaked in 2006 at 13.3 times per capita incomes, but that they may now be about 11.1 times per capita income.

• The article suggests that 40% more of California's home values need be erased to "get back into line." (7 times per capita income)

• The article ends with this disclaimer: “Yes, these are projections and estimates. Time and chance will play their usual roles. And there will doubtless be different pictures within regions of the same state.”

 About the income of South Lake Tahoe Buyers :
Before we explore what’s in the article, lets understand that South Lake Tahoe is a vacation home resort real estate market.

• On average vacation / second home buyers on average make at least $200,000 a year.
• Characteristically they are overqualified financially. (In fact, we have never represented a buyer or a seller who was not financially qualified.)
• Source: NAR 2006 Profile of Second Home Buyers.

  About South Lake Tahoe Value in General :
There are a number of factors to be aware of when considering “value” in highly desirable resort communities:

• In resort areas, one is not only buying a house. One is also buying “lifestyle.”
• Additionally, one is buying location over and above house.

 Limited Dirt :
Especially here in South Lake Tahoe, with our limited supply and environmentally protective growth restrictions, one is also buying very limited “dirt”.

• Often we see a “house” sell that is worth little more than the lot it sits on.
• Some dirt is much more valuable than other dirt.  It just depends on where it is.

Ok. lets take a look at the facts in the article and see what we can find out:

 Accuracy of Zillow  :
According to Zillow, their data in Eldorado County California is as follows: (it is rated "2 Stars, see it here)

• 99% of the homes are estimated
• 25% of their estimates are within 5% of the sale price
• 47% are within 10% of the sale price
• 75% are within 20% of the sale price
• And they have a 10.6% median error.

Read what we found out by comparing Zillow to every home in escrow in South Lake Tahoe at present here.

When reviewing this data, it’s important to understand the difference between an “estimate” and a sale.

• When Zillow or any other source reports a recent sale, one can usually depend on the amount of the sale to be accurate.
• It’s in estimating value before a sale where difficulty comes.
• The difficulty applies not only to Zillow, but sometimes to real estate agents, and licensed appraisers as well.

Our comparison indicates that Zillow is not an accurate source for estimating real estate value for South Lake Tahoe.

• Some, possibly much of their data is right on in other places, and some isn’t, which is common knowledge throughout much of our industry.
• Where Zillow can be a valuable guide, the standard sources of accurate real estate data are reported sales from our multiple listing services, or the country recorder’s offices all across the country.
• It's our hope that Brett used sales, rather than estimated data. We suspect he did.

Median Family Income in CA : (see it here)

• The Median Family income in California in 2006 was $64,563.
• The current Median Sold Price of a California home in 2007 was 7 times that.

US Per Capita Income : (see it here)
The term is defined as “income computed for every man, woman, and child in a particular group. It is derived by dividing the total income of a particular group.”

• In other words it is the average income of every man, woman and child living in the country.
• That number comes from dividing the total US income by the US population.
• US per capita income in 2006 was $36,726. (see it here)

Note:

• Per capita income for a family of four totals $146,904. (4 people times $36,726)
• The per capita income for a young couple without child looking for a home to buy is $73,452. (2x)
• Both figures above are plenty enough to buy a median priced house.
• But both income figures are more than the US median family income.
• Per capita income need be quantified and understood when using it.

CA Per Capita Income :
California per capita income in 2006 was $38,956, slightly more than the US average. (see it here)

• The 2007 median price of a CA home is 12x 2006 per capita CA income.
• Therefore Brett Arends is accurate about the relationship of per capita income to the median price of a California house.
• But it has no bearing on the value of resort properties whose buyers characteristically make more than per capita income.

Median Home Price in CA : (see it here)
The median price of a California home in October of 2007 was $497,110.
It was $450,990 in 2004 (see it here)
In the last 365 days, the median price of a South Lake Tahoe home is $405,000.
The South Lake Tahoe home is on average priced 18.5% lower than the October 2007 California median.

About further Value Decline :
Here are the median prices in South Lake Tahoe since 2000.

• Since the market high on September 1, 2005, there has been a 12.3% decline in the median price.
• This includes all sales in the last 180 days, which has produced a little more than a third of the overall decline.
• But, this number has to be looked at carefully.
  
  • The last quarter spans the slowest time, thus the least number of sales, of our real estate year.
  • Sales in the next 180 days could bring this number up, or produce additional slight declines.
• See the chart below for further discussion.

The chart below indicates South Lake Tahoe Median Price changes by quarter since Jan. 1, 2006 (as indicated by the last 365 days starting with Jan. 1, 2007)

• Median prices per quarter have ranged from a low of $385,000 to a high of $474,000.
• Note that every quarterly result since the lowest result has been higher.
• It's our guess that median prices will continue to decline somewhat slightly and may eventually settle some where near, if not slightly higher than the 2004 median of $375,000.

3 new Bank Owned Properties in South Lake Tahoe last week.

(LAKE TAHOE REAL ESTATE BLOG) According to our California title company sources, there were 3 new Bank Owned Properties ( REOs) in South Lake Tahoe for the week ending February 22, 2008.

An exact count of NOD’s, Not’s and REO’s is difficult to assess. However, according to additional sources of ours, there are 56 homes in South Lake Tahoe that are Bank Owned Properties. (The souces actually show 72 REOs, but some are duplicates of which we manually purged.)

REOs:
These are homes that are bank owned and are for sale (REO stands for “real estate owned”)

• Every REO has the potential of being a good buying opportunity.
• REOS’ usually sell near or at list price, but not always.
• Sometimes the price can be less than what was owed to the bank.
• In negotiations, a buyer is dealing with an unemotional seller who wants to get the property “off their books.”
• There are 56 of these at present.

 For more information about South Lake Tahoe REO's, click here.

3 new Notices of Foreclosure in South Lake Tahoe last week.

(LAKE TAHOE REAL ESTATE BLOG) According to our California title company sources, there were 3 new Notices of Default (NODs) in South Lake Tahoe for the week ending February 22, 2008.

An exact count of NOD’s, NOT’s and REO’s is difficult to assess. However, according to our additional sources there are 97 homes in South Lake Tahoe that have notices of default. (These souces actually show 153 NODS, but many are duplicates of which we manually purged.)

NOD’s:
These are homes in foreclosure (NOD stands for “notice of default”).

• We don’t like these because a NOD may signal a family in distress.
• It is our hope that every family who wants to gets out of foreclosure asap.
• There are 97 notices of default at present.

For further details, click here.

No new notices of trustee sales (NOTS) in South Lake Tahoe last week.

(LAKE TAHOE REAL ESTATE BLOG) According to our California title company sources, there were no new Notices of Trustee sales in South Lake Tahoe for the week ending February 22, 2008.

An exact count of NOD’s, Not’s and REO’s is difficult to assess. However, according to our other sources, there is one home in South Lake Tahoe that will be put up for trustee sale on March 5, and one that will be on the auction block tomorrow.

NOTs:
These are homes that are up for auction (NOT stands for “notice of trustee” sale)

• A NOT is put up for bid at the local courthouse.
• The sale price is the exact amount that is owed on the property.
• Only multiple bids can raise the price over what is owed.
• If the property is not sold here, it becomes bank owned and normally put back on the market.

Request more information here.

Better Use a Pro in South Lake Tahoe: Zillow’s estimates average more than 20% off... in both directions!

(Well, this one should be fun. It's background for our next post about an article written in the WSJ online a few weeks ago. We put it up outside yesterday, and since then both David Gibbons and Drew Meyers from Zillow have visited our site. They will have comments for sure. Perhaps we'll all learn something from this one.)

(LAKE TAHOE REAL ESTATE BLOG) We remember first hearing about Zillow a few years before it was launched.  Back then Zillow existed on the web as a blank white page with one button in the center of it. Clicking on that button was for recruiting people to work for them while they were in their infancy. We had no thought at that time as to what Zillow might mean, or not to the South Lake Tahoe real estate market.

There was much talk about Zillow’s launch throughout the 3 days that we were there. Central to that discussion was the accuracy of Zillow’s “Zestimates,” their built-in estimator of home values that was the principal attraction of their website then, and now.

I remember it so well. The official word from Zillow was they were 80% accurate 60% of the time. We are sure Zillow has gotten better since then, but the reason I remember it so clearly was it was such a goof to figure out what 60% of 80% is. It certainly is a creative way of saying 48%, we all agreed. It was the insider talk of the convention.

We don’t use Zillow ever for home estimates. And thankfully most all of the buyers and sellers we have represented since then do not either. While in some parts of the country, we know Zillow is accurate, it is not here in our South Lake Tahoe real estate market. Not by a long shot.

But then again we don’t expect it to be accurate up here in the mountains. Home values vary greatly throughout every one of our neighborhoods. There is nothing cookie cutter about any of them, and as such home values can not be accurately estimated by bots, formulas, square foot averages or any other mechanical or technical apparatus.

It takes an experienced, hands-on pro to help people with home values here in South Lake Tahoe. Even then there are more than just a few homes that are so unique that evaluating them is nearly impossible. Often putting up a home for sale is the only determinant of value, after the fact... if it sells.  (We suspect that Zillow is may also be off in most vacation resort ares in the country for similar reasons as well. )

We’ve got one of those difficult-to-evaluate homes on the market right now. It has no comparable guide to be found anywhere. It was originally listed for $1.89M, and the truth is that was nothing more than an educated guess by the Seller. And one that the market did not accept, even closely. Frequently appraisers call us for our take for value problems they are trying to solve.

We just had a question from one of the people who attended our real estate seminar yesterday, and it’s one that involves Zillow. So we thought we’d check Zillow to see how accurate they are in South Lake Tahoe These Days.

Rather than select anything at random for comparison, we thought we’d compare Zillow with everything in escrow in South Lake Tahoe right now. That way, we’ll span numerous price ranges and neighborhoods for the exercise. And we can't be accused of selecting anything we know that might, or might not produce predictable results.

Please remember this: homes in escrow right now will be lower than their current price when they close. On average about 5 to 10 percent lower. So this means that when these homes close, Zillow will be even more inaccurate than their Zestimates are now.

Here’s what we found out:

There are 48 homes in escrow:

• Zillow had estimates for 24 of them. (or Zillow did not recognize that 24 of them are for sale)
• Zillow found that 24 of them were for sale.

Of the Zillow Zestimates (24 of them): (remember, all will be more when these escrows close)

• 8 were estimated lower.
• 15 were estimated higher.
• 1 was close (.7%).
• 2 were 50% off or more.

• The estimates ranged from 53.2% lower to 45% higher than the current price.

• Zillow’s low estimates were off 23.1%. on average.
• Zillow’s high estimates were off 20.9% on average.

• Zillow was within 10% of the current price on 6 homes, or 25% of the time.
• Zillow was more than 20% off the current price on 12 homes, or 50% of the time.
• Zillow was more than 40% off on 3 homes, or 8% of the time.

Of the Homes Zillow found were for sale (hence no “Zestimates):

• Zillow only found that 50% of the homes were for sale (or they missed half of them)
• Zillow cited the accurate sales price on 14 of them, or 58%.
• Zillow had an incorrect sale price on 10 of them, or 42%.
• The prices that were off were off an average of $22,000.

Here's the chart of the 24 homes in escrow that Zillow estimated:

How to Sell and Buy in the Current South Lake Tahoe Real Estate Market

(LAKE TAHOE REAL ESTATE BLOG) We got to meet about 50 new people at our real estate Seminar last Saturday at Lake Tahoe Community College. That was really special for us. Anytime we get to meet and talk to people about what is, and is not, going on in their real estate market is a real pleasure. Market knowledge and being helpful is what our practice is all about.

This image is before it all started. Each of our seminars is in three sections. The first one, about 45 minutes long, starts off with a discussion about real estate news. It explores how real estate news for the most part is reported by non real estate professionals... who get things right about as often as they don't. It's a fun discussion about what is "good" news, as opposed to "bad" news in the market, and how the media so frequently spins news that's good for buyers as bad news for a market.

The first section of our seminar is 39 slides about the current state of the market. It's about 45 minutes long and covers both sides of our market that has the California and Nevada state line running through it. The slides detail demand, supply, price, absorption, escrow and the odds of selling a house in the market right now.

There is a slide showing the real estate cycle since 1970, a review of expired listings, the average difference between list and sold prices, and a fun discussion about "turning down money." Throughout this first section, there are 24 charts and graphs and 6 animated gifs.

The second section of each of our real estate seminars, also about 45 minutes, covers an array of subjects. There are 40 slides in it. The section starts with a discussion about how to use and subscribe to the information found in our Lake Tahoe Real Estate Blog.  There are about 10 slides on Agency and the teamwork necessary for a successful sale or purchase of a house.

Following is an important discussion about who your buyers are, what they like, why they buy, the methods of advertising that work for them, and what doesn't. The session concludes with details about the risk of over-thinking market changes and the potential costs associated with it. The bottom line being that there are some excellent opportunities for buyers right now. The key being of course how to find them among those that are not. There are 18 charts and graphs in this section.

The image here is at the beginning of our second break. 

The third section of our seminar is about price. It takes about 30 minutes. The information is the same for both buyers and sellers. There are 36 slides to this section with many charts and graphs. Included is an extensive look at what one should have to best price and evaluate a house in this market. Most of the time in this section is devoted to it.

Perhaps the most audience receptive part of it are our Value Graphs, two charts where a buyer or seller can clearly visualize the value of a home on the market.

Before it all started. Here Gary and Maxene's son Olivier get ready. It takes about 5 weeks to produce each seminar. Much of that time includes the research and writing. The charts and graphs take about two weeks to produce alone. We run a two-week campaign to expose each one. This includes both direct mail and newspaper advertising. This time we sent our 8,000 pieces of direct mail.

We set up the day before. There were four rehearsals the week of, which included one for the newspaper and one for our brokers. The last rehearsal is always the night before. It starts as soon as we have the projector set up properly and is done from start to finish with me in the room alone.

Maxene and Gary also do the food and refreshment set ups too. For Saturday morning seminars we do a continental breakfast with fresh fruit, croissants, bagels and assorted pasteries.  We serve a pizza and salad dinner for those that we do on weeknights. What we like is our attendees seem to like what we do to help make them comfortable. This time the only thing that was left was a half of a chocolate muffin.

An informal question and answer discussion usually follows each seminar. This was the beginning of it, here with the real estate investors who attended. Behind were three local contractors who were waiting to talk to us. About 45 minutes this time, these after-seminar exchanges are particularly informative and rewarding for us, and we hope for our attendees as well.

 This is a chart used for our Real Estate Seminar we had today in South Lake Tahoe.

Here the chart indicates home value appreciation in Stateline, NV since 2003.

The seminar was held at Lake Tahoe Community College. About 50 people attended.

We are scheduling our next seminar at the end of March. Details to follow.

This is a chart used for our Real Estate Seminar we had today in South Lake Tahoe.

Here the chart indicates annual absorption rates for Stateline, NV since 2003.

The seminar was held at Lake Tahoe Community College. About 50 people attended.

We are scheduling our next seminar at the end of March. Details to follow.

 This is a chart used for our Real Estate Seminar we had today in South Lake Tahoe.

Here the chart indicates the number of annual expired listings since 2005.

The seminar was held at Lake Tahoe Community College. About 50 people attended.

We are scheduling our next seminar at the end of March. Details to follow.

This is a chart used for our Real Estate Seminar we had today in South Lake Tahoe.

Here the chart indicates real estate market performance for Stateline, NV for the last 365 days.

The seminar was held at Lake Tahoe Community College. About 50 people attended.

We are scheduling our next seminar at the end of March. Details to follow.