What a year!!!! Reflecting back on it brings a multitude of emotions. Clearly there are so many related to the emotional struggles we as a global community have faced that I don’t even need to get into as we all have faced some sort of struggle related to it. Add a crazy election and the ensuing actions afterwards that only brought further division to our country and we’ve got ourselves one heck of a year. And that’s before we even start to dive into the insanity that has transpired in real estate markets nationwide!
How the real estate market unfolded in 2020 blind-sided nearly everyone in the industry. I don’t think there was any way to predict what occurred. For those of you who have not been paying attention to the national real estate market, or even your more local real estate markets, let me give you a quick run-down of trends. We started 2020 at a snail’s pace with what seemed to be trending towards a plateau. Year-Over Average Sale Price in Truckee was up by only 1.3% from 2018 and Total Volume Sold was actually down by 9.5% in Truckee and down by 23.9% in North Lake Tahoe. And then COVID hit, our markets were going crazy with the uncertainty of the times as were interest rates. There were crazy day-to-day fluctuations in mortgage interest rates, so much so that if you were quoted something one day, the following day it could be a whole percentage point higher from that lender and whole percentage point lower from a different lender. A lot of lenders stopped lending on Jumbo Loans, other than large banks. In California, we were in a lock-down for around 12 weeks. Unemployment was crazy, people thought the real estate market was going to tank, we were all going crazy from being in our houses, and a lot of people began working remotely, some for the first time ever. Some who had always been told they would never be able to work remotely now were proving to their employers that not only could they work remotely, but they could also remain extremely productive. Big companies started announcing that they would not return to campuses and offices until at least summer 2021. No longer being tethered to the city by their employment, mass amounts of people nationwide starting looking for wider, open spaces to park their laptop in, enjoy outdoor recreating and a little more personal space than is usually allotted in urban settings. The Lake Tahoe and Truckee area became an extremely hot commodity nearly overnight and turned what we thought was a dipping market into an explosive year of growth.
Median & Average Sale Prices Increase in 2020
2020 saw healthy increase in both the Average Sale Price and the Median Sale Price for homes and condos in both Truckee and North Lake Tahoe. Average Sale Price on the lake was up by 7.3% and Median up by 14.9%. In Truckee the Average was up 22.8% and Median was up by 19%. That is the Year-Over Growth, however, and does not take into consideration the full market swing that we saw in 2020. You can’t even break it down by quarter to get a full senses of that; 2020 really needs to be looked at month-by-month to get a full grasp on the insanity that ensued. If you look at the Truckee numbers by month and look at the lowest monthly average sale price and compare to the highest monthly average sale price there is an increase 45.3%. The year also saw monthly year-over growth of the average sale price upwards of 20% from July on and even reaching 46% in Nov and 37.6% in December.
Total Volume and Units Sold Up
One of the biggest areas of growth in 2020 was in sheer volume. Average Sale Price in 2020 increased at much more reasonable pace in comparison. Year-Over Sales Volume was up 81.4% in Truckee and 64% in North Lake Tahoe from 2019. This is the largest increase of volume on record in North Lake Tahoe and Truckee!!! Some months were showing year-over growth in volume of 180%+
When you break it down by month you can see where the craziness starts to happen; Total Volume in April in Truckee was $38.8 B (the lowest producing month and the low point of the market with the lowest Average Sale Price as well). May produced $42.4 B in sales and then in June sales jumped to $115.2 B! That is an increase of 128% from June 2019, and an increase fo 172% from May 2020! It would have kept going if the inventory could have kept better pace with the demand through the latter part of the year. But alas the inventory took a dive in the fall, as it usually does, and created even higher demand which resulted in the following market indicators.
All-Time Low Marketing Times
A huge indicator of the high demand in 2020 is the record-low marketing times. In the North Lake Tahoe region (which includes all of California’s North Shore’s and West Shore’s of Lake Tahoe) the average “Days on Market” dropped by 88% compared to 2019 down to 49 Days. This is for the entire condo and single-family market. If you dissect it further you will see even more astonishingly low marketing times. Days on Market dropped to 20 day average for the entire market in Oct and down to 21 days for single-family homes under $1M in November.
In Truckee even more astonishingly short marketing times were seen. The average Days on Market for the years as a whole down to 47 Days which was down by 25%. When you break the market down by month, the entire market for condo and single-family homes had an average of just 17 days in November. For single-family homes under $1M, the Average Days on Market for September through December were 11, 17, 10 and 17 Days respectively. Absolute craziness. This is the average!!!! When I am saying homes were going under contract in days, that is no exaggeration.
Unprecedented Multiple Offers in Truckee
Here is a stat that is unquantifiable because there are no records kept of this in the area. I can only report to you what I’ve experienced and heard through the grape-vine from other agents. We have certainly experienced such competitive markets previously that multiple offers were the norm, but in the past generally there would be 2-5 offers in that scenario. The 2020 summer in many ways it felt like what we heard was happening in the San Francisco Bay Area in the post-2008 recovery days. 2-5 offers felt like you were getting off easy because on many we were seeing more like 10 offers as a norm and particularly attractive offerings were fetching as many 25 offers!!! As the inventory dwindled through the fall and into winter multiple offers have continued to be the norm; I heard 17 offers on a home listed recently.
Average Sale Price Is Above the Listing Price
Another indicator of the extreme demand for homes in the North Lake Tahoe and Truckee area is the Sale Price to List Price Ratio. In the past when demand is strong the Sale Price has been hovering in the 98%-99% of the List Price. In the post-2008 era the Sale Price was down to as low as 90% of the List Price on average. In strong markets in the past the super high-demand properties would sell for over-asking. I’d often advise my clients to go $5-$10k over asking and remember blatantly saying “yes, homes sell for over asking here but it’s not like it is in the Bay Area”. Well, yet again it seems like the market here caught up with the Bay Area market.
In 2020 I was generally advising my clients to put in offers anywhere from 5-20% over asking which is much more closer to $100k+ over asking in most cases. and much more in-line with San Francisco trends. For the first time we saw the Average Sale Price to List Price Ratio exceeding 100%, that’s on average! You do have to dissect the market down to Single-Family homes under $1M to see this and that is the niche where the highest demand is. The Average Sale Price for this group for the entire year was 101.8% of the List Price. June is when the year really started to heat up and in July, when we started seeing the closing numbers for June, the Ratio jumped from 97% in May, 99.7% in June, and then 100.3% in July. It grew even higher, up to 105.7% in August, and remained above 104% for the remainder of the year. So on average homes were selling for 4% over asking. And when those homes that everyone was looking for hit the market that’s when homes sold for 20%+ over asking. Inventory levels fell in the fall months and as they did the Sale Price to List Price Ratio grew, the Days on Market dropped to those staggeringly low numbers discussed previously, and the Average Sale Price increased by 46% for the entire condo and single-family home market in Nov as compared to Nov 2019 and by 37.6% in December.
Wrapping Up 2020
All in all 2020 was an unprecedented year to say the least. Where is the market going? It’s hard to say. What I can tell you is that interest rates are believed to remain hovering under 3% through 2021 and demand has not shown any signs of dwindling with the winter months even if the inventory has. Mortgage loan applications are up in comparison to 2019, which is a large indicator of the demand to come. Though prices have increased in the last year, 2019 was a slightly down year when all was said and done. North Lake Tahoe’s average sale price was still lower in 2020 than in 2018. If you’re thinking you’ll sit it out as a buyer until the market cools again, it could be awhile and it will likely be accompanied with higher interest rates. So the actual cost of buying might not be that different. Just be mentally prepared for multiple offers if you’re looking to buy. If you’re looking to sell, clearly it is an amazing time. Don’t let the demand scare you from that move-up or move-down; we can structure contracts to be in your favor to find a replacement property. Compass also offers bridge-loans to make yourself more competitive on the buyer side of things! Whatever your needs are in 2021, I’m here to help you strategize and attain your goals.