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In a year of extremes, Tahoe Truckee real estate activity settled into an in-between zone in November. The market had made a noble effort to return to historical averages in the last 90 days following a historically low 12-month period for transaction volume. November saw 91 residential sales, mirroring the results of the same period in 2022.

Like so much of that last two years, pricing was dead steady indicative of consumers’ willingness to pay 2022 prices for premium product but lack of interest in anything considered imperfect. This sentiment combined with unmotivated or unrealistic sellers has resulted in painfully few transactions while providing the illusion of prices holding steady.

The circumstances of the market seem to be steady pricing for great homes but an unrealized decline for homes that require forms of deferred maintenance. A look at certain submarkets reveals regressions close to 10% where sellers require liquidity.

For example, Tahoe Donner is often considered the bell weather community for the greater Tahoe Truckee region. Because the community is so large and contains such a wide spectrum of quality, it largely defines the middle of the regional market, and its performance is a good general indicator of the performance for the area. Through 11 months in 2023, Tahoe Donner has transacted just over 200 residential sales; approximately 66% of calendar 2022 and almost exactly half that of the banner 2020. Both median price and price per square foot have regressed by 8% in 2023 while average price is down 10%. The greater Tahoe Truckee market is 4% and 2% respectively.

This would seem to portend a gentle correction in the first half of 2024 as sellers become more realistic about their chances for liquidity. As a second home market, the Tahoe Truckee region has never been overly sensitive to interest rate fluctuations. However, the tremendous spike in rates in the last year has changed the accessibility to easy leverage that renders most transactions cash. While most regional consumers have the capacity for such purchases, they are generally seeking a discount for having to deploy their resources in this way.

The prevailing sense of a rate cut in 2024 is proving an accelerant to equity markets in recent weeks and months. Real estate is likely to be a lagging indicator, in that the purchase activity will likely follow such an action. Nonetheless, any relief for purchasers that drives interest rates below 7% will likely be stimulating the local market where expressions of demand remain high. Should demand accelerate, more supply is likely to loosen up simultaneously as today’s crop of reluctant sellers find motivation to liquidate.

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