The third quarter of 2018 was record setting for real estate in the Tahoe Truckee region by every measure but for one. Total sales volume and average price hit all-time highs while median price equaled the 2006 market peak. Only the total number of sales units fell behind the same period last year due, in part, to a supply constrained market.
Total sales volume from July through September totaled $540,385,789. The second ever period eclipsing a half billion and pushing higher than the same time in 2017 by 7%. With the total number of transactions lagging by 7%, the market is being driven by premium inventory. In fact, average price (a metric more easily manipulated by extraordinarily high prices), surged by 14% from $903,576 in 2017 to $1,037,785.
Median price, more reflective of whole market conditions, bumped up 8% from $595,000 to $645,000 despite lower transaction volume.
In good markets and bad, the third quarter begins a steady climb as the regional market gains momentum when summer visitors combine with anticipation of winter-to-come. This momentum will typically peak with closed transactions in October before tapering to year end.
Driving activity during Q3, were an extraordinary number of premiere transactions of both Tahoe lakefront properties and Martis Camp estate homes. In total, 4 properties crested $10 million including Tahoe Mountain Realty’s $24,000,000 masterpiece sale on Tahoe’s West Shore. Martis Camp, a community that didn’t exist when the market last peaked in 2006, transacted ten homes in the last 90 days from $4,185,000 – $11,750,000 adding $64,000,000 to the region’s transaction volume.
With any market, the wealth is not distributed equally. While most residential structures have appreciated at a healthy clip, raw land has continued to depreciate. In addition to simple supply and demand considerations, land values have even greater variability based upon construction costs. Building cost has soared at a rate even greater than either inflation or home appreciation due to a complex combination of rising commodity prices, regulatory costs and exceptionally tight (and busy) labor supply. As a result, residual land value, defined as the value of a finished new home minus the cost to build, is actually inverted in many neighborhoods throughout the region. As a result, land values hover closer to mid-recession lows than peaking home values.
Looking ahead, Q4 appears poised to maintain at the steady pace of recent years. At 5 month’s supply, there is sufficient inventory to the consumers currently engaged though many are accumulating significantly days on market for having been ambitiously priced.
While the current bull market is showing no sign of major correction, a plateauing appears inevitable as the buyer pool becomes saturated. Whether such a slowing comes before the end of 2018 is yet to be seen. Regardless, the beauty and health of the region remain recession-proof commodities.