May 2013 marked another month of continued improvement for Tahoe Truckee real estate. The 123 residential sales achieved is the second highest number of monthly transactions year-to-date, and the $78,588,726 total sales volume represents a 27% increase over the prior month and a 5% increase over May 2012. With the average selling price coming in at $638,993 (12% improvement over same period in 2012), all market indicators are pointing at consistent growth for the area.

Not surprisingly, the surge of activity and corresponding price appreciation have brought many sellers off the sidelines in hopes of finding improved liquidity.  May typically is the most active month for new listings as owners anticipate a rush of consumer activity beginning over Memorial Day Weekend.  Market and weather conditions have intensified this situation as 274 new listings have come to market in the past 30 days; equal to 53% of all sales year-to-date. The average asking price of these new listings is $808,000, a solid 29% higher than the $622,150 average price of all residential sales in 2013, revealing the ambitious / optimistic nature of this wave of sellers. Overall, there are 772 residential properties currently listed – 7.5 months supply at current absorption rates. I believe this to be an appropriate level of supply to meet the strong demand we foresee during the summer months without creating the frenzied conditions found in many Bay Area communities due to a severe lack of inventory. With distress notably out of the market, (just 18 of 772 listings are REO or Short Sale) there appears to be a very healthy balance to the Tahoe market heading into what is historically the most active season for real estate.

Of the 123 sales in May, 11 were at prices greater than $1,000,000 led by a Martis Camp home sold by Tahoe Mountain Resorts for $5,975,000 and three lakeside properties from $2,350,000 – $5,950,000. Lahontan, Squaw Valley and Tahoe Donner each had a sale between $1,000,000 – $2,000,000.  Northstar saw the results of a surge in high-end activity at the end of ski season with the closing of two Home Run Residences at $1,740,000 and $1,800,000. A third Mountainside sale will follow in June.

The most remarkable story in recent weeks has been the Truckee Land Rush. No market segment withstood a more significant drop in demand than vacant land through the market downturn.  Because many residential properties were selling well below replacement cost, there was little incentive for new construction thus dampening land sales to the point where certain properties lost well more than half their peak value. The exception to this was at the loftiest heights of the market where the opportunity to create something grand and unique provided an economic incentive to build. The remarkable success of Martis Camp in recent years and the strong introduction of Martis 25 this past winter are the two most notable examples.

The appreciation seen in residential property over the past year has created greater equilibrium relative to construction prices rejuvenating demand for land sales. While speculative builders are often the first to take advantage of such changing conditions, end-users seeing the opportunity to establish roots in quality communities at a remarkably low cost basis have lead the most recent charge.

No community has experienced the extremes of the market more than Gray’s Crossing.  An historical look tells the story of remarkably successful launch years followed by a sharp downturn:

The 25 land sales year-to-date tells a remarkable story, exceeding the annual totals for three of the past six years. Similarly a 48% increase in average price shows a strong bounce from the low in 2012.  However, the real story over the past month is the 18 homesites that are currently pending sale, 8 of which are at prices greater than $100,000.  The peak pending value of $179,000 represents the single highest price since 2008. Helping to spur demand above the improving real estate market, Gray’s Crossing launched a revitalized marketing effort – developed by Tahoe Mountain Resorts in partnership with the new owner of a significant portfolio of Gray’s Crossing homesites – and enhanced access to recreation facilities for homeowners.

Similarly, Lahontan homesites have spiked both in activity and value.

The peak launch years for Lahontan precede the tracking of this report. However, even during the high market years of 2004-2005 land values in Lahontan struggled under the weight of excess supply. During those years it was not uncommon to see 100 more homesites listed for sale at any given time. By comparison, the 26 currently listed represents just 5% of the total community, and a rather significant shortage of supply. Another 10 homesites are currently pending sale at an average asking price of $145,000 indicating that the upwards trend should continue.

There are many themes that may be isolated out of the dramatic improvement of vacant land:
1. A relative lack of quality residential property available for sale has created interest in building custom homes.
2. Value of residential real estate has improved creating greater equilibrium between construction cost and value.
3. Vacant land dramatically overcorrected in the downturn creating overwhelming value propositions; even after price increases of 50% or more.
4. Consumers possess confidence in the trajectory of the Tahoe Truckee real estate market beyond today’s value – long enough to complete the design and build process.
Perhaps most significant is recognition of quality in the market. This is applicable both for individual homesites, as well as the communities in which they reside. No longer is value largely determined by the motivation of the seller. Instead premiums are being realized for high quality settings whether for view, size, or access to amenities.  In cases where all three are available, consumers have made the decision to invest in a lifestyle not otherwise available, as was the case with first ever closing in Martis 25. At least two other closings will follow in June ultimately leading to groundbreaking and new residential experiences Mountainside at Northstar in early 2014.

While June and July are historically less active for closed transactions as consumers begin the buying process anew, current market conditions appear to be overriding many seasonal trends. I’ll look forward to reporting on another active month at he end of June. Until then, enjoy the exceptional summer weather in Lake Tahoe.