There is no doubt people are buying their Truckee-Tahoe dream homes and values are solid. Yet, pricing is all over the board with inconsistent results by neighborhood. Our overall inventory of available homes for sale has been low. The banks reduced their REO property inventory and have focused on reducing short sales inventory. This is a trend we expect to continue. Equity sellers and vacation home owners are awaiting signs that the market has stabilized while buyers are preparing for our summer inventory, which has traditionally increased. Buyers are responding to the market changes and purchasing available inventory. Take a look at our Truckee Real Estate recap below.
Prices: Elder Group Tahoe Real Estate reported in March that we are “at the bottom” and prices have stabilized through Q1 2010 and we were right on target. Truckee prices declined 6% as compared to the 4th quarter, 17% lower than one year ago and appear to be holding and in some areas, increasing in others. Donner Lake and Glenshire are good examples with a 44% and 13% closed sale price increases, respectively. Donner Lake increased to $625,000 from $435,000, a significant 44% due to several luxury sales.
Home Sales: Overall, Truckee area home sales increased 34% from a year ago with Northstar and Glenshire (133%) providing large swings over historical results. Northstar’s price points dropped 49% and moved to an incredible $800,000 versus its prior $1,565,000. Tahoe Donner remained stable with 38 homes sold – a 12% increase and a 10% price decline versus one year ago. Tahoe Donner’s single family homes closed at an average of $502,000 versus $557,500 and days on the market dropped 24% from 130 to 106 days. Throughout Truckee’s local neighborhoods, pricing dropped 24% from $586,500 to $447,250.
Tahoe Real Estate: The defined “Tahoe” market includes Alpine Meadows, North Shore, Squaw Valley, Tahoe City and the West Shore. Prices increased 9% in the fourth quarter to $550,797 from $503,379 yet are down 11% from a year ago. The North Shore home sales increased 200% with 26 homes sold in Q1 versus one year ago with 12 and prices declined a modest 5%. Prices were hit hard on the West Shore and declined 33% from $660,500 to $445,000.
Bank Owned and Short Sale Property Inventories: Varying slightly day-by-day, we continue to have approximately 150 properties listed as short sales or REO’s (bank owned) with 2/3 categorized as short sales and 1/3 categorized as REO’s. Today, Truckee has 59 short sales or REO’s listed with 22% under contract. In the North Shore, Tahoe City, Westshore areas, there are 16 active with 19% under contract. We are trending back to conventional sales, which may well create price increases over the summer.
As reported by CAR, distressed homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure or loan modification. Enacted into law yesterday, Senate Bill 401 generally aligns California’s tax treatment of mortgage debt relief income with federal law. For debt forgiven on a loan secured by a “qualified principal residence”, borrowers will now be exempt from both federal and state income tax consequences. The existing federal exemption is for indebtedness up to $2 million, whereas the new CA exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.
“Qualified principal residence” indebtedness is defined as debt incurred in acquiring, construction or substantially improving a principal residence. It includes both first and second trust deeds. It also includes a refinance loan to the extent the funds were used to pay off a previous loan that would have qualified.
The tax breaks apply to debts discharged from 2009 through 2012. Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.
Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may nevertheless be except under other provisions. Most notably, taxpayers who are bankrupt are exempt from debt relief income tax. Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.
For more information about mortgage forgiveness tax consequences, go to California Franchise Tax Board’s Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue Service’s Mortgage Forgiveness Debt Relief Act and Debt Cancellation webpage. The full text of Senate Bill’s 401 is available online.
Given the unique bubble market, the counts for the Lake Tahoe and Truckee area for bank owned properties (REO’s) and short sales were relatively low compared to Q4 sales volume. In Truckee, only 7% were short sales and 16% bank owned REOs—equaling about 1 out of every 4 homes sold that were involved a bank related situation. Around the Lake, the statistics are higher with 31% of the sales involving a bank. Competition for REO properties continues. Quick decisions, cash and “as is” are key to securing a bank owned property.
The following is a snap shot of what happened in Q4 2009 in the Truckee Tahoe real estate market:
• Bank owned property sales: 29
• Short sales: 100 count
• Q4 2009 Totals: 129 homes sold via an REO or short sale position in the Truckee Tahoe market
As Banks carry short sale properties on their ledgers and attempt to avoid the liability required to carry REO properties, I am confident these properties will be listed, marketed and available for purchase and will improve the transaction processes with the Banks over the course of 2010.
In areas that have been and will continue to be hit hard, increased inventory will impact the overall square footage prices for areas including Kings Beach, Tahoma and some areas in Tahoe Vista. Remember, cash is still king when negotiating with a bank. As a seasoned agent with both short and REO transactions, I can help navigate Buyers through the changing market.
E-mail Alison Elder directly with your questions or more information about bank owned properties.
Blending REO and short sale properties, there’s a common consumer theme from our clients, “I want to buy a short sale bank or bank owned property!” While we can accomplish this, be aware that dealing with short sales requiring bank approval can be very disappointing for motivated Buyers and if you are in a 1031 exchange situation it can be even dicier due to identification and closing timelines involved.
A solid percentage of the time, the properties cannot be cleared from the short sale process quickly enough and move to the court house steps, typically becoming bank owned REO’s sometime in the future. Or, if there is a first and second on the property, Buyers may wait months with zero results or ability to purchase.
“Hot” REO properties require Buyers to pay cash, agree to a very quick close and are “as is.” Depending on client objectives, negotiating with a traditional Seller can deliver the same or better result to secure your Truckee-Tahoe property. The feeding frenzy of pursuing these properties can result in the Buyer actually paying more for the property with a much tighter timeframe for property investigation.
If you plan on pursuing this type of property purchase in lieu of a traditional buy/sell situation, it’s important to find the right agent with a successful track record, desirable product and one who will negotiate diligently. There’s a tremendous feeding frenzy that can occur with both short sales and REO’s that actually have the Buyer paying more for the property instead of less.
As a seasoned agent in REO property sales, I’ve received national designation as a Certified Distressed Property Expert combined with an excellent track with negotiating and closing these types of sales on both the listing and purchasing sides.
For more on REO and to learn if it’s a good fit based on your buying need, e-mail Alison Elder.