Northstar Martis Camp and North Lake Tahoe Real Estate Sales Summary

Market Re-Cap.  North Lake Tahoe, Martis Camp and Northstar

The second quarter of 2011 was a quarter that wasn’t.  Given the challenges produced by an overabundance of snow throughout the entire quarter, we didn’t have much of a chance to interact with consumers to show and ultimately sell real estate. Understanding that deals transacted in Q2 are generally contracted 30-60 days prior, the majority of the closings reflected in this quarter would have resulted from showings during the heart of the ski season. As has been oft-reported in this space, road closures and other non-economic factors, in addition to a national real estate market seeking traction, made for a challenging period.

 As we look towards the second half of year, we know that, statistically, there will be a significant pickup in the volume of sales as evidenced by the chart to follow:

Typically, we would see a pickup from the beginning of the year to the end of Q1, with gradual growth through the 2^nd quarter before a slight lull about this time as we emerge from the shoulder season.   In 2011, the first quarter held to form but deal flow in April and May diminished significantly for reasons detailed above.

Clearly June showed some resilience, despite some unwelcome, lingering snow, as we climbed back above 100 sales units. With 183 sales currently pending, July is likely to continue on an upward trajectory. With some confidence returning to the market, it is easy to see that some pent-up demand exists for quality Lake Tahoe Real Estate that could poise us for a strong 2^nd half of 2011. If the crowds currently in town for the 4^th of July holiday are any indicator, the improvement could be explosive as we’ve rarely if ever seen such density.

Modest deal flow, regardless of the cause, is generally unkind to values as a certain number of sellers will have to find liquidity thus dropping price. As such, the average price per sale dropped by 5% from the same period in 2010; a fairly gentle drop given the 18% reduction in transactions. Distressed properties, including short sales and foreclosures, are the greatest culprits of this accounting for 36% of all closed transactions (a steady number relative to 2010).

Certain areas felt this impact more harshly than others. Certain neighborhoods had previously been able to avoid significant loss of value by simply avoiding distress sales and showing meager deal flow while maintaining some price integrity. At some point, gravity inevitably sets in resulting in overly dramatic price reductions. Among the most impacted was Lahontan with an 18% drop in median price. Case in point, the sales transacted in this high-end neighborhood included several that were short sales, foreclosures, incomplete construction or simply were marked down to attractively low prices. I will be very surprised if we do not see a rebound in values, specifically at Lahontan, in the second half of 2011 as less predatory buyers are able to see the community in prime conditions and find the best quality for their value rather than simply the best bargain. Similarly, vacant land in Old Greenwood had generally avoided the pitfalls of lots in other communities, namely Gray’s Crossing, by avoiding distress sales. As one REO and one short sale transacted in the past quarter, median price finally dropped to levels consistent with Lahontan and other higher-end resort communities.

The flip side of this equation continues to be Martis Camp, defying gravity with extraordinary velocity of both homesites and, now, completed homes. The developer has sold 56 properties already in 2011 with the prime summer season yet to come. As they near 100 completed homes the community is taking form and with the opening of the clubhouse last weekend, the crown jewel of the community is in place.   Their Community is defying all national market trends in terms of real estate sales and new home construction – and for a very good reason.   It’s really “the best of the best” which is much easier to show you first hand rather than attempt to articulate.   

Combining the concepts of value and luxury with good results has been the Northstar Lodge Hyatt.  With eight sales year to date, this project offers quality appealing to a discerning buyer while offering strong value pricing and perhaps the best opportunity for income in the resort community. A new, more conventional financing option has recently been made available on this product that, along with limited supply remaining, could spur even greater sales as we look toward the next winter season.

Several other communities appear to have worked some (never say all) of their distressed inventory and appear poised for stronger returns as the year goes on. Namely, Gray’s Crossing where inventory is down well below one year. 14 homesites have closed at median pricing identical to 2010 indicating a bottoming out of that market while just 11 remain.  Most significantly, the sale of completed homes has cleaned out all remaining bank-owned inventory leaving just six, including three instantly well-positioned townhomes, available.   

Looking ahead to the second half of 2011, there exists the possibility for an extraordinary amount of news that could create buzz and excitement for the Tahoe region beyond standard market forces. Such events as the opening of the clubhouse at Martis Camp, new ownership at Schaffer’s Mill (formerly Timilick), the installation of a new chairlift, and construction of the Home Run Townhomes at Northstar promise to bring publicity that will rival the late-2010 news of Vail Resorts and KSL’s investments in Northstar and Squaw Valley. East West Partners have begun planning a very small, exclusive enclave of single family homesites on the mountain at Northstar to be known as The Glades.  This project will be introduced to the market in the 2011-12 ski season and will create an entirely new category of on-mountain real estate for Lake Tahoe.

Attached you will find a series of historical statistics following the trajectory of real estate values for numerous communities throughout the Lake Tahoe region. Some will show modest increases year over year while others seek a bottom. As has been the case for the past several quarters, this trend is likely to continue until nearly all distressed inventory has been purged from the system. Until then, we will continue to celebrate the many successes apparent in the premium-end of the market and seek the best values wherever apparent.

Best wishes for an enjoyable and prosperous summer.

Posted by Tim Lampe, Provided by Steve Kegal