INCLINE VILLAGE, Nev. — As we start the second week of January 2012, it's interesting to note that the inventory of Incline Village and Crystal Bay residential real estate currently for sale on the MLS is at its lowest level since 2006. As of Monday morning, January 9, there are a total of 311 single-family homes, condos and freestanding condos listed on the IVBOR MLS.
Part of the reason we have seen the inventory drop to its lowest level in several years is the increased rate of sales during 2010 and 2011. While we have only crept back to the mid 200s in terms of closed escrows, this is much better than 2009 and 2008 when less than 190 properties changed hands in Incline Village and Crystal Bay each year. Unfortunately, we are not going to see a return to the boom times of 500 to 600 residential transactions per year anytime soon unless there is some type of extraordinarily positive economic event.
The decrease in the number of residential properties for sale parallels the decline in the local rental inventory. Many property owners entered into long-term leases with tenants when real estate prices started to soften a few years ago. Some absentee owners have enjoyed earning additional income instead of trying to compete with other sellers in an overcrowded real estate market. The cumulative effect of renting your property for two or more years can provide tens of thousands of dollars of additional income.
So, while some rental properties fall into the category of “shadow inventory”, these properties will come back on the market one at a time when each owner feels it is prudent to do so. (This is in contrast to the foreclosure properties held in the “shadow inventory” by banks and other financial institutions,of which there are relatively few in Incline Village and Crystal Bay).
In the past few months we have seen residential rents start to stabilize and in some cases tick upward slightly for the most desirable properties. Even with the mild winter weather and lack of ski industry workers crowding into the rental market, desirable properties are now commanding rents that are 10% and in some cases 20% higher than one year ago. Cap rates on residential investment properties are finally becoming far more attractive than in years past.
While the inventory of houses, condos and freestanding condos has declined significantly since 2009, there are a finite number of quality properties in good locations. Buyers have been extremely selective during the past four years and I do not see that trend changing in 2012. The vast majority of Incline Village and Crystal Bay real estate purchases are discretionary so buyers can afford to be patient until such time as the annual average inventory drops below 12 months. With 311 properties for sale as of early January and another 100 to 160 properties likely to come on the market later this year, it appears the supply of inventory will continue to fluctuate between 18 and 24 months in the foreseeable future.
— Don Kanare is a Realtor at RE/MAX Premier Properties. Read his blog and weekly stats on his website at www.InsideIncline.com.