Real estate: It’s a really cloudy crystal ball (column)
Special to the Tribune
Weekly real estate update
Statistics gathered from the Incline Village Multiple Listing Service
Houses Condos PUDs
For Sale 69 51 11
Under $1 million 9 36 5
Median Price For Sale $2,875,000 $689,000 $1,146,200
YTD Sales 2020 29 39 9
YTD Sales 2019 25 37 12
New Listings 5
In Escrow 4
Closed Escrow 4
Range in Escrow $440,000 - $7,500,000
These statistics are based on information from the Incline Village Board of Realtors or its MLS as of April 5.
During the past several years the Lake Tahoe real estate market has been in a steady uptrend. Since the market turned around in early 2012, we have seen the inventory declining and prices increasing year after year.
As we entered 2020 with extremely low inventory levels and very strong demand it appeared that it would take some type of calamity to have any negative influence on the Lake Tahoe real estate market.
Unfortunately, we are seeing some economic impacts of the coronavirus both here and abroad. There is no way to predict the ultimate breadth and depth of the damage except to say that everyone will suffer impacts to one degree or another.
Those who purchased real estate with cash (especially rental properties) will fare far better than those who are highly leveraged and have monthly mortgage payments that need to be met.
Tens of billions of dollars in residential rent comes due at the start of every month. Many tenants are out of work and for some of them their jobs will disappear permanently depending on the nature of the business where they were employed.
Landlords who do not have sufficient cash reserves may find themselves in a liquidity crunch. How long this liquidity problem lasts and how many people it affects will ultimately impact real estate prices all over the country.
Landlords who do not have mortgages and are sitting on ample cash reserves will actually be in a position to acquire distressed properties at favorable prices and terms.
However, those investors who are highly leveraged and do not have adequate cash to ride out the storm may find themselves trying to sell properties in an effort to service their debt and other monthly expenses.
Whether or not we will see a cascading effect and a tumble in investment real estate is yet to be seen. It all depends on how long the economy remains in a state of suspended animation and how much relief is provided by institutional lenders across the spectrum.
This brings us to the concept of risk versus reward and whether or not the federal government should step in to provide assistance to those who could suffer severe economic consequences from events beyond their control. Capitalism is supposed to reward risktakers when times are good but it’s not supposed to protect losers when times are bad. However, coming out of the great recession the concept of socialized capitalism and protecting losers during economic downturns became part of our financial culture.
Whether it’s being an enormous financial institution that is deemed too big to fail or the neighborhood mom-and-pop store getting relief, elements of socialized capitalism ultimately encourage irresponsible risk-taking by investors large and small.
While we support the efforts of the federal government to stabilize the economy and inject liquidity it’s important for everyone over the long term to consider the moral hazards of socialized capitalism. But that debate can wait for another time.
Right now we all need to pull together during the current crisis to avoid spreading the coronavirus because the health and safety of all the people on this planet is the top priority.
Once that effort is successful and the pandemic has passed, we can devote our energy to rebuilding the economy and work on restoring normalcy to our daily lives.
Don Kanare is the founder and Sabrina Belleci is the owner and broker of RE/MAX North Lake in Incline Village.
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