As we reach the end of January 2018, it’s interesting to note that the inventory of Incline Village and Crystal Bay residential real estate currently for sale on the multiple listing service is far less than what it was just 2 years ago.
As of this writing, there are less than 140 single-family homes, condos, and freestanding condos listed for sale on the IVBOR MLS versus 196 at this time in 2016.
This is the time of year when the number of properties for sale is generally at or near its lowest level. A significant number of listings expire annually at the end of December and many sellers take their properties off the market for the winter months when sales activity tends to slow.
However, since sales in January 2018 have moved along nicely, some sellers may be missing out by taking their properties off the market this winter.
Part of the reason that we have seen the inventory drop to its lowest level in several years is the unusually high rate of sales during the past two years. In 2016 and 2017, we had well over 400 properties closing escrow each year in Incline Village and Crystal Bay. This is well above the historical norm of the mid 300s that we saw in 2014 and 2015.
Realistically, 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 or a new buying mania grips the general public.
The decrease in the number of residential properties for sale parallels the decline in the local rental inventory. We have seen an increase in the number of small businesses starting up in our community.
Also, there has continued to be an influx of new residents relocating from California. This has created a greater demand for rental properties than just a few years ago. The cumulative effect of renting your property for two or more years can provide tens of thousands of dollars in additional income and that’s been attractive to many property owners.
So, while some rental properties fall into the category of “shadow inventory,” these properties will only come back on the market one at a time when each owner feels it is prudent to do so. Most rental properties carry one-year leases with a fair number of leases scheduled to expire in May or June each year.
These lease expiration dates coincide with the general seasonal uptick in new listings giving property owners a good opportunity to evaluate the market and determine what is best for their personal situation.
In the past year we have seen residential rents escalate significantly for the most desirable properties. The best properties are now commanding rents that are 10 percent and in some cases 20 percent or more above the rates they were leased for just one year ago.
Cap rates on residential investment properties are becoming more attractive than in years past. Although higher real estate sale prices make it difficult to achieve annual cash on cash returns of greater than 4 percent in most cases in our local market.
The inventory of houses, condos, and freestanding condos has declined significantly since the real estate apocalypse of 2009. We anticipate the inventory of houses will fluctuate between six and eight months between now and May, with condo inventory remaining at around two to three months until we get the usual seasonal surge of new listings in late spring and early summer.
Sabrina Belleci and Don Kanare are the owners of RE/MAX North Lake. Read their blog and find weekly stats on their website at http://www.InsideIncline.com.