Real Estate Numbers with an Agenda: How that Hurts the South Lake Tahoe Real Estate Market.

Or How to Cut Through South Lake Tahoe Real Estate Double Talk through Agent Eyes.

The article below about a recent spotting of the not-rare-enough High Sierra Real Estate Jackass suggests it’s probably a good time to review the abc’s of reporting real estate numbers again.  As you know, accurate reporting is most important for the health of our South Lake Tahoe real estate market.

Sometimes though, and it’s a drag for all of us, the numbers get “skewed”, and we think it might be helpful to explore how and why that might happen. Hopefully this little exercise will help you better spot the difference between accurate real estate statistics that are relevant to your South Lake Tahoe real estate market, and those out of the “skew” pot which are not.

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Once understood, this might also help one better identify a High Sierra Real Estate Jackass, which all too often has an uncanny ability of blending into, and hiding among us. It might also help in recognizing the real estate skew that spews out of one.

If you have not read the article below, please do. It discusses an agent turning into a high mountain burro over his exception with us for reporting in the Tahoe Daily Tribune that there have been no Tahoe Keys single homes sold in 2008 to date. We were told in menacing, stentorian hee-haw that we reported this fact at exactly the wrong time!

Why would the agent say that? What would be the “right time”? Why would an agent feel threatened by real estate market reality? Obviously our report conflicted with the agent’s agenda, but what could that be?

As background, lets first understand this basic principle of real estate practice. Getting listings is the holy grail of our business. An agent who gets more listings makes more money that one who gets less.

It’s the same for brokerages too. The broker that gets the most listings does better than all others. Getting listings is the name of the game.

All good agents and brokers know this; listings are fundamental to our psyche. The basic, underlying foundation of all agent and broker advertising… is to get more listings.

Yet, real estate advertising in South Lake Tahoe is somewhat problematic. Some 65% of our homeowners don’t live here, which means there is no common newspaper, television station, program or news media that reaches them. One has only direct mail as a sure means of targeting all South Lake Tahoe homeowners. (Getting them to read it is another matter.)

If an agent uses a combination of direct mail, the newspaper and/or the local real estate magazines as their advertising mix to get more listings, the first, and easiest, thought to best do that is to provide as many reasons as possible to tell an owner why he or she should sell now, and then why the agent is the “best” to do that for them. (We think this approach is nonsense, and misleading, which we’ll do another article on subsequently.)

Most agents will conclude that the two best reasons to encourage an owner to sell… and thus get the  listing… is to show that prices are up, and the market is booming. “Sell now and you’ll make more quickly” would be that message.

Now, we don’t know for sure if the agent who got so offended with us has an agenda or not. He could have turned burro for any reason, but one possibility seems obvious to us. He perceived that our report about the lack of Tahoe Keys sales threatened his ability to get a listing, and it’s our bet that it was one in the Tahoe Keys. (See, rocket science isn’t all that hard.)

We don’t want to get off subject here, but not all home sales occur at the very top of a real estate market. Homes sell in both buyer’s and seller’s markets, when markets are expanding, contracting or correcting, and even so those in the Tahoe Keys (see “The Tahoe Keys Right Now” coming soon above).

There are many compelling reasons for people to sell a home. There are those too, and increasingly these days there are a lot more of them, who think that reasonable market yield is plenty enough. If a family has a desire, or need to sell, we believe one good reason to do that right now has to do with when the home was purchased.  If one has owned a South Lake Tahoe home since 2002, if it sold today the owner can expect an average of 86% more than he paid for it. (Since Jan.1, 2003, 251 homes have sold in the Tahoe Keys, which means almost 80% of all Tahoe Keys homeowners have owned their homes since 2002.)

Now we’re back on point. An agent’s, or a brokerage’s, advertising message to get listings in a Seller’s market is certainly less challenging than that in a Buyer’s market, granted. In our current buyer’s market, all one need do to be helpful to homeowners is work harder, work smarter, not settle for what’s easiest, know the market precisely, and tell relevant market truth to anyone who asks… no matter what. (If an agent does that, they will show, rather than tell, why they should be considered for the listing.)

 When a Real Estate Number Doesn’t Make Sense :
If one sees the reporting of a real estate statistic in the newspaper, or in direct mail, that seems to run contrary with what you think might be true, it probably isn’t. Such a situation at least calls for a closer look and keener understanding of what the number actually says, or doesn’t say. Lets look at a few recent examples which we think will be helpful to you in both dissecting and appreciating differences in real estate reporting.

For the last two years, the national news media has saturated the country with news about the US housing industry. And rather than package the news as “good for buyers”, it has been consistently categorized as “bad” for the housing industry as a whole. Predominantly this news has been reported on cable news stations and on news and economic resources throughout the internet.

Even more astoundingly, the sensationalistic housing industry news these days is based on comparing current market conditions with those of early 2005, the highest point ever in terms of both value and demand. It’s like comparing the best of times… to anything else.

Now lets understand the fact that 80% of all US home buyers use the internet first as a real estate resource. Another way of stating this is 8 of every 10 home buyers shops for a home first on the internet. Lets also appreciate that these people also primarily get their news from both cable television and the internet, which they do. This means that South Lake Tahoe home buyers are seeing the same national real estate news that you are, and that collectively they are an extremely informed and tech savvy lot as well.

Lets also again remember that 65% of South Lake Tahoe homeowners, who were buyers first, do not live here. This means the South Lake Tahoe home buyer is even more prone to shop for homes on the internet than most. As such, they are also more likely to getting real estate news off the internet too.

So, what do you think happens if a potential buyer sees something in the online version of the Tahoe Daily Tribune, or in a piece of direct mail, coming from an agent or brokerage in this market climate that reports the South Lake Tahoe real estate market is up; or that prices have increased; or has ambiguous, irrelevant information that suggests so?

The smart, tech savvy internet home shopper knows better. Rather than being attracted by real estate skew spew pooh, they are taken aback from it. Insulted by it. If we were them, we’d stay away. And we bet you would too. And that’s exactly what a potential buyer, perhaps your potential buyer, does too.

And this is the very point why it is so important to make sure all real estate reporting is accurate, relevant and specifically qualified as to what is, or is not included, in the report. Buyers must understand that real opportunity exists up here right now. And telling them that prices are up, when they aren’t, or our market has stabilized, when it hasn’t, and demand is up, when it isn’t, simply won’t cut it.

 Now for the Two Skew Spew Pooh Examples :
On April 7 of last  year, a real estate agent and broker reported in the Tahoe Daily Tribune that:

•  “Tahoe” home prices were up 20% in the first quarter compared to the year before, 

• The average price of a “Tahoe” home “soared” to $1,400,000 in that same time period.

Even more amusing was the broker who reported this also continued, “I think we going to see it go higher.” (Turn off the brights, please!)

Do you see anything here that looks suspicious? Anything odd, or doesn’t seem right? Anything that might not be relevant? We saw it instantly, but the problem is the public for the most part does not look at things like this through professional real estate eyes.

First lets look at the word “Tahoe” used in the article. You know, the place where homes average $1.4M each. But where is it? We all know there’s a lake named Lake Tahoe, but there is no town or community named “Tahoe”, or “Lake Tahoe” for that matter. In other words, no real estate market exists by that name.

In fact there is no central resource to gather “Lake Tahoe” real estate statistics or information. Real estate around Lake Tahoe is served by 4 different multiple listing services,  those that serve:

• (1) South Lake Tahoe, CA,

• (2) Stateline, NV from Glenbrook to the CA stateline,

• (3) Incline Village and

• (4) the other side of the lake including Truckee, Tahoe City and Tahoma.

The only possible way to get a “Tahoe”, or a “Lake Tahoe” number is to combine, or average the data from all 4 multiple listing services. More importantly though, is real estate market data from each MLS is separate and autonomous, and home values in each one have no bearing, or relevance, to that of any other. In other words, Incline Village home values have no relationship to South Lake Tahoe, CA homes that is meaningful.

So, is the claim that “Tahoe” home values average $1.4M relevant? Does it have any bearing  or helpful information for the South Lake Tahoe, CA home buyer or seller? Hardly, and we’re in a narrow range here, one that starts at “zero” and runs to “none whatsoever.”

Is the claim accurate? Maybe, probably, but what’s the point? More importantly is this question: how do you think information like this affected potential South Lake Tahoe, CA home buyers and sellers last year? Is it possible that the reporting of such a high avenge price, even if it was accurate, was misleading? That it added to buyer’s perceptions that the South Lake Tahoe real estate market remains over inflated? Or added to a Sellers insistence to list a home at a price they will never get?

Lets look at the next bit of information in this piece of real estate improper propaganda, the one that claims that “Tahoe” home prices increased 20% in the first quarter of last year compared to the year before. We’ve already discussed that  “Tahoe” is a market that doesn’t exist, so lets take a look at the first quarter in both South Lake Tahoe, CA and Stateline, NV. (The broker who said it should be ashamed of herself.)

The charts above are the actual sales results in both South Lake Tahoe, CA and Stateline, NV for the first quarters of 2006 and 2007. If one notices, there is no 20% price increase anywhere. Yet your trusted real estate broker reported such… in the South Lake Tahoe newspaper! (There was an actual 4.2% decline in South Lake Tahoe, CA, and a 7.8% increase in Stateline, NV in the first quarter of last year, which was a direct result of two exceptionally high-end  NV sales… that would never have any relevance to mainstream South Lake Tahoe buyers and sellers in the slightest.

As the chart below indicates, there was a 2.2% median sold price increase in Staetline, NV in 2007. (Seems like it didn’t go "higher" as the broker predicted after all.) As one will notice, we’ve had a 9.2% decline in the 180 days. (Which is very good for buyers.)