Millionaire Watch: In Silicon Valley a Countdown is Underway
WSJ Oct. 24

IPO’s LinkedIn and Pandora “lockup” period is set to expire in the next two months, and we will likely see a resurgence of wealth in Silicon Valley, especially in the real estate market. Employees that owned shares prior to the companies going public are subject to a 180 day lockup period from the date of the IPO, prohibiting them from selling shared until the period expires.

LinkedIn’s market cap. is currently at $9 Billion and the current stock price is over $90 a share, double the $45 initial offering price. They employ over 1,500, and the expiry will free up approximately 50 million shares with another 44 million shares in the future. Pandora’s market cap. is over $2.4 Billion.

With social gaming leader Zynga and social giant Facebook likely to go public in 2012, we will see a new breed of millionaires emerging in the Bay Area home buying market. There are 215 companies waiting to go public- the longest list since 2001. Although the recent drop in the stock market and worries in Europe have delayed many IPO’s, the backlog will come to the table as market turbulence settles. Facebook will be the biggest IPO since Google went public in 2004, driving real estate sales in the South Bay and spilling over into desirable second home markets, like Lake Tahoe. 2006 marked the peak for home prices in Tahoe, and with prices off approximately 30% from their highs, luxury properties are relative “bargains” to buyers looking to own a piece of this pristine lakefront and skiing mecca.

This should come as welcome news to Tahoe sellers who saw a decrease of 4% in number of sales through the 3rd quarter of 2011, versus the same period in 2010. With some sellers pulling homes off the market in the winter, there will likely be a smaller inventory for buyers to choose from. This combined with an influx of cash into the hands of new buyers could give sellers the opportunity they’ve been waiting for this winter into 2012.

Panoramic Lake View Home in Incline Village

Larry Ellison’s real estate empire- he’s back on the hunt…
WSJ Oct. 21 The Nation’s Most Avid Trophy Home Buyer

Incline Village Ellison Estate Video
Ellison’s latest Lake Tahoe compound is well under construction in Incline Village, Nevada. Records show Mr. Ellison has spent $102 million in the last several years buying property, both on and off the market, to assemble three different parcels fronting the 191-square-mile lake. On his 7.6 acre assembled parcels in Incline Village, purchased over three years for a total of $58 million, Mr. Ellison is constructing a compound with more than 18,000 square feet of living space as well as a pond with an island, waterfalls and a tennis court with a pavilion, with 420′ lakefront, two piers and a private beach, according to plans submitted to Washoe County, Nev.

Bruce Olsen is the builder for the Incline Village project. The eight structures are architecturally pleasing and in keeping with mountain lodge style homes that are being built around the Lake.

According to the plans, the main house, three-bedroom beach house and “West House” are located on the side of the property closest to Lake Tahoe. The writer’s cottage and a clay tennis court and tennis pavilion—with a lounge, fireplace, fold-down bed and powder room—occupy the middle of the property. Closer to the street are another cottage and a caretaker’s cottage. A guard house is at the entrance.

Home Prices are Down, Inventories are Up- Buyers worry ”What if prices continue to fall?” When you’ve found a home that has the potential for everything you want, and the Seller is motivated to sell now, this home won’t be available next year when you’ve decided prices aren’t going any lower. There is an opportunity to find homes below market value in any market, so if the right home comes along and you can negotiate a fair price, don’t pass it by.

You Can’t Call the Bottom- The only way to tell when prices have truly “bottomed” is when they start going back up. By that time, Buyers that have been waiting to purchase will try to move quickly. Demand will increase, the media will flip-flop on their “doomsday” message and prices will start to improve. Some Buyers will look back to some lost opportunities, as soon as we’ve all realized we finally turned the corner. Others will pay more than they could have a year ago when everyone was afraid, and still counting on their stocks to rise.

Less Volatility- We’ve all watched the stock market gyrations in reaction to market news, fears, and even rumors where 5-10% swings aren’t uncommon any more on a daily basis, and extreme volatility is now “commonplace”. Many investors are purchasing real estate in their retirement accounts. Your stock broker won’t tell you that since they won’t make anything off the trade (unless it’s an REIT). You can’t take your family on vacation to your REIT.

Lowest Interest Rates EVER- Interest rates have dropped below 4% for a 30 year fixed rate mortgages for the first time, ever. HELOC’s are available below prime (I have a variable rate HELOC currently at 2.75% I got with no closing costs). If you opt for a long-term rate now, you won’t regret looking back to a missed opportunity if rates edge back up to 6%. If they continue to fall (there’s not much further to go), you can always refinance to a lower rate if you have equity in your home and good credit. In reality, if home prices drop another 10%, the savings to Buyers is nullified if mortgage rates go up by 1%.

Treasured Places- Tahoe will always top the lists as one of the most treasured locations to live, play, relax and enjoy. Families have come to places like Lake Tahoe for generations to swim and boat in the clear waters with consistently sunny, dry weather; hike, camp, climb and bike in the Sierras, and ski in one of the highest concentration of ski areas in North America- just 3 hours from the Bay!

Tahoe Land is a Scare Resource- 85% of the Tahoe Basin is publicly owned land, and will likely never be built on.  What developed land remains, will not “grow” in response to demand, so as with any limited resource, value will increase. Polulation continues to increase, and we see the continued tred towards migration to populated areas, especially on the East and West Coasts, the Bay Area included. Demand for property in Tahoe will only increase in the long-term.

Stable Economies- Silicon Valley and the Bay Area is the most valuable incubator for innovation, jobs and education in America. Where real estate values in many areas have languished, homes in Santa Clara county have not been hit as hard. Lake Tahoe Real Estate values have been linked to the Bay Area, as the trend towards vacation and second homes continues. Unlike many other vacation destinations like Hawaii, Vail and Aspen, or foreign destinations, Lake Tahoe is accessible. Tahoe is within a few hours drive of San Francisco and only 45 minutes from The Reno-Tahoe International Airport, with affordable “close-haul” carriers like Southwest Airlines. Accessibility to wealthy, working populations bodes well for Tahoe’s stability.

Cost to Rent vs. Own- Rental rates have grown and rents have increased, while the affordability of home ownership has gone down. Vacation rentals revenues have grown by 18% in 2010, and 4% YTD 2011 (Goldfish Properties), and many second home owners are recouping costs by offering their homes and condos as vacation rentals while they aren’t there. Tahoe is fortunate to have two strong rental seasons, both in Summer and in Winter (up through spring with late snowfall).

Property Taxes have Decreased- As home prices have decreased, so have assessed valued. Incline Village residents are being refunded $17 million in overpaid property taxes. In Washoe County, taxable values are reviewed annually independently of sales price. This is making home buying more affordable.

Real Estate is Tangible- What are your favorite childhood memories? Warm summer days boating with friends? Family ski trips to the mountains? Maybe you didn’t have that opportunity, but you do now. If you are lucky enough to have the means to invest in this market, or feel your investments are a little too weighted in the volitility of the stock market, consider this a unique opportunity to buy while others are selling. ”Think Different”- Steve Jobs embodied this. “Be greedy when others are fearful” Warren Buffet said this. You can put a price on happiness, and that price is now…”Negotiable”, just make an offer.

(Data compiled from Incline Village MLS, deemed reliable but not guaranteed)

The number of sales has dropped 12% year to date in 2011, with 169 total sales this year compared to 191 for the same period last year. Median pricing is mixed, with single family home sales prices down 6% and median condo sales prices actually up 7%. PUD’s, or townhomes, saw the steepest decline of over 20% in both average and median sales prices, and in number of units sold.

Of note, more than twice as many condos sold in the $500K to $1 Million range in 2011, than last year, with an 8% increase in square footage. Conversely, there were about 30% fewer homes sales in the over $1 Million range for single family homes, and practically no sales in PUD’s over $1 Million in 2011 (bar one).

It’s early to tell how many sales we’ll see through the fall, as it is typically a busy time for escrows. The new lows in interest rates and motivated Sellers who’ve dropped prices bodes very well for Buyers looking for opportunity.

We know that travelers are visiting Tahoe more, with record numbers of ticket sales for 2010/2011 at Tahoe Ski Resorts, and year over year increases in vacation rentals of 18% in 2010, and 4% to date in 2011 (Goldfish Properties). Recent news of the merger between Squaw Valley and Alpine Meadows gives Lake Tahoe the second largest ski resort in North America, and puts them on solid footing for a 2022 Winter Olympic Games bid. Northern Nevada is poised for economic growth, offering a favorable business climate with Nevada Tax Incentives and an unparalleled array of activities and entertainment. All this, within 3 hours of Silicon Valley and the Bay Area, major innovators and job producers who are lucky enough to call “Tahoe” their second home.

Here are the numbers for 2011 compared to 2010 year to date, for the same period…

Single Family Homes

A total of 73 homes have sold year to date, down 11% from the same period in 2010. Average sales price has dropped 21% while the median price has dropped by 6% to $775,000. Median price is a better indication of the market as it is not skewed by relatively high or low sales. Along with sales price, buyers have purchased smaller homes so that the actual price per square foot has remained unchanged at $312.

Days on market for listings has increased 28% to 357, so the “average” listing has been on the market for nearly one year. The number of short sales in the Incline Village MLS has tapered off to 31% from last year to just 11, and cash sales have increased by 9% to 35 year to date.

The highest price paid for a home year to date in 2011 was $9,050,000 for a beachfront estate at 935 Lakeshore. There has been 1 sale at $4.4M and 4 other sales in the $3M, all non-lakefront homes with panoramic lake views. Median price was $775,000.

In 2010, there were 4 lakefront sales- $7.7M, $8.9M, $11.3m and $11.8M, three of which were the old Walsh, or Trepp, estate which was sold as 4 separate parcels. There were 5 other sales over $3M, all non-lakefront with lake views. The relatively high number of multi-million $ sales in 2010 skewed the average sales price for homes nearly twice that of the median price, which was $827,000.

At the other end of the spectrum, there were 12 sales below $500,000 in 2011, the lowest price being $359,000, compared to 15 in 2010 with the low price at $330,000.

Condos

A total of 76 condos have sold year to date, down 8% from the same period in 2010. Average sales price actually increased by 4%, and median sales price increased by 7% to $348,000. We saw an increase in square footage for units sold, and price per sq foot remained relatively unchanged at $230.

Days on market for listings has increased 20% to 323 days, still under the benchmark set by homes. The number of short sales dropped dramatically, down 56% from 16 last year to just 7 this year. Cash sales dropped 25% from 44 to 33, a possible indication buyers are taking advantage of attractive mortgage rates (and qualifying for the loans).

The highest price paid for a condo in 2011 was $2.25M, a three level lakefront unit at Crystal Bay Cove with a common pier, buoy and unobstructed views (I represented the Seller in this transaction.) There was one other unit in this complex that sold for $1.4M, the only other condo sale in 2011 over $825,000.

In 2010, there were 3 luxury condo sales over $1M, including a lakefront unit at Crystal Shore Towers at $2.4M, a lakefront at Crystal Shores West for $1.85M, and a non-lakefront at The Pointe luxury lake view units for $1,080,000. The remaining sales were all below $879,000 for 2010.

The lowest priced condo sale, and only sale under $100,000 in 2011, was a unit in Pine Brook for $70K. In 2010, there were 3 sales in the upper $90K’s that sold, all in Pine Brook, which is primarily a medium income capped complex. We saw more than twice as many sales in the $500K- $1M price range for condos in 2011, accounting for the bounce in average and median prices.

PUD’s (Townhomes)

A total of 20 PUD’s have sold year to date in 2011 versus 26 for the same period last year, a decline of 23%. Average price has dropped 21% and median sales price also declined 26% to $557,500. Square footage also dropped for the units, with a relatively steady $235 per sq. ft. price paid in 2011.

Days on marketing for listings remained stabile at 235, short sales remained unchanged at just 4, and cash sales dropped from 8 in 2010 to just 3 in 2011, possibly due to attractive financing offered.

There was just one sale over $1M in 2011, an Incline Creek Estates unit priced at $1,121,001, whereas in 2010, there were 7 sales priced from $1M to $1.75M. This would account for the declines in both average and median sales prices for PUD’s.

On the low end, there were 5 PUD sales under $300K in 2011, compared to just 2 last year, with the lowest price being $240K for a unit in Tyrolian Village.

Here’s the Data:

Squaw Valley and Alpine Meadows FAQ Squaw Valley USA – Lake Tahoe Ski Resort.

Follow the link for info for passholders.
Potential purchase of White Wolf to connect the two ski areas.
Squaw and Alpine would be the 2nd largest ski resort in North America- great news for the Tahoe region taking a run at the 2022 Winter Olympics!