Featured Trades: (THINK AGAIN BEFORE BUYING THAT VACATION HOME)
3)Think Again Before Buying That Vacation Home.If you’re entertaining buying a vacation home any time soon, I’d think again. In my annual review of the residential real estate market in the High Sierra mountain hamlet of Incline Village, Nevada, and I am sad to report that antidepressant addiction among realtors there is still at epidemic proportions.
This is the town on the shores of sparkling Lake Tahoe that is the home to the Godfather III, former junk bond king Mike Milliken, the mythic arms dealer Adnan Khashoggi, and a high school with one of the worst drug problems in the state. Devoid by edict of the down market fast food chains that afflict most of America, Incline boasts two municipal golf courses, where at 6,300 feet, the air is so thin that your drive travels an extra 50 yards. If you want a Big Mac, you have to drive down the road to California, if the road isn’t blocked by snow.
Incline is also a Mecca for libertarian millionaires drawn by the absence of a state income tax. Unfortunately, they also possessed the financial sophistication to buy trophy waterfront homes, extract cash-out refi’s all the way up, invest the proceeds in the stock market, and lose it all in the subsequent crash.
The result has been a meltdown of Biblical proportions in the housing market. Of the 8,000 homes in the village, 400 are for sale at distressed prices and another 400 or more discouraged sellers hang over the market. Brokers report a brisk business in short sales, foreclosures, and sales on the Washoe County Court House steps at prices down 60%-70% from the 2006 peak.
Jumbo financing is now an extinct species, unless you’re happy to pay a 200 basis point premium over conventional loans. So the high end market has ceased to exist. One fabulous property on tony Lakeshore Drive, with every imaginable upgrade (a heated driveway, beveled glass windows, an elevator, and a fireplace in the bathroom?), originally listed at $14 million and sold for $4 million. Only cold, hard cash talks here. But high net worth individuals hate tying up capital in an illiquid asset when more attractive options about. Precious metals coins are especially popular in the Silver State.
Some properties have been on the market so long that snow drifts have collapsed balconies, the local wildlife have moved in, and prospective buyers are scared away by offensive odors. Break-ins by black bears have become a serious problem, leaving basketball sized poops on the living room floor and finally answering the eternal question, ‘Does a bear shit in the woods.’ Abandoned homes see their pipes freeze and burst, causing irreparable damage. In Las Vegas, foreclosed homes can be easily spotted from the air by their dead lawns and green swimming pools. In Incline the ‘tells’ are the ten foot high mountains of frozen snow dumped there by snow plows. I guess all real estate markets really are local.
Owners used to be able to cover half their annual carrying costs by renting out their properties during Christmas and New Year’s, and for a few weeks in the summer. Unfortunately, that market has collapsed also. There are not a lot of high rollers willing to fork out $10,000 a week for a vacation rental in a recession. An earlier start to the school year has wiped out a good part of the prime summer months.
The only consolation is that conditions are much worse in Las Vegas. The optimists concede that prices could stay down for another decade. The pessimists can already be found at the bottom of the lake with the Godfather’s Fredo Corleone.