Big Bear Real Estate Is There A Crash Coming In November?

Before I get into this newsletter, I want to bring up two items.  First the second quarter stats are out.  I have a new format with a table to help explain some of  the graphs.  Let me know if you like it or if you have any suggestions.  Second, I am switching from the blog to having everything on the website we still have to get the property search function set up better and a few minor tweaks. Hopefully it will be a better experience for you.   Let me know what you think or what changes you would suggest.  

Now let’s get into the Big Bear Real Estate Market.  From the last two newsletters we know that we were in a transitional market.  Now we are in a declining market.  Which we knew from the previous stats and graphs that was going to happen.  I would suggest looking at the new second quarter stats to get a feel for the numbers. Look at The Total Big Bear Market stats for properties in the 0-$800,000 market and The Total Big Bear Luxury Market for properties $800,000 and up.  So, if we are in a declining market now why do I have a headline of a crash in November?  First let’s look at our current market and then I will get into the problem with November.

So how did we get into this declining market? We know the reason. Declining sales.  What causes the declining sales?  The war, Inflation, Bubble Burst (all bubbles don’t last forever), Market Correction, Interest Rate increases and Second Home Market. 

What were the indicators this market was coming. Sales were down, remember when I reported reduced sales for July and only 9 pending sales for the month of July. But by August 5th we had 12 pending already. I was hoping for at least 25 pending by the end of the month but only got 20. So we were seeing reduced closed sales and pending sales but we hadn’t see an increase in Listings or noticeable sold price reductions.  Well, that has changed in the second quarter.  Look at the tables and graphs in the The Total Big Bear Market stats for properties in the 0-$800,000 market and The Total Big Bear Luxury Market for properties $800,000 and up.  You will see that in The Big Three Areas (Total Big Bear Valley, Big Bear Lake and Big Bear City) all three areas averaged prices that went down and in 3 of the 5 sub areas prices went down. What is also noteworthy is that on September 1st we had 355 listing in the Big Bear Area.  Remember a few months ago when I reported we were averaging 54 - 65 listings on a given day. So where does all this lead us now.  The economy isn’t going to change overnight, so there is going to be international and national influences that are going to put pressure on the Big Bear Real Estate Market for prices to continue to go down.  This is normal in a economic down turn. 

Now let’s get into November.  One of the hottest topics in Big Bear in the last 2 years has been the STR (short term rentals).  Well, that hasn’t gone away. The right for people to do what they want to do with their property is a very hot situation.  This is where we are now with STR’s.  The people who wanted to reduce the amount of STR’s got on the November ballot for residents to be able to vote on reducing the number of STR’s to 1,500.  Depending on who you talk to there are about 2,500 in Big Bear now.  So, until the number of STR’s gets to below 1,500 the city of Big Bear Lake won’t issue any more permits.  This reduction is supposed to take about 7 years.  If this passes these are some of the things that some people are afraid will happen. First in a down economy many people won’t be able to buy a cabin in Big Bear and use it for a STR to help pay for the cost of owning the cabin.  Because of this you will have even less buyers than we do now, which puts even more pressure on prices to go down.  Also, you will have less tax money from the rentals that would have gone into the city. The people who will really need the money so they don’t have to sell will rent their place out illegally, so the city still won’t get the tax money and these owners won’t be subject to the restrictions that the city has passed.  Things like noise ordinances. If the city tries to enforce their permit restrictions on these owners, the owners will fight back with lawsuits which is going to cost the city even more money.  If there are less rentals during the peak summer weekends and during the snow season there won’t be as many places during peak times for people to stay, so they won’t come up here they will go someplace were there is lodging.  That will hurt the local economy, the job markets and the amount of taxes the city gets.  If the amount of jobs are reduced people won’t be able to convert their cabins to long term rentals.  Unless they are able to rent their cabins out to section 8 renters.  Most section 8 renters are not skilled labor and earn a small living, that is why they need rent assistance.  Because of their lack of income, they don’t contribute very much back into the area economy.  With less income coming into the city and community you will see a reduced availability of services from the Fire Department, the Sheriff’s Department and the local hospital may even close. If it passes will have to see how many of these factors come into play and to what degree. When you combine all or part of these factors prices are going to go down.  How much will have to be determined. 

As I wrote about several times the city council and market forces will take care of the STR situation.  And they have.  We have a higher vacancy factor now in the STR market which will take out some of the STR cabins.  The City Council has passed laws for noise levels, made it so owners that have bad renters often, will lose their permit to have a STR.  The city controls the hot line for problems now and has two compliance officers with one being on duty 24 hours a day.  

When you combine all these factors with all the influences, international and national mentioned above and the Problems with Measure O, prices are going to go down even more.  I don’t want to seem like a doom and gloom type of person. But all these things are possible to some degree. Is the Big Bear Real Estate Market going to collapse? No of course not. But there is going to be some kind of additional influence for prices to go down from Measure O if it passes. 

I will keep you posted on what the market is doing between now and November.  It will be interesting.