The Bay Area Influence to North Lake Tahoe’s Real Estate MarketDylan Griffin, February 16, 2013 in Real Estate
While Lake Tahoe is a natural landmark known throughout the world, the region has always existed as a drive-to playground for the Bay Area. Just an easy 3 hour drive up Interstate 80 allows for frequent visits of a week or weekend as opposed to other destination markets that require a greater time commitment to justify the travel. As such, economic trends within the Bay Area will often permeate the Lake Tahoe region with only a small lag involved. Specifically, trends in Bay Area real estate create an attitude of confidence (or lack thereof depending on market conditions) for Lake Tahoe as we are dealing with the exact same consumers.
Of course certain elements hedge against a direct correlation. Primarily, Bay Area residents purchasing in Lake Tahoe are generally doing so as a second or vacation home thereby using disposable income or wealth. This would be indicative of a demographic less impacted by economic cycles. Similarly, there exists only a finite supply of residential options in Lake Tahoe thereby altering the supply balance when compared to the Bay Area. To put in plain terms, if Danville doesn’t have a great option for a primary home, the consumer can continue their search to Walnut Creek, Concord and further outlying areas until a good match in found. In Tahoe, the market strata is much more limited.
In good times, as consumers see values in their primary home neighborhoods accelerate, it provides confidence that an investment in Lake Tahoe is safe, even if the driving factor for such a purchase is an emotional return, (time with family) versus economic. As values in the Bay Area have been on a decisive rebound since approximately September, 2010 Tahoe entered the 2011-12 winter season poised for a strong rebound. Unfortunately factors beyond economics impacted this recovery as a historic lack of snow kept many of our consumers away in a time that is typically productive for real estate sales. With a dry winter, both literally and figuratively, it was not until the second half of 2012, when consumers returned to the region to enjoy the less-weather-dependent summer season, that we were able to experience acceleration in the market — and accelerate the market did.
• 1st half 2012 luxury buyers missing due to low snow resulting in clean up of lower end inventory
• 2nd half saw pickup in both total sales and values
With rapid appreciation in certain Bay Area communities, consumers appear more confident than ever that real estate is a safe investment. Articles like this one, SF Gate Article, are highlighting median home price growth of up to 32% in a year. The data shows that from December, 2011 to December, 2012 median home sale prices rose from $335,500 to $442,750. This is the highest jump in over 25 years.
As we look toward the remaining winter season with already more snow on the peaks than at any time during the last winter, Tahoe appears poised for a rapid return to prosperity given the rise of value in our feeder market.