Premium Value Placed On New ProductTMR Team, February 8, 2017 in New Product, Premium Value, Real Estate Trends, Tahoe-Truckee
Among the more notable dynamics fueling a sensational 2016 for Tahoe-Truckee real estate, was the premium value placed on new and innovative product. The stereotypical Tahoe home may be a 1970’s era A-frame with a filtered lake view within an easy drive to any number of mountains or trails. While this romantic notion remains, the functional obsolescence of these older homes has grown until finally hitting a tipping point in recent years. With overly restrictive regulatory requirements around redevelopment in and around the Tahoe Basin, this stock of homes has not kept up with consumer tastes.
While older homes have continued to trade, more modern vintage homes have found greater traction, particularly when found in newer, amenitized resort communities. New homes generated nearly double the value of homes built in the most recent 15 years and almost 400% more than older vintage properties.
Demonstrating that these are not simply larger homes being constructed, price per square foot is commanding premium of nearly $100 for new product. Also interesting to note a quickly diminishing return on this premium for inventory up to 17 years versus even older.
Interestingly, days on market and the discount rate from asking price were consistent throughout each age class.
An obvious example for this trend is found in comparing sales in Martis Camp, a very successful, new resort community to Tahoe lakefront property; the traditional bell weather of luxury for the region. In 2016, Martis Camp sold double the number of residential units at roughly the same price as lakefronts. A less obvious example can be found at Lahontan; a community launched in the late 1990’s whose product is neatly divided between pre- and post-recession.
In 2016, 26 homes traded in Lahontan. Of these, there 4 offered as new construction yielded $700 per square foot versus $474 for used inventory; a 47% premium. Average price varied from $2,361,250 for new to $1,959,975 for dated product; 20% higher.
While building costs have continued to escalate, the premium available for new product continues to offer opportunity. New architecture, modern interior design and a fresh start on deferred maintenance are highly valued assets for today’s consumer.