Affordable housing woes: Are Tahoe locals being priced out of the real estate market?
Special to the Tribune
There is a good-news, bad-news scenario unfolding in the Lake Tahoe real estate market. For current homeowners the news is undoubtedly good. Single-family home sales have been steadily increasing in value since February 2013, according to South Tahoe Association of Realtors.
In February 2013, statistics showed the median value of a single-family home in South Lake Tahoe at $254,500. Figures released for June 2016 reflect it at $384,000, an increase of $129,500. Tahoe Sierra Board of Realtors lists the June 2016 median for a single-family home in Truckee at $547,500, as opposed to $492,000 in February 2013, up $55,500. Numbers can fluctuate around the lake from month to month due to sales volume and sold pricing. But overall the news is rosy and values continue to rise.
The bad news, however, is for first-time homebuyers. Many are locals who have lived in Tahoe for their entire lives. Others have moved here, secured a job, and are now ready to purchase a house. But elevated prices have placed the proverbial carrot beyond their reach in far too many cases.
Jennifer Fortune, Realtor with Chase International South Tahoe Realty said, “Many of my clients feel they’ve missed the boat. I often hear them say they will need to wait for another downturn. The market turned around at the end of 2012. Some wanted to buy then, but waited. Now they’re sorry.”
Second-home ownership plays a role in the current circumstances. As of the 2010 census and reported by the Tahoe Metropolitan Planning Board, seasonal usage or second-home ownership is at 44 percent in the Lake Tahoe Basin. North Shore has the largest number at 52 percent, while 39 percent of South Lake Tahoe’s homes are second homes. These vacation home sales drive prices up as buyers from elsewhere, many the San Francisco Bay Area, overbid for the houses they want. This was never truer than in the mid-2000s when many Tahoe homeowners sold at inflated prices, creating a bubble.
“Ninety-five percent of my business is vacation and second home-buyers,” Fortune said. “In fact almost all of it is. Once in a while, you will find a Tahoe local who makes an effort to sell to another Tahoe local, but not often. Buyers come to Tahoe to purchase a vacation home and often pay cash. There are so few Tahoe buyers that can afford to do that.”
In the area of new builds, there is also a shortage of construction workers. Many left after the bubble burst to seek work and homes elsewhere. This contributes to higher costs for homeowners.
Androo Allen, president of the Builder’s Association of Northern Nevada, said, “Wages aren’t growing at the speed that the cost of living is growing in terms of housing. This is a concern for a healthy real estate market.”
Renting is an option for many, but has its own set of issues.
Julie Lucksinger, property manager at Lake Valley Properties, said, “Rents have been increasing steadily at the rate of about 10 percent per year in the last few years. An average rent for a single-family home is around $1,600.”
When asked if she thinks rents will continue to rise, Lucksinger replied, “I think so and eventually locals will be priced out of the market, but I hope not.”
She added, “Limited inventory is an issue, too. It’s very low and tight, and that makes it hard on families.”
She said some families are being displaced due to the real estate market’s improvement.
“One family I’m working with is being forced to relocate after 18 years. The owners are selling. We’re trying to find them something, but it’s been difficult. Other families are doubling up in order to make things more affordable.”
As for leases, in order to lock in a price, Lucksinger said, “A one-year lease is pretty standard.”
There are many other contributing factors that make housing difficult for locals. Minimum-wage workers make up a large segment of Lake Tahoe’s workforce. They are compensated at $10 an hour in California and $8.25 an hour in Nevada. California Governor Jerry Brown signed in April a “living wage” bill to increase the minimum wage to $15 an hour, but it is a gradual increase that won’t be fully implemented until 2022.
Low-wage earners, another large sector of Tahoe’s workforce, make more than minimum wage but not enough for home ownership. The U.S. Census Bureau reports that the median household income in South Lake Tahoe is $41,380. To break that down even further, the median wage for men is $24,503, and for women it is $20,484. Considering the fact that a down payment of $76,800 is needed, 20 percent of the sales price for a median home in South Lake Tahoe, it is difficult — if not impossible — for these workers.
Let’s do the math using South Shore’s median single-family home price of $384,000 and its median household income of $41,380. A mortgage payment on a home at this price point would be approximately $1,830 at a 3.5-percent interest rate — including taxes and insurance, as well as factoring in a 20 percent down payment of $76,800. An income of $41,380 would net a worker approximately $3,000 in his/her paycheck; more than 60 percent of the household net income would be consumed by mortgage payment alone.
Lake Tahoe’s employment picture has been problematic, with South Lake Tahoe being the hardest hit. “Measuring for Prosperity,” a report compiled for the Tahoe Prosperity Center (for which Heidi Hill Drum is executive director), reveals there has been modest recovery in job growth since 2013 — but it has not been groundbreaking. Between the years of 2003-13, the report cites 5,500 jobs were lost throughout the Tahoe Basin, 5,000 of them in the tourism industry. Although the unemployment rate has improved from the double-digit numbers seen during the recession, many workers remain underemployed with seasonal and/or part-time jobs and no benefits.
So, what will locals do? It’s a conundrum for sure. The median home price in Carson City, Nevada, is listed at a more affordable $240,200. But according to Zillow, a 7.7-percent increase is predicted there over the next year.