Jim H, Home Buyer in Oakland, CA

What is the price trend of vacation homes in South Lake Tahoe, CA, over this year and what is it expected for?

Asked by Jim H, Oakland, CA Fri Oct 19, 2007

next year? Also, what this the expected trend of vacation rentals (number of rentals and cost of renting a vacation home) going into this holiday season and into 2008?

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Jim, since peaking in 2006, Tahoe RE has lost 50% of its value, and Tahoe RE market conditions remain bearish for a number of reasons:

- Euro zone continues to slip into recession
- Euro zone bailouts will saddle world growth with huge new debt
- Massive U.S. debt will probably reach $20 trillion by 2015
- Huge remaining backlog of bank-owned "shadow inventory" homes waiting to be listed
- U.S. growth is slowing, with 2012 now forecast to be under 2% GDP growth and unemployment back up to 8.2% from 8.0% last quarter
- Tahoe-area economy remains dismal with >15% unemployment (some say 25% is a more realistic number)
- A UNR study says Tahoe economic conditions will not improve for many years.
- Underwater mortgages are still increasing - now fully 1/3 of all U.S. homes are underwater. In California, the number is 31% and rising. In Nevada (Reno), it's a staggering 61%.
- Add to this a myriad of other economic woes that continue to kill any hope of a housing "recovery" for years to come.

Nobody can predict the future, but the Shilling study notes that underwater mortgages will continue to rise, from today's 32% to over 40% by 2014. The RE market simply cannot recover until underwater mortgages drop to roughly 10-15%. The Case-Shiller graphs also suggest that we have another 15% RE value drop (or so) coming by 2015, likely followed by price stagnation thru 2020. Others are less pessimistic, but no economist is RE bullish (except Lawrence Yun at the National Assn of Realtors.)

So, Jim, to answer your question: while sales will start to pick up a bit, the price forecast of SLT RE is clearly down (or at best flat) for at least another 3-4 years. Tahoe will continue to see short-term price jumps now and then, but the long term average trend line is what's important for buyers.
1 vote Thank Flag Link Tue Jun 26, 2012
Hi Jim!
Right now is a great time to purchase a vacation home. The market is moving quickly. Right now there are several vacation homes in escrow in my office. I have to be honest with you that in Lake Tahoe there is a wide price range it goes from about $100,000 to skys-the-limit. But, the price range that is moving very rapidly is from about $200,000-$350,000. Now, for next year I have heard different things. An economist came and talked to our company and said basically that things are going to get worst before better. So that is good for buyers because that means that prices will be going down. But, when it comes to forcasting trends I can only go by statistics just like you. http://www.nadiajoneskirkman.com
1 vote Thank Flag Link Wed Aug 18, 2010
Currently 70% of all buyers in the South Lake Tahoe area are second home buyers. Many of these new homeowners will be looking toward vacation rental income as a means to subsidize the cost of their investment. The median home price for a three bedroom, two bath home with 1,400 SF is in the mid $400,000 range.
Another up and coming trend is the purchase of shares of ownership. These shares generally range from quarter to eigth shares. One can find these types of ownership through private home owners or through established resort companies.
How much rent one might pay for a vacation rental varies greatly depending upon the location, size of the property, amenities and location. For example, a three plus bedroom home with a game room and hot tub located close to the beach or ski resort will do quite well. Especially if the decor is that of a contemporary mountain home. We call it the "Tahoe-Feel."
We have been tracking the values of the various neighborhoods on a month-to-month basis and have been finding that the reduction in values appears to be slowing down and leveling at this time. These statistics are available to the public under a section referring to Neighborhoods. As of December 31, 2007, the median home price is approximately 8% lower than that of the same time one year earlier.
We have been tracking the values of each neighborhood
Web Reference: http://homeintahoe.com
1 vote Thank Flag Link Sun Jan 13, 2008
I think South Lake Tahoe, both rental and resale will continue to grow. Heavenly Ski Resort area is undergoing a lot of renovations, improvements to make South Tahoe a destination spot.

There are just a lot of disposable income in the Bay Area, which is just 3 hours away from south Tahoe; weekend skiing is almost a household pass time (at least where I am).

Of course, a specific year's winter rental will have a lot to do with the amount of snow you get. However, with man made snow improving every year and with the seemingly tradition of spending winter in Tahoe. I think you are pretty safe in investing there.

Do be careful when you try to figure out the profit or rental income you will be getting - if you purchase in a development and the place is managed by property company, their management fee can be as high as 50% of rental. There will also be other costs associated with seasonal rentals. Think through the numbers before your purchase.

Sylvia
1 vote Thank Flag Link Fri Oct 19, 2007
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
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p.s., vacation rentals are a dime -a dozen here, most of them are on a property management program moreso to comply with IRS regulations than to generate income...there are more than enough to go around...book early to ensure a fabulous vacation...the lakeviews & killer locations go 1st! If you are considering a vacation rental investment you must go super small or super big to make a buck! We have a surplus of 2-3 bedroom homes. A studio, 1 bd, loft does well as does a 4 BD + home with extra amenities such as hot tub, boat dock, pool table, easy access to parks, tennis courts, pool, etc....
the # of rentals will remain steady, but will be competing with more timeshares, quarter shares & Redevelopment rooms as they continue to build...rents should also remain the same as last year with a small inflationary adjustment up...(gotta try to recoup visiting the gas pump somehow, right?)...
0 votes Thank Flag Link Tue May 6, 2008
If you haven't already bought a second Lake Tahoe home/vacation investment there is no better time than now!

WHY? Top 10 Reasons:

1. Interest rates are still at historically low levels. Buyers are taking advantage of this & buying, which is helping stabilize the surplus of homes. What an awesome time to be a buyer!!!

2. The Conforming loan rate cut-off is now based upon 110% of the median price, setting all of El Dorado County at $580,000, thus giving buyers MORE buying power at lower rates, BUT ONLY through the end of this year unless further legislation is passed! Take advantage of this opportunity now!

3. There is no crystal ball to predict the future, but, we may be "at the bottom" of the market now. There are currently deals priced at fair market values of 3-5 years ago! There are a small handful of bank owned/foreclosed properties, but not many, in the Lake Tahoe area. Eventually, God-willing & with a successful Presidential election, real estate prices will normalize & then continue through a regular cycle.

4. For quality of life & a quality lifestyle investment, Lake Tahoe is an ideal choice for not only Northern California buyers, but any one in the World! Approximately 80% of the Lake Tahoe home owners are secondary/investment purchases. Could this many people be wrong?

5. Lake Tahoe continues to advance, redevelop, grow & offer a true World-class tourist destination all while being environmentally conscientious & guided by the Tahoe Regional Planning Agency.

6. For my job security! Kidding, actually, I always advise clients to think through how long they plan to hold a Lake Tahoe property! Timing is everything! If you intend to keep your Tahoe home for at least 2-5 years or more, NOW may an ideal time for you to buy. Historic statistics have revealed an approximate doubling in California real estate prices every 10 years for the LAST 100 years! What goes up must come down...& vice-versa! Tahoe vacation homes are a pretty solid long-term investment.

7. Lake Tahoe is a dream come true for many investors who utilize tax-deferred exchanges! What a beautiful place to "plunk your money down" for a while! Whether you are an avid skiier, boater, hiker, biker, casino gambler or someone who just appreciates the peace & quiet of the National Forest setting Tahoe is situated in, now is an ideal time to invest!

8. Location!

9. Location!

10. Location!
0 votes Thank Flag Link Tue May 6, 2008
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