No matter where you live in the United States currently, there is a narrative that home prices are astronomically high and no longer affordable. That is definitely a conversation that is happening in the South Lake Tahoe real estate market as folks feel that the long term vacation rentals has created a lack of affordable housing in the local area. California specifically had a median sold price of $589,770 as of December 2019. When looking at South Lake Tahoe’s median sold price in December of 2019, it was $475,000. There is a lack of available housing which has caused prices to go up. As we all know, when supply is low and demand is high, prices do go up. It is Business 101. It doesn’t matter what the item is, whether it is a popular toy, a vehicle or house. What is important to take in, when discussing the pricing changing of South Lake Tahoe real estate, is that it goes beyond just the price. Let’s take a look.
First, let’s cover the Housing Affordability Index. This is released monthly by the National Association of Realtors. It determines how affordable homes for sale in South Lake Tahoe are by the following:
“A Home Affordability Index value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index of 120 signifies that a family earning the median income has 20 percent more than the level of income needed pay the mortgage on a median-priced home, assuming a 20 percent down payment so that the monthly payment and interest will not exceed 25 percent of this level of income (qualifying income).”
The higher the index, the more affordable homes for sale in South Lake Tahoe are. While homes were very affordable during the crash of 2009-2016 due to distressed properties, foreclosures, etc., real estate is more affordable today than any other year since 1990.
Now let’s talk about how we purchase homes for sale in South Lake Tahoe. In most cases, unless you are incredibly wealthy and sitting on a ton of cash, properties are purchased using a mortgage. The mortgage rates are a big factor when looking at affordability. This percent impacts your purchasing power and adds to the cost of the home as you have an added interest rate. If mortgage rates are low, more buyers will be able to purchase. Currently, our mortgage rates continue to be historically low and less than 4%.
We also have to add in income as a factor. While the median family income has risen by 3% in the last year, when we looked at the South Lake Tahoe stats compared to the national average, our area was significantly less. South Lake Tahoe’s median wage is $45,223 while the U.S. median wage is $63,179. This can create an impact on a local’s ability to buy, however, a lot of the jobs available in the city of South Lake Tahoe are tourism driven and considered entry level jobs which don’t pay a high salary. However, when looking at California as a whole, housing is considerably cheaper in this California town compared to so many others.
If you are thinking about buying South Lake Tahoe real estate, chat with your South Lake Tahoe Realtor. We can recommend a qualified lender who can tell you exactly how much you can afford, which let’s you know whether you can or cannot afford to buy. Regardless, you are paying a mortgage so it may as well be your own!