Pick up any paper or read any online news article and likely, somewhere in the past couple of years, you have seen something about housing affordability. There have been so many headlines regarding an “affordability crisis” in the residential South Lake Tahoe real estate market, as well as all over the country. While it is true that buying homes for sale in South Lake Tahoe is less affordable than it has been over the last ten years, we need to look at the bigger picture to understand it.
Every month, the National Association of Realtors creates a Housing Affordability Index that measures whether a typical household earns enough to qualify for a mortgage loan on your average house at both national and regional levels based on recent income and price data. Below is how they determine this:
“To interpret the indices, a 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 above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”
In a nutshell, the higher the index, the more affordable homes for sale in South Lake Tahoe are to purchase. While the index is lower now compared to the last 10 years, the reasons South Lake Tahoe homes for sale were so affordable is because of the housing crash and the large quantities of foreclosures and short sales as a result. If you look at South Lake Tahoe homes for sale from the years 1990 up until the crash, the index is higher today which means homes for sale in South Lake Tahoe are more affordable than any other time with the exception of the obvious housing crisis. Wages are going up and with mortgage rates still low, now is a great time to buy a home for sale.
It is important to note that buying homes for sale in South Lake Tahoe is different in that it is a second resort market. Our economy is based on tourism. Yes, we have locals who work and serve our community who need housing, however, there are a lot of tourist-based jobs that either don’t pay that much or are based off tips. This means the median annual income for the area is lower, which creates a different real estate atmosphere in comparison to other major towns or cities that have multiple sources of revenue for their residents. As a result, the cost of living is considered more expensive in relation to the local average income. There are a lot of long-time local residents who are upset because they feel that the rental rates and home prices for the area have increased an extraordinary amount. Rent & home prices have gone up around the country, not just South Lake Tahoe. According to a recent report, the median rent for the United States for 2018 was $1,255 for a 2 bedroom, while another report stated the average was $1,405. For California, the median rent is $2,800 according to Zillow. The average rental rate for a 2 bed apt in South Lake Tahoe is $1,200. The median home price in California is $549,000 currently, while the median home price in South Lake Tahoe is $460,000. While it may feel expensive to live here due to the lower wages, our cost of living is lower in general compared to California as a whole. For more information on the local housing market, both real estate & rental. Feel free to give me a call. I would be happy to share more details on the topic.