Prediction: Is Lake Tahoe the Hot ‘New’ Housing Market for 2021?

Highlights from this real estate report:

• Forecasts call for a hot Lake Tahoe housing market in 2020 – 2021
• Many Bay Area transplants are now looking for homes around Lake Tahoe.
• Tech workers, in particular, are hoping to trade crowded cities for open spaces.

The San Francisco Bay Area housing market is currently undergoing a kind of migratory shift, spurred in part by the ongoing COVID-19 pandemic. Recent reports show that a number of people from the Bay Area — and especially tech industry workers — are moving from San Francisco and Silicon Valley to more suburban and rural areas in the state and nationwide.

(We’ve written about this trend before, in this article about urban flight, and also in this forecast for the Sacramento housing market.)

But there’s another side to this story, and another city. The Lake Tahoe real estate market is currently heating up, as home buyers from various parts of the San Francisco Bay Area move inland to get more space.

Lake Tahoe Housing Market Increasingly Popular

Long-time residents of the Lake Tahoe area might not want to hear what we’re about to say. But there’s no denying the truth. This area is about to get more crowded. It will happen gradually, of course, through the end of 2020 and into 2021. But it will happen.

We’re seeing the start of this trend already, in late summer 2020. High-earning tech workers from San Francisco, Silicon Valley and other “parts west” are showing increased interest in the Lake Tahoe-area real estate market.

In a July 29 article on CNBC, local real estate broker Sabrina Belleci said: “People are writing all-cash offers for houses, sight unseen. They just want to get out of the city.”

And from that same article:

“A new wave of urban flight is reshaping real estate markets from New York to Chicago and Los Angeles to San Francisco. As part of this shift, Lake Tahoe is seeing unprecedented bidding wars, buying activity and price increases.”

The Lake Tahoe area, which straddles the California-Arizona border, has been a popular vacation destination and tourist attraction for decades. It’s known for its beautiful scenery and year-round outdoor activities.

Now, it’s attractive to a new subset of Californians — people who want to get “out of the city” and have a little space to themselves. The ongoing rise of remote working makes the transition easier.

But don’t worry about the San Francisco real estate market. It’s going to be fine. For every resident that leaves, there will be another ready to take their place. The crowded city center might not be very appealing right now, given the COVID-19 situation. But that will pass, and when it does housing demand in the area will rise again.

Remote Working on the Rise

In many cases, tech and other white-collar workers can perform every aspect of their jobs remotely. So they’re not tethered to a certain location. And a lot of companies are allowing, even encouraging, this type of remote work.

Twitter was one of the first high-visibility Bay Area tech companies to adopt a remote-work kind of model. And for them, and many other companies, the COVID-19 situation might permanently alter their office culture.

Back in May, Twitter’s Human Resources head Jennifer Christie told BuzzFeed News:

“People who were reticent to work remotely will find that they really thrive that way. Managers who didn’t think they could manage teams that were remote will have a different perspective. I do think we won’t go back [to a traditional office model].”

A recent survey of hiring managers, conducted by the international freelancing platform Upwork, found that one-fifth of the workforce could remain fully remote after the coronavirus pandemic subsides.

Hot Housing Market Forecast for 2021

But getting back to the Lake Tahoe real estate market. Housing inventory in the area is fairly tight, relative to the number of home buyers in the market. There are two reasons for this — construction limitations and growing demand. Lake Tahoe offers plenty of natural beauty to visitors and puts limits on new construction, as they should.

The point is, you can’t just build whatever you want wherever you want in the Lake Tahoe area. Nature is prioritized in this remote part of California. So we have a situation where an increasing number of home buyers are eyeing a real estate market with a limited number of properties available to purchase.

And we all know what happens in situations like that. Buyers resort to bidding wars, in an attempt to outfox one another. The number of properties for sale dwindles, while home prices rise.

It’s too early to say if that’s going to happen in cities and communities like South Lake Tahoe. But it’s a reasonable prediction for the housing market, given current trends.

We’re only seeing the early signs of it right now. But if people continue to move into housing markets like Lake Tahoe, it will almost certainly drive inventory down and home prices up as we move into 2021.

The real estate database company Zillow recently offered a negative home-price forecast for South Lake Tahoe and other communities in the area. As of early August 2020, the company’s website stated: “South Lake Tahoe home values have declined -0.7% over the past year and Zillow predicts they will fall -2.8% within the next year.”

But this might be more of a “data-driven” forecast that doesn’t account for current trends and the ongoing shift in demand. Given the current supply-and-demand situation in the Lake Tahoe area — along with the anecdotal reports from real estate agents — it’s hard to imagine a scenario where home prices would dip going into 2021. It seems like they’re poised to rise.

Disclaimer: This article includes predictions for the Lake Tahoe area real estate market. Housing and economic forecasts are the equivalent of an educated guess and should be treated as such. Real estate prices and trends are driven by a wide variety of factors that change constantly.