COMPLIMENTARY SPRING CLEANING FOR DOLLAR POINT PROPERTY OWNERS
Category: Tahoe Real Estate News
Good Economic News is Good News
Interest rates hover near the best levels since September, despite several good economic readings reported. Let’s discuss what happened and see what is coming next week.
“Hey, alright now And don’t it feel good” – Walking on Sunshine by Katrina and the Waves
O’Dette Mortgage Group
January 30, 2023
Economy Grew to Finish 2022
Gross Domestic Product, a measure of economic growth, for the Fourth Quarter 2022 showed the economy expanded at a 2.9% annual rate, down slightly from the 3.2% rate in the Third Quarter 2022. Seeing the economy grow in the back half of 2022 after negative growth in the first half of 2022 is good news.
This positive reading elevates the chance of a “soft landing” by the Fed, where they hike rates to slow inflation but do not slip us into a recession.
Unemployment Line is Historically Short
Initial Jobless Claims for December came in at 186,000…the lowest reading in 9 months. This is also good news as it tells us the length of the unemployment line. If the amount of people signing up for first time unemployment benefits remains near historical lows, it further lowers the chance of a recession. Moreover, it highlights the continued strength in the labor market, and this is paramount as jobs buy homes. Yes, we want interest rates to move lower but if someone doesn’t have a job or is in fear of losing their job, they can’t commit to a home purchase. Let’s hope the labor market remains strong as the Fed continues to hike rates to slow demand and lower inflation.
New Home Construction Costs Coming Down
The National Association of Homebuilders reported that building materials costs, less energy, are up 8.3% which is a big increase annually. However, the price growth is down a staggering 60% as input costs increased over 16% in 2021.
We should expect input cost growth to slow further in response to slower demand and further reopening of supply chains. This is another positive theme as we move through 2023.
Smaller Fed Rate Hike Still Priced In
One of the headwinds to the economy is the threat of higher short-term rates by the Federal Reserve. The good news there? After four consecutive .75% rate hikes, followed by a .50% hike in December, the financial markets are fully pricing in a smaller .25% hike at next week’s Fed Meeting.
The markets also believe the Fed will raise rates by another .25% in March and then pause to allow all the hikes that date back to last summer to seep into the economy.
This means the Terminal Rate, or the fancy way of saying the peak in the Fed Funds Rate, is going to be in a range of 4.75- 5.00%. From there we will have to continue to watch the standoff between the Fed who says they want to keep rates higher for longer. Additionally, with no rate cuts this year versus the financial markets, which are starting to “price in” as many as two rate cuts later this year.
Bottom line: The economy is showing mixed signals, but the labor market remains strong, and we are nearing the end of Fed rate hikes. So, the plan to land the U.S. economy softly and avoid a deep recession remains very much in play. That is good news for housing and the economy.
Looking Ahead
Next week is Fed week. As of this moment, the markets fully expect the Fed to raise rates by .25%. Anything other than that would be a surprise and generate a lot of market volatility. The Fed generally looks to avoid sending the market mixed signals but the markets will be on edge.
Have you experienced property damage due to the 2022/2023 Winter Storms?
A federal emergency declaration has been proclaimed by President Biden and financial assistance may be forthcoming. While the federal government has not yet declared a disaster (a different designation that provides different resources) for California that could authorize direct financial assistance to affected residents.
Placer County requests those who have suffered damage to report it HERE.
If the issue is life threatening please dial 911. The intention of the survey is to allow the reporting of non-emergency issues during periods when the Emergency Operation Center is active. Your answers to the brief survey will help better document the extent of damage these storms have caused, so Placer County can continue to advocate for all available support for impacted residents.
With more weather still in the forecast, please use the Ready Placer Dashboard for the latest on road and weather hazards and to access resources to help protect your family and property.
Breaking News: CPI Report at 6.5%
The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The U.S. Bureau of Labor Statistics (BLS) calculates the CPIas a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending.
O’Dette Mortgage Group of Synergy 1 Lending
January 12, 2023
January’s CPI (consumer price index) inflation data was released this morning and came in right at expectations of 6.5%. This is good news as it’s notably lower than December’s reading of 7.1%, and CPI inflation has now moved lower for 6 consecutive months, with the last 3 CPI reports being the real catalyst in mortgage rates lower. While this 6.5% CPI figure remains notably higher than the Fed’s target of 2% inflation, today’s report was still good news in the context of how inflation/mortgage rate are recovering from the distortion created by the Fed’s red line full throttle bond purchase program during Covid, and all supply chain related Covid issues which are mostly in the rear view mirror. Here’s some context to share with clients and what it all means for mortgage rates.
We’re currently in this interesting window of time where it’s valuable for real estate investors to understand that increases to the Fed Funds rate does NOT mean mortgage rates increase. Sometimes reiterating the mechanics of what determines mortgage rates (bond prices, which have move significant been determine by 2 things in the past few years: the Fed’s bond purchase program and inflation) can instigate the question of; “why does it matter if the Fed hiking the Fed Funds rate isn’t what drives mortgage rates higher, it seem they’re usually moving in the same direction?”, in other words – does it really matter if it’s correlation or causation?
Answer: yes – very much so, and the current market is precisely why it’s so important to clearly communicate the differences & mechanics for clients. As of November, we are now in a phase where the Fed will continue to hike the Fed Funds rate, while mortgage rates are moving lower. This is key for those looking to capitalize on a real estate opportunity before mass market sentiment pendulums back.
Here’s what’s going on with inflation mortgage rates: CPI, a primary measure of inflation, had peaked at 9.1% this past summer. The Fed hikes the Fed Funds rates (short term consumer debts) to fight this inflation. The November & December CPI reports both came in notably lower/better than the market expectation, this benefited bond prices, and therefore mortgage rates. Since mid-November we’ve been talking about how; unless we got surprisingly bad news on inflation in the months ahead, it looks like mortgage rates peaked that first week in November. Today’s CPI data coming in right at expectations further reinforces this trend. To put into perspective, the 10 yr Treasury, which is what Jumbo mortgage rates follow, hit ~4.35% that last week of October, then had it’s best day of the year the same day the November CPI report came in lower than expectations, then again moved another leg lower after the December CPI data, and is settled in today at ~3.4%. This is significant good news as we all know higher mortgage rates are part of the downward pressure on real estate prices, and vice versa.
We’re still seeing Jumbo rates today a bit lower than conforming, and the larger loan amounts actually pricing the best. For example today, a ~$2.0M purchase with 20% down, can get a 30 yr fix in the 5%’s with no points, and as low as ~5.25% with a little over a point. This is a historically healthy place for mortgage rates to be.
In sum, the headlines will soon again talk about rates moving higher when the Fed increases the Fed Funds rate again, which is coming, and meanwhile mortgage rates have already come down to a healthy level.
Your Guideline to Short-Term Rental in Lake Tahoe
If you are looking to purchase a home to use as a short-term vacation rental (rental periods of less than 31 nights), you will be required to apply for a permit with the county in which the home is located. While Lake Tahoe falls into two different states, we have five different counties around the lake, that each have their own set of requirements and their own application processes. The guidelines have gone through numerous renditions and are always subject to change, so your best resources will be found on the county websites, organized below.
Let’s start with the counties. In the below map of Lake Tahoe, you will see four counties, with Truckee falling into both Placer County and Nevada County (detailed in the second map), and in some neighborhoods, it may even come down to what side of the road you live on! Northstar lies in Placer County, while Tahoe Donner is in Nevada County. The town of Truckee lies in Nevada County, which has additional restrictions, including that your home can not be short-term rented within one year of purchase.
Notably, many gated communities and some condo complexes and HOAs will not allow rentals for less than 31-day periods. If renting your home for short increments of time is a requirement for your purchase, this may dictate neighborhoods that you search in.
Some counties experience waitlists for permits. If renting your home is a necessary part of your purchase, you may want to call county offices to determine the waiting period.
Below, we provide links for more information on each county’s Short-Term Rental program and application process.
Placer County, CA
Short-Term Rental Program Information
Short-Term Rental Permit Application
Nevada County, CA (Town Of Truckee)
Short-Term Rental Program Information
Short-Term Rental Permit Application
El Dorado County, CA
Vacation Home Rental Program Information
Vacation Home Rental Permit Application
Washoe County, NV (Incline Village & Crystal Bay)
Short-Term Rental Program Information
Short-Term Rental Permit Application
Douglas County, NV
Vacation Home Rental Program Information
Vacation Home Rental Permit Application
Navigating the Path to Homeownership
UPCOMING EVENT
Want to buy a home in Tahoe/Truckee but not sure where to begin? Join Amie Quirarte with Tahoe Luxury Properties and Chelsy Delia with The Rice Team at Guild Mortgage for an informative presentation on Navigating the Path to Homeownership from two home-buying experts who will guide you on a path toward buying your first home.
New Developments Breaking Ground in Lake Tahoe
With a wave of new development projects underway, revitalization of Lake Tahoe continues. Read our summary of upcoming projects below, and see the significant investments being made to North Lake Tahoe. Links are provided to take you to developers’ websites with more detail.
The Waldorf Astoria by EKN
© 2022 HiltonHotel giant Hilton announced plans for the luxury Waldorf Astoria Lake Tahoe to be located on the 15-acre site of the former Tahoe Biltmore Hotel and Casino on the Nevada side of North Lake Tahoe. Slated to open in 2027, the newly built resort will feature 76 guest rooms and 61 Waldorf Astoria-branded residences. Hilton signed a brand and management agreement for the Northern Nevada project with EKN Development Group.
Boatworks at Tahoe
At the site of the Boatworks Mall in Tahoe City, there are plans to develop the approximately four acres to a development that includes a lakefront hotel, 31 residential condominium units, and 8,000 square feet of commercial retail space along North Lake Boulevard. Boatworks at Tahoe, LLC acquired the Mall in 2019 and the adjacent 35-room Tahoe City Inn in late 2018.
Homewood Mountain & Lake Club
Homewood Mountain Resort is switching to a members only model with 175-180 residences to be built around the base of the ski resort area, plus a hotel with 15-20 rooms. Memberships offer lifelong access to skiing. Purchasing a residence will include a membership and an additional number (TBD) of non-residential memberships will be sold. The Discovery Land Company operates a vast portfolio of private residential clubs and resorts, including the famed Yellowstone Club.
Tahoe City Lodge
Located in downtown Tahoe City, a new luxury development is opening its doors to a limited number of astute buyers. Tahoe City Lodge, the first new resort development project in over 50 years, is scheduled to break ground in Spring 2023, with estimated completion in Winter 2024/2025. This will be a four-star hotel with 65 resort condominiums and a restaurant and rooftop bar.
Hyatt Lake Tahoe
Larry Ellison’s investment firm acquired the lakeside resort for $345M on September 3. At more than $817,535 a room, the deal for the property in Incline Village, Nevada, set a per-room record for hotel pricing in the Tahoe market, according to Atlas Hospitality Group President Alan Reay. The deal includes the 16-acre main Hyatt property at 111 Country Club Drive, as well as an adjacent 8.5-acre parcel on the lake’s shore that contains 24 cottages and the Lone Eagle Grille restaurant. The 12-story resort features 422 guest rooms, including 35 suites, restaurants, spa, casino, and more. According to the website, Hyatt Regency will be undergoing renovations to enhance the guest experience from late April 2023 through April 2025. During this time access to Lake Tahoe, the beach and the pier will be unavailable.
39°N Lake Tahoe
39°N is a vibrant new hotel, housing, restaurant/retail and community space right in the heart of Kings Beach. 39°N is anchored by a 153-room hotel and will offer 36 for-sale townhomes and 74 units of for-rent workforce housing. The project is intended to bring a new energy to the Kings Beach core.
Nine 47 Tahoe
Nine 47 Tahoe is a luxury development of 40 mountain modern condominiums located in Incline Village, starting at $2.5M. The development boasts reserved garage parking, stunning courtyards, a rooftop deck and a dog washing station. Residences include two, three, and four bedrooms ranging 1,525 to 4,171 square feet.
Placer County short-term rental updates
Vacation towns have been seeing an influx of second homeowners, and Lake Tahoe is no different. Placer County has said it is committed to preserving “the residential neighborhood character and addressing community concerns regarding nuisances caused by STR operations.”
The implementation of the new short-term rental policies will start April 1, said Community Development Director Crystal Jacobsen, of the Tahoe City office. Here’s how Sierra Sun breaks down the updates:
- The ordinance contains new cap provisions to limit the quantity of short-term rental operations in East Placer — for the first time.
- According to Jasmyn Carr, Placer County’s short-term rental administrative clerk, there are about 2,500 active permits.
- The county has a 3,900 permit cap, Jacobsen said. The cap was suggested by county supervisors in January after they placed a moratorium on all new applications last July.
- No applications can be accepted after 3,900 permits, except from primary residents.
- According to the county website, short-term rentals are residential units rented for 30 days or less, and typically advertised as vacation rentals.
- The county has a priority for processing permits. First is current short-term rental permits for renewal. Second is currently approved exempted properties. And third is properties previously renting without a permit or exemption, and new permits.
- The permit application fee is $306. The fire fee, which covers a fire-life safety inspection, is $475.88 for professionally managed short-term rentals every three years, and the same amount annually for privately managed short-term rentals.
- Applicants need to provide photo evidence of an installed bear box trash enclosure, a business license and a Transient Occupancy Tax certificate. Jacobsen said those using their primary residence as a short-term rental must show proof of primary homeowner exemption.
- Jacobsen said the short-term rental Fire Life Safety and Defensible Space Inspection will be required for 2023 permits and renewals.
Article originally shared via Sierra Sun on March 17, 2022.
Tahoe Daily Tribune: Incline Village seeks new path on housing crisis
Some Incline residents want independence from Washoe County
Since the pandemic, local governments and organizations around the lake and in Truckee have been scrambling to come up with solutions to the housing crisis.
That’s included putting moratoriums on short-term rentals, building multiple workforce housing developments, and even offering thousands of dollars to second homeowners to rent their vacant homes to local workers and families.
Among this expedient change, Crystal Bay and Incline Village have been experiencing some of the worst effects of the housing crisis. Recently, the Village Market of Incline closed its doors after 42 years — in part due to a lack of employees.
Tahoe Luxury Properties real estate agent Amie Quirarte said that the Nevada side of the lake has always been a hot spot due to its low property taxes.
“…the second piece, which is arguably the biggest, is that there were so many changes happening in the political climate across every state and because… the coronavirus has become so highly politicized people left California… and Nevada was a really great state for people to relocate to as far as retirement benefits go and capitalizing on some tax benefits over there if you were switching your residency and Incline saw a huge demand,” Quirarte said. “We just saw a $60 million dollar sale over there – the prices are much higher there than on the California side.”
Due to the lack of affordable housing, much of the local workforce has been pushed out and left many businesses at a loss for employees. Incline Village General Improvement District has also been experiencing an impact to its ability to recruit and retain employees, according to General Manager Indra Winquest – but it does not have as much autonomy over housing as some may think.
“A lot of people think that IVGID has more abilities than it does in regard to how we control (housing) as the local government,” said Tim Callicrate, chairman of the district’s Board of Trustees. “The tough part is we can’t – we have to work with the county. Though we have many, many people here in town who have been really forthright and stepping up and trying to come up with a positive, workable solution. … we’re a general improvement district under the auspices of the county. These are zoning issues that we have no control over … so far we’re doing the best that we can with the limitations that we have as a general improvement district.”
Read the full article here.