Prepared by John Burns Real Estate Consulting 11.18.2015

Lake Tahoe/TruckeeHousing and Economic Outlook

White PaperSan Francisco Bay Area to 2018

Real EstateEconomic Forecast

 

As a year-round resort getaway for affluent Bay Area residents, the Lake Tahoe housing market depends heavily on the health of the Bay Area economy and housing markets, both of which have been very strong for the last few years.

Bay Area Impact

• Feeder Markets: Housing and employment data from core Bay Area MSAs helps us understand how the Lake Tahoe market will perform. Strong job income, and net- worth growth in the Bay Area means more demand in Lake Tahoe. High and rising home prices in the Bay Area and a strong sales environment provide the equity for primary (often retiree) or second homes in Lake Tahoe.

• Jobs and Income: Bay Area jobs have been booming over the last three years, with 4 percent annual job growth since 2011. We project this growth to continue in the near term, though at a more conservative rate. The Bay Area is a highly affluent region with the current median household income in the East Bay and San Francisco MSAs at $81,000 and $90,000, respectively, and the San Jose MSA just under $100,000.

• Sales Volume: Existing home sales have been strong throughout the Bay Area in recent years and are projected to maintain steady growth.

• High Prices: Pricing of existing homes has surged in all three core Bay Area MSAs. We project existing home prices will rise healthily in the coming years, though appreciation will slow notably by 2018. (JBREC does not project home prices, but the table below shows our price change rate projections for each MSA.)

Demographics

• Steady Growth Ahead: Lake Tahoe has just over 45,000 residents in about 19,300 households. The area’s population has declined through the 2000s at a rate of -1.0 percent per year but is forecast to grow over the next five years and approximate its 2000 level by 2020.

MSA 2009 2010 2011 2012 2013 2014 Current 2015P 2016P 2017P 2018P

East Bay MSA 984,900 964,300 972,700 1,002,100 1,037,500 1,065,000 1,085,900 1,090,000 1,110,000 1,125,000 1,130,000San Francisco MSA 964,200 955,400 979,600 1,026,400 1,074,300 1,121,300 1,179,400 1,166,300 1,186,300 1,196,300 1,191,300San Jose MSA 867,900 865,200 885,900 921,000 960,800 1,004,300 1,062,800 1,059,300 1,094,300 1,114,300 1,109,300Aggregate Total 2,817,000 2,784,900 2,838,200 2,949,500 3,072,600 3,190,600 3,328,100 3,315,600 3,390,600 3,435,600 3,430,600

Aggregate Change -167,600 -32,100 53,300 111,300 123,100 118,000 126,100 125,000 75,000 45,000 -5,000Aggregate Change Rate -5.6% -1.1% 1.9% 3.9% 4.2% 2.9% 4.1% 3.9% 2.3% 1.4% -0.1%

Source: U.S. Department of Labor

Employment Trends and Projections - Bay Area

Sales 2009 2010 2011 2012 2013 2014 Current 2015P 2016P 2017P 2018PEast Bay MSA 34,368 31,254 31,420 34,068 32,542 30,302 31,987 32,500 33,100 33,600 33,800San Francisco MSA 13,864 14,438 14,949 18,024 18,167 16,704 16,136 16,300 16,600 16,800 16,900San Jose MSA 19,533 18,641 18,612 20,679 20,120 18,277 18,786 18,800 20,000 20,500 20,900Aggregate Total 67,765 64,333 64,981 72,771 70,829 65,283 66,909 67,600 69,700 70,900 71,600

Aggregate Change 10,430 -3,432 648 7,790 -1,942 -4,369 1,626 691 2,100 1,200 700Aggregate Change Rate 18.2% -5.1% 1.0% 12.0% -2.7% -6.1% 2.5% 1.0% 3.1% 1.7% 1.0%

Median Pricing 2009 2010 2011 2012 2013 2014 Current 2015P 2016P 2017P 2018P

East Bay MSA $292,000 $332,800 $313,300 $349,000 $457,700 $529,200 $582,900 10.9% 5.1% 3.2% 1.7%San Francisco MSA $664,500 $698,900 $663,600 $711,400 $841,900 $958,300 $1,082,300 15.2% 7.2% 3.0% 0.0%San Jose MSA $477,900 $536,600 $518,300 $574,900 $698,500 $775,100 $898,300 13.0% 5.4% 3.3% 0.0%

Source: John Burns Real Estate Consulting; CoreLogic

Existing Home Sales Trends and Projections - Bay Area

Source: John Burns Real Estate Consulting; CoreLogic

Existing Home Pricing Trends and BHVI Projections - Bay Area

 

• Households: Growth projections for the next five years translate into about 500 new residents annually in the Lake Tahoe area or about 250 new households each year. Household growth at a higher rate than population growth is common in major secondary markets like Lake Tahoe.

The Housing Market

• Prices Rising: The median sales price for existing homes in the Lake Tahoe area has generally been increasing in recent years. Single-family home prices are up 4.3 percent year over year, but condominium pricing is currently down 8.3 percent. Median pricing can fluctuate considerably from month to month given the comparatively low volumes and the variety of homes that might come onto the market.

• Higher Supply: There are a considerable amount of homes on the market in Lake Tahoe, typically ranging from five to eight months of supply. This is relatively high in terms of larger market standards, but is the norm – if not somewhat tight – for high-end, second-home-oriented markets.

• Longer to Sell: High-end vacation homes typically stay on the market longer than conventional housing given how discretionary a second home purchase is. In Lake Tahoe, the average single-family home is on the market for close to three months, and it is not uncommon for condominiums to be up for sale longer.

Market Color

• Developers and Conservationists Strike a Deal: Officials of Placer County have recently approved a deal that would transfer development rights for a major new home project in Martis Valley. Property owners Sierra Pacific Industries and developers Mountainside Partners intend to develop up to 1,360 homes east of state Route 267. This prospect, however, was worrisome to some conservationist groups including Trust for Public Land and Truckee Donner Land Trust. As of October, the parties have reached an agreement whereby Mountainside Partners would transfer their development rights to now develop 760 residential units, as well as 6.6 acres of commercial use, to the west of state Route 267. This agreement will help end a seemingly endless stalemate while protecting up to 50,000 acres of Martis Valley.

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2000 2010 2015 2020PPopulation Total 47,629 42,740 45,268 47,925 Annualized Change Rate - -1.0% 1.2% 1.2%Household Total 18,929 18,026 19,300 20,564 Avg. HH Size 2.50 2.34 2.31 2.30

Population and Households Trends and Projections - Lake Tahoe Area, California

Source: ESRI. The Lake Tahoe area is defined as the following eight California ZIP codes: 96140, 96141, 96142, 96143, 96145, 96146, 96148, and 96150.

Median Sales Price Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 YoY %

Single-Family Homes $587,000 $607,342 $740,000 $572,000 $725,000 $611,250 $650,000 $535,000 $530,500 $560,000 $585,000 $580,000 $612,500 4.3% Condominiums $385,000 $416,000 $392,500 $370,250 $290,000 $359,500 $362,500 $281,000 $339,000 $385,000 $356,000 $427,500 $353,000 -8.3%Months of Supply Single-Family Homes 7.2 6.0 5.2 4.7 6.6 8.4 6.2 7.0 8.5 6.8 6.7 7.8 5.2 -27.8% Condominiums 6.5 6.2 6.2 9.9 14.5 11.3 9.3 19.2 9.3 12.5 8.8 8.2 12.5 92.3%Avg Days on the Market Single-Family Homes 86 91 127 118 110 143 183 102 83 60 81 80 96 11.6% Condominiums 197 154 101 120 122 138 112 100 73 42 107 55 109 -44.7%

Existing Home Pricing and Supply Trends - Lake Tahoe / Truckee

Source: Pacific Union. The Lake Tahoe / Truckee region includes the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley,Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe. YOY figures measure September 2014 against September 2013.