Sacramento Business
Journal
IN DEPTH: REAL ESTATE & CONSTRUCTION
From the October 22, 2004 print edition
Tahoe housing costs spur urge to tear down, rebuild
Barbara Marquand
Correspondent
South Lake Tahoe real estate agent Deb Howard is
listing an almost 1-acre waterfront property with a pier for $2.6
million. That doesn't include, though, the cost of demolition
and building. The buyer, after all, probably will tear down the
two 1930s-era cabins so he can build a new home.
No one is tracking the tear-down-and-build phenomenon at Lake
Tahoe, but it appears to be growing.
From the building plans submitted to the South Tahoe Public Utility
District, customer service manager Lisa Coyner estimates the number
of residential tear down projects in South Lake Tahoe doubled
in the last year. She expects the trend to continue.
Mary Strohm, president of the South Tahoe Association of Realtors,
isn't surprised. "One factor is we're running out of good
lots, and the other factor is the wait for building permits on
empty lots can be a number of years," she said.
In some cases residents can build a larger home on a property
where they tear down a structure than they would be able to build
on a vacant lot under Tahoe's environmental land-use regulations.
The Tahoe Regional Planning Agency classifies developed properties
under a different system than it does for vacant lots to determine
whether owners can obtain building permits. Prospective buyers
should always check with the agency before investing in a property
on which they want to build, said Julie Regan, the agency's communications
director. An owner wouldn't be allowed to rebuild on extremely
environmentally sensitive property.
Maybe 20 percent are tear-downs: Kelly Smith,
an agent with Century 21 Tahoe North Realtors, estimates about
one in five properties on the market in North Lake Tahoe includes
an older cabin that a buyer may tear down or remodel.
"I've done it myself," he said. "I bought a two-bedroom
log house, and the land is worth more than the house. I have my
permit to tear down and build."
No vacant lots for building are available on the lakefront. A
lakefront property sells for roughly $2 million these days. A
nearby property with a view of the lake will run at least $1 million.
Buyers aren't paying that kind of money for a small summer cabin,
Howard said. So if the structure isn't to their liking, they tear
it down to build a house that justifies the investment.
The tear-down option isn't a new phenomenon, and although more
people are looking at the option than before, Shari Chase of Tahoe-based
Chase International wouldn't go so far as to call it a trend.
"In some areas, there aren't that many candidates for a total
tear-down."
It's hot all around the lake: Driving all this, of course, is
Tahoe's red-hot housing market.
Tahoe is a different kind of market from Sacramento or the Bay
Area, where most people are buying houses to live where they work.
In Tahoe, many of the buyers are investing in second homes and
buying for the enjoyment of future generations of their families.
"Many of the purchases in Tahoe
are for emotional reasons," Smith said. "Buyers are
doing it for overall quality of life, and they're willing to pay
more for that."
Meanwhile, sellers often don't have to get rid of a property quickly
because it's a second home and they can take their time to get
the right offer.
"You put those two factors together, and you have a very
unique market," Smith said.
As a result, Tahoe doesn't see the erratic peaks and valleys of
the Bay Area or Sacramento housing market. "It's more of
a rolling-hill economy," Chase said.
But in the last five years, the Tahoe housing market has climbed
an unprecedented steep hill. The upswing began with the dot-commers
buying up property, and the boom continued even after many of
them had to sell and the technology industry and the stock market
tanked.
"What we thought would be bad news for our market was a boon,
with folks diversifying portfolios," Howard said.
Smith said 2000 was the hottest year
he had ever seen.
"Until this year," he added.
Chasing the rising numbers: Sales volume and prices just keep
zooming upward. According to an analysis by Chase International,
dollar sales volume of single-family homes around Lake Tahoe jumped
80 percent in the third quarter from the second quarter.
In the most recent quarter, the south shore was the hottest spot,
with dollar sales volume almost double, but each of the three
other areas into which Chase splits the market -- Tahoe City,
east shore and Incline Village, Nev. -- topped 69 percent.
The third-quarter numbers from Chase show greater percentage hikes
in sales tallies from houses going for more than $1 million than
for less than $1 million.
The average price of homes in the Tahoe basin continued to rise
dramatically, Chase reckons, hitting $919,332.
"This is definitely a seller's market," said Susan Lowe,
vice president of Chase. "The market this year has been strong,
but the third quarter is phenomenal and the over-million market
is experiencing huge growth."
Properties are still available for $250,000 to $500,000, Shari
Chase said, but the days of finding a house for much less than
$200,000 are gone. "The low range is what the midrange used
to be," she said.
In South Tahoe, major redevelopment, such as the new Heavenly
Village and Marriott resorts, along with smaller renovations by
individual business owners have helped the housing market, too.
The median home price in South Lake Tahoe was $355,000 in August,
a 13 percent increase from a year earlier and an 88 percent increase
from the median price of $189,000 in 2000, according to the South
Tahoe Association of Realtors.
Every market segment is strong, the association's Strohm said.
Buyers include local residents, baby boomers wanting vacation
homes and investors. "Investors have been a strong feature
in our market for a while," she said. "They perceive
it as a good value and are convinced that prices will continue
to appreciate."
Real estate agents, meanwhile, see a strong market ahead. "We
may not see 20 percent a year in appreciation, but it will be
a good market," Howard said.
And although no one can project the popularity of the option to
tear down and build, agents agree it will continue to be a phenomenon
in the market as the number of lots where homes can be built dwindles.
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