The booming nationwide housing market of 2020 was in large part driven by a spike in second-home purchases. Before the pandemic, demand for both primary and second homes was growing at moderately strong rates. Since the pandemic, interest in second homes has grown twice as fast as primary homes and demand has doubled since last year according to a major brokerage’s research. With the pandemic eliminating the need to go to the office until late 2021, the tech world has taken advantage of this opportunity to purchase homes in several of the most beautiful places in California and Nevada. This article explores how four of Silicon Valley’s second-home markets fared in 2020 and examines projections for the future.

Incline Village and Truckee

There is arguably no housing market booming more than the Incline Village/Truckee area of Lake Tahoe.  Home sales in Lake Tahoe jumped 87% from October 2019 to October 2020, more than any other housing market in the nation, resulting in a large increase in median prices.  One agent was quoted as saying, “The Lake Tahoe housing market is hotter than ever.  People are coming from San Francisco and bringing their Bay Area salaries with them – everyone here drives a Tesla now.”  

Amongst the hottest neighborhoods is Martis Camp, an exclusive enclave with a plethora of family-friendly amenities.  The neighborhood has maintained its natural beauty with stunning Redwoods and Cedars surrounding the $5M to $15M homes that range from Tahoe lodges to modern masterpieces, while the ski lift has back mountain access to NorthStar. We forecast strong future growth for the Tahoe area as its stunning landscape, once discovered, is hard to leave. In 2020, the price for a home in the Truckee area increased by 14% from the previous year, with further appreciation forecast.

We project stronger appreciation on the Nevada side, with 0% state income tax being complemented by a low property tax rate around .6%. There has been particularly strong demand in the upscale areas of Glenbrook, a gated community on the east shore, and Incline Village, the site of our first Tahoe office.  With a quick 35-minute flight in DeLeon Realty’s pressurized turbo-prop corporate aircraft, Lake Tahoe never seemed so close.

Carmel and Pebble Beach

Amongst the many draws to beautiful Carmel is the easy hour and a half drive from the heart of Silicon Valley. This proximity became forefront to Silicon Valley buyers again during the pandemic and both Carmel and Pebble Beach enjoyed the strongest demand and sales prices they have seen in a decade.  We project moderate growth for Carmel as the gains of 2020 are unlikely to be replicated in 2021, but strong demand will remain. Carmel had one of the strongest 2020s of any micro market, with the number of sales up over 25% and the average price of a home increasing by 17%.  This revival of Carmel real estate likely is sustainable, as less traffic is making this once two-hour trip down to just 1.5 hours. As the owner of a home in Carmel for over ten years, I have felt that it was undervalued until the pandemic reignited interest.
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Napa and Sonoma Counties

The powerful impact of the pandemic almost made me forget about the past fires in Napa and Sonoma.  It seems I was not the only one as home buyers’ interest in the areas sparked a renaissance of demand for Napa homes from June through September and prices rose significantly. However, the Glass Fire in October, which consumed more than 630 residences and wine country icons such as the Restaurant at Meadowood and Calistoga Ranch, left their mark.  Thus, while prices did go up in 2020, the appreciation is less than other regions due to the ongoing and seemingly worsening threat of wildfires. With climate change likely exacerbating an already arid climate, I am pessimistic on the appreciation potential of the Wine Country. My only recommendation to purchase a second home there is reserved for those clients who can pay all cash and afford the risk of self-insuring, thereby avoiding the astronomic costs of fire insurance, which can range from $20,000 to $100,000 annually on estate properties. While home prices in Napa and Sonoma County increased by 7% in 2020, we forecast much lower appreciation for 2021 as the wild fires seem like an inherent and frequent risk endemic to this housing market.
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Santa Barbara and Montecito

My love affair with real estate began whilst studying Mathematics and Economics at UCSB, where I would exhaustively analyze local market data of the area. I always felt this area was undervalued relative to other elite areas such as Aspen, Atherton, or Newport.  Within Silicon Valley, affluent buyers pay in excess of $20M to $30M, yet only acquire a little over an acre in Atherton with a newer home. In addition to a more tropical climate, you get a lot more home for your money. To point to this reality, take a Montecito estate, owned by a cofounder of Kleiner Perkins, which sold in December 2020 for $32M. Several of my clients expressed envy at the relative affordability of this palatial offering, a very gracious Renaissance inspired Villa of nearly 20,000 square feet on 12 flat acres. Despite the area’s experiences with natural disasters as evidenced in the, fortunate contained, fire in Montecito, but later tragic mudslides that killed 23 people and destroyed many homes, hundreds of millions of insurance dollars were used to address the root causes of the erosion and debris flow. With the insurance proceeds judiciously used to eliminate many of the fixable causes of the mudslides, the likelihood of future mudslides is extremely low. Though prices took a hit after the mudslides, the area saw a strong increase in 2020 and my assessment is that favorable appreciation will continue as Bay Area entrepreneurs and venture capitalists increasingly recognize that the stunning American Riviera can be reached in less than an hour by private jet. Typically, a second-home market for LA residents, agents are reporting burgeoning interest from Silicon Valley buyers. With average sales prices increasing by 16% in 2020, this market still seems poised for double-digit appreciation in 2021. Recently, I enjoyed flying down in an aircraft and showing clients beautiful oceanfront homes at relatively reasonable prices.