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Inflation and Impacts on Lake Tahoe Real Estate



Inflation seems to be a hot topic everywhere you look. Prices for Incline Village real estate along with many commodities, products and services continue to rise. But, it’s important to differentiate between inflationary price increases and upward trends in real estate that are driven by demand outstripping supply.


One of the things that makes real estate a good long-term investment is that it is relatively inflation proof. Real estate prices tend to rise at a rate that is equal to or greater than the rate of inflation. This is because real estate is a tangible asset for which demand will continue to grow as the population grows. The more desirable a property is and the stronger the demand in any particular market the greater the price increases will likely be.


A number of factors have contributed to the inflationary spiral that we are currently in the midst of. Some of the biggest contributing factors are badly mismanaged monetary and fiscal policies along with supply chain issues brought on by the pandemic. The dramatic rise in energy prices during the past year has only helped to exacerbate the situation. When energy costs go up the price of all goods that need to be transported along with anything that is made from petroleum is going to see a price increase.


Anyone who lives on a commune that is almost completely self-sufficient will not really notice inflationary pressures until they have to leave the commune to purchase something. Living inside your own closed economic bubble is one way to escape from the scourge of inflation. But let’s be realistic that option is not practical for 99% of the general population.


However, there are many things that we as individuals can do to fight inflation even while central banks around the world continue along the path of absurdly low interest rates and ridiculous levels of money printing. We are experiencing cost push inflation that is being driven to a large degree by a robust money supply where too much money is chasing too few goods.


The dramatic increase in the price of bacon during the past year is just one example. No one needs to eat bacon, it’s just something people want to do. So, if everyone stopped eating bacon for about a month the price would drop precipitously. If everyone reduced their automobile driving by 10% the price of gas would come down sharply. There are many ways where we as consumers can have a direct impact on prices.


But it would take a concerted effort by a significant percentage of the population for the actions of consumers to have any effect. If everyone would simply purchase only things they need and not things they want for the next 6 months we would likely see a significant decline in the inflation rate. Invoking the concept of deferred gratification would go a long way towards lessening inflationary pressures.


So, what does all of this have to do with Incline Village real estate? The primary reason that prices continue in a steady uptrend is due to a lack of supply combined with very strong demand. We have seen an extremely low inventory of properties for sale in our community for the past 18 months. As long as this equation does not change and buyers are willing to pay a premium for the Tahoe lifestyle there will be upward pressure on prices in our market. If inflation continues at its present rate, this will only add to the higher cost of living at Lake Tahoe.

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