There has been a lot of hoopla in the media recently about Rick Perry the Governor of Texas making public appeals for California businesses to relocate to his state. And while the land of 10 gallon hats does have a very favorable business climate, the state of Nevada is even more welcoming to businesses and entrepreneurs. The next upward leg of price increases for Incline Village and Crystal Bay real estate will be fueled by a combination of purchases by vacation homeowners and high income California residents looking to relocate to our community for the economic benefits and quality-of-life advantages.
The Tax Foundation which is a nonpartisan institute based in Washington DC that ranks all 50 states in regard to personal and business taxation along with other parameters provides us with some interesting information. According to the Tax Foundation the state of Nevada has the 3rd most favorable business climate in America while Texas ranks 9th. Nevada has the second lowest tax burden in the nation while Texas comes in 5th. So, even though Texas does provide a very favorable tax situation and business climate compared to California, it still lags behind the Silver State.
The cost of moving a business and its employees from California to Texas in most instances would far exceed the cost of relocating to Nevada. Also, the rent for commercial space especially in northern Nevada is a fraction of what businesses are paying in the metropolitan areas in California. And high income residents of California are subjected to a new state income tax rate of over 13% after the passage of Proposition 30 last November. What this means for the Incline Village and Crystal Bay real estate market is that many business people will start to consider whether or not they should remain in California or contemplate relocating to another state that could provide greater economic benefits.
Nevada is at the top of the list for anyone considering moving out of a state with a high tax burden and a complex regulatory environment. The Reno/Tahoe area is in close proximity to the major urban centers in California. It is only natural that businesses ranging from a salesperson working at home to Apple Computer are moving some or all of their operations to northern Nevada. Part of what makes northern Nevada attractive to businesses relocating from California is the relatively inexpensive cost of electricity, total labor costs and housing.
Employers can pay wages that are slightly above market for the Reno / Tahoe area but still save on labor costs when compared to Sacramento or the Bay Area. Housing is much more affordable in northern Nevada than in most parts of the Bay Area and then there is the Tahoe lifestyle. One of the most attractive things for a business owner to consider is the health and well-being of their employees. If a move to the Nevada side of Lake Tahoe make sense both economically and psychologically for a particular employer it makes relocating a lot easier for everyone involved.
With real estate sales in units jumping dramatically during the past 12 months a good part of this growth was fueled by pent up demand from buyers who held back during the recession and California residents looking for a great place to live along with a reduced tax burden. As more people realize that relocating to the Nevada side of North Lake Tahoe has significant benefits, demand for homes and condos will increase and there will be further upward pressure on prices. This phenomenon has already begun and will likely accelerate as high earning individuals in California are confronted with the latest state income tax increase. Properties in traditionally high demand locations such as lower to moderate elevation lakeview homes and houses and condos below Highway 28 will probably see the greatest percentage price increases. With the demand for quality properties in good locations having ratcheted up during the past year, sellers who do the proper staging and cosmetic work will have a leg up on the competition.
It’s unlikely that we will see a feeding frenzy in the real estate market like we did during the first half of the previous decade. However, buyers can expect to encounter multiple offer situations from time to time especially if a very desirable property is priced aggressively to sell. So, while the governor of Texas would like to see a mass migration of California businesses to the Lone Star State, the moving vans can make a much shorter trip up Interstate 80 to the friendly environs of northern Nevada and the unique quality of life that only property owners in Incline Village and Crystal Bay enjoy.