CA tax law woes mean Northern Nevada luxury spending is on the rise
RENO, Nev. — The continued growth of the Northern Nevada economy — coupled with changes in California tax law that’s seemingly sending residents fleeing the state in droves — has meant more in terms of high-end spending within the Silver State.
The main beneficiary is the real estate market, with luxury home sales skyrocketing.
For example, in the first six weeks of 2018, there were 20 sales for homes of $1 million or more in Washoe County, said Jen McDonald, director of business development and luxury collection specialist for Berkshire Hathaway/Drysdale Properties HomeServices in Reno.
Those sales equate to $32 million in total sales volume, which McDonald said is an unusually high amount of activity in the high-end real estate market.
She expects that kind of activity to continue for the foreseeable future — in fact, one listing for a home around $4.1 million in South Reno is garnering several inquiries.
McDonald estimates about 50 percent of luxury home buyers are already living in Northern Nevada, while the rest come from other regions, particularly the Bay Area.
“I’ve been in the real estate industry for 20 years, and this is the most confident I’ve been for the market in years,” McDonald said.
The Lake Tahoe real state market is heating up as well.
Mike Herman, chief operating officer for Oliver Luxury Real Estate — which recorded 287 home sales of $1 million or more in 2017 — said an uptick in high-end sales at the lake should continue as disgruntled Californians, weary of the state’s new tax laws, stream into Northern Nevada.
Things are going so well that many Reno-Sparks residents are looking for vacation or second homes in the Lake Tahoe market, he said.
“More people are looking to keep more money in their pocket,” Herman said. “Bay area couple moving to Nevada who makes $300K a year in combined income would save $35-$39K in state taxes by moving to Nevada.”
Increased confidence in spending money
Other high-end luxury sectors, including those involving leisure activities, have seen a moderate uptick after struggling through the recession.
Jackie LaTragna, member and marketing director at Montreux Golf & Country Club in Reno, said the private golf community currently has 330 members. They are expected to add at least 15 to 20 new golf memberships with the warmer months ahead.
“With our real estate community, a lot of Californians are downsizing, selling their homes and coming to Northern Nevada,” she said. “These people usually come from places with country club-style amenities, and they’re very attractive to what places like Montreux has to offer.”
Ward Sutton, general manager at Hidden Valley Country Club in Reno, indicated the club gets about 10 new members a month, a positive step toward growth, but not as dramatic as it may seem.
He said many of the new people are coming from California, while several members affected from the last recession have gradually come back.
“They are more confident in spending their money now,” Sutton said. “(When the recession) happened, everyone had to tighten their belt a bit.”
Dave Rowe, master certified salesperson and lease retention manager for Mercedes-Benz of Reno, said buyers have turned their attention to luxury SUVs, rather than the expensive sports cars, considering SUVs get better fuel economy and are better equipped to deal with inclement weather.
Mercedes-Benz typically sells 2-3 sports cars a month, while SUV sales hover around 30 a month.
“Ever since the recession, we’ve seen people spend less on exotic cars, but seen an increase in luxury vehicles such as SUVs that they drive every day,” Rowe said.
He added another increase in business is from buyers who are now leasing a vehicle, rather than buying. Typically, leasers will change cars every 3-4 years.
“Right now, leasing accounts for about 50 percent of new car sales, while pre-recession, it was about 20-25 percent of the business,” Rowe said.
Private jets, RV Sales and other high-end amenities
While spending habits may have shifted among Northern Nevada’s affluent residents and home-owners, that doesn’t mean people won’t at least occasionally splurge.
Patrick Wink, general manager of Atlantic Aviation at the Reno-Tahoe International Airport, said he is seeing an upward shift in the last two years in commercial and private flights to and from the airport.
However, he said it is hard to judge actual number of private jets at the airport for business or leisure purposes, since many users prefer to remain anonymous.
“We have seen an increase in air traffic in large part because of the area’s development, or big activities or holidays,” Wink said.
Mark Magnacca, general manager of Sprad’s RV in Reno, said RV sales are steady.
“With the economy improved and people with more income, a lot more people seem to be taking up camping or traveling abroad,” Magnacca said.
Meanwhile, Lynne MacLean, owner of Franktown Meadows Equestrian Facility in Washoe Valley, says the equestrian business is erratic, but with more Californians moving to Northern Nevada, business has surged.
The equestrian and horse boarding facility also sponsors the annual Franktown Meadows Derby, an equestrian competition with the proceeds going to local charitable organizations.
According to national statistics provided by Franktown Meadows, 40 percent of persons who utilize equestrian services have an average income of more than $150,000, and 84 percent of those folks’ average home value is at $412,000.
“You have to have quite a bit of money to participate in equestrian,” said Lynne MacLean, owner of Franktown Meadows. “This business is up and down, but all things considered, we seen positive growth lately.”
While luxury spending appears to be on the rise, some experts sense that even people with deep pockets have learned their lessons from the recession and be conservative with their money.
Linda Lovie, a veteran Reno-based independent investment adviser, financial planner and owner of Reno’s L Lovie Wealth Management, said people with disposable incomes have been cautious after the recession and would rather sink their assets into something with a greater return on investment. She senses that’s one reason the real estate market in particular is doing so well.
“Many of these people got to where they are by being smart with their money,” Lovie said. “Now I believe they would rather invest in appreciating assets such as real estate, rather than depreciating assets.”
“Beginning in 2020, real estate enterprises must maintain contemporaneous documentation similar to the way a law firm might track time spent on client matters.”