After Houston and Florida, let’s put our housing challenges in perspective
September 29, 2017
I write this article as I continue to digest the news of hurricanes and devastation in Florida and Houston – one of the largest cities in the country – as well as many other cities in Texas. Seeing the images and listening to the stories, for me, puts our growing pains into perspective. Our challenges are good challenges to have!
The overall housing market is still a story of supply and demand. Simply put, we have more demand than we have supply, completely opposite of where we were from 2007-2011. How does this affect our community? We have talked endlessly regarding how the law of supply and demand has almost eliminated the distressed properties in our area. Daily, we see the effect of supply and demand on rising home prices. The August median price was $329,450, down 2.8 percent from July, but up 13.9 percent from a year ago, which is just below the peak of the market in January 2006. Unit sales are up 6.8 percent from the previous month of July, and up 12.4 percent from August of last year. If this trend continues, we will have a record year in sales in 2017.
It is obvious the Reno-Sparks housing market remains a seller's market and will be so for some time in the future. If we speak of a "balanced market," there would be 180 days (6 months) of inventory (the time it would take to exhaust the active inventory at the current rate of sales). The Reno/Sparks Association of Realtors reports we had 1.4 months' supply of inventory as of the end of August. This is down 48 percent from the same time last year. When you break down the year-to-date sales by price range, a more detailed picture emerges:
$300,000 and under: 45.7% of sales through August and has a 18-day supply.
$300,001 – $600,000: 46.3% of sales through August and has a 60-day supply.
$600,001-$900,000: 5.5% of sales through August has a 5.8-month supply.
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$900,001 – $1,500,000: 1.9% of sales through August with a 9.7-month supply.
$1,500,001 and above: 0.6% of sales through August with a 33-month supply.
The Center for Regional Studies recently released its 2nd quarter 2017 New Residential Construction and Sales Statistics Report. There were some interesting trends to note.
In the 2nd quarter, existing single-family home sales were up almost 9 percent over the same quarter last year while new single-family homes were down a little over 20 percent for the same time frame. The median price of a new home in June was $401,387 compared with the median price of an existing home, which was $320,000.
My advice? If you are thinking of selling your existing home and purchasing a larger (or a smaller home), do it now. I do not think you will receive more money for your existing home than in the next year or two. After that, there will be more new-home inventory, prices will stabilize and be more competitive with existing home sales, which will affect existing home pricing.
It is interesting, but not surprising, to see where the most homes were sold, which is a result of pricing. In checking the chart above, note that 92 percent of our sales through August were under $600,000. So far this year, the Spanish Springs area has had the largest number of sales through August with 572 existing homes sold, followed by the Reno-South Meadows area with 487 sales. Condo sales through August increased by 6 percent over the same period in 2016, but the median price of condo sales jumped 32 percent, to $180,000 from $136,450.
Rentals continue to be full, with a vacancy factor of only 1.17 percent and dropping, according to the Jackson Perkins Griffin 2nd quarter report. The good news with rising rental rates is that hopefully we will see remodels and improvements in older properties to be competitive with the new rental communities coming on board.
Since December 2014, we have seen an increase of just over 40,000 new jobs created, according to the EPIC report, while population and new household formation has increased 4.7 percent. However, if people cannot find a place to live, they will not move here. According to a recent article in Northern Nevada Business Weekly, EDAWN CEO Mike Kazmierski stated, "We no longer have adequate workforce for really big employers… and have adjusted our attraction efforts to focus on higher-paying jobs, which include technology companies, advanced manufacturing and company headquarters."
For the citizens of our community to thrive and prosper – and for us to have the community we want to live in – we all have to be on the same page. We have to rethink what is the future, not the past, regarding the type of housing offered and where that housing is located. We have to be realistic about the impact on roads, schools and services like fire and police; and finally, we have to look at how we are funding these services, and make some changes in our property tax laws to start with.
While we are having growing pains now, this is a much better place for us to be than where we were in 2007 through 2011, and we are certainly in a better situation than what is happening with our friends and family in Florida and along the Texas coast.
Nancy Fennell is president of Dickson Realty.