According to a recent article about Reno in Bloomberg Businessweek, we are a hipster haven, and while watching the Rodeo parade, I could definitely see it. The headline was “Reno is Starting to Look More Like Silicon Valley.” It was a complimentary article about the many changes happening in our city and how these changes share similarities to the Silicon Valley.
The article mentioned the Whitney Peak Hotel and the 15,000 new manufacturing jobs. However, what I see are the bright and creative entrepreneurial people who have built businesses around the new demographics in town; places like The Eddy, the Renaissance Hotel with their bocce ball courts, and the Nevada Museum of Art with their Burning Man archives, First Thursdays and Sky Room.
While Silicon Valley is a beautiful place and a worthy model in many areas, housing is not one of them. While we are experiencing tight inventories and rising prices, another Silicon Valley similarity, this is a temporary issue for us. I believe we are in the “ying and yang” of real estate. We had a boom in mid 2000s, the economic crisis hit, and our construction workers left to find other jobs. Now, our economic development groups have done superb work and have brought businesses, people and jobs to our area – which means we currently have a temporary shortage of housing. We will have some pain for a little longer as construction workers come back to town or are brought by large companies, local ordinances get tweaked, money for builders becomes less difficult and then we will have an adequate and perhaps an over abundance of housing. While we are going through this, as appealing as Silicon Valley is, we need to chart our own unique course. Let’s be authentic Reno and authentic Sparks – and let’s not forget who we are and what we want our communities to be.
It is obvious there are new people moving into the area. Panasonic (at the Tesla factory) is planning on hiring 3,000 people by the end of the year. Added to that number are the existing companies that are thriving and expanding, and the 100-plus companies that have come to town, attracting even more notice. These companies have driven our unemployment to fewer than 4 percent annually. Where are these new people living and what is happening in real estate?
In some ways, it is the same story we have been writing about for the past eighteen months: Tight inventories have driven prices up. In May, the median price hit $335,575 with days on the market dropping to 93 from a high in February of 115. The number of units sold January through May was down from 319 in 2016 to 291 this year. New listings in May were also down by 11.2 percent. The housing model we have worked on for the past 40 years has changed. First time homebuyers are not selling their homes and moving up because they cannot find their next homes in the location and areas they want to live, so we are challenged with that first stage.
Developers who haven’t felt comfortable building standing inventory need to rethink their position, perhaps aided by construction funds from large companies moving into the area. New forms of building need to be considered which shorten the building time. New models of inventory using the “shared economy” for housing need to be considered.
Our multifamily expert at Dickson Commercial Group, Trevor Richardson, shares his insights about the robust Reno apartment market we are experiencing. “On one hand, investors and apartment owners are enjoying the highest rental rates we have ever seen in the Reno area, which generates higher returns for their bottom line.”
Rising monthly rental rates and challenges with the low availability of inventory are concern for tenants. Housing affordability is threatened in Reno due to rapid growth in both multifamily rental rates and single family prices. I believe this is temporary as wages rise because of our low unemployment numbers, and as more inventory comes on line. According to the Johnson Perkins Griffin’s fourth quarter apartment survey, rents increased by 12.6 percent to an average of $1,066 per month (year over year) and vacancy rates are down to just under 3 percent at the end of 2016. In the Reno/Sparks area, there are more than 1,000 units under construction and over 7,000 in the planning phases, many along the I-80 corridor, which will help the major employers located in the Tahoe Reno Industrial Center (TRIC).
Trevor notes that the hip urban restaurants, retail stores and bars in midtown and downtown have created an opportunity for converting existing motels into new apartment units, and shaping our downtown to a destination we have been working on for some time.
Yes, we have some short-term challenges in housing, both single family and multifamily, but it is already forcing us to think more creatively about housing in our area. That is progress. I would mention, as the largest real estate company in the area, we have found housing for everyone that we have worked with this past year. It has taken longer – and the process requires patience, local connections and willingness for the buyers and tenants to understand the realities of our marketplace – but it happens.
Nancy Fennell is the president of Dickson Realty. Trevor Richardson is the multifamily expert at Dickson Commercial Group.