Most of our clients and friends are under the impression that we are in a “hot” market, and in many ways we are. Certain neighborhoods and price points have recovered to a point close to pre-recession levels. In these select markets buyers are often faced with very low inventory which can make the purchase of a home quite challenging.
The Reno/Sparks Association of Realtors reported 1,359 homes for sale at the end of January 2016, this represents a 15% reduction in the inventory reported on January 31st, 2015. While we would like to credit our low housing supply to brisk sales, the total number of units sold has remained consistent year over year. Which leads us to the question:
Why are so few homes on the market?
- Realty Trac recently reported that in the U.S., there are still over 7 million homes with underwater mortgages. Almost 30% of those underwater mortgages are in 5 states and Nevada is one of them. We still find many local homeowners in a negative equity position and unable to sell short of writing a check at the closing table or pleading with the bank as a “short sale”. This should become less of a factor as our local home values continue to improve.
- Home builders aren’t keeping pace, particularly in the affordable and mid-priced price ranges. Red Fin recently reported that nationwide, there were 1.1 million new home starts in 2015. Historically, 1.6 million new homes per year were needed to keep up with population growth and new household creation. Considering our current shortage of skilled construction labor and soon-to-be shortage of finished lots locally, it may be late 2017 before our local builders catch up. This factor leaves the potential move-up buyer with fewer options to consider and serves to hamper many affordable homes from hitting the market.
- Many current homeowners purchased their homes at big discounts in 2008-2013. In the past, increased home equity inspired many move-up buyers to look for something bigger, newer, more convenient, etc. Today, many if not most of our local homeowners have a more conservative viewpoint and seem to be staying put, reducing move-ups. Assuming we’re able to sustain the area’s current economic growth, this prevailing outlook will likely decrease over time.
- Local optimism, AKA The Tesla Effect, is inspiring an even more hopeful future. While all the good news has provided a big jolt to our combined psyche, we have yet to see much in terms of high-end job creation. We’ve met with numerous homeowners over the past year or so that would love to sell now but feel as if they should wait things out for still higher prices; that is, they’re anticipating a big jump in local home values in the near future. This is particularly prevalent among “down-sizers”.
- Speaking of down-sizers, many are finding it difficult to find something to down-size into. Anyone looking for a single level home, offering an “in-town” location will know what I mean. Many of these folks feel as if they would be selling their large suburban home at a discount while over-paying for something smaller and more practical.
We do see the Northern Nevada real estate market normalizing over time. Unfortunately, probably not in 2016. Please contact me with any questions regarding the Reno and Sparks real estate market. We are here to help.
Photo courtesy of Flckr Commons / House, Property by Mark Moz