This post by Ben Tedore
Washoe County’s resiliency has been put to the test in 2007 as the slumping housing market has continued to grab the headlines month after month.
Following three extremely hot years for real estate, no one was surprised to see things start to cool off, but the cooling trend is starting to look like a deep freeze and the worst may be yet to come. By mid-year 2006 it was apparent that the housing boom was over and the market was beginning to cool off, but a year later it’s obvious that this slowdown has been more pronounced and will be longer lasting than most analysts predicted early on.
The fact that data for the preceding three years show such phenomenal appreciation rates makes this market correction seem worse than it really is, though, and when the dust finally settles we’ll be left with more “normal” (or “historically average”) appreciation and sales rates.
Until we’re back on track, though, the housing market is likely to get somewhat worse as record numbers of foreclosures hit the market and shell-shocked consumers wait to see where the bottom truly is.
- In August 2007 there were 45 percent fewer new single family home sales and the median sales price of those homes had dipped 12 percent from the previous year. Existing home sales looked much the same – 24 percent fewer sales and 10 percent lower sales prices in Washoe County.
- Sales of existing condos were better in August, with a 29 percent increase in sales of existing units, with a 10 percent higher median sale price. The condo market could wind up being the one bright spot in Northern Nevada real estate by virtue of their lower prices relative to traditional single family homes. With several new condo projects in the works, the Truckee Meadows will soon have more variety at the lower end of the market. In August, only 16 new condo units sold (a 57 percent drop from a year ago), but the small sample size makes it particularly sensitive to changes in units and pricing.
- The inventory of new homes available for sale has remained somewhat high by historical standards, although new home builders have all but stopped building homes in 2007 in order to clear out standing inventory and reduce their exposure to the market. Single family building permits issued through the first half of the year were about 46 percent off pace from 2005 and 2006 levels and several new projects slated to begin construction in 2007 have been put on indefinite hold.
- In the second quarter of 2007 new and existing home sales were dramatically lower than one year earlier and pricing continued its continuous slide from the peak in 2005. There were 29 percent fewer existing single family homes sold in the second quarter of this year compared to last, and the median sales price was 16 percent lower. For new construction, sales were down 27 percent and reported pricing was down 11 percent according to data from the county assessor’s office. Condos performed similarly – 28 percent fewer sales with a median price 9 percent below the previous year.
- At the end of June 2007 there were approximately 14,800 residential units with final approval to start construction but had not yet started to build and an additional 35,000 residential units with tentative approval to begin construction that were not yet final mapped with the county. Many of these units will be phased in over the next decade, and many will never come to fruition based on market conditions.
- There were just over 1,000 units in standing inventory at the end of the second quarter – which are newly built units ready for occupancy but still owned by the builder. Builders had slowed their construction dramatically by the end of 2006 to try and reduce this number of standing units, but given the slower sales rate this year it could take several months to absorb these units.
- Applying an estimate of 2.5 persons per household to these approved-but-not-built units yields a population increase in the area of nearly 125,000 people – and this does not include projects that have not even begun the planning phase. Clearly there is still tremendous growth potential in the Reno-Sparks area over the coming years.
- The sales rate of new homes has slowed significantly from the pace of previous years, but the steady stream of new residents from California and the Pacific Northwest has provided builders with a qualified pool of buyers ready to take advantage of the generous discounts and incentives being offered. With the rest of the Northern Nevada economy on solid ground, it’s just a matter of time before we see an end to the housing slump.
- As the availability of vacant land within or near the McCarran ring diminishes, land values on parcels large enough to contain a residential development have skyrocketed, forcing most of the new development to the outskirts of town. The North Valleys, Spanish Springs, and the Damonte/Double Diamond areas are all slated for thousands of new homes in the coming years and there are several thousand units planned east of Sparks along the north side of the Truckee River canyon towards Fernley.