This post by Ben Tedore
Single-family home sales and sales-prices continued to decline in Washoe County during the first quarter of 2008, but the area’s condo market seems to be the area’s rising star amid the fallout from the housing slump. In particular, new condos in the downtown Reno area have enjoyed relatively brisk sales during the past few quarters, and sales prices are actually on the rise, which is in stark contrast to what’s happening in the single family market. In the past year, sales of new condos in Washoe County were up 71 percent, and the median sales price was up 3 percent.
New single family home sales dropped 56 percent in the first quarter from the fourth quarter, and 74 percent from a year ago. Median sales prices were also down 2 percent from the fourth quarter and 10 percent from the first quarter of 2007. Sales of existing single family homes were similarly battered: down 27 percent from fourth quarter, and down 54 percent from a year ago.
There have not been many signs of life in the single family market lately, and I wouldn’t be surprised if we’re in for another 20 percent decline in median sales prices. What’s that estimate based on? Just for fun, I made a spreadsheet of quarterly home sale prices going all the way back to 1990, then I removed the “bubble years” of 2002-2005 and looked at the average quarterly appreciation rate for the area, which turned out to be 0.96% per quarter. I applied that quarterly appreciation rate to the median sales price of homes in the last quarter of 2001 and began estimating new resale prices from 2002 to today to see what today’s values would look like if we never went through the bubble and the difference was sobering.
Assuming that we had avoided the housing bubble altogether and had continued growing at a more reasonable (read: historically average) rate of appreciation, the median home resale price today would be just over $200,000. Using that same source data, the actual median home resale price last quarter was nearly $60,000 higher…that tells me that today’s pricing is still about 23 percent higher than it “should” be and leaves the door wide open for continued price adjustments in the area.
Now, granted, this was not an all-encompassing, scientific forecast – on the contrary, it was just a very simple “what-if” scenario that I had running through my head. I know that there are a ton of factors that influence the market (and its prices), but I thought it was an interesting experiment nonetheless. My hope is that the market stabilizes near where we’re at today, languishes here for a while, and then starts climbing out of this hole. My fear is that my little numbers-experiment above comes true and the market continues its slide to the bottom.
For more information on the local housing market, visit our website at www.nvdata.org and look for the “data and downloads” section. The Center for Regional Studies is an economic development partnership between the Nevada Small Business Development Center and the University of Nevada, Reno.