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.

Assessor’s Data on New and Existing Home Sales:

Single family home sales were down across the board in 2007 – both new and existing homes experienced price decreases coupled with reduced sales. New single family home sales were down 38% in 2007 and existing single family home sales were down 29% — those are some pretty significant decreases in units from 2006. The median price of new homes was down 13% last year, and existing homes sold for roughly 7% less. That’s more than the decrease we saw in 2006 compared to the peak year of 2005, but overall that’s a fairly moderate decline in value relative to the increases immediately preceding the fall.

Regionally, the “New Southwest” part of town actually saw a 7% increase in new home sales and the median sales price remained flat from the previous year – not bad at all in light of how the rest of the Truckee Meadows performed. The rest of the area mostly saw fewer sales of new and existing homes coupled with lower transaction prices than in 2006.

Condo sales were a mixed bag. Existing condo sales were up in the second half of 2007 with a slight increase in sales price. New condo sales, though, were down 31% in the 4^th quarter with a median sales price 3 percent greater than the previous year. This is good news for the area because it demonstrates that there is at least some sign of life in the market. With several new condo and townhouse projects slated for 2008 and 2009, this segment of the market should do relatively well.

It’s interesting to note what’s going on up at Incline Village at Lake Tahoe – if you’ve ever wondered if sales of high end homes performed differently than the rest of the market, here’s your proof that the ultra-rich are largely above such petty concerns as “markets,” “mortgages,” and “foreclosures.” Last year, sales of single family homes in Incline Village were up 10% from 2006, and the median sales prices were up 11%! Those are really strong numbers when you consider just how poorly the rest of the market has been performing. Lake Tahoe real estate is certainly still in high demand, economy be damned!

Foreclosures:

You’ve all seen the headlines and, yes, there was a sharp increase in the number of foreclosures in Washoe County in 2007 – a 614% increase for the year – and the number of foreclosures has been steadily rising each month since the beginning of 2006. Regionally, the Truckee Meadows have seen increased foreclosures in all areas of town; even the higher end communities were not immune to the effects of the careless lending practices.

Still, it’s important to keep in mind that although foreclosures were up 600% last year, the actual number of foreclosed homes was only 750 (compared to 105 in 2006). Considering there are over 160,000 housing units in Washoe County, having 750 foreclosures isn’t that dramatic relative to the total number of units.

There were 225 foreclosed homes which sold in 2007, amounting to roughly 5% of the total number of MLS resales last year. As of December 2007, 14 percent of the active listings in the Reno-Sparks area were bank-owned homes…and this number is sure to grow in 2008.

The fact that Washoe County’s housing market slowed even more in the third quarter of 2007 is hardly even newsworthy – it’s evident everywhere you look and I am starting to sound like a broken record each month with my “more of the same” analysis of the market.  There are, however, a few bright spots on the bleak landscape of housing in Washoe County.

From the second to the third quarter of this year, the median sale price of new and existing single family homes held virtually steady.  Sure, there were 20 percent fewer sales over that time, but the fact that pricing has held the line is good news no matter which way you look at it.  The median sale price of a single family home in the greater Reno-Sparks area was $323,857 in the third quarter of this year – about 9 percent below where it was a year earlier, but at least it’s holding steady.  Spanish Springs was the only part of town which posted an increase in existing home sales over the quarter, with nearly 4 percent more home sales than in the second quarter.

Also, sales of new and existing condo units were up 15 percent in the third quarter, with average transaction prices 4.4 percent higher than in the second quarter.  The real strength, though, was with existing condo units (versus new units), which is likely a function of the greater supply of existing units on the market.  While there is a ton of condo units planned for the Reno-Sparks area, there simply aren’t many new units on the market right now.  Look for this change in the coming months, though.

Sales of existing condo units were up 22 percent in the third quarter with sales prices averaging 5 percent higher than in the previous quarter.  When you compare the third quarter to the previous year, the picture looks even brighter – 24 percent more sales and a 10 percent appreciation in median sale price.  Third quarter sales were strongest in the New Northwest, New Southeast, North Urban, North Valleys, and the Old Southwest parts of town…and by “strong” I mean that sales were up 10 to 80 percent over the previous quarter.  I find that especially impressive in light of the utter lack of sales in the single family market over the same time period.

The condo market in the Reno-Sparks area is going to surprise people – I see SO many new units ready to hit the market at a variety of price points and I can’t help but feel like the timing is going to be pretty good for them.  The Reno-Sparks area is still experiencing positive in-migration from other states – people are relocating here every day because of the employment opportunities in the area as well as for the outstanding quality of life that the area offers – and many of these people are going to be buying homes.

For the most part, condo living is a new concept to the Reno-Sparks area and we’re just beginning to see how well these new units absorb in the market.  The Palladio – a higher end development in Downtown Reno – has enjoyed very strong sales since the units became available a few months ago, and the same can be said for the high-rise luxury condos in the Grand Sierra Resort.  If these early indications hold true for the rest of the condo market, this is a product that will do very well in the Truckee Meadows.

• source: Washoe County Assessor’s data, compiled by the Center for Regional Studies, UNR

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.