Over the past couple of weeks I have had the opportunity to attend two separate economic forecasts for our region. Each took a little different approach, but both reached a similar conclusion: our Northern Nevada real estate market is on a firm foundation. Here’s why…
Great Geography: I’ve brought this point forward on several occasions, but I should make it again: our proximity to California is conducive to relocation here. Recent research revealed that over 25,000 residents migrated to Washoe County in 2018. When the source of these new residents was tracked by the county they relocated from, 18 of the top 30 trailing counties were in California. The consensus is that political turmoil, exacerbated by the pandemic, rolling blackouts, and forest fires, will only accelerate this trend over the next several years.
Jobs & Employment: In contrast to our neighbors to the south, Washoe County is no longer a one-trick pony. The leisure and hospitality industries have been hit hard by the pandemic but unlike past decades, these industries now account for only 15% of our total workforce. I can remember a time not so long ago when that number was around 30%. Additionally, our overall wage growth has been very strong over the past 5 years, averaging an increase of over 5% per year. Case in point: the hourly wage in neighboring Storey County is now over $33 per hour, up from an average $19 in 2015. Thank you TRIC.
Population Growth: Of course, some people move away as others move in but over the past several years Washoe County’s net gain is averaging over 2% (or 8,000 people) annually. These aren’t just retirees looking for a tax break; over 27% are between the ages of 20 – 40 and 33% of our incoming residents have a bachelor’s degree or better. While many communities of a similar size are struggling to retain their youth and talent, we seem to be attracting them.
Supply & Demand: To put it simply, we just don’t have enough homes for sale. Home sellers were already hesitant to move due to the lack of available replacement housing and the pandemic has worsened that trend. New construction is projected to provide almost 2,000 new homes and 3,100 apartments in 2020 but the numbers are indicating that we’re still falling behind significantly. Considering the element of time and the overall cost of development, which is now aggravated by supply and labor shortages, this problem isn’t going away anytime soon.
What about all the impending foreclosures?: I hear this question at least once a week and here are the facts: It’s estimated that in Washoe County we have a delinquency rate of about 7.5%, mostly in some form of forbearance, amounting to about 10,000 homes. Keep in mind that the majority of homeowners still possess solid equity of 10% or more and will have the ability to sell prior to foreclosure, so let’s pretend the foreclosure rate is half of that. Assuming they all hit the market at the same time (and they won’t) the current trends indicate that our market would absorb that inventory within two years.
At 7.2% unemployment, there is no doubt that Washoe County will face some tough times ahead. It appears that most of that despair will fall on the backs of low-income hospitality workers and their landlords. In the end this will all likely lead to yet another transfer of wealth from the poor to the not-as-poor, a sad truth we all need to get our minds around. Still the most likely scenario is that the real estate sector will eventually lead us out of recession rather than into one as it did in 2008. I for one hope that’s true. (Source: Brian Bonnenfant, Project Manager for the Center for Regional Studies, UNR)