I’m sure by now you have heard about the craziness in the residential real estate market. Rather than repeating the numerous headlines, in this article I’ve primarily focused on the events of the past 30 days on a hyper-local level.
• Freddie Mac recently reported that across the U.S., we are almost 4,000,000 homes short of meeting current buyer demand. Things may be comparatively worse in our local region as the number of available “New Homes” is still less than 50% of what we had to choose from in 2006. Considering the current scarcity of land, labor and materials, this problem is not going away anytime soon.
• Locally, our median price for single family homes increased by 7.8% in the month of March this year. Not a typo, we had a 7.8% median price increase in one month.
• Available inventory remains historically low and as of this writing, in Reno and Sparks, there are 9.8 residential real es-tate agents for every available single-family home available in the MLS. New licensees are flocking to the industry hoping to cash-in on a hot market. Unfortunately, the only thing they’re finding an abundance of is scarcity.
• Over the past 30 days, 28% of all single-family closings were cash transactions. Those folks shopping in the lower end face stiff competition as the percentage of all cash transactions of $400,000 or less is well over 30%.
• Further research into closings of $400,000 or less, over the past 30 days reveals that over 60% of these homeowners accepted offers within 5 days of hitting the market. These sellers also received an average of 3% over their list price.
• Turning the spotlight towards higher-end homes exposes results that I find even more shocking. Of the 45 closings of $1,000,000 or more over the past 30 days in Reno & Sparks; 47% were all cash and 44% of sellers accepted offers within 5 days. These homeowners also received an average of 1.5% over their initial list price.
The question is, are we in a bubble? I do feel that these fanatical bidding wars for homes represent a real concern and are unsustainable in the long run. On the other hand, our housing market is much healthier today then it was prior to the last financial crisis. According to a recent estimate from the Mortgage Bankers Association, 2.3 million U.S. homeowners are enrolled in some type of forbearance program. That is tempered by the fact that over 95% of these properties are worth more than the underlying mortgage. Most distressed owners will have the option of selling their homes rather than handing it back to the bank and there almost certainly is sufficient demand to absorb that inventory. Particularly if this liquidation occurs over a number of years which is the most likely outcome. dan@nvhomeconnections.com