I put a couple of affordable houses on the market in early June of 2018, both attracted multiple offers. This year I listed two equally affordable, well priced homes within the same time frame and encountered a much cooler response. In fact, we had to reduce the price on one of them to attract an offer. I know, a price reduction on a $300,000 home in Reno/Sparks, crazy right? My experience is anecdotal of course but it did inspire me to crunch some numbers. I’d like to share some of the details I pulled from the Reno/Sparks Association of Realtors this week:
New listings and sold homes are both down while the available inventory is up significantly on a monthly and year over year basis. I have to say that it’s quite rare to see the numbers jump around like this in the early summer months although we saw similar trends in 2007 as we crept into the last recession. Does this indicate that we’re headed for another housing crisis? I don’t think so, but I do believe we are in the midst a slow-down. With this thought in mind I would like to make a few predictions for the local real estate market in the remainder of 2019.
· Home prices will continue to rise: Although I would anticipate a slower rate of appreciation. The slow-down in price appreciation will ultimately improve affordability which invites a greater number of buyers into the market over time. Interest rates are low and it’s very unlikely that we’ll see any meaningful jump in mortgage rates this year. Those factors along with the reality that we still have less than ½ of the home inventory we had back in 2005 indicate that we should see a gentle normalization over the next 6 – 12 months.
· Inventory will improve, a little: Most local home builders are barely keeping up with demand and there were almost 20% fewer new home permits pulled this year than last. Affordable options for new home buyers remain almost non-existent which will continue to push those buyers into older, often smaller, resale homes. The good news is that those buyers may be able to take a little more time in their search.
· Millennials will drive the market: This may be the year of the first-time buyer. Those affordable homes I have in escrow right now, both have attracted young buyers that needed some financial assistance with their closing costs from the sellers. Closing cost credits to the buyer were almost unheard of in 2018, sellers simply didn’t need to entertain that. This year is likely to be a different story with some potential help for those folks struggling to save for their down payment.
· Clean, well-priced homes will still sell quickly: Perhaps 25% of our active inventory is unsalable at any given time, typically due to price and/or condition. To be competitive, sellers will need to get their home in “move-in” condition then price it viably within their market. The overpriced homes in poor condition will languish and the percentage of unsalable homes will Increase.
The real estate market is in a constant state of change and those fluctuations tend to create both challenges and opportunities in equal measure. A cooling market will undoubtably work in favor of most buyers. Particularly first-time buyers and thank goodness, they need a break. Please feel free to direct comments and questions to dan@nvhomeconnections.com .