The Reno/Sparks real estate market had its share of ups and downs this past year. Amazingly, the median price for single family homes increased by over 8% in the first quarter of 2018. In the fourth quarter the median price dropped with similar severity leaving an annual appreciation rate of 4.9%. Rising interest rates, a volatile political environment, and affordability issues combined to create stiff headwinds for real estate in the second half of last year. These factors will likely continue to have at least some influence on our market in 2019.
The majority of homes for sale in our area priced under $600,000 remain in a seller’s market. Based upon the pace of sales, there are currently less than two months of active inventory in the $300,000 price range. Six months of inventory is considered a balanced market.
The competition in our luxury home market remains tight, however there are some positive signs for sellers in the upper price points. For example, 218 homes sold for over $1,000,000 in 2018. That is an increase of over 50% when compared to 2017’s 143 closings. The Californians are still coming.
After a record setting year in 2017, the total number of sales of single-family homes in Reno / Sparks dropped by 12% in 2018. Until quite recently the number of active listings in all price points tended to drop as well. This trend may be directly related to affordability. While we still have an abundance of buyers looking for affordable homes, today’s entry level buyers have decidedly fewer options to choose from.
New home construction continues to lag behind demand and surprisingly, according to The US Census Bureau the number of building permits issued in Washoe County for new homes actually dropped by 14% in 2018. It’s increasingly difficult to find any new, detached home priced under $350.000 and it seems that the days of profitably building $250,000 homes are behind us. Sadly, with a median household income of $58,000 in Washoe County, that’s exactly the price point our typical local buyer can afford. Meanwhile, apartment construction is stepping up to fill some of the gaps. In the Reno/Sparks area there are currently more than 3,000 units under construction, plus an additional 6,000 units in the planning and entitlement phase. In spite of this increase in inventory, according to The Johnson/Perkins/Griffin 2018 Apartment Survey rental rates for apartments are expected to rise in 2019.
In conclusion, it is likely that residential real estate values will level-off a bit this year. Most experts agree that the 8% to 10% annual appreciation rate we have seen at some price points over the past several years is simply unsustainable. Between 1990 and 2003 homes in Northern Nevada appreciated at a consistent rate of 3% to 5% annually. With that in mind perhaps last year’s 4.9% appreciation is a sign that our market is normalizing. Wouldn’t that be nice? Factor in record low unemployment and a very healthy local economy and I think the future looks pretty darn bright. If you’re planning a move in 2019 we would love to help.
MLS Data courtesy of Northern Nevada Regional MLS