Market Trends Year-End 2018 Market Report for the Reno/Sparks Region
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RENO/SPARKS
REGIONAL PRICE MAP YEAR-END 2018 CONDO Median Sales $$ Year to year change +
Median Sales $$ Year to year change -19.98%
Average Price/SF
Average Price/SF
CONDO Median Sales $$ Year to year change +
Median Sales $$ Year to year change -18.18% Average Price/SF
Average Price/SF
SPARKS
CONDO
CONDO Median Sales $$ Year to year change Average Price/SF
+
Median Sales $$ Year to year change -6.56% Average Price/SF
Median Sales $$ Year to year change
Median Sales $$ Year to year change
Average Price/SF
Average Price/SF
CONDO Median Sales $$ Year to year change +
Median Sales $$ Year to year change +26.11%
Average Price/SF
Average Price/SF
CONDO Median Sales $$ Year to year change +
Median Sales $$ Year to year change +0.76%
Average Price/SF
Average Price/SF
CONDO
CONDO Median Sales $$ Year to year change +4.47%
Median Sales $$ Year to year change
Average Price/SF
Average Price/SF
Median Sales $$ Year to year change
Median Sales $$ Year to year change
Average Price/SF
Average Price/SF
CONDO
Source: ListingService Service(NNRMLS), (NNRMLS), All Reno/Sparks areas (Area 100). Source:Northern NorthernNevada Nevada Multiple Multiple Listing
Median Sales $$ Year to year change
Median Sales $$ Year to year change
Average Price/SF
Average Price/SF
2018 Home Sales Recap & What’s Ahead Review and Insight by Nancy Fennell, president of Dickson Realty 2018 started out with rising home prices, which finally exceeded the high point of that period “just before the crash.” For most of the year, many took advantage of extremely low mortgage rates and buyers had to struggle with tight inventory, which greatly favored sellers and drove prices up. In that time period, when a reasonably priced home went on the market in just about any neighborhood, there were multiple offers within hours. Many times, those offers were submitted with heartfelt letters from the buyer, which could have been the basis for an oscar-winning screenplay. During these times, buyers felt the need to waive safeguards such as inspections. Cash was king. One thing, besides death and taxes, that is always certain -- the real estate market goes up but eventually comes down. We have just been experiencing a long run of “up.” To understand what to expect in 2019, we need to look at the 2018 results. In 2017, 6,826 single family homes were sold. In 2018, 5,980 single family homes were sold. That is a decrease of 12.4 percent. On the surface, it may appear our market is softening. I believe that the decrease is not from lack of demand, but from a lack of inventory. Also, there is some impact on sales due to rising mortgage rates. Realtor. com predicts the interest rate for residential mortgages will rise to 5.5 percent by the end of 2019, which will translate to about an 8 percent increase in price (on top of rising prices). In our market where 31.7 percent of all sales were under $300,000, sales in this price range dropped from 2017 to 2018 by 46 percent, mainly due to the lack of inventory. However, even if there was inventory, there will be an impact for some buyers because rising prices at a higher interest rate translates into less borrowing capacity.
So, how does 2019 look? Interest rates will continue to rise. Although mortgage rates will continue to rise, Millennials, the largest segment of buyers at 45 percent with Boomers at 17 percent and Gen Xers at 37 percent, will keep buying homes. Danielle Hale, chief economist for Realtor.com writes, “While first-time buyers will struggle next year, older Millennial moveup buyers will have more options in the mid-to upper-tier price point and will make up the majority of Millennials
2018 Home Sales Recap & What’s Ahead who close in 2019. Looking forward, 2020 is expected to be the peak Millennial home buying year with the largest cohort of millennials turning 30 years old. “ Recently, most of the predictions I have seen estimate interest rates rising from 5.2 percent to 5.8 percent by the end of 2019.
Home sales will drop. Most credible sources (e.g. Realtor.com, large franchise economists, the California Association of REALTORS, the National Association of REALTORS and Zillow) anticipate home sales to have a modest decline, somewhere around 2 to 2.2 percent. We are already seeing the impact that increased (and sometimes unreasonable) home prices are having on sales. With rising interest rates, buyers will hit an affordability issue, especially if they are applying for mortgages. The biggest issue will remain the lack of inventory below $600,000.
Inventory troubles will ease a bit. We began to see a slow down of sales in the fourth quarter. Some of it was buyer fatigue, and some was due to pricing getting a little ahead of the market which resulted in a reduction in price on nearly 50 percent of listings. There will be more apartments available which will give buyers an option prior to purchasing if they feel the market is priced too high for them.
Home price growth will continue to slow. Many economists believe home price appreciation will likely slow to near 3 percent. This is based on the assumption that the recent pattern of increasing inventory levels will be sustained in the upcoming year. Again, our community may be an exception because of the demand but we have seen pricing softening.
Buyers will see less competition, but that might not help first-timers. “Buyers who are able to stay in the market will find less competition as more buyers are priced out but feel an increased sense of urgency to close before it gets even more expensive. Their largest struggle in 2019 will be reconciling wants, needs and budget versus the heavy competition of 2018. Although the number of homes for sale is increasing, which is an improvement for buyers, the majority of new inventory is focused in the mid- to higherend price tier, not entry-level.”— Danielle Hale, Realtor.com
2018 Home Sales Recap & What’s Ahead National rents will rise, but apartment construction could ease renters’ pains. “As higher rates limit the number of homes that potential buyers can afford, some would-be buyers will be too financially stretched to buy and will continue renting. As a result, recent (and very slight) drops in rent will reverse and turn positive again. The shift will be muted, however, by continued steady investment in apartment construction, which will prevent rent growth from shooting too far above income growth.” — Terraza Here’s a look at Realtor.com’s housing forecast for 2019. Look at rising mortgage rates to play an even greater part in affordability, slowing the market for sellers and impacting buyers. Home prices are still expected to rise, though at a much slower rate than we’ve become accustomed to. Realtor.com forecasts home prices to increase by 2.2 percent nationally. Buyers still don’t have a lot of good news to look forward to. “Unfortunately, it’s only going to cost even more to buy, especially in the entry level market. To be successful, buyers should think through how they’ll adapt to higher rates and prices,” explains Danielle Hale, Realtor com’s chief economist. “Some buyers will be thinking I can’t even afford a home. They will have to struggle with the decision of what they want versus what they really need,” Hale adds.
What all this means. All in all, housing is set for a slow down in 2019. That’s not necessarily a bad thing. Northern Nevada’s medium and long-term prospects for housing are good because demographics are going to continue to support demand. With a slower price appreciation and a tight workforce, incomes have an opportunity to catch up. With slower sales, inventory has an opportunity to normalize. A slowdown in 2019 creates a healthier housing market going forward. There will continue to be a lack of affordable inventory especially for first time home buyers. In many markets nationally, luxury home inventory is expected to grow, but if sellers are reasonable about pricing, that might not be a problem here as people leave neighboring states, especially California to be in a more tax friendly state. 2019 will remain a sellers’ market but it won’t be the same one we had in early 2018. If sellers want to move their home quickly, it will have to be priced to sell. And over the next 24 months, I predict we will have a brief moment in time where the amount of homes for sale are in sufficient supply and it will be a “balanced market” before the advantage tips into a buyers market. That’s real estate for you!
DOWNTOWN RENO 775.324.7000
CAUGHLIN RANCH 775.746.7000 TRUCKEE 530.587.7444
DAMONTE RANCH 775.850.7000 DONNER LAKE 530.587.4811
SOMERSETT 775.746.7222
MONTRÊUX 775.849.9444
SPARKS 775.685.8800
PORTOLA 530.832.1700
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