Reno-Tahoe Housing Bubble (Round 2) - March, 2013
Housing Bubble? Yes. If you are a fan of the movie "Groundhog Day" (I love it!; if you have not seen it, watch it to fully understand this post.), that is a good backdrop for our current market conditions. [Yes, Groundhog Day was last month... I know.]
Of course, we are not repeating our "real estate market" on a daily basis, but it was not long ago (Summer, 2005) that the most recent Reno-Tahoe housing bubble burst. The rise to the peak of that market cycle began in the very early 2000s - a 5 year run up in prices with a good number of those years recording 20 - 25% annual price appreciation. Read below or review our report to get refreshed on current conditions.
Fast forward to 2013 and we are, again, seeing annual appreciation in median home prices comparable to the run up to the last bursting of the bubble. The big questions are 1) Why?, and 2) How long might it last?
- As sharp increase in investor buying activity. (The Las Vegas market, while not directly comparable to ours has many parallels so check out this article from the Las Vegas Review that was recently published.)
- Continued value (for now) for home ownership versus paying rent scenarios. At the rate of appreciation, this will not last much longer. Interest rates are also beginning to creep up, although still historically low.
- A gross lack of new home construction over the last several years due to builders' inability to be price competitive with distressed home sales.
- Continued impact from AB-284 resulting in a sharp decrease in REO homes hitting the market (and a segment of underwater home owners who have realized they can stay in their home for quite some time without making payments and no imminent threat of foreclosure. Notices of Default have increased to levels that are 6 - 7 times higher than where they were one year ago, however. Check out Ticor Title's Report on Notice of Default and Trustee Sale volume for Washoe County.
How Long Will It Last?
This is much harder to predict. I continue to be quite surprised that the "rebound" we are experiencing is so aggressive considering the weak economic and unemployment environment our region, state, and nation is working its way out of. Given that the last bubble burst was so recent, I expect our current market conditions to "balance out" much sooner than the five year run we were experiencing a decade ago. Prices have been appreciating since early 2012. At this rate of appreciation, it will be sooner rather than later that we all learn how this mini-bubble ends.
Below is a brief summary of each local market with year over year details:
- Reno - During February, home sales were down 14% to 281 homes. This decrease is due to a lack of inventory as evidenced by increasing prices. February median sold home price came in at $192,900 - 29% above February, 2012. Reno Months of Inventory for March is at 4.3 months - 27% lower than March, 2012. On the distressed property front for February, 2013, Reno had 101 short sales (36% of the total) and 35 REO sales (12% of the total). For a visual review of these trends, visit our interactive charts - use the "Reno" menu at the top of the page for different chart options; these charts are interactive - click the Help menu from the charts site to see how.
- Sparks - Sparks homes sold in February totaled 131 (up 2% from one year ago February sales); median home price was $190,000 - up 31% from Spark's median home price of one year ago. Months of Inventory for Sparks is down to 3.6 months, 32% lower than March, 2012 which is consistent with the market experiences mentioned earlier in this blog post. Both Reno and Sparks will continue to see rising prices until inventory builds and allows better balance between supply and demand. Currently, there are multiple qualified buyers for every reasonably priced listing under the $300,000 price range. Again, distressed sales in Sparks totaled 51% of the total market with 38% as short sales (50 homes) and 13% as foreclosure sales (17 homes). To see how the mix of short sales and foreclosures has reversed over time based on AB-284 impact, check out this chart.
- Carson City - There were 47 homes sold during February, 2013 which represents a 42% increase from February, 2012. Carson City's median home price was $169,900 in February - 17% higher than the median price a year ago. Carson City Months of Inventory is at 4.5 months showing a decline of 32% from one year ago. 36% of Carson City sales in February were distressed - 17 short sales (36%) and 4 foreclosure sales (9%). See Carson City Housing Trends on our interactive chart. While Carson City has lagged Reno/Sparks in rebounding, this market is experiencing the same phenomenon.
- Carson Valley - Homes sold in February 2013 totaled 47 - a 12% increase over February, 2012. The Carson Valley median home price at $195,900 is 1% higher than the February, 2012 median price. Months of Inventory is at 5.1 months and down 37% from the same time one year ago. The Carson Valley has fewer distressed sales than other areas (except Tahoe); total distressed sales for February were 32% of the total: 10 short sales (21%) and 11 REOs (11%). For a quick view of these trends, visit the Carson Valley real estate trends chart.
- Lake Tahoe - With 12 homes sold in February, the Tahoe market (Douglas County only) was up 300% from the February, 2012 sales volume. Months of Inventory, at 9.5 months, is 50% lower than March, 2012 and is continuing downward. The median home price was $508,600. Due to the small sampling size of homes sold and the wide range of home prices at Lake Tahoe, the median price shows wide fluctuation on a monthly basis. Tahoe saw no REO sales and three Short Sale in February. See Tahoe Real Estate by Charts.
- Dayton - Dayton home sales in February, 2013 totaled 15 homes - a 35% decrease over February, 2012. Months of Inventory is at 4.6 months - 23% lower than one year ago. Dayton median home price, at $122,000, is up 28% from one year ago. During February, Dayton saw 6 short sale and 3 REO sales for a total of 60% of the total sales. See Dayton Real Estate Interactive Charts here.
- Fernley - The median home price for Fernley in February, 2013 was $112,400 - a 52% increase over the median Fernley home price in February, 2012. Fernley saw 40 homes sold representing a 25% increase over February, 2012. Months of Inventory is at 4.2 months. 41% of Fernley February sales were distressed: 11 short sales (28%) and 4 foreclosures (10%).
If you want more details and the color charts used to prepare this blog post, you can view from one of two formats:
These are very dynamic times in real estate! Home buyers are aggressively competing to buy the most sought after properties (remember the "irrational exuberance" of the dot com era!) and Home sellers are now holding most of the cards. One thing is certain, however: 25 - 30% home price appreciation is not long term sustainable - remember 2005?
I hope you find this information useful. If we can help you or anyone you know who needs professional guidance buying or selling a home, please give a call!
Broker - CalNeva Realty