Reno-Tahoe Real Estate 2009 Recap / 2010 Forecast

Posted by Mitch Argon / CalNeva Realty on Wednesday, January 20th, 2010 at 10:03am.

Reno-Tahoe Real Estate Market Update - 2009 Recap

Review a quick summary of real estate market statistics for key cities in the Reno-Tahoe region. If you are not a subscriber to The Greater Reno-Tahoe Real Estate Report, you can find complete details and charts behind the market statistics outlined below. Feel free to subscribe to The Greater Reno-Tahoe Real Estate Report here - yes, it is free.

2009 Summary

In summary, 2009 was a year of many changes in the local real estate markets. Reno, Sparks, Fernley, and Dayton all experienced dramatic increases in the number of homes sold over 2008 and Dayton's home sold total was more than 2005 - the peak year of the boom for Dayton. Each of these markets also experienced a continuation of decreasing median price, however, the median price remained relatively stable through most of the second half of 2009. With this increase in homes sold in the Reno, Sparks, Fernley, and Dayton markets came a substantial decrease in Months of Inventory; each of these markets is now within the 5-7 month range indicating the median price should remain fairly stable in the months ahead.

While the markets noted above showed strong signs of correction, the Carson City and Carson Valley markets did not demonstrate the same strength in the trends towards price stability. Home sales in our Capitol and Carson Valley were up over 2008 but still fairly weak in comparison to the market activity in other local markets. With the Months of Inventory in the 8-10 month range for these markets, expect continued pressure down on pricing going into 2010.

2010 Market Forces

  • Distressed Properties - While the numbers indicate we are seeing a stabilization in prices in many local markets, the continuing onslaught of foreclosure and short sale home listings DEFINITELY puts downward price pressure into the market. This year (2010) we will see the peak of ARM (Adjustable Rate Mortgages) resetting (the reset period is 5 years from loan origination and 2005 was the peak year for this type of loan). These ARM loan resets is a MAJOR factor driving foreclosures and short sales. You should expect to see a continued high volume of REO and short sale listings during 2010 and well into 2011 based on the ARM resets alone - not even considering unemployment and other factors. Speaking specifically of short sales, they will be in the local real estate market for at least the next 5 - 7 years. Yes - years. The Short Sale phenomenon will not entirely go away until housing prices increase to levels at or near the peak we experienced in 2005.

  • Interest Rates - The general consensus in the mortgage industry is that mortgage interest rates will creep upward this year after being in the high 4% to low 5% (for a Grade A borrower for a 30 year fixed rate loan) through most of 2009. Any increase in the interest rate translates to higher payments for the home owner. As a result, this will put pressure down on home prices.

  • Federal Tax Incentives - The current extensions to Federal Tax Credits are set to expire on June 30, 2010. Don't expect these to be extended any further. While these benefits had a major impact on first time home buyers last year and will likely continue into 2010, the "rent v. buy" numbers will compel many people to buy a home without the credit, provided interest rates remain reasonable.

  • The California Real Estate Market - For our region, the California factor can not be ignored. California's markets are recovering much like ours with extremely high levels of sales volume at the lower price ranges for their local markets. As California recovers 'upward' in price, many people looking to leave the Golden State (and there are many) will consider relocating to this region. Expect this trend to regain some momentum in 2010 after being nearly stalled for the last 2-3 years.

Market by Market Summaries

  • Reno - For December, home sales are up 46% over December, 2008 - 269 homes sold. December median sold home price was $180,000 - down 22% form December, 2008. The number of homes sold in Reno during 2009 was 3,572 - a 43% increase over 2008 but still down from a recent peak of 4,175 homes sold in 2005.
     
  • Sparks - Sparks homes sold in December totalled 144 (up 40% over one year ago December sales); median home price equals $175,000. Months of Inventory, at 5.7 months, is down 40% from this time last year and continuing a steady decline since January of 2008. Like in Reno, the rate of decrease (on a year over year basis) in the median price for Sparks homes should begin to slow and, if not already, will likely reach a new bottom (only to stay there for a while) within the next 6 months.
     
  • Carson City - December homes sold totalled 33 which represents a 32% increase from December, 2008. Carson City's median home price was $176,000 in December. At 8.4 Months of Inventory, Carson City's key metric of buy/seller market is down 5% from one year ago. Compared to Reno and Sparks, this market has more downward pressure on pricing and will take longer to bottom out.
     
  • Carson Valley - Homes sold in December 2009 totalled 448 - a 30% increase over December, 2008. Carson Valley median home price at 264,000 is 6% below December, 2008. At 9.5 Months of Inventory, this market, like Carson City, will remain in 'buyer market' territory for a while longer than other local markets.
     
  • Lake Tahoe - With 6 homes sold in December, the Tahoe market (Douglas county only) continues to have an extremely high Months of Inventory (17 months) but is trending down - 30% lower than January, 2008. 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. January's median home price was $669,000.
     
  • Dayton - Dayton home sales continue to be strong as a result of lower prices and affordability; Dayton saw 16 homes sold in December - a 23% increase over December, 2008. Months of Inventory is 6.2 months - down 61% from one year ago. Median home price, at $127,450, is down 23% from one year ago and represents a new low for Dayton. I expect this is a 'blip' due to the low Months of Inventory in this market. Of note is the fact that the number of homes sold in Dayton in 2009 totalled 308 compared to a total of 288 homes sold in 2005 - the peak year of the boom.
     
  • Fernley - The median home price for Fernley in December, 2009 was $101,500. Fernley saw 54 homes sold representing a 74% increase over December, 2008. Months of Inventory is at 4.3 months which is the lowest in the region. While the median price in Fernley may dip a bit lower, it will likely not be by much due to the current Months of Inventory should buying activity continue at the same rate.
     

I hope this summary is useful for you. If you are not a subscriber to The Greater Reno-Tahoe Real Estate Report, sign up (at the top of this blog post) so you can review the charts and graphs behind the summary in this blog post.

All the best in 2010!

Mitch Argon

Mitch Argon
Broker - CalNeva Realty

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