Announcing: The first market bottom in Reno real estate (hint: it's in the 100's)

 Spectacular photo by: Austie1

A bullish real estate market is lead by a strong demand and strong supply.

For months now Joe has experienced multiple offers in the first-time home buyer price range, specifically in the $150,000- $200,000 mark.  However intriguing, this was not a big surprise. 

Our train of thought was that all this 'sudden' increase in demand was just seasonal and due to the bank owned properties (priced significantly lower than normal sale homes).  Thus, buyers have been very aggressive in making offers.

Then I came across this:

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Price range: $150,000 - $190,000
City: Reno

Before I inadvertently confuse anyone, I want to be clear that this is not for the whole of Reno and Sparks.  Just Reno.  I hope this is clear for I wouldn't want to mislead anyone in saying that the Reno-Sparks real estate market has already reached a bottom.  I wish. Unfortunately-- like you my dear reader--I'm still waiting for that to happen. 

But with confidence I can say that if you're buying in the Reno area in the price range of $150,000 - $190,000 the market is stronger than ever-- as you can see in the above graph--the median home price has been steady in the last two years. 

Here's the supply and demand in the same area.  This will shed light to some of your other questions.

Supply

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Demand

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Comments

[gary]

Hey Joe, thanks for the heads up.

[Joe Salcedo]

Gary,

Sure thing. Let me know if you have more questions.

[Brent]

Joe, saw your blog and found it interesting. I thought I might share some thoughts with you as I am hoping someone will benefit from my experience. I have been in financial services for over 25 years in Oklahoma. I travel to Reno at least twice a year for some R & R. I could go other places, but Reno just suits my personality. If you live in Reno, you have much to appreciate. It is a terrific city.

What I would share is the economic circumstances that Reno and other parts of the U.S. may be facing now and in the next few years. Oklahoma went through a severe economic contraction that began in late 1984 and lasted until about 1990. During this time, real estate prices dropped dramatically. The drop was caused by a sudden increase in unemployment due to the oil bust coupled with a large decrease in economic activity caused by same coupled with major weakness in agricultural commodity prices. Housing prices in some cases fell as much as 60% from peak levels.
Having lived through that period, what was interesting is that when this recession hit its depth, a person could own a home with a legitimate value of say $150,000 and be offering it for sale for $100,000. At first glance, one would say that would be a great buy for a potential homebuyer and that there would be offers to purchase. IT DID NOT MATTER. Economic activity had declined to the point where so few persons were in the financial condition to be able to qualify for financing of a purchase that the home sold for around $70,000 to $80,000.
Of course, those persons who had some financial capacity and foresight reaped the benefits of owning property that in the 1990s appreciated with renewed demand for residential real estate. The point I am trying to make is that economic contractions can sometimes be quite lengthy. It takes employment levels at average or above with stable or increasing wages to support a healthy residential real estate market. A 4 year period of near depression era economic activity feels like 40 years to the people living it, and recovery is fairly slow. Hopefully Reno and other cities will not see the kind of declines in real property values experienced by Oklahomans in the mid and late 80s. If so, be ready for a long period of very slow real estate sales.

[Joe Salcedo]

Brent,

I couldn't resist not replying immediately for I found your comment rather thought-provoking.

I have often been captivated by first hand experiences of people more than theory based opinions. Your sharing of your experience is appreciated. The readers appreciate these kinds of insights.

"Having lived through that period, what was interesting is that when this recession hit its depth, a person could own a home with a legitimate value of say $150,000 and be offering it for sale for $100,000. At first glance, one would say that would be a great buy for a potential homebuyer and that there would be offers to purchase. IT DID NOT MATTER. Economic activity had declined to the point where so few persons were in the financial condition to be able to qualify for financing of a purchase that the home sold for around $70,000 to $80,000."

Even if I wanted to, I don't think I can disagree with the possibility of the situation you experienced in Oklahoma could also happen somewhere else,even in Reno.

Though I might contend that last time I checked employment and growth are in the positive for our city. I certainly hope it continues.

The other thing I see coming,connecting to what happened in your city(where people could not be approved loans to buy homes), is that for the past year mortgage laws have been tighter and tighter and it seems that it will be headed in that direction for a while.

I'm expecting them to pass laws that would require buyers 20% downpayment or even more. That would certainly cause a stir in our industry.

"Hopefully Reno and other cities will not see the kind of declines in real property values experienced by Oklahomans in the mid and late 80s. If so, be ready for a long period of very slow real estate sales."

Yes. I Hope so too. I hope that the stronger $150K-200K would not be the first to reach a bottom.

And lastly, I'm glad to hear that Reno fits somebody's personality. I hope more and more people would see Reno as the hidden gem it so rightfully deserves.