The holidays are in the rear view and many homeowners are feeling the pinch of the swinging market, especially if they currently have their home on the market or are thinking about listing. This nervousness is understandable, after all the last few years most regions have enjoyed rising prices and many homeowners finally managed to get out from being “under water.” For homeowners who managed to hold on to their real estate through the recession or those who bought during the “fire sale” days of 2009-2013 they saw some nice equity gains. Sadly for many sellers the days of furious appreciation may be behind us as we saw the market take a swing in favor of the buyer mid-way through 2018. However, Reno home buyers may be in for a bit of a relief.
Due to our consumer-friendly commission model, we carry a decent inventory of homes for sale at any given time. Last summer we noticed that many of our listings that we took in June were not getting much activity. This was a major change from the listings that hit the market in March or April. Spring proved to be the last feeding frenzy of 2018. In spring, the moment a home went live in the MLS, it immediately had multiple buyers looking at it. Sadly for summertime sellers, everything came to a crawl with little to no showings. Also, if and when an offer was submitted it was significantly lower than asking price. It seemed that over night, buyers lost the appetite to submit offers at or above asking. Gone were the days of crazy competitive multiple offers. Many sellers who had expectations of getting their asking price were hugely disappointed by the lack of activity and insulted by the offers.
The reality of all markets including real estate, is that sometimes a correction is in order. Buyers simply can’t keep up with the rising prices. In Reno, much of this inability to keep up is driven by the relatively low wages earned by the residents. The household median in Northern Nevada is $50,000-$65,000. This range has not moved much in the last 10 years, while home prices have continued to go up after the recession. What this means for the average buyer in Reno is that the dream of ownership remains unattainable when average home price continues to outpace income.
Compounding this problem have been rising mortgage interest rates. While rates are still low, they have climbed steadily over the past 12 months. The result of growing interest rates is that affordability diminishes. As rate goes up, buyers find themselves being able to afford “less house.” Their preferred monthly payment amount remains the same but the amount of money spent on loan interest increases forcing the buyers to consider a lower-priced home. Therefore buyers who were in the market for a 3 bedroom, 2 bath home in a Northwest Reno neighborhood for $350,000 found themselves needing to consider a smaller home or maybe a condominium, or perhaps a different area, to be able to stay within their budget. Some sellers saw this trend and chose to wait for a buyer who was more flexible on price. Others chose to price their home lower or reduced the asking price in order to appeal to more buyers.
As we head into 2019 it appears that the trend of stagnating (or even reduced) home prices and increasing interest rates is here to stay. This may be worrisome to some home owners, but considering that we have had double digit annual appreciation over the last four years, occasional small corrections are healthy for the economy. Without these corrections the alternative is what we saw during 2008-2012. No one wants to revisit those difficult days. For the buyers who have been feeling priced out and nervous about missing out on the American dream, don’t fret, there should be plenty of great buying opportunities in the Reno area in 2019.
As you set out on your home selling or buying journey, don’t forget to check out our full-service-on-a-budget commission model for sellers and buyers. Transacting real estate shouldn’t be cumbersome or expensive. At Home NV, we make sure that each of our clients is happily satisfied with the process and the value.
From our family to yours, here’s to a happy, healthy, and a prosperous New Year!