‘Prepare for bidding wars’
Campbell Construction recently mass grading for a new housing development in Somersett in Northwest Reno, as seen here the afternoon of Oct. 20, 2020.
Every morning, Robert Bartshe, 2021 president of Sierra Nevada Realtors, looks up all the single-family homes available on the market in the Carson City-Sierra region.
In recent months, just about every time he pulls up the database, both the number of new listings and the number of days a unit stays on the market has been dropping.
“Homes are selling and they’re selling quickly,” said Bartshe.
In the greater Carson City-Sierra region — which consists of Carson, Douglas, Lyon and Churchill counties — the average amount of time a home lasted on the market was 52 days in 2020. A year prior, in 2019, available homes were sitting for an average of 133 days before getting scooped up, Bartshe said.
In all, Sierra region Realtors sold 3,319 homes in 2020, a 3.5% increase compared to 2019.
“Buyers are buying,” Bartshe told the NNBW. “We have more buyers out there than we did last year. And that’s in conjunction with our median home price going up because of the number of buyers that there are.”
Record-low interest rates have boosted home buying demand in recent months in Northern Nevada and beyond. At the same time, fears of virus transmission have made potential sellers wary of putting their homes on the market. Others are waiting to pull the trigger as home prices continue to spike.
As a result, the supply of homes for sale across the country has dwindled, creating a historic shortage. In November 2020, the U.S. saw its inventory drop to 2.3 months, the lowest level on record since 1982, according to the National Association of Realtors (NAR).
Narrowing in on Northern Nevada, the inventory is even slimmer.
“Our supply as a whole is running at about three weeks,” Bartshe said of the Sierra region. “As we know, a healthy inventory would be six months or so.”
‘Considerable pressure’ on home availability, pricing
In nearby Reno-Sparks, meanwhile, the available supply is hovering around “two weeks or less,” said Gary MacDonald, 2021 president of the Reno/Sparks Association of Realtors.
MacDonald said the region’s available supply in November 2020, for example, was down 73% compared to 2019.
Meanwhile, any listed homes in Reno-Sparks have been flying off the market like clockwork. In December, the average length for a listing was 31 days, according to RSAR’s most recent monthly report.
The final month of 2020 also saw the median sales price for an existing home in the Reno submarket (which includes the North Valleys but not Sparks) hit a record $500,000 — a 23.5% jump from a year ago and up from the $485,000 mark it recorded in November.
The median home price in Sparks (and Spanish Springs) in December, meanwhile, came in at $405,000, down slightly from November’s mark of $410,000.
“We just haven’t had enough housing and that’s reflective in our pricing,” MacDonald said. “With the low interest rates, and as long as people have jobs, and as long as the economy’s going, there will be considerable pressure on availability and pricing. And I think that’s going to continue.”
Bartshe, too, doesn’t see the red-hot real estate market cooling anytime soon, considering median home prices for Lyon County, Carson City and Minden/Gardnerville came in at $352,665, $386,250 and a whopping $519,080, respectively, according to Sierra Nevada Realtors' December 2020 market report.
“I think inventory is going to be our biggest challenge for the next couple years,” he continued. “If inventory remains low, prices are going to continue to increase, which is going to push some people out of the market. And I don’t anticipate seeing an increase in inventory enough to influence prices.”
Bartshe and MacDonald both see demand increasing even more in 2021. They pointed to the influx of companies and remote-working Californians migrating to Northern Nevada for the quality of life and business-friendly environment.
“Especially now, with COVID, they can live and work wherever they want,” MacDonald said. “And they’re choosing not to work in the big cities. They’d rather work in Reno-Sparks or Carson or Lake Tahoe.”
In other words — with a widespread shortage of homes for sale, Bartshe said the ball is in the sellers’ court.
“Sellers really have an advantage in this market right now, they’re the ones with the opportunities,” he said. “And buyers better buckle-up and prepare for bidding wars.”
Shortages in supply, labor and land
A shortage of previously owned homes on the market is prompting more buyers to opt for new construction. However, in Northern Nevada, along with other fast-growing regions of the country, construction of new single-family homes can’t keep up with the demand.
“The demand in the market for new construction is significant,” said Dan Morgan, who took over as executive director of the Builders Association of Northern Nevada (BANN) in November. “From the perspective of our membership, everybody’s building everything they can.”
The pandemic hasn’t helped. Many builders paused or slowed land purchases when Gov. Steve Sisolak ordered a shutdown in economic activity last spring.
Moreover, Brian Bonnenfant, project manager of the Center for Regional Studies at UNR’s Nevada Small Business Development Center, said the workforce in the region dipped during the pandemic. In a recent interview with the NNBW, he cited employment numbers in the second quarter of 2020, when the total number of construction workers in Washoe and Storey counties was down about 500 workers, or 3%, compared to 2019.
“With the increase in demand and decrease in labor supply, we’re not going to be able to build enough inventory of detached product,” Bonnenfant said. “And that’s been pretty much the case for a while.”
Another issue that could slow residential development in 2021 and beyond: homebuilders are worried they are running out of land, Bonnenfant said.
“I’m hearing from a lot of builders in Reno proper, more in the south, that there are not a lot of available lots to build on,” he said. “Their margins have already been cut pretty heavily, absorbing a lot of those cost increases in materials and wages. So, they’re at a point where that single-family detached is going to be an ongoing issue forced by topography and the desirability of where people want to live.”
As more and more new homes get scooped up in Northern Nevada, there is a growing need to find skilled workers to build them.
“While we employ thousands, there is a skilled workforce deficiency,” BANN’s Morgan said. “We could use a significant number of new workers in the residential construction and development.”
With that in mind, Morgan said there needs to be an increased focus in offering opportunities for students in K-12 and higher education systems to learn skilled trades through programs and certifications.
Along the way, Morgan said BANN is doing “everything it can” to help the region meet the housing demand.
“If I had a specific goal, it would be to make sure that everybody that’s involved in the development process works together,” Morgan said. “Whether that’s different businesses or governmental bodies, regulatory bodies, to make sure that we’re meeting that demand in the most effective, efficient way possible. Because there’s a lot that goes into development and building, and it requires a significant amount of collaboration and communication.
“In order to increase supply to meet demand, a lot of people in a lot of organizations have to come together to the table to find a way to do that.”
EDITOR'S NOTE: This story first published Jan. 20 at www.nnbw.com as part of a series of stories planned for the NNBW’s B2B Industry Focus section for the first quarter of 2021, “Economic Outlook,” which initially was scheduled to publish in the Jan. 20 print edition. Due to the delay in print publication, some of the information and/or data included in this story may be outdated.