Builders Association of Northern Nevada Midyear ReviewBlog | Aug 1, 2013
Mark Krueger presents at this year’s Builder’s Association midyear review. Covered by the RGJ; read about it here.
Reno-Sparks housing market gains strength
Reno-Sparks home sales, construction, prices all improving in ’13, experts say
After years of slumping forecasts, the Reno-Sparks housing market is seeing big gains in new home construction, sale prices and land value during the first half of 2013.
The median home sale price has increased 64 percent since its lowest point in January 2012, the value of land is up, and home construction has nearly doubled, said real estate experts gathered at the Builders Association of Northern Nevada midyear review of industry on Wednesday.
“I’m very optimistic for the entire residential real estate market,” said Mike Dillon, executive director for the builders association. “Clearly, we still have some things to work out in the resale market. … But we are seeing that, in new home sales, the pricing is at a very good point right now.”
Nevada led the nation in growth during the early 2000s but fell the hardest during the financial and housing crises. The state has struggled to recover the jobs lost, including construction, which was a major economic driver. Housing also is an indicator of economic recovery.
Limited inventory in lower-priced existing homes drove the median sale price up to $220,000 in June compared to the low of $135,000 in January 2012.
Homes listed below $250,000 are selling as soon as they hit the market, and some properties are receiving multiple bids. Cash buyers, mostly investors, are finding deals in the Reno-Sparks homes.
“It’s the ‘cash is king’ syndrome, which is making the first-time homebuyer unable to compete,” said Helen Graham, president of the Reno/Sparks Association of Realtors and agent with Keller Williams Group One.
In 2014, cash deals will decrease as investors leave, and conventional loans will make up most of the transactions, she said.
As homeowner demand continues to grow, new home builders are gearing up to increase construction. More than 600 new construction jobs have been added since last year.
New home sales and permits have nearly doubled during the first half of the year compared to the same time in 2012, according to Mark Krueger, principal with ArchCrest Commercial Partners.
Up to June, 632 new homes were sold and 612 building permits were submitted. It nearly matches the numbers for all of 2012, which ended with 780 sales and 798 permits.
Krueger revised his forecast for 2013 to increasing the sale and permits numbers to 1,125 and 1,150, respectively.
It is better than the average of 400 permits pulled during the depths of the housing crisis. A normal average would be about 2,500 permits per year, Dillon said.
Land in demand
New home builders also are working through their available land to develop and are starting to expand, which has not happened in the past few years.
In response, much of the distressed tracts of land held by banks have been bought, and the value of raw land is rising, Krueger said.
“In the first half of the year, we did actually a lot of cleanup,” he said. “Not a lot of big, new deals, but smaller deals ate up pretty much all the distressed, and you saw builders leap into the next phase of their existing communities.”
New homes also carry a larger price tag. The average price increase in the top 10 area communities was more than $30,000 since the second quarter in 2012.
Krueger has seen an increase of transactions and expects $75 million of land deals to happen this year.
Experts did warn that new legislation passed this year might further hinder the foreclosure process in Nevada.
“AB284 changed our foreclosure market; SB321 will take foreclosures to a whole other level,” said Erin Schiller, regional business development officer with Ticor Title Co.
Distressed inventory and foreclosures slowed to a trickle in the past 18 months as banks worked with stricter documentation guidelines set forth by the passage of Assembly Bill 284 in 2011.
Notices of defaults, the first step in the foreclosure, started to pick up in the beginning of 2013 but stalled again in June after the 2013 Legislature passed two bills affecting the real estate industry.
Assembly Bill 300 addressed the strict documentation standards of AB284 by clarifying the language and changing documentation.
Senate Bill 321 is known as the “Homeowner’s Bill of Rights” and will go into effect Oct. 1. It could change the way banks and loan servicers handle foreclosure proceedings in Nevada.
It could extend the foreclosure proceeding even more because lenders are required to provide foreclosure prevention alternatives to distressed homeowners before even issuing default notices, Schiller said.
The banks and loan servicers have slowed the process in order to revamp their policy and procedures ahead of Oct. 1 deadline.