I recently posted an analysis of the extremely tight housing inventory that Reno, Nevada and Sparks, Nevada is facing. See: Reno, Nevada’s Housing Shortage — How Bad Is It? As an eleven-year local REALTOR® serving the Reno-Sparks area, the numbers I uncovered surprised even me.
During the course of my analysis some other findings came to light. With inventory being so tight and demand being so great, it was not surprising the see the average DOM (days on market) to be low. As I touched on in the aforementioned piece, many home sellers today are receiving multiple offers out of the gate. But with new listings practically “flying off the shelves”, I wondered why there were any available listings left at all.
Well one obvious reason that comes to mind is price point. The vast majority of the current listings are simply unaffordable to the average buyer shopping in the Reno-Sparks area. Let’s take a look.
Household Income and Affordability
Depending on who you ask, the median household income in Washoe County ranges from $52,910 to $56,382. Without going into debt-to-income ratios, credit scores, size of down payment, and other factors that affect loan amounts, at today’s interest rates a buyer with the median Washoe County income could afford about a $200,000 home. That being said the homes currently being purchased in Sparks and Reno, Nev. exhibit a median sales price of $355,000.
This chart above shows the distribution of homes sales for November 2017. Connecting the tops of the bars produces a bell curve with the peak number of homes sold in the $300,000 to $399,999 range — which makes sense, as November’s median sales price was $355,000.
When the sales distribution chart above is viewed against the current inventory distribution chart below an obvious mismatch comes to light.
In the chart above we see the current inventory mix skews heavily to the higher price points. In fact, at the moment, a whopping 77 percent of the Active available listings in our MLS are priced above November’s median sales price of $355,000. And, if you are a buyer with the median Washoe County household income, and are looking for a $200,000 home, there are presently only 12 listings priced at or below $200,000 — less than 2 percent of our market’s available inventory.
Homes Priced Below the Median Price
Another thing that came to light when diving into the current inventory was the correlation between list price and the age of the house. It should not be surprising that newer homes command a relatively higher price than older homes, but when I looked at the inventory distribution across price points the difference was striking. The median age (year built) of a home listed at or below the median sales price of $355,000 is 1977; whereas the median age (year built) of a home listed above the median sales price is 2002.
And using our previous $200,000 house example, the 12 current listings priced at or below $200,000 exhibit a median year built of 1956.
The charts below show the available inventory distribution across various price points. Each chart is for inventory of a the specified age range (year built).
2010 and Newer Inventory (no. of units by price range)
2000 – 2009 Inventory (no. of units by price range)
1990 – 1999 Inventory (no. of units by price range)
1989 and Earlier Inventory (no. of units by price range)
As can be seen in the charts above, more affordable inventory exists with the older homes.
When I am asking clients for their housing criteria (e.g. number of bedrooms, size of house, area of town, etc.) oftentimes they’ll say they want a newer home. When I ask what they mean by newer, typically they’re respond with, “something within the last ten years.”
I filtered the current available inventory on “homes built in 2008 or newer”. Currently listed homes in Reno and Sparks, built between 2008 and present, exhibit a median sales price of $499,950, and an average sales price of $721,059.
Does one really need half a million dollars to purchase a newer (built in the last ten years) resale home in Reno-Sparks? Not really, but the pickings are slim below that price. Refer to the “2010 and Newer Inventory” chart above. At the moment there are only 62 such houses priced below $500,000.
Note: The data presented above covers the cities of Reno, Nevada and Sparks, Nevada [NNRMLS Area #100]. Residential data includes Site/Stick Built properties only. Data excludes Condo/Townhouse, Manufactured/Modular and Shared Ownership properties. Data and charts courtesy of the Northern Nevada Regional MLS – December 21, 2017. Note: This information is deemed reliable, but not guaranteed.
Related post: Reno, Nevada’s Housing Shortage — How Bad Is It?