Last month Realtor.com® published a report titled, Luxury Home Prices Gain Momentum in First Half of 2018. In the report, Realtor.com® analyzed sales of luxury homes in 91 markets. I read the piece with interest because I expected Reno, Nevada to be mentioned. But Reno, Nev. was not mentioned, despite the phenomenal growth of its luxury market.
Adding to the mystery of Reno being conspicuously absent was that earlier this year Mansion Global published a focus piece on Reno, Nevada’s luxury market — using data released from, wait for it, Realtor.com®. See Mansion Global’s Reno, Nevada, Luxury Prices Soar Amid General Housing Shortage.
It was only when I finished reading the report that I noticed a footnote that read, in part, “The following markets were excluded from rankings this month as we review their data: Washoe, Nevada; Lake, Ill.; Dallas; and St. Louis.” Ah-ha! So, Washoe County (hence the Reno, NV market) had been excluded from the Realtor.com® report.
Well, being the real estate agent and blogger I am, I decided to perform my own analysis on Reno, Nevada’s luxury home prices, and then to compare the results to what was found in Realtor.com®’s national analysis of 91 other markets. So, without further ado…
Realtor.com®’s Luxury Home Index defines the luxury market as the top 5 percent of all residential home sales. So, for my analysis I will do the same. I will be analyzing residential home sale data for 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. And, finally, I will be analyzing sales from January 1, 2018 through June 30, 2018, and then comparing to the same time period of the prior year.
Luxury entry price point
As stated above, Realtor.com® defines a luxury market as the top five percent of home sales. During the first half of 2018, 3,058 homes were sold. Five percent of that total is 153. The 153 most expensive sales ranged from $890,000 to $3,550,000, and exhibited a median sales price of $1,195,000.
From the Realtor.com® report highlights: “In the 91 luxury markets analyzed, the entry-level price for luxury, measured as the top five percent of all sales, increased 4.6% year-over-year on average.”
The entry-level price for luxury in Reno-Sparks was $890,000 for the 1st-half of 2018. The entry-level price for luxury in Reno-Sparks for the same time period in 2017 was $719,000. Wow! 2018’s entry-level price for a luxury home in Reno-Sparks increased a staggering 23.8 percent year-over-year.
From the Realtor.com® report highlights: “The top five fastest growing markets are Sarasota, FL; Collier, FL; Queens, NY; King, WA; and Monterey, CA – all seeing 13-20% price growth year-over-year.”
Had the Reno-Sparks market data been included in the study, our local market would have taken the #1 spot for fastest growing markets.
Furthermore, looking at only luxury home sales, the median sales price in the 1st half of 2017 was $888,250. The luxury median sales price during the 1st half of 2018 was $1,195,000 — an increase of a whopping 34.5 percent year-over-year! To put that number in perspective, consider that if the same growth had occurred to the median sales price for the non-luxury home segment here (the other 95 percent), we’d be looking at Reno-Sparks’ median home price around $430,000 today.
From the Realtor.com® report highlights: “Million-dollar sales in the 91 markets combined are up 25% over last year, the biggest jump observed since January 2014.”
From January 1st through June 30th, 2017, 62 homes sold for a million dollars or more in our market. For the same time period in 2018, 114 million-dollar sales took place — representing an incredible 83.9 percent increase year-over-year!
Time on market
From the Realtor.com® report highlights: “Luxury properties in most markets continue to sell faster than this time last year too, with the combined median age of inventory in the 91 luxury markets down 7 percent year-over-year on average.”
The median days on market of the luxury homes sales during the 1st half of 2017 was 139 days. The median days on market of the luxury homes sales during the 1st half of 2018 was 129 days. Median days on market declined 7.8 percent year-over-year; therefore luxury properties in Reno-Sparks continue to sell faster than this time last year too.
What is driving buyer demand for high end homes in Reno and Sparks? To help to answer this question, I sat down for a Q & A with Cristy Silverman, Certified Luxury Home Specialist of The Silverman Real Estate Team at Keller Williams Group One, Inc. in order to gain some insights.
Our conversation follows…
Guy: Cristy, you have been a licensed REALTOR® serving the Reno / Sparks luxury market for over 15 years. Thank you for joining me today.
Cristy: Thank you for having me. By the way, Iove your blog.
Guy: Thank you for that.
So, you’ve seen the current numbers for our luxury market, what is driving the phenomenal growth in buyer demand for high-end homes in Reno and Sparks, Nevada?
Cristy: There are several contributing factors. Reno / Sparks has been experiencing incredible economic and population growth. We have had an influx of tech companies to our area — Tesla, Switch, Google, Apple, and Panasonic, to name a few. The Tahoe Regional Industrial Center alone is expected to bring more than 100,000 new citizens to our area.
Additionally, our neighbors in California relocating here have been a big factor. In June, Forbes reported that California’s top income tax rate is now 13.3%, making it the highest state income tax rate in the nation. When you compare California’s income tax rate to Nevada’s no income tax, Reno as a relocation destination looks very favorable.
And, of course, our home prices can be much more attractive than much of California’s, particularly in places like the Bay Area.
Guy: And we have Lake Tahoe!
Cristy: Yes, we do. And you can’t top that!
Guy: Are you seeing higher pricing for pre-existing luxury homes in Reno and Sparks, or is the growth in the segment being fueled by new construction of luxury homes?
Cristy: Of the $1M+ home sales reported in our MLS, the large majority were pre-exisitng home sales. Only a small fraction was new construction. We do need to keep in mind, though, that not all new construction home sales are reported in the MLS.
Luxury home builders are actively building in our community again, which is nice to see, and we expect to see the number of new construction home sales rise.
Guy: In your opinion do you feel the growth we’re seeing in the luxury segment is sustainable?
Cristy: Yes, I do, for a few reasons. I recently read that in the past 5 years, over 18,000 people have left California for Nevada. I believe this trend will continue because the Proposition 30 income tax increase was originally set to expire in 2019. However, in 2016, the California voters extended this until 2030! Since January 1st of this year, 9% of the homes sold in Reno / Sparks have been purchased by Californians.
Additionally, I recently saw a report stating that for the past 5 years, real estate has outranked stocks, mutual funds, gold, savings accounts, CDs, and bonds as the best long-term investment among Americans.
Furthermore, the latest VeroFORECAST predicts real estate appreciation through May 2019 at a national average rate of 4.4%. Landing at #6 in their ‘top 10 markets’ list is Reno / Sparks at a projected rate of 9.5% appreciation.
Guy: Yes, I saw some of those stats too. Lots of signs pointing to continued growth.
And finally what advice can you give for today’s luxury home sellers and buyers?
Cristy: It is vitally important that luxury home sellers and buyers work with a REALTOR® who specializes in luxury home sales. I recommend the luxury consumer sit down with an agent they are considering hiring and then conduct an interview with her or him. Not only to see if there is a good match on a personable level, but also to determine if that agent has the experience and skill set needed to successfully negotiate on their behalf.
This is a business decision. Don’t be afraid to ask pointed questions. Such as, how many high-end transactions has the agent been a part of? How well does the agent know our luxury market and inventory? For example, currently our market has 189 homes listed at, or above $1M. How does that translate to months-supply of inventory in the luxury segment? Does the prospective agent attend broker open houses when new luxury listings hit the market?
Guy: Great recommendations, Cristy. I would like to thank you for your insights and wish you continued success.
Cristy: Thank you so much, Guy. To you as well.