“Is the Reno housing market slowing down?” That is a question I get asked daily in the midst of the current COVID-19 pandemic.
To answer the question let’s take a look at some recent trends.
Median Sales Price
Looking only at home prices, the answer would seem to be No. Last week I reported that the median sold home price for the Reno-Sparks’ market jumped nearly 6 percent in March — coming in at $415,000, and setting a new record high for home prices in Reno and Sparks, Nevada. [See March median sales price and other market metrics]
Certainly, there seems to be no slowdown in home sale prices. However, sales price is but one metric and does not tell the whole story.
The number of homes sold is the most telling metric of the housing market’s strength and velocity. And looking at the number of homes sold in March we see that home sales were up an impressive 10.3 percent over February’s homes sold, and up 9.8 percent over March 2019. Not too shabby.
However, “home sales” is a lagging economic indicator. Keep in mind the majority of those homes sold in March went into contract in February, and some even in January — well before Nevada’s stay-at-home order went into effect.
That is why March’s home sales number exhibited little or no impact from the COVID-19 pandemic — and actually appeared quite healthy.
It would be April’s home sales that will exhibit an impact. And to get a picture of April sales, we can look at…
Unlike homes sold, “pending sales” is a leading indicator of housing activity. So how are current pending sales looking?
With “social distancing” guidelines and Nevada’s stay-at-home order in place, home showings have been drastically negatively impacted (and, in some cases, have been prohibited altogether). And with no home showings happening, placing a home into contract becomes very difficult.
Let’s take a look at weekly pending home sales for the Reno-Sparks market over the post ten weeks.
As can be seen in the chart above, pending sales began trending downward in late February as news of the Novel Coronavirus pandemic become more prevalent in the media. Then the second week of March saw pending sales drop nearly 14 percent from the previous week as the Governor of Nevada declared a state of emergency and closed all schools. (See Emergency Order Timeline below).
By the fourth week of March pending sales were off 38 percent from their February highs — this coming after the Governor’s declarations: closing all non-essential businesses; suspending public meetings; and prohibiting gatherings of groups of ten or more. (Again, see Emergency Order Timeline below).
April has seen a slight uptick in pending sales — despite the stay-at-home order issued on April 1st — but don’t be mistaken in thinking that home sales are on the rebound.
Take a look at year-over-year weekly pending sales below.
In the chart above we can clearly see the dramatic effect the COVID-19 pandemic has had on pending sales.
Weekly pending sales this year were initially outpacing those of the corresponding weeks of 2019 — see the first three weeks of February. In the fourth week of February, however, pending sales for 2020 and 2019 were essentially equal.
March is where we see pending sales really begin to nosedive relative to where they were in 2019. The relative year-over-year differences can be seen in the table below.
As of last week, pending sales are off a staggering 46 percent year-over-year! This drop does not bode well for May and June closed sales.
Homes taken off the market
While many homeowners continue to list and attempt to sell their homes during these uncertain times, other have decided to take their homes off the market — either temporarily or indefinitely.
As can be seen in the chart above, the third week of March witnessed quite a spike in the number of homes being taken off the market temporarily as home owners likely wanted to assess the situation. Again, this spike coincided with the closure of all non-essential businesses and schools.
The chart above shows the number of weekly listings that have been withdrawn altogether from the MLS. Again we see an upward trend.
The “temporarily off market” and withdrawn listings discussed above pertain to those homes that had already been listed. What about homeowners who had been planning to list during the typically busy spring season? To answer this, we take a look at weekly new listings compared to last year.
Again, the dramatic impact of the COVID-19 pandemic can clearly be observed in the chart above.
Prior to the Novel Coronavirus outbreak, 2020 was forecasted to be a record-breaking year for home sales. And things were looking good earlier this year. A look at the weeks of February and early March in the chart above shows weekly new listings clearly outpacing new listings from the prior year’s.
However as the effects of the COVID-19 pandemic began to unfold, the number of weekly new listings did an about-face and began to decline sharply in the third week of March.
In the table below, we can see that last week new listings were off nearly 45 percent from this time last year.
BOMKs (Back on Market)
Another metric not often reported on is that of “Back on Market”. Back on Market refers those homes that were pending sale, and in escrow to close, but for some reason failed to close, thereby causing the home seller to place the property back on the market.
Pending home sales can fail to close for many reasons — for example:
- the property does not appraise at the purchase price (and buyer and seller are unable to come to an agreeable solution)
- something insurmountable was revealed during inspections
- a different property, on which the subject sale was contingent, failed to sell
- buyer no longer qualifies for financing
Fortunately, pending transactions do not fall out of escrow often.
However, the coronavirus pandemic seems to changing the status quo. Below is a chart showing the weekly number of back-on-market listings (BOMKs) over the last ten weeks.
As can bee seen in the table above, in February BOMKs were average less than ten per week. The month of March began with an uptick. And then the third week of March saw a dramatic spike in BOMKs — with more than 40 BOMKs in one week. As observed with the other metrics above, this spike followed the declaration of the State of Emergency in Nevada, and subsequent emergency directives.
So what happened? Though I do not have direct evidence and data to provide specific reasons, anecdotally I have been hearing that many of these recent BOMKs are due to causes related to the coronavirus pandemic and the subsequent closing of many business. Some of these include:
- Buyers losing their employment, and thusly, no longer qualifying for a mortgage
- Buyers losing other sources of purchase funds (e.g. investment accounts no longer having sufficient funds to complete the purchase)
- Mortgage brokers no longer possessing the ability to lend
- Properties on which the subject sale was contingent failed to sell
BOMKs will be another metric I will continue to monitor and report.
To the question posed at the beginning of this blog post, Yes, the Reno-Sparks housing market is slowing down. As of last week (April 5th – 11th):
- Pending sales are down 46.2 percent, year-over-year
- New listings are down 44.8 percent, year-over-year
- The number of home sales falling out of escrow is up four-fold
- The number of homes being taken off the market is increasing weekly
Each of these items has the capability to decrease the number of forthcoming home sales. However, taken collectively, these factors will definitely depress the number of homes sold. How much so?
Taking a look at recent weekly home sales in the table below, we see that for the week of April 5th – 11th the number of homes sold is down more than 28% compared to the corresponding week a year ago. And keep in mind units sold are just beginning to see the effects of the coronavirus pandemic.
With aforementioned pending sales (a leading indicator) down 46 percent, one can expect subsequent home sales (30 – 60 days out) to be impacted accordingly.
March monthly sales came in at 506 homes sold — this number was up an impressive 9.5 percent, year-over-year. However, again, as mentioned at the top of this post, these homes were already in contract/escrow well before the impact of COVID-19 and the coronavirus pandemic. Given the data presented in this post, it is not inconceivable that our market could expect home sales for the month of April to be down as much as 25 percent, year-over-year. And if the trends above continue, May’s home sales could be depressed by as much as 50 percent.
Another question I get asked frequently is what will happen to home prices. Home prices are impacted by so many variables — buyer demand, seller motivation, available inventory, financing availability, future market expectations, buyer/seller fears/uncertainties, etc. — that predicting what home prices are going to do becomes guesswork — especially given the unchartered waters in which we now find ourselves.
That being said, I don’t believe that a decreasing number of homes sold, by itself, will necessarily cause home prices to drop. With already low inventory (both existing and new to market) trending downward, if Buyer demand is sufficient enough, then prices may remain relatively stable. But again, many factors will ultimately come into play. I will continue to monitor and report home sale price trends, as well.
In closing, presently there are no signs of the trends reported above reversing. I will continue to monitor the numbers and report to the readers of this blog.
In the meantime, stay well, thank you for reading, and please leave a comment below.
Governor of Nevada Emergency Order Timeline
- 03/12/2020 Governor of Nevada declares State of Emergency
- 03/15/2020 Governor of Nevada closes all kindergarten through 12th grade schools effective March 16
- 03/18/2020 Governor of Nevada closes all casinos
- 03/20/2020 Governor of Nevada closes all non-essential businesses effective March 20, 2020, at 11:59 p.m.
- 03/22/2020 Governor of Nevada suspends public meetings
- 03/24/2020 Governor of Nevada prohibits the general public to gather in groups of ten or more in any indoor or outdoor area
- 04/01/2020 Governor of Nevada issues stay-at-home order
- 04/08/2020 Governor of Nevada prohibits open house showings, and in-person showings of single family and multi-family residences currently occupied by renters
See all COVID-19 Emergency Orders here
The housing data reported on 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 courtesy of the Northern Nevada Regional MLS – April 12-16, 2020. Note: This information is deemed reliable, but not guaranteed.