If you didn’t catch my recent interview on KTVN Channel 2 News this week, you can watch it here: One Hot Sellers Market: Local Home Sales Break New Records
The segment centered around the record low available inventory in the Reno-Sparks’ housing market.
Because of time constraints of the aired segment, some of what I had presented during the interview did not make it into the final piece. So, today I’d like to provide a bit more data regarding the current record low inventory our market is experiencing.
Utilizing historical sales data that I’ve compiled over the years, I graphed the following inventory trends for the Reno-Sparks market.
In the chart above the red line shows available homes for sale for each month going back to June 2010 [the first month that I began tracking inventory]. Note: Hover over the lines to see the corresponding inventory numbers for each month.
As can be seen in the chart January’s inventory of homes available for purchase is the lowest it has been since I’ve been tracking the metric.
A current active inventory of 165 homes is less than two weeks supply at January’s unit sales of 372 homes sold for the month.
However, the reality of the current extreme low inventory is even more dire than the aforementioned two weeks. Consider that, of the currently available inventory, only about 20 percent are priced at or below the current median sales price. That’s equivalent to 34 homes.
The green line represents the number of homes sold. Despite the huge existing buyer demand January’s home sales were the lowest in two years — no doubt largely impacted by the lack of available inventory.
Sale-to-List Price Ratio
Another topic raised in the news piece was the occurrences of multiple offers, and homes selling for above asking price.
In the piece I describe such instances as “commonplace”.
Though multiple-offers data is not available, one metric we can use to get a sense of the trend of the number of properties receiving multiple offers is to look at the average sale-to-list price ratio. The thought being that the more offers received on a property, the higher the sales price achieved.
The table above shows the sold price as a percentage of asking price over the past five years. Though the percentages do not appear to vary much — ranging from 96% to 99% — some variability and trends can be observed.
One observation is that (other than Q4 of 2020), the 4th quarter of any given year typical exhibits the lowest ratio for that year.
Conversely, the 2nd quarter of any given year typical exhibits the highest ratio for that year — again, not including 2020.
These observations correspond to the typical seasonality of home buyer activity throughout the year.
2020 bucked those trends though. As can be seen in the chart above, the average sale-to-list price ratio for 2020 climbed steadily throughout the year — ending at 99%.
Anyone want to take a guess at what was the average sale-to-list price ratio for January 2021? Well, let’s just say the upward trend observed in 2020 appears to be continuing.
January’s average sale-to-list price ratio was 100%. Meaning that, on average, homes fetched 100% of their asking price. No negotiating price. No discounts.
This upward trend is even more remarkable when one considers that the average sale-to-list price ratio has been climbing even as the median list price has been increasing as well.
The chart above illustrate these trends. [Note: Hover over the bars and data points to see the values for each quarter.] Higher home prices do not seem to be deterring bidding wars. Or is it that the bidding wars are driving the higher home prices? And how high can each of these trends go?
What are your thoughts on the market? How will it shake out in 2021? I would love to see your comments below.
The residential sales data in the table above includes Site/Stick Built properties only. Data excludes Condo/Townhouse, Manufactured/Modular and Shared Ownership properties. Data courtesy of the Northern Nevada Regional MLS. Note: This information is deemed reliable, but not guaranteed.
Catherine
Why is inventory so low?
Guy Johnson
Thank you for your question, Catherine. And thank you for reading the blog. 🙂
There are several reasons for the extremely low housing inventory, but the short answer is buyer demand exceeds incoming supply.
However, to answer the question more thoroughly we need to ask “What is driving buyer demand?”, and also “What is suppressing home sellers listing their homes?”.
I found a blog post that answers these questions nicely — See the Sacramento Appraisal Blog‘s, Why is housing inventory so low?
In this piece, the author provides nine drivers contributing to the low housing inventory. And though this comes from Sacramento, the reasons outlined apply to the Northern Nevada housing market as well. For our local market, point #8 is especially pertinent.
Thank you again for reading the blog!
Gaius Gracchus
The low inventory situation could be turned around by a few things. One is that sellers get vaccinated and are more willing to show their homes to the public. Another is that the working remotely trend reverses and people start moving back to urban areas and renting again. Another would be that building of new homes increases.