Drop in Reno Home Prices – a Trend or a Blip?

A snowy day at 5295 Canyon Drive, Reno, NV

The real estate market in Northern Nevada changed in the past few months. The latest reports show a drop in median home prices year over year, raising questions including: Why? What’s ahead? Will prices nosedive in 2023? Great questions! Let’s dig deeper.

Perspective:

In our area, generally, prices tend to rise, then plateau or flatten. Nationally, home values on average rise 4% to 6% a year over a 20 year period. Not every year, but over time. My research suggests Northern Nevada is in a plateau phase.

The Why

Economic and environmental factors.

• Rising interest rates on mortgages certainly worry buyers and definitely impacts their buying power. In the fall, many potential buyers pulled back, shocked at the change. Many sellers ignored this reality, thinking buyers would pay more. The result: Longer days on market, price negotiations and more homes selling for below initial list price.
• Reno’s had a tough winter. Snow nearly every weekend discouraged house hunters. I-80 often closed, cutting off a prime feeder market. People just haven’t been out and about looking for homes. Sellers who need to move, now negotiate and accept less than list price.

Spring, however, is coming. If history is any guide, as the trees start to bud, buyers will start looking again. They’ve had time to accept that 2.5-3.5 percent interest rates are gone and unlikely to return. We’re already seeing some properties — those in those in great locations, in decent to “perfect” condition and properly priced — get multiple offers. Several of my clients have been in multiple offer situations in the last month.

To me, all this suggests that today’s buyers are lucky. Sales activity often dips in winter. Annual data shows seasonal ups and down — December and January are low points, May through August tend to be the peak.

For those thinking the Reno real estate market is about to crash, I suggest viewing the EDAWN website and forecasts. The Economic Development Authority of Western Nevada relentlessly recruits businesses to move jobs here. Their successes are measured by the thousands of new jobs — and thousands of people who have moved here. Their mission continues. More jobs, more people will come. Companies from around the nation and the world now know this is a great place to work and live.

Housing Supply Facts

Homebuilding lags significantly behind the actual and projected growth in Northern Nevada. There simply are not enough homes here now or in the building pipeline to meet the current and future demands. Home values rose at crazy rates — 10% to 20% a year during the pandemic. 

People who can work from anywhere are choosing this area. The lifestyle, the economic benefits, the weather all beat much of the country. Retirees love this area too — partly for the zero income tax, low property tax and overall cost of living. It certainly beats many West Coast communities on housing costs. Conversely, folks from the Midwest and South experience sticker shock.

Chase International Real Estate recently released its 2022 year-end Real Estate Market Report which showed lower overall volume in sales (number of homes sold). Yet prices rose — in some neighborhoods prices jumped drastically in 2022.

Specifically, in Reno and Sparks, 13% fewer homes sold in 2022, yet the median price of those homes was up 10% from $480,000 to $535,000. To the eest, Fernley saw comparable results. South of Reno in Carson City and the Carson Valley the number of homes sold dropped 9% and 16%, respectively, while prices rose 8% in Carson City and 5% in Carson Valley (Minden/Gardnerville).

Ahead

So what will the rest 2023 bring? I don’t have a crystal ball. From analysis by economists, fellow realtors and my own clients, I expect to see days on market (listing to closing times) shorten and prices to stop sliding and perhaps rise for many, but not all, properties.

People still need places to live. They still want to build wealth over time through home ownership. Based on the number of multiple offers my Chase colleagues and I have seen in mid-February to mid mid March, the best “deals” for the next six months likely are homes currently on the market.

The Verdict: Data, history and economic forecasts suggest the recent dip in median home price likely is a blip vs a trend.