Reno/Sparks Market Update

All Reno/Sparks Market Update – 12/7/2024

30-Year Mortgage Interest Rates: 7.00% (7.035% APR)

What does this all mean?

The short answer is: Expect Home Prices to continue to increase between 2% to 5%. If mortgage interest rates go down to the 5%’s, Home Prices could go up alot! When will home prices go down? Maybe in late 2026 if we get a big increase in housing supply. There’s a cool short article below about how President Trump’s policies and campaign statements could affect the Housing Market.

The Trump Presidency and what it could mean for the Housing Market:

Well the Presidential Election is done and it’s time to take a look at some of the plans and announcements President Trump has made during his campaign.

• Open up Tracks of Federal Land for Housing Construction – During an Aug. 15 news conference Trump said. “We desperately need housing for people who can’t afford what’s going on now.”
  
  As of mid-2023, there has been a housing shortage of 4 million homes in the U.S., according to the National Association of Realtors.
• Deregulation to Increase Affordability – Trump called for slashing regulations and permit requirements, which can add onto housing costs for homebuyers.
  
  Experts say that regulatory costs trickle down to the prices homebuyers face.
  About 24% of the cost of a single-family home and about 41% of the cost of a multifamily home are directly attributable to regulatory costs at the local, state and federal level, Tobin said.
• Impacts on Construction Workforce – Trump has also blamed rising home prices on a surge of illegal immigration during the Biden administration. However, experts say that most undocumented immigrants are not homeowners. This will probably be a wait and see what actually happens.
• Tariffs could hike building costs – Trump has proposed a 10% to 20% tariff on all imports across the board, as well as a rate between 60% and 100% for goods from China.
  
  It’s likely that builders will need to evaluate prices for products from abroad and could shift their buying to American products. With that, we could see some cost increases in building materials.

As always, plans and campaign announcements many times don’t come to fruition. So we’ll need to see how things progress as the Trump Administration ramps up. Stay tuned for more updates and information.

Why are Reno/Sparks Median Sold Prices going up?

In spite of a pretty robust 30-year mortgage interest rate (7.00%), we’re still seeing Reno/Sparks buyers come to the closing table. Closed sales (Demand) were up 22.4% over October 2023 (YoY). Another interesting statistic is New Listings were also up 26.2% YoY as well as Active Inventory (Supply) was up 13.7% YoY. These statistics indicate that the Reno/Sparks housing market and economics continue to be strong.

• Nevada has one of the highest Unemployment Rates (5.6% in September 2024), Reno/Sparks is still strong (4.3% compared to the US @ 4.1%). Tesla continues to ramp up for the production of their 4680 (Gen 3) Battery and Semi-Trucks. That’s going to again push employment numbers up for Reno/Sparks when they go to full production.
• Lyten also announced plans to build the first lithium-sulfur battery gigafactory (A $1 Billion Plant) in North Reno. If it goes into full operation in 2027 it will add over 1000+ new jobs to Reno. There’s still many more steps to take place before they can break ground. I’ll keep you posted as more information becomes available.
• People continue to move to Reno/Sparks. We have no personal state income tax, we’re new business friendly, we enjoy 4 seasons and there are lots of outdoor activities to enjoy including Lake Tahoe.

What’s going to happen going forward?

• Mortgage Interest Rates are predicted to decline in 2025 and maybe in the 5’s. That means more buyers will be entering the market. That will drive home prices up. Get ready, it could get really crazy!

Conclusions – The Reno/Sparks Real Estate Market is still a Seller’s Market, however, we are beginning to see a bit of a shift. Evident by the Months Supply Increase to 2.4 months. Definitely not like 2020/2021 when the market was a White Hot Seller’s Market and had a months supply of 0.7 months.

Reno/Sparks Economy

Conclusion/Predictions:

The Federal Open Market Committee (FOMC) recently reduced the Fed Funds Rate to 4.83 in October 2024(compared to 5.33 in October 2023).

The FOMC has indicated that they may take another small reduction to the Fed Funds Rate before the end of the year. Will we see any reductions to the 30-Year Conventional Rate in December?…Not by much. However, stay tuned as the Consumer Price Index (CPI), Unemployment and other key economic indicators improve, the 30-Year Mortgage rates will start to come down, probably in 2025.

BTW – this is all based on the premise that everything in our world remains constant and continues as normal. However, a trigger event can change our economy and housing market.

Trigger Events:

• Economic Crisis – for example, in 1929, the stock market was greatly over-valued and when investors started to figure that out, there was a mass exodus out of the market which caused the Great Depression. Ok, there’s a bit more to it than just that. However, the Great Depression caused a huge drop (about 60% in value in some areas) in the Real Estate Market in the 1930’s.
• The next big “Trigger Event” for the housing market was in December 2007, when banks realized that a huge number of home loans were made to people that couldn’t make their payments when the loan adjusted to long term. That caused 3.1 million home foreclosures in just 2008. The Real Estate Market was flooded with homes for sale and in distress. Prices dropped dramatically (about 47% in Northern Nevada) and yes, there was a lot more to the Housing Market Crash than toxic mortgage loans, but that’s what basically happened.
• Are we headed for another Trigger Event in the residential real estate market? There would have to be a catastrophic trigger event or a combination of events. I.E. – war, recession, another health crises, major weather event/natural disaster to Reno/Sparks or something that may be new to the list of Trigger Events. The point being that it is unlikely that we’re going to see another huge drop in the Real Estate Market soon.

Disclaimer: This article/website contains forward-looking statements which are predictions and opinion based on data and information at a particular point of time. As data and information is updated and changes, the predictions and opinions can and will change. It is recommended that you always conduct your own research and base any of your investments and decisions on your finances on your own conclusions.