Northern Nevada Economic and Market Watch Report 1st Quarter 2011

8/6/2019 Northern Nevada Economic and Market Watch Report 1st Quarter 2011

1/15

Economic and Market Watch Report

1stQuarter, 2011

*Click on a County to view economic and real estate information at the county and zip code level

2011 The Northern Nevada Regional MLS and

NATIONAL ASSOCIATION OF REALTORS

Reproduction, reprinting, or retransmission in any form is prohibited without

written permission.


2/15

The Northern Nevada Regional MLS

Index

The Northern Nevada Regional MLS provides services to almost 3,000 real estate professionals throughout eight

counties in the Northern Nevada and Lake Tahoe areas. Over 2.3 billion dollars in residential real estate sales

transactions were reported through the MLS in 2003. The NNRMLS system hosts content on over 160,000

property listings and public records information from five local counties. Properties for sale can be found on-line

at realtor.com, rgj.com and on countless broker websites throughout the region. We are committed to providing

real estate professionals with superior real estate market information services and technology.

NNRMLS is pleased to expand services to our members by providing the Economic and Market Watch Report,

designed to help identify current and future economic and real estate trends that affect our market and our industry.

Economic and Market Watch Report

Local Report

Nevada

1 Churchill County .........................................................................................................

2 Douglas County ............................................................................................................

4 Lyon County ................................................................................................................

5 Storey County ..............................................................................................................

6 Washoe County ............................................................................................................

8 Carson City ..................................................................................................................

9 Others ...........................................................................................................................

10Trends ...............................................................................................................................................11Chief Economist's Commentary* ...................................................................................................

13Economic Monitor* .........................................................................................................................

*Reprinted from Real Estate Outlook: Market Trends and Insights. 2011 NATIONAL ASSOCIATION OF REALTORS .

Used with permission. Reproduction, reprinting, or retransmission of this article in any form (electronic media included) is

prohibited without permission. For subscription information please call 1-800-874-6500.


3/15

Local Report

Churchill County, NV1 2 3 4 5 Seller'sMarketBuyer'sMarket

Employment declined by 312 jobs in January and February. The job losses brought about an increase in

the average monthly unemployment rate from 10.7% in the fourth quarter to 11.4% for the initial two

months of the first quarter. Layoffs continued, which will weigh on buyer confidence and demand in

Churchill County. However, mortgage rates remain near record lows, maintaining a favorable buying

environment for those with a job.

Labor Market :

Housing Market :(Forecast)Q4' 10 Q1' 11 Q2' 11

$136,800Average Price $117,700

197# Homes on the Market * 202

59# Homes Sold ** 50

0# New Homes Built *** 0 ***

140Avg # of Days on Market **** 130* Available as of Mar. 31, 2011.

*** During the first two months of 1st quarter.

** May not add to total of zip codes.

**** Days on market is defined as the difference between the list date and contract date.

Zip Code Average Price Price Change***Total #

Homes Sold(Quarter)

% Change in #Homes Sold

***Average Days

on Market% of Asking Price

(Sold/List Price)

Data by Zip Codes for Q1 2011

89406 $117,900 -20.07% 49 22.50% 5.7%133

OTHER $112,400 -7.87% 1 0.00% 97.7%48

1

*** % Change of current quarter compared to the same quarter to year ago.


4/15

Local Report

Douglas County, NV1 2 3 4 5 Seller'sMarketBuyer'sMarket

Employment declined by 1,137 jobs in January and February. The job losses brought about an increase

in the average monthly unemployment rate from 14.9% in the fourth quarter to 15.2% for the initial two


Douglas County. However, mortgage rates remain near record lows, maintaining a favorable buying


Labor Market :











Homes Sold(Quarter)


***Average Days


(Sold/List Price)


89410 $216,400 -14.20% 41 24.24% 78.1%153

89411 $693,000 40.14% 8 100.00% 68.2%432

89413 $800,200 -24.51% 3 200.00% 74.5%226

89423 $256,900 -13.00% 36 28.57% 90.2%98

89448 $1,215,400 44.12% 13 -31.58% 74.7%303

89449 $322,900 1.00% 22 83.33% 85.8%176

89460 $258,300 36.74% 41 51.85% 92.0%71

89705 $211,300 3.38% 10 -41.18% 88.5%63

2



5/15

Local Report

Douglas County, NV


Homes Sold(Quarter)


***Average Days


(Sold/List Price)


OTHER $121,700 -0.33% 9 28.57% 83.8%139

3



6/15

Local Report

Lyon County, NV1 2 3 4 5 Seller'sMarketBuyer'sMarket



months of the first quarter. Layoffs continued, which will weigh on buyer confidence and demand in Lyon

County. However, mortgage rates remain near record lows, maintaining a favorable buying environment

for those with a job.

Labor Market :











Homes Sold(Quarter)


***Average Days


(Sold/List Price)


89403 $136,400 -14.43% 77 71.11% 85.5%94

89408 $100,300 -9.31% 105 -17.32% 87.5%79

89429 $59,700 -45.83% 20 0.00% 71.1%143

89430 $315,000 92.07% 1 0.00% 83.1%241

89444 $158,500 -75.80% 6 500.00% 81.2%53

89447 $86,000 -32.02% 18 28.57% 65.3%199

OTHER $172,600 6.02% 3 0.00% 91.2%8

4



7/15

Local Report

Storey County, NV1 2 3 4 5 Seller'sMarketBuyer'sMarket

Employment increased by 7 jobs in Storey County during January and February. However, the number

of job seekers also increased. The combined effect of these two trends was an increase in the average

monthly unemployment rate from 12.9% for the fourth quarter to 14% in the first two months of the first

quarter. Solid job growth will help confidence, while near-record low mortgage rates boost affordability.

Labor Market :

Housing Market :(Forecast)

Q4' 10 Q1' 11 Q2' 11





51Avg # of Days on Market **** 96

* Available as of Mar. 31, 2011.





Homes Sold(Quarter)


***Average Days


(Sold/List Price)


89440 $121,500 35.00% 2 100.00% 65.9%125

OTHER $149,600 12.65% 8 -33.33% 82.8%89

5



8/15

Local Report

Washoe County, NV1 2 3 4 5 Seller'sMarketBuyer'sMarket

A decline in employment of 1,632 jobs was offset by a decrease in the number of persons looking for

work during the first two months of the first quarter. The net effect was no change in the 13.3% average

monthly unemployment rate from the fourth quarter. Job losses are cutting into confidence and demand,

but near record-low mortgage rates have created a great buying opportunity for those with a job and

good credit.

Labor Market :



3,717# Homes on the Market * 3,948

1,559# Homes Sold ** 1,538







Homes Sold(Quarter)


***Average Days


(Sold/List Price)


89431 $90,100 -11.93% 103 11.96% 89.4%69

89433 $89,800 -10.11% 51 -13.56% 87.3%91

89434 $132,200 -12.97% 92 29.58% 90.5%61

89436 $181,600 -10.32% 204 12.09% 90.0%84

89439 $387,400 -30.51% 5 150.00% 81.8%121

89441 $216,300 0.60% 33 -15.38% 91.8%81

89442 $71,300 42.60% 3 200.00% 83.4%50

89451 $768,300 21.14% 24 -7.69% 85.0%121

6



9/15

Local Report

Washoe County, NV


Homes Sold(Quarter)


***Average Days


(Sold/List Price)


89501 $163,400 -36.74% 19 533.33% 79.7%48

89502 $103,000 -11.66% 100 16.28% 40.1%83

89503 $122,300 -13.51% 80 25.00% 90.3%76

89506 $109,700 -12.17% 190 -5.00% 36.5%75

89508 $122,100 -13.47% 40 -14.89% 89.0%88

89509 $247,500 -5.86% 89 32.84% 83.3%107

89510 $265,000 1.57% 3 -50.00% 86.4%121

89511 $408,100 -0.61% 102 5.15% 81.1%126

89512 $95,000 -14.80% 50 -9.09% 4.6%100

89519 $427,500 -24.42% 35 59.09% 80.9%116

89521 $204,000 -12.33% 149 37.96% 90.0%90

89523 $223,100 -3.63% 139 16.81% 46.7%88

89704 $277,700 12.20% 11 175.00% 74.0%125

OTHER $292,000 59.56% 16 -15.79% 78.0%83

7



10/15

Local Report

Carson City, NV1 2 3 4 5 Seller'sMarketBuyer'sMarket




Carson City. However, mortgage rates remain near record lows, maintaining a favorable buying


Labor Market :











Homes Sold(Quarter)


***Average Days


(Sold/List Price)


89701 $142,800 -11.52% 56 21.74% 28.7%88

89703 $283,500 -0.07% 32 18.52% 83.5%135

89706 $130,500 -9.00% 39 50.00% 86.4%94

OTHER $197,600 11.64% 3 -25.00% 94.6%179

8



11/15

Local Report

Others


Homes Sold(Quarter)


***Average Days


(Sold/List Price)


89301 $72,500 N/A 2 N/A 73.5%42

89415 $78,700 -24.98% 4 0.00% 79.6%222

89419 $63,000 -4.98% 2 0.00% 89.4%72

96120 $241,200 N/A 1 N/A 83.2%91

96150 $267,500 -21.32% 2 100.00% 87.1%133

9



12/15

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13/15

Chief Economists Commentary

11

Demand is Keyby Lawrence Yun, NAR Chief Economist

The housing market continues to show fragility. Home sales have risen broadly - by more than 20 percentfrom their low point last year. At the same time, home prices slid down after the homebuyer tax credit

expired last summer. A review of several local MLS data indicates a fairly consistent downward trend in theratio of the final sales price-to-original listed price, implying that homes are not being priced to sell fromthe start.

The most recently available data are mixed. While existing home sales which measure actual closings fell 9.6 percent in February, pending sales which measure contracts to purchase rose slightly. Snowyweather in a number of areas of the country hurt both closings as well as pending contracts as evidencedby deeper downturns in activity in the Midwest and Northeast regions.

And new construction? New home sales are stuck in a rut. Only 19,000 newly constructed homes weresold in February. That translates into 250,000 new home sales (at a seasonally annualized rate) whichwould represent the worst activity in at least 50 years. But the new home sales figure is more reflective of

supply than demand. Homebuilders continue to express concerns about the lack of construction loans tobuild new homes. The banks, in order to abide by regulatory requirements, have to put aside a largercapital reserve for what are considered riskier loans and, hence, have largely shunned homebuilders (eventhough bank profits have recovered quite nicely the past two years). With housing starts at historic lows,there are just not that many newly built homes that can be sold. In fact, the inventory of new homes for saleis also at 50-year lows.

New homes are also selling at a higher price than normal in relation to the price of existing homes, which islikely putting off some potential buyers of new property. Why? Because the price of new homes has toaccount for much higher commodity prices as part of the construction cost and, therefore, new homes needto sell at above these input costs in order for the builders to turn a profit. This is hard to do in the currentenvironment where existing homes are being discounted by 30 to 40 percent off the price of new homes.

Historically, the price differential between existing homes and new ones has been 15 to 20 percent.

Perhaps the banks have concerns about lending to homebuilders because they anticipate a continuinglarge number of foreclosed properties that they themselves will be stuck with. Of the mortgages in seriousdelinquency, the share of those over 90 days late in payment has modestly come down from its peak butstill remains very high at 8.5 percent at the end of 2010. In normal years, it should be less than 2 percent.Therefore, the inventory and the sale of distressed properties will continue to account for a large portion ofhousing activity this year and probably next year as well. The share of distressed sales, either a foreclosureor homes requiring a short sale bank approval, edged up to 39 percent of all existing-home sales inFebruary. These distressed sales need to take place because it means getting these homes into the handsof financially sound homeowners and thus will help reset the conditions for a healthy housing market in thefuture.

Recent homebuyers have been highly successful with historic low default rates, and a sizable number infact one third of all buyers have made their home purchase with all-cash and thus a zero chance ofdefault.

The faster pace of incoming distressed inventory into the marketplace does not necessarily mean a furtherslump in the housing market. The key is demand. If these distressed inventories are quickly picked up bybuyers, then no worries. But if distressed inventories linger in the marketplace then we can expect anotable further decline in home values. All indications point to plenty of ready buyers for foreclosed homes,


14/15

Chief Economists Commentary

12

not uncommonly with multiple offerings. So housing demand appears to be present at the moment andcould grow as the economy turns for the better.

The number of homes available for sale at the end of February both normal and distressed properties was 3.5 million, but look for the inventory to climb to about 4 million by the end of this summer. Thisupswing in inventory is a normal seasonal occurrence more homes are listed through the spring and

summer months. The rising inventory will be met by rising demand through those spring and summerspring and summer. The peak months for sales closings are May, June, and July with sales roughlydoubling that in winter months (on a non-seasonally adjusted, raw number basis).

Last year the demand arose from the home buyer tax credit. This year the demand will come fromimproving job market conditions. The latest jobs figures (released April 1) show that a net 216,000 new

jobs were created in March alone, with 478,000 job creations in the first three months of this year. We areon track for a 2 million new jobs for 2011. Yes, mortgage rates will surely rise but not alarmingly. Expectaround a 5.7 percent average rate on a 30-year fixed mortgage by year-end, up from the current 5 percentrate.

The second-home market should also begin to show a recovery this year. Stock market gains are providing

the financial wherewithal for wealthier households to buy vacation homes. Investors, looking fordiversification and an inflation hedge, are looking at deeply discounted homes to generate rental income.The median price of an investor purchased home in 2010 was cheap at $94,000. That is certainly betterthan putting money in the bank and getting essentially nothing in return, as well as protecting against thepossibility of devalued currency from potential rising inflation and very high budget deficits. One thing thatwas lacking for the second home market in the past two years was mortgages to buy a non-primaryoccupant homes because government-backed mortgages are not there for these properties. An eye-popping 59 percent of investor home purchases were made with cash in 2010.

Finally, as the housing market is trying to get back on a firm recovery track, we should be wary ofunintended consequences of some of the consumer protection legislation that is out there such as thatfocused on what we call QRMs. The new rule on Qualified Residential Mortgages (QRMs) could mean

significantly reduced credit availability. The QRM rule says that a lender must set aside additional capitalfor any losses (i.e., reserve fund) and for skin-in-the-game to loan funds for what are considered non-qualified mortgages. But the end result could be that mortgages become readily available to only theupper-income segment of society. Many working and middleclass Americans - who may have good thoughnot pristine credit scores may have to scrape up a very large downpayment, perhaps upwards of 20percent, in order to buy a home.

Prior to 2000, the housing market was just fine and stable. Many middle-class households purchasedhomes and thus became successful homeowners even though they did not put 20 percent down. That isbecause households stayed well within their budget and lenders did not hand out funny toxic mortgages.We need to simply revisit what worked in the past rather than imposing onerous new regulations.Government regulatory actions, though perhaps emanating from goodhearted intentions, unfortunately can

lead to unintended harsh outcomes. In the case of housing, they could wind up denying working-classAmericans the opportunity to become homeowners. The QRM rule could well be the most importantregulation impacting the housing market in upcoming years. Washington bureaucrats should not jeopardizewhat is a staple of the American Dream homeownership.


15/15

Economic Monitor

Notes: All rates are seasonally adjusted. Existing home sales, new home sales and housing starts are shown in thousands. Employment growth isshown as month-to-month change in thousands. Sources: NAR, Bureau of the Census, Bureau of Labor Statistics and Freddie Mac.

13

This table reflects data available through

April 1, 2011.

Likely Direction

Recent Over the Next ForecastMonthly Indicator Forecast Six Months

Existing-home sales declined in February to a seasonally

adjusted annual rate of 4.88 million units down 9.6% fromJanuary and 2.8% below the pace in February of 2010. Even

so, the pace of re-sales remained 26.4% above the cyclical

low in July of 2010, and Januarys re-sales figures were

revised upward to 5.40 million units

New home sales also declined in February, posting aseasonally adjusted annual rate of 250,000 units off

16.9% from Januarys sales pace and 28.0% off the pace in

February of 2010. While the number of new homes available

for sales was unchanged at 186,000, the months supply didrise to 8.9 based on the current sales rate.

Housing startsposted a seasonally adjusted annual rate of

479,000 units in February 22.5% below the pace in January

and 20.8% below the pace in February 2010. Both single- and

multifamily starts were off on a month to month basis, but

multifamily starts were up by more than 54% from a year ago.

Housing affordabilitycontinues at very high levels. NARsHousing Affordability Index posted a reading of 192.3 forFebruary, up slightly from Januarys index and ahead of the178.5 index registered in February of 2010. Continued lowhome prices and an improving economy are contributingto the record levels of affordability.

Mortgage rates The average 30 year fixed mortgage rate

was 4.83% in March a decline from the 4.95% inFebruary and 4.97% a year ago. Historic low inflation ratesand the recently increased demand for U.S. securitiesallowed fixed mortgage rates to drift lower.

Employment The U.S. economy added a net 216,000 jobs in

March, with the private sector accounting for 230,000 new

payrolls. Sectors that gained the most jobs included durablemanufacturing, retail, education and health care, and

professional and financial services, while the public sector

(mainly local governments) shed positions. The

unemployment rate fell again to 8.8% which is its lowestlevel in two years.

Economic Growth Real GDP increased at a 3.1% annual rate in

the fourth quarter of 2010. This is the third estimate of GDP based

on more complete data. As a comparison, real GDP increased

2.6% in the third quarter of last year. The healthy GDP growth

was due primarily to increases in consumer spending and exports.

In fact, consumer spending rose 4.0% in the fourth quarter of last

year, with spending on durable goods increasing 21.1%

Feb 2011 4,920Jan 2011 5,400

Feb 2010 5,020

Pent up demandfinally set to beunleashed,though slowly

Recoveringstock markethelps with downpayment to buyexpensivehomes

Mar 2011 4.83%Feb 2011 4.95%

Mar 2010 4.97%

Down fromrecord highlevels

Banks with hugecash pile lookingfor places to lendincluding tobuilders

High budgetdeficit raisesborrowing costs

1.5 to 2 millionnet new jobs inthe next 12months

Mar 2011 +216

Feb 2011 +19412-month

total: +1,300

2010:IV +3.1%2010:III +2.6%

2009:IV +5.0%

Nothing excitingbut steadygrowth

Feb 2011 250

Jan 2011 301

Feb 2010 347

Feb 2011 192.3

Jan 2011 192.2

Feb 2010 178.5

Feb 2011 479

Jan 2011 618

Feb 2010 605

Documents

Northern Nevada Economic and Market Watch Report 1st Quarter 2011