As residential market limits mobility, effects felt through economy

Back in the olden days say, 2004 people who owned houses sometimes sold their houses, and they almost always took the money and bought another house.

That's far less likely these days, and the effects ripple widely across the northern Nevada economy.

"It's made us less mobile," says Ken Amundsen, the number-crunching immediate past president of the Reno-Sparks Association of Realtors.

Taking a look at sales data compiled by the association during the past couple of years, Amundsen concludes that only a third of all home sellers are in a position to buy another home.

A third of the sales in the Reno-Sparks market, he says, involve bank-owned properties. Banks almost certainly aren't going to take the proceeds of a sale and buy another house, and people who have lost a home to foreclosure aren't likely to have either the cash or the courage to jump back into the housing market.

Another third of the sales in the market involve short sales, Amundsen says. Those sellers probably have damaged their credit enough that they won't be in the market for a new home for several years.

And the remaining third of the sales? They involve good old-fashioned transactions in which sellers have some equity and probably will buy another home.

Recruiters in human resources offices are among those who feel the effect.

Folks who don't think they can sell their current house are far less likely to accept a job offer that requires relocation, says Mindy Brenner, whose Mindy Brenner Consulting LLC in Reno provides human-resources outsourcing services.

As financially pinched companies curtailed their relocation benefits and no longer offered financial help to transferred employees stuck with a house, mobility became even more limited.

And the psychology of a job move plays a role, too.

Relocation to a new job always carries some risk, Brenner says, but workers now look at the risks of selling their home, the risks that a newly purchased home might decline in value and the risks that the new job might not pan out. Combined, those worries are enough that some workers will turn down even an attractive offer.

On the other hand, Brenner says, the lack of mobility for people who own homes may be opening some opportunities for younger workers or single persons who historically have been renters.

The Economic Development Authority of Western Nevada, whose industrial recruiters sometimes found last year that companies were reluctant to move to northern Nevada because executives didn't think they could sell their existing homes, is beginning to see signs that the market is thawing.

"Some of the markets in California are starting to shake loose," says Stan Thomas, vice president of business development for the economic development agency.

As those markets thaw, Thomas says, the lower home prices in northern Nevada will look good to people leaving California.

In fact, Amundsen says, a renewed flow of retirees leaving the high taxes of California for the low taxes and attractive home prices in northern Nevada may prove to be one of the factors that will stabilize the Reno-area market.

In the meantime, the changing dynamic of the residential market is creating a far larger pool of renters, and that's boosting the prospects of landlords, says Kevin Sigstad, president of the Reno/Tahoe Chapter of the Institute of Real Estate Management.

The vacancy rate in single-family homes offered as rentals is running about 8 percent, down by half from its level a couple of years ago, says Sigstad, who is also the broker and owner of RE/MAX Premier Properties in Reno.

Apartment owners, who historically saw vacancy rates as high as 9 percent in early 2009, today report vacancies in the 7 percent range. (Historic apartment vacancy rates in the area have run about 5 percent.)

The falling vacancy rate in single-family homes is particularly noteworthy, Sigstad says, because investors are actively buying single-family homes and putting them onto the market as rentals.

Amundsen notes that single-family rentals pencil out these days for the first time in a while, and owners often can cover their mortgage and operating costs with rental income.