New home starts in the Reno market are at their highest level since 2007, according to a recently report published by Metrostudy.
The report for the fourth quarter 2015 stated that new home starts are up 21 percent compared to the fourth quarter of 2014. The number of finished vacant homes is at the lowest level since Sacramento-based Metrostudy began tracking the Reno market in 2006.
Homebuilders confirm the trend.
Christo Reynen of York & Reynen Homes said his company currently has 10 high-end homes under construction. A few years ago, they typically built only two to four houses.
“As the market is changing, we’ve sort of changed with the market,” Reynen said.
Other trends Reynen is noticing include an increase in the cost of land, which contributes to increases in the cost of new homes, and reduced availability of developed lots – those with roads and utilities.
There’s “absolutely” a shortage of developed lots, Renen said, “especially with 20,000 jobs coming into the region that EDAWN has speculated for the next 10 to 15 years.”
Lot absorption has outpaced lot delivery for the past five years, according to the Metrostudy report. The greater Reno market has 4,202 “finished and vacant” single family lots, which equates to 28 months of supply based on the current pace of development. Only three years ago, the area had 14 years of lot supply.
“With fewer, bank-owned and short sales dominating the market, prices continue to increase,” said Greg Gross, director of Metrostudy’s Reno market.”
In the past, over-supply of lots along with diminished demand drove down lot prices and land values, but the quickly shrinking supply will force builders to pay more for future lots.
Higher prices for lots equates to higher sales prices, which then decreases affordability, which is a growing concern in the area.
In 2014, 44 percent of all new homes starts were under $300,000, according to the Metrostudy report. In 2015, only 24 percent were priced below $300,000.
“It’s an uphill battle we face to provide affordable housing,” said Reynen, who expressed concern about meeting the housing needs of workers, even though York & Reynen builds houses aimed more to executives, who can afford more. He said they fell into the business of building custom and spec homes because that market was not as hard hit during the economic downturn.
Metrostudy expects home demand to remain steady into 2016.
“Nevada is once again among the top relocation destinations, and more companies are beginning to consider Nevada,” the report said. “The Tesla factory construction is in full swing and has reenergized economic development for the state.”
Reynen said “We see steady growth. We’re ready and positioning ourselves to accelerate construction.”
