RENO, Nev. — In 2010, the Reno-Sparks area was on the heels of the great recession and the housing market was still on shaky ground.
A decade later, the Biggest Little City boasts one of the hottest economies in the country. However, as the population has swelled, so too have the home prices, and demand is at an all-time high.
With that in mind, as fast-growing Northern Nevada embarks on a new decade, the Northern Nevada Business View sat down with Reno/Sparks Association of Realtors (RSAR)'s new 2020 president, Erika Lamb, to talk about the real estate industry's rebound from the recession, the outlook for 2020, and if a bubble burst is on the horizon.
Q: What's the RSAR's overall outlook for the real estate industry in 2020 and beyond?
Lamb: We are being cautiously optimistic. It's not that we want to get political, but we are coming into an election year. And anytime we get into an election year, you have buyers that are on the fence because the consumers start to lose some confidence. What happens in November and December … well, that will be a different story. But that's traditionally what we notice during the election years: buyers are a lot more cautious, especially those who do investments.
Q: What's been the good, bad and ugly when it comes to the past decade — 2019 in particular — in terms of housing prices, inventory and the overall business of real estate?
Lamb: The good is that we were able to recover from the recession a lot better than most cities across the nation. And we've actually recovered above what our peak prices were. The bad is, of course, our supply. We don't have a lot of supply and, unfortunately, the builders are not building much affordable housing, because it doesn't fall within their budget to do so. There's just so much cost involved, so they are doing entry-level luxury. The entry-level luxury is attracting a lot of people from out of state. But, going back to the good, the market has been stable and — year-over-year — we're looking at an average of a 4-percent increase.
Q: Median prices continue to rise across the region and the region's economy is booming. Do you foresee a potential bubble burst on the horizon? If not, how are we prepared as a region to withstand an inevitable recession?
Lamb: Economists aren't looking at a bubble burst similar to what happened in 2006-2009. That happened due to poor lending practices. Folks were basically able to go get a loan and in some cases falsify documents in order to get that loan, and they were just hoping to turn around and resell it. And it was just a trend that led up to that 2006 recession because they were selling those loans and the integrity of those loans wasn't there. Lending practices have changed dramatically to get a loan.
As far as a recession happening due to the real estate market or the lending practices, that's unlikely. I know many people are nervous because we've been doing well for such a long period and people expected a recession to happen years ago. But in our local market, there are no signs of that happening. Of course, we could never predict the future and we don't know what will happen; major things can happen in the world that will cause a recession.
But, with regards to a recession, if it did take place, the Reno-Sparks area has a lot more stability. Previously, we were very dependent on tourism. And we're becoming more focused on locals. And our downtown area is changing where it's more focused on locals. Unless a lot of these technology companies go out of business — a lot of them are very large, so it's unlikely — I feel like locally we're going to be doing OK.
Q: Our region's rising median prices dominate the headlines, and concerns among residents and businesses are mounting when it comes to being priced out. How do we find a balance when it comes to understanding the region's “housing crisis”?
Lamb: Looking at the resell market, a couple of things that buyers who are getting outpriced can look at are buying homes that are not necessarily centrally located but might be in the outskirts areas because those houses are more affordable and lower than the median price at the $400,000. Plus, the commute time in Reno typically isn't that bad. Something else is buyers could look at are older homes; one thing about older homes that makes them more affordable is the property taxes are a lot lower. Another option is getting fixer-upper and making it your own. So there are different options. The best thing people can do is talk to a realtor because a realtor can explain to them their options.
Q: Homebuyers 37 years and younger were the largest shares of the market in the National Association of REALTORS' 2018 Home Buyer and Seller General Trends Report. However, real estate experts predict that rising mortgage rates could distance millennials from homeownership. Is that happening in this market?
Erika Lamb: No, actually the mortgage rates have been really great. And because the mortgage rates have been so great, it's allowed some buyers who fell out of the market to reenter the market. For instance, at the end of 2018, the interest rates were creeping up and had gone up an entire point. But we haven't been seeing that. In some cases, the interest rates have dropped and some buyers were able to get an even better interest rate. I don't know what they're planning on doing with interest rates, but we're loving where we're at at the moment.
Editor's Note: This interview has been edited and condensed for clarity.
-->RENO, Nev. — In 2010, the Reno-Sparks area was on the heels of the great recession and the housing market was still on shaky ground.
A decade later, the Biggest Little City boasts one of the hottest economies in the country. However, as the population has swelled, so too have the home prices, and demand is at an all-time high.
With that in mind, as fast-growing Northern Nevada embarks on a new decade, the Northern Nevada Business View sat down with Reno/Sparks Association of Realtors (RSAR)'s new 2020 president, Erika Lamb, to talk about the real estate industry's rebound from the recession, the outlook for 2020, and if a bubble burst is on the horizon.
Q: What's the RSAR's overall outlook for the real estate industry in 2020 and beyond?
Lamb: We are being cautiously optimistic. It's not that we want to get political, but we are coming into an election year. And anytime we get into an election year, you have buyers that are on the fence because the consumers start to lose some confidence. What happens in November and December … well, that will be a different story. But that's traditionally what we notice during the election years: buyers are a lot more cautious, especially those who do investments.
Q: What's been the good, bad and ugly when it comes to the past decade — 2019 in particular — in terms of housing prices, inventory and the overall business of real estate?
Lamb: The good is that we were able to recover from the recession a lot better than most cities across the nation. And we've actually recovered above what our peak prices were. The bad is, of course, our supply. We don't have a lot of supply and, unfortunately, the builders are not building much affordable housing, because it doesn't fall within their budget to do so. There's just so much cost involved, so they are doing entry-level luxury. The entry-level luxury is attracting a lot of people from out of state. But, going back to the good, the market has been stable and — year-over-year — we're looking at an average of a 4-percent increase.
Q: Median prices continue to rise across the region and the region's economy is booming. Do you foresee a potential bubble burst on the horizon? If not, how are we prepared as a region to withstand an inevitable recession?
Lamb: Economists aren't looking at a bubble burst similar to what happened in 2006-2009. That happened due to poor lending practices. Folks were basically able to go get a loan and in some cases falsify documents in order to get that loan, and they were just hoping to turn around and resell it. And it was just a trend that led up to that 2006 recession because they were selling those loans and the integrity of those loans wasn't there. Lending practices have changed dramatically to get a loan.
As far as a recession happening due to the real estate market or the lending practices, that's unlikely. I know many people are nervous because we've been doing well for such a long period and people expected a recession to happen years ago. But in our local market, there are no signs of that happening. Of course, we could never predict the future and we don't know what will happen; major things can happen in the world that will cause a recession.
But, with regards to a recession, if it did take place, the Reno-Sparks area has a lot more stability. Previously, we were very dependent on tourism. And we're becoming more focused on locals. And our downtown area is changing where it's more focused on locals. Unless a lot of these technology companies go out of business — a lot of them are very large, so it's unlikely — I feel like locally we're going to be doing OK.
Q: Our region's rising median prices dominate the headlines, and concerns among residents and businesses are mounting when it comes to being priced out. How do we find a balance when it comes to understanding the region's “housing crisis”?
Lamb: Looking at the resell market, a couple of things that buyers who are getting outpriced can look at are buying homes that are not necessarily centrally located but might be in the outskirts areas because those houses are more affordable and lower than the median price at the $400,000. Plus, the commute time in Reno typically isn't that bad. Something else is buyers could look at are older homes; one thing about older homes that makes them more affordable is the property taxes are a lot lower. Another option is getting fixer-upper and making it your own. So there are different options. The best thing people can do is talk to a realtor because a realtor can explain to them their options.
Q: Homebuyers 37 years and younger were the largest shares of the market in the National Association of REALTORS' 2018 Home Buyer and Seller General Trends Report. However, real estate experts predict that rising mortgage rates could distance millennials from homeownership. Is that happening in this market?
Erika Lamb: No, actually the mortgage rates have been really great. And because the mortgage rates have been so great, it's allowed some buyers who fell out of the market to reenter the market. For instance, at the end of 2018, the interest rates were creeping up and had gone up an entire point. But we haven't been seeing that. In some cases, the interest rates have dropped and some buyers were able to get an even better interest rate. I don't know what they're planning on doing with interest rates, but we're loving where we're at at the moment.
Editor's Note: This interview has been edited and condensed for clarity.
