After a record-breaking year of sales in 2021, the Sparks and Reno luxury real estate market is poised to offer opportunities to sellers and buyers in 2022.
Buyers are gaining confidence and feeling less anxiety, and sellers are more willing to list their properties. With these two factors working together, we expect the market to be more balanced in 2022 in a way that benefits buyers and sellers.
Sparks and Reno Luxury Real Estate By The Numbers
In 2021, 601 homes sold in the Sparks/Reno luxury real estate market, representing a more than 78% increase year-over-year and an average of almost two home sales per day. This means more homeowners decided to take advantage of peak-value housing prices, cash offers from buyers, and the demand for existing homes in the Northern Nevada region.
The median home price increased from $1.5 million to $1.6 million, with an average sold price per square foot of $413.35. However, the number of days it took for a home to go into contract decreased from 133 to 92.
How Shifting Demographics Are Changing Luxury Market
These numbers reflect a recent shift in demographics, preferences, and geography of buyers in our market.
Millennials Demand and Buying Power Stays Strong
If you read our mid-year review, then you’ll know that millennials have entered the market along with retired homebuyers from Northern California. Millennials account for over half of all home-purchase loan applications and economists expect them to bolster demand for years. Many Millennials are also coming into generational wealth and are prepared to pay cash for homes. By 2030, millennials will hold five times as much wealth as they have today and will inherit more than $68 trillion from their Baby Boomer parents.
From North to South, Urban to Suburban
Since the pandemic started, more people have been moving from Southern California to Northern Nevada for the state’s tax benefits and a better quality of life. This urban to suburban migration combined with the shift in buyer demographics almost doubled the price for entry-level buyers in 2021.
Three Trends to Watch for in the Sparks and Reno Luxury Real Estate Market
This year, I will be presenting at the Leading Real Estate Companies of the World’s Luxury Portfolio SUMMIT.
Leading Real Estate Companies of the World, also known as LeadingRE, is a selective global community of the highest quality independent residential real estate companies, with more than 550 companies and 135,000 sales associates in more than 70 countries. Dickson Realty is proud to be a longstanding member of this community and a trusted expert on Sparks/Reno luxury real estate and beyond.
As part of the presentation, I will be sharing some of our projections for 2022 and what it means for luxury buyers and sellers in the Northern Nevada market:
- Interest rates rising
- Less anxiety in the market caused by COVID-19
- Equilibrium can occur over time
Interest Rates To Continue Rising
Many buyers and sellers in the Sparks and Reno luxury real estate market are discussing interest rates going up, and I’d like to explain why this isn’t a reason to panic.
Since the beginning of 2021, low-interest rates and high demand have driven the housing market, allowing buyers to purchase more homes while still keeping their monthly payments the same. But this has also caused housing prices to increase and interest rates to rise. Although we don’t expect some metaphorical bubble to burst, we believe mortgage rates will increase to 4% by the end of 2022.
Hopefully, this should put less pressure on home price growth and demand in our market. I’d also like to point out that interest rates are still historically low—even if they rise a couple of percentage points—and since most luxury home sales are cash, interest rates have less impact.
COVID-19 Is No Longer The Driving Force
Although COVID-19 remains a significant factor, many homebuyers have already accounted for its effects on the market and are managing their daily lives better. As a result, they have started to assess whether or not living in a more remote area works for their lifestyle—finding the right work-to-life balance was a significant concern for 27% of luxury buyers in 2021.
There has been a reverse migration trend of individuals returning to more urban living environments, particularly people who have to be in a bigger city in an office. Although this trend is occurring nationally, I do not anticipate it impacting our local market as strongly because of our region’s longstanding business and workforce attraction efforts. The reasons these buyers came to Northern Nevada existed before COVID and will continue to exist after the pandemic.
Here are six of the top reasons why most luxury buyers are choosing their next home:
-
Next chapter in life
-
Settling down and nesting
-
Investment property
-
Better run city/town
-
Better place to live
-
Better location
Achieving Balance
This graph of the number of luxury units sold by quarter shows you just how much the luxury market has improved over the last 15 years and more. But some of the most dramatic increases have happened in the previous year. Since the first quarter of 2021, the number of luxury units sold has almost doubled.
The number of luxury-residence seekers also decreased by 58%, and the number of luxury sellers increased by 26%. This means that we’re starting to see buyers and sellers come closer together, and it’s having a positive impact on the market. And with buyers taking more time to enter the market, we’re expecting a more balanced ratio to come in the new year. However, as we wait on construction efforts to increase the amount of new inventory on the market, demand for existing homes will stay strong.
How To Use This Information To Your Advantage
While we don’t have a crystal ball that predicts the future, we can make some suggestions based on the conditions we’re seeing in the luxury market right now. So, whether you’re a buyer or a seller, you can use this information to make the best decision for your future.
- Advice for buyers: Whether you’re buying luxury real estate to settle down or begin the next chapter of your life, it’s crucial to think about a variety factors—such as interest rates and the overall economy—that could affect your purchasing power. Now is the time to get your finances in order and find an experienced REALTOR to help you make the right decision, not a rushed decision.
- Advice for sellers: Although the market remains in your favor, buyers are taking more time to put in an offer. But don’t worry, there is still plenty of demand for Sparks and Reno luxury real estate, and we’re expecting sales to continue climbing. One of our neighborhood experts can help you get the most out of your home and make it worth your while to cash out.
Rebecca Dickson is a Broker/Owner and is Vice President of the Dickson Luxury Division. To contact her about Sparks and Reno luxury real estate, click here.
