In this Reno-Sparks real estate update for Q2 2022, we look closely at the U.S. housing market slowdown and how it impacts buyers and sellers in the greater Northern Nevada region.
From one extreme to another, the last two years have been challenging for many to navigate, and since home sales and housing prices have cooled slightly, some wonder if a crash is on the horizon, while others believe a housing bubble is brewing. However, most experts predict the market will remain strong, calling it a full-blown housing correction or normalization.
Lawrence Yun, Chief Economist for the National Association of REALTORS, puts this stabilizing effect into perspective:
“Home sales have essentially returned to the levels seen in 2019—prior to the pandemic—after two years of gangbuster performance.”
As Yun said, housing markets across the country have gradually shifted to more sustainable supply and demand levels. So, if you’re wondering how this impacted the Reno-Sparks real estate update in Q2 2022 and what to expect in the upcoming months, keep reading.
Where The Greatest Shifts Happened Nationally
While searching for updates about local and national housing markets, it’s important not to draw any long-term conclusions. From supply chain issues to 40-year high inflation to changing buyer demographics and migration patterns, the U.S. economy constantly fluctuates, which affects markets worldwide.
Though some wacky real estate trends have resulted from this, the national housing market, including real estate in Reno and Sparks, has started to normalize. Here’s how we know:
In the first quarter of 2022:
Buyer offers were down.
Homeowners received fewer over-ask offers.
Overall existing home sales decreased.
Inventory levels reached pre-pandemic numbers.
To better understand these trends, we must consider how home sales and housing inventory levels have shifted over the last five years.
Closing The Gap Between Units Sold And Monthly Supply
In this graph, the green line shows the number of units sold by the millions, which peaked three times in the last two years due to low supply and high buyer demand fueled by the pandemic. However, this graph also shows home sales have dropped by almost 3 million since the beginning of the year.
While this decrease may appear to be a significant fallout, home sales have simply returned to pre-pandemic levels. The gray line of this graph shows a similar trend for housing inventories.
In Q2 2022, about 2.6 months of available single-family homes were on the market. Typically, the national average ranges from 4 to 4.5 months. So, although inventories have shown rapid growth, supply remains historically low compared to 2017 and 2018.
With this information in mind, let’s take a more micro look at what’s happening in the Northern Nevada housing market.
Homes Sales In Reno And Sparks Also Dropped
In June 2022, there were 447 homes sold, representing a 14.2% decrease month-over-month and a 30.3% decrease year-over-year. While this number is lower than the units sold in the years before the pandemic started, it can be attributed to higher living costs and rising mortgage rates digging into the buyer pool.
Another indicator that home sales have slowed, or stabilized, is the number of days it takes for a home to go into contract. In June 2022, it took 14 days for a home to go into contract, a 100% increase since May and a 180% increase from June 2021.
Again, this percentage may seem high to some, but it remains historically low. This graph shows that, on average, homes took 30 to 60 days to go into contract before the pandemic started.
Home Values Declined Slightly, But Not Significantly
In our Reno and Sparks real estate update for June 2022, the median home sale price reached $600,000, a 2.4% decrease from the previous month and a 13.2% increase year-over-year. Both of these numbers indicate Northern Nevada’s typical housing market fluctuations.
That said, buyers are starting to gain the upper hand—out of 1,144 homes listed in June 2022, more than half reduced their price before selling. However, that doesn’t mean it’s not a good time to sell. As a seller, you have options to creatively cope with Nevada mortgage rates, such as closing cost credits and discount points.
Housing Inventories Reached Pre-Pandemic Levels
When measuring supply, it’s critical to know the difference between inventory and active inventory. Inventory refers to all the homes for sale in a given market, regardless of their status. That’s why we use active inventory as a more dynamic metric to inform buyers of the number of available homes for sale every month.
In June 2022, there were 1,178 homes available for sale, representing a 38.3% increase from the previous month and a 200.5% change year-over-year. While this percentage shows quite the climb, it also means inventory has returned to where it was before the pandemic. It’s important to remember that even in 2018 and 2019, we were experiencing low inventory in most price ranges. So, we’ve gone from extremely low inventory back to pre-pandemic low inventory.
More Properties Were Just Listed
In this Reno-Sparks real estate update, we are also looking at the number of new listings that entered the Reno-Sparks market. In June 2022, there were 854 new listings, representing a 13.6% increase month-over-month and a 29% change year-over-year.
Buyer Demand In Northern Nevada Declined
To measure demand, we look at the number of homes that go into contract every month. In June 2022, there were 490 new contracts, 9.5% down from the previous month and 29.4% down year-over-year. This number is consistent with the number of units sold, further indicating that the higher mortgage rates along with other global events, have caused more buyers to press the pause button on their search. This is a great opportunity for home buyers to find their new house with less competition from other buyers in the market. On a national scale, the average demand for housing is up, with half the population—Millennials or younger—ready to become first-time homeowners. This generation has the desire and the funds to purchase a home now.
Sellers Received Lower Offers
During the high point of the pandemic, sellers received a significant amount over their original asking price. But, now that the Reno-Sparks market is balancing out, buyers have more housing options at their fingertips. In June 2022, the average sale price for a home was 99.14% of the asking price, a 1.76% decrease from the previous month and a 4.46% decrease year-over-year. Although this percentage is consistent with pre-pandemic averages, sellers may have to do more to prepare their homes for the market and negotiate more with buyers in the upcoming months.
Does The Housing Correction Impact Buyers And Sellers?
Buyers: As a buyer in today’s market, you have the upper hand more than in the past two years. But even though there have been price reductions, home prices are expected to hold for the foreseeable future, and with supply chain issues, new home construction is also behind. So, finding the house of your dreams now could mean saving money down the road. Don’t let the mortgage rates scare you, especially if you’re interested in investing in a property for the long haul.
Sellers: While it’s true that home sales and housing prices have slowed down, buyers are still willing to pay top dollar if you have a desirable home in a good location. Contact one of our neighborhood experts to help you understand the current market conditions in each micro-neighborhood and what you can expect when listing your home. You should also follow these tips to get your house ready to sell in Reno-Sparks right now.
At Dickson Realty, we provide monthly and quarterly Reno-Sparks real estate updates for clients and community members to stay informed. For more information on living in Northern Nevada, contact our experienced team of REALTORS today.