For the Reno MSA employment has historically been based largely on construction and the leisure and hospitality industry. The construction industry has lost almost 15,000 construction jobs since 2006, more than the 8,900 jobs the construction industry added from 1997 to 2007. At its peak construction jobs accounted for 11% of Washoe County s total employment. By the 2 nd quarter of 2012 they accounted for just 5%. Construction jobs have increased to total of about 10,000 jobs in 2015, but it is unlikely that jobs in the construction industry will return to the levels they were at prior to the economic downturn. Nevada is now moving to fill the hole left by the loss in construction jobs with a focus on research and commercialization, especially in the aerospace and defense, green energy and health care sectors. All of the industrial categories in the Reno MSA increased from 2014 to 2015, with the largest increase in Trade and Transportation and Utilities.
According to the Nevada Department of Employment, Training and Rehabilitation, job growth is projected to have annual increases of about 2%, with the highest growth projected in the health care and computer sectors. Income Personal income is a significant factor in determining the real estate demand in a given market. The Site To Do Business estimates the median household income for the Reno/Sparks MSA to be $50,444 in 2014. Median household income is projected to increase at an annual compounded rate of 2.8% to $57,788 in 2018. Real Estate Trends The brunt of the economic recession appears to be near its end, as property values in most sectors stabilized in 2013. The vacancy rate for the office, retail and industrial sectors declined in 2013. Although vacancy rates have declined from the record high vacancies experienced in 2010 through 2012, a balanced market is projected to occur in the near future. It is anticipated that vacancies will continue to decline in 2015, and rental rates will remain fairly stable to increasing. Conclusion The short term economic outlook is more optimistic than it has been in recent years. The recovery in the Reno MSA and the State of Nevada has been expanding, and there will likely be more improvement in the economy as employment growth continues in the area. Property values have experienced significant declines in the past few years; however, these conditions have been stabilizing as distressed properties are being absorbed. Recently Tesla began construction of Gigafactory in the Tahoe Reno Industrial Center, which reportedly will add significant jobs to the local economy. The long-term economic outlook for the Reno MSA is positive, with total population and employment projected to increase.
RENO MSA HOUSING MARKET The market analysis forms a basis for assessing general housing market conditions including market trends, supply and demand factors, and indications of financial feasibility. The recovery continued in full force for the northern Nevada land and new home market in 2014 thru 2015 Several regional indicators helped the area deliver positive results: 1) Unemployment rates were down and job growth was strong. EDAWN reported 4,300 new jobs that will roll out over the next two to four years. Several new employers relocating to the area include; Teleperformance U.SA. (500 jobs) Clear Capital (400 jobs), Petco (150 jobs), Zulily (1,000 jobs), Cenntro Motors (300 jobs), Ghost Systems (150 jobs) and Tesla. Tesla is expected to bring 700 jobs in the short term and 6,500 jobs over the next six years. 2) The resale market in the Reno/Sparks area remained in short supply with about one and half months of active inventory and a 13% annual jump in the median house price at year-end. A tight resale market is a great environment for new home builders as it strengthens demand and price appreciation for new homes. 3) Northern California was also healthy showing solid job gains and home price appreciation in 2014. A strong Northern California will help promote a steady in-migration into Northern Nevada. 4) The Leading Market Index, which compares current permit, home price and employment data with normal years, showed our market at 77% compared to a normal year in 2014 meaning there is still room to further improve in 2015 and beyond. 5) Builder confidence, which seems to parallel housing starts, also remained strong both locally and nationally. Annual new home starts through 2Q15 were nearly 31% over 2Q14. Annual starts are an indicator of future new home closings, and annual closings are up 8% more than one year ago. Increased demand continues to drive builders to start new homes. The average price has increased steadily since 2012 and now, base prices have remained fairly steady over the past year. Builders are pricing their product to the competing resale and trying to remain in line with market affordability.
Builders are pricing their product to the competing resale and trying to remain in line with market affordability. Start activity has shifted over last year into the price ranges above $300K as builders adjust pricing to offset increased land and construction costs. Lot costs are also increasing as lot supply dwindles. Affordability remains a concern as home prices are rapidly increasing. Last year, 54% of all new home starts were under $300k; this year only 39% were priced below $300k.
Reno/Sparks ended 2013 with 967 new home sales and 1228 single family permits. We surveyed a 27% jump in 2014 to 1,227 new home sales and 1,495 single family permits. Sales are predicted to reach the 1,500 mark in 2015 which is a 225% gain from the 2011 market bottom but still below the 15-year average pace of 2,122 new home annual sales. 51 active communities were surveyed in 2014, up from 41 in 2013. We expect an increase to 58 communities at yearend 2015. This active community number is right around the twelve year average of 55 communities but well below the peak of 105 surveyed in 2006. With 126 Finished Vacant Single Family homes, the market has only 1 month of supply at current absorption pace. The number of Finished Vacant Homes is at the lowest level since 2006. Finished Vacant Homes make up only 15% of total housing inventory which is below equilibrium. However, the number of Under Construction homes has increased 30% since last year. While this is a significant increase it appears the market is not at immediate risk for over-supply. Single Family Lot Supply We have just over a year s worth of finished lots in the Reno/Sparks market based on 2015 projected sales and permits. The 2,040 vacant finished lots at year end include 1,300 new lots that were constructed in 2014. The Reno market has virtually ceased single family lot delivery, but with lot absorption outpacing lot deliveries for more than four years, lot Inventory continues to shrink. Spanish Springs holds nearly half of the finished lot inventory and about 1,000 more lots are planned to come online in 2015. Builders control the finished lot inventory and are responsible for the new neighborhoods. Final maps are one step ahead of finished lots. There were 2,091 vacant final mapped lots at year end representing a little over a 1.3 year supply with more coming online. Final maps are spread evenly through all of the submarkets and are owned by both builders and investors. At 8,346 lots, there is a five year supply of tentative mapped lots based on the 2015 projected sales number. Rounding out the lot supply are planned unit developments (PUD s). 15,000 units are proposed in these PUD s. They represent our future pipeline of lots. Investors control most the tentative maps and PUD s. There are few, if any, REO s left in the Reno/Sparks land market. Lenders have liquidated these assets to builders and developers and are slowly moving back into the residential lending business. Conclusion Pricing increased significantly in 2012 and 2013. The long-term economic outlook for the Reno MSA is optimistic, with total population projected to increase.