Housing affordability has been a hot topic of conversation in our area in the past few years. A sophisticated new tracking tool has just been released and has good news and bad news to share about housing in Washoe County.
The gist of the bad news is that the typical Washoe County family still doesn’t have a high enough income to afford an average priced home. The good news is that housing is getting just slightly more affordable as time goes on.
Economists Eugenia Larmore of EKAY Economic Consultants and Brian Bonnenfant of UNR’s Center for Regional Studies developed the new index.
How does it work? By combining median housing prices, mortgage rates, and median family incomes they were able to come up with a tool that tracks affordability quarter-by-quarter. A score of 100 means that median incomes are enough to buy a median-priced home. A score below 100 indicates that there are problems.
This spring, Reno MSA Housing Affordability Index stood at 84.89, which means the median family income (roughly $75,000) is about 15 percent below the level that’s needed to buy a median-priced $400,000 house.
Incomes are beginning to rise and mortgages are becoming cheaper, so the second-quarter index showed an improvement of 3.5%.
I reached out to Brian Bonnenfant, Project Manager for the Center for Regional Studies at the University of Nevada, Reno. He had these thoughts on the index:
“The affordability index improved due to income growth and falling mortgage rates, not because homes are now less expensive. Although we are now seeing appreciation rates (existing homes) that reflect a normal, healthy economy (approx. 4% per year), prices for new homes and rents for new apartments are still faced with increasing land, labor, and material costs. Thus, new product will continue to be expensive and branded as “luxury”. The developers have no choice to sell/rent at high prices in order for their projects to “pen out”. Hopefully this problem does not creep into Fernley, where new homes are more affordable.”
Realtor® Sierra Nevada Properties