Signs of Recovery: Washoe County Building Permits Are On the Rise

Even before Tesla announced it will build a giga-factory in Storey County, creating as many as 6,500 direct jobs and possibly 16,000 indirect jobs (according to a report by the Governor’s Office for Economic Development), Washoe County’s real estate market was showing signs of recovery.  One of the biggest indicators of growth in the real estate market is the number and valuation of building permits in the area.  Building permits are required to construct new buildings and to make certain improvements to existing properties.

These permits are issued by local governments prior to construction and are a good leading indicator of actual construction to take place in the future.  Washoe County’s growth in building permits since the recession is a good sign of the region’s economic recovery.

Single family permits in Washoe County peaked in 2005 with 5,535 permits and a permit valuation of $957.7 million.[1]  As the graph below shows, the number of permits and valuation declined significantly for all areas of Washoe County (Reno, Sparks, and unincorporated Washoe County which includes Incline Village, Sun Valley, Wadsworth, etc.).  The number of permits hit its lowest level in 2010 with 477 permits issued, a 91% decrease in the number of permits over 2005.

Building permits increased by 156% between 2010 and 2013 (the last full year for which data is available), from 477 to 1,221 permits.  Building permit data for 2014 is available through September only; using historical growth in permits between October and December, we estimate approximately 1,450 building permits will be issued in 2014.  This is a 19% increase over 2013.  Building permit valuation followed a similar trend to the number of issued permits.  While the 1,450 permits expected for 2014 is much lower than the peak of 5,535 in 2005 or even the years prior to the real estate boom, four years of growth since 2010 indicate a positive trend for this real estate market component.

 sf permits*2014 data through September 2014 only, full year data is estimated using historical end of year percentages.

While the single family market saw a strong positive growth trend through 2005, followed by a steep decline through 2010, and some recovery to date, the multi-family’s market’s path was a little more varied.  This is due to the less consistent nature of the multi-family market, where large projects in some years can shift trends significantly.  While the number of single family permits grew, multi-family permits dipped in 2003, before reaching the peak of 146 permits in 2004.  Building permit valuation did not peak until 2006 with a value of $103.3 million.

Like the single family market, building permits for multi-family units declined through the recession, though the bottom of the market was not reached until 2011 with only two permits issued in that year.  This was an almost 99% decrease in the number of permits issued over 2004.

The number of building permits issued for multi-family projects showed a consistent positive growth trend since 2011, with approximately 71 building permits estimated through 2014, an over 3,000% increase over 2011.  Building permit valuation is expected to reach $79.3 million in 2014.  While still below peak levels, the market has shown three years of significant positive growth, indicative of recovery.

mf permits*2014 data through September 2014 only, full year data is estimated using historical end of year percentages.

As with the multi-family market, large commercial projects in certain years can skew the market trend, making growth and decline trends less smooth.  However, overall, a trend similar to single family and multi-family markets is shown by the commercial market.  The number of commercial permits issued peaked in 2006 with a total of 457 permits with a value of $509.2 million.  Commercial permits did not hit bottom until 2010 when 99 permits were issued with a value of $53.4 million, a 78% decline in the number of permits over 2006.  Permit valuation decreased further in 2012 to $44.7 million, though a higher number of permits (140) were issued in that year.

The number of commercial building permits issued increased steadily since 2010, with approximately 242 permits estimated for 2014 with a value of $290.1 million.  This is a 144% increase in building permits since 2010.  While this amount is still below the peak number of building permits issued in 2006, the commercial market has experienced positive growth for four consecutive years, indicating a recovery in this market.

 comm permits*2014 data through September 2014 only, full year data is estimated using historical end of year percentages.

Overall, the steady growth in building permits and permit valuation in all three components of the real estate market show the increasing confidence by builders in the recovering economy and the increases in demand for new construction from residential and commercial buyers and lessees.  The growth in the number of building permits can be seen in the remainder of the real estate market.  Construction employment in Washoe County increased by 16% between 2011 and 2014 (1st Quarter) from 8,697 to 10,125.[2]  Median single family home prices also increased from $145,000 in the 1st Quarter 2012 (lowest price through recession) to $248,000 in 3rd Quarter 2014, an increase of 71%.[3]  While it is unlikely pre-recession, boom, construction levels will be reached in the near future, the market is recovering steadily, to the benefit of the region’s economy.

[1] All building permit data in this blog from City of Reno, City of Sparks, and Washoe County websites.

[2] Nevada Department of Employment, Training, and Rehabilitation.

[3] Center for Regional Studies, University of Nevada, Reno.

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