Reno MSA Homes Prices vs Wages

An interesting graph from the Center for Regional Studies at the University of Nevada, Reno compares growth in median homes values in the Reno-Sparks area* with growth in wages.  

First, a little bit of background.  Reno-Sparks existing home values grew strongly pre-recession and declined just as strongly during and following the recession (the recession officially ended in 2009 and area prices did not begin recovering until 2012).  Historically (ignoring the boom and bust of the 2000s), area home prices increased by almost 1% per quarter or 4% per year.  The figure below shows quarterly existing home prices in the region (red line) compared to what prices should have been had they followed the 4% “normal” appreciation (blue line).  The figure shows actual prices reached normal prices by the end of 2015, into the first quarter of 2016.  This is the point where our home values can be considered to be neither overvalued (as they were pre-recession) or undervalued (as they were during the recession) using historical expectations of price growth. 

This brings us to the wages vs. home values graph (below).  The graph shows changes in home values and wages in the area between 1Q2012 and 1Q2019.  However, as discussed above, homes were effectively undervalued until 4Q2015, so the graph ignores this period.  The graph shows that from 1Q2016 to 1Q2019, home values in the area increased by 27%. 

The graph also shows MSA wages increased by 17% over the three-year period. Given the inflation (CPI) growth during the same period of 6.5% (Bureau of Labor Statistics), we can say wages outpaced inflation, which is a great metric for the area. However, wage growth was significantly below growth in home prices during the period.

The graph shows home value growth rates began to decline starting 2Q2018, even becoming negative in 1Q2019 (-0.1%), while wages grew relatively steadily since 2012.  In fact, the MSA has posted six straight quarters with wage increases above 3% (above inflation rates), and nine out of the last 11 quarters are above 3%.  Also, while 2Q2019 wage data is not yet available, 2Q2019 values increased by 4% compared to the same period last year.  This is the type of healthy, but moderate appreciation the market needs.  As we close out 2019 and enter the next decade, hopefully our economy will reach the happy medium between wage growth and home appreciation with both increasing on a similar trajectory. 

*Reno-Sparks MSA includes Washoe and Storey counties. We like to look at wages at the MSA level as it includes employees of the region’s largest employment center, Tahoe Reno Industrial. In 2017 (latest data available from the US Census Bureau), 63% of Storey County employees lived in Washoe County, having significant impact on housing demand in the MSA. Storey County does not have significant home sales, as a result the graph shows only data for the Reno-Sparks area.

Introducing Reno-Sparks Housing Affordability Index

Ekay Economic Consultants, Inc., in partnership with the Center for Regional Studies at the University of Nevada, Reno, is pleased to introduce our new Housing Affordability Index (HAI) for the Reno Sparks MSA. The HAI compares family income necessary to purchase a median priced home in Washoe County to the median family income in the region. This index will be updated quarterly and was recently created due to non-credible home values and sometimes inconsistent data provided by other indexes from non-local sources.

The Reno MSA Housing Affordability Index is based on a ratio of median family income to qualifying family income, the income necessary to purchase a median priced home in Washoe County. Qualifying income is estimated using a proprietary mortgage calculator with inputs for median home price, average 30-year fixed mortgage rate, and housing-related expenses (property tax, utilities, and mortgage insurance). The index is based on annual data between 1997 and 2018, with data starting in the 1st Quarter (1Q) 2019 reported on quarterly basis.

The following variables are included in the index:

A ratio of 100 indicates that median family income is sufficient to purchase a median-priced home. A ratio below 100 indicates median income is less than qualifying income and affordability issues exist. For example, the 2Q 2019 index of 84.89 indicates median family income is 15.11% below the income necessary to qualify for median priced home.

The index increased by 0.16% between 1Q and 2Q 2019, making homes in the region slightly more affordable. This is due to a small increase in estimated median family income and a larger decline in the quarterly mortgage rate, which declined more than the median home price increase. The index increased by 3.51% compared to 2018, mainly due to declines in the mortgage rate.

Historically, the index saw its lowest period of affordability since 1997 (63.65) in 2006, indicating median area income was 36.35% below the level required to buy a median priced home. The highest level of affordability was reached in 2012 at an index of level 176.50, with median income 76.5% greater than necessary to purchase a median priced home in the area. These affordability levels (up and down) were driven primarily by significant home price growth and declines in the area during the time.


Reno MSA Economic Outlook Presentation

Brian Bonnenfant, Center for Regional Studies at UNR, and I did a presentation this morning for the Northern Nevada Network.  The presentation focused on an overview of the economic performance of the Reno MSA, including a look at historical economic indicators, including taxable sales, gaming revenue, visitors, single family home sales, home prices, employment, wages, and more.  The presentation also considered future population and employment projections and issues in the region associated with this growth.  A copy of the presentation is included below:

Reno MSA Economic Outlook Presentation

EEC’s Industry Dynamics Reports-Housing Market

This week, we are introducing the Single-Family Housing Index for the Reno MSA.  The full Housing Dynamics Report can be found on our website by following the link provided below.  Some of the findings of the index for 3Q 2015 are summarized below:

-Reno MSA Single-Family Housing Index, based on seasonally and inflation adjusted data, increased by 0.57% between 2Q and 3Q 2015, totaling five straight quarters of continued growth in residential housing activities in the region.

-Year-over-year, the Index increased 4.73% in 3Q 2014 compared to 3Q 2015.

Clink here for the full copy of the Single Family Housing Dynamics Report-Reno MSA for January 2016.

Washoe County Economic Indicators-January 2012-Part 2


The housing market continues to remain unpredictable, with growth and declines abounding.  On the positive side, the number of new home sales increased both over the previous period and the same period last year.  This news is tempered by the large amount of remaining housing inventory and the slowdown of sales between December 2011 and January 2012, though some of that may be attributed to seasonality.  Single family prices continue their decline, but there is some growth in the condo prices.

It makes sense that the number of notices of default is growing as institutions figure out ways to continue issuing these notices, following the changes in the foreclosure processes.  This may also impact REO listings and notices of sale, as fewer notices of default are issued.  This does not represent the performance of the real estate sector, but rather the impact of these restrictions.


Commercial data is published on quarterly basis, latest available Fourth Quarter 2011 data was discussed in the previous post.


Overall, January was not a good month for the much anticipated economic recovery for Washoe County.  With declines in tourism, general, employment and housing markets, it is difficult to be optimistic about a quick recovery.  While some positive indicators exist, including fewer days on the market for residential properties, increasing weekly wage rates, and especially an increase in taxable sales; the overall picture is still bleak.

Washoe County Economic Indicators-November/December 2011-Part 2


Washoe County’s residential real estate market has seen some positive changes, though the overall outlook is still bleak.  New home sales decreased in December 2011 compared to the previous month and the same period last year.  Existing home sales, however, increased by 75.7% from the previous December and 10.5% from the previous month.  Median single family and condo/townhouse closing price also increased, a 2.6% increase from November for single family homes and 5.8% for condos.  Days single properties remained on the market also increased for single family homes, but decreased for condos/townhouses.

Notice of defaults saw an increase between November and December 2011, as did notices of sales.  Trustees deeds and REO listings decreased during compared to the previous month and previous year.

Note: Notices of default data from the previous year should be disregarded as this data was impacted by restrictions placed on financial institutions regarding issuing these notices.  The number of notices of default is expected to grow as institutions figure out ways to continue issuing these notices.  This may also impact REO listings and notices of sale, as fewer notices of default are issued.  This does not represent the performance of the real estate sector, but rather the impact of these restrictions.


The commercial real estate market performed well and poorly, depending on the sector.  The industrial property sector saw a decrease in vacancies, however, this decrease came as a result of reduced rental rates.  The office sector also saw some decrease in its vacancy rates, though not as significant as that for industrial properties.  Office retail rates grew slightly during this time.  Retail properties fared the worst in December.  Retail vacancy rates grew from the previous year and previous month, while retail rental rates declined, a combined negative impact on the sector.


The health of the Washoe County economy remains unclear.  Taxable sales and gaming revenue increased from the previous year, but not from the previous month.  This could be in part due to seasonality associated with the holiday period.  The tourist sector is a bright spot for Washoe County, with positive tourism numbers over the previous year.  This may be due to an improvement in the national economy.  Employment data also shows much improvement from the previous year.

Residential real estate indicators are also monthly positive, though there remains a slowdown in the new homes market.  On the commercial property side, industrial and office sectors are seeing some improvement, while the retail sector continues to struggle.  There is some hope for growth in this sector as taxable sales increase.

Overall, Washoe County is seeing more green numbers than in previous months, and if growth in these indicators continues, it will bode well for our recovery.

Washoe County Economic Indicators-November/December 2011-Part 1

Our last blog focused on data for October 2011.  Since then, both November and December data has become available.  Since the blog attempts to cover latest economic data available, we will skip November data and focus on December values, with the exception of taxable sales and taxable gaming revenue, data for which is available through November 2011 only.

As always, data is provided for the latest available period, the period immediately prior to the latest period and the data for the same period the year before. For example, Visitor Count data, available for December 2011 (current period) is compared to November 2011 data (previous period) and December 2010 (same period previous year).


Data for population, assessed value and personal income is the same as in the previous report; please see the October indicators for a detailed discussion.

County taxable sales decreased by 9.3% from October, but increased by 5.3% from November of previous year.  Taxable gaming revenue continued to decrease, falling between October and November of 2011, though revenue did increase by 1.4% from November of previous year.

Consumer price index increased by 2.75% between December 2010 and 2011, but fell slightly between November and December 2011.


Washoe County’s tourism outlook as of December 2011 is bright, with all indicators showing positive growth.  Area visitors, available rooms, occupied rooms, resulting room occupancy rates, and average room rate increased between November and December 2011 and December 2010.

Note: Tourism indicators are highly seasonal, changing from month to month.  As a result, comparing the current period to the previous period may not be a good indicator of growth or decline, the comparison of the same period in current and previous year is more accurate.


The employment picture for Washoe County was less positive.  Labor force numbers continue to decline, the County’s labor force numbers decreased by 2.36% between December 2010 and December 2011.  While the number of unemployed workers has also declined significantly since December 2010, between November and December 2011, this number grew by 2.27%.  This resulted in an unemployment rate of 11.9%, which is 14.4% lower than in December 2010, but 2.3% higher than in November.

No new data for new unemployment claims and average weekly wage is available.

Please see next week’s blog for residential and commercial real estate market indicators and conclusions regarding the meaning of indicator changes.