Published Caption: Cathleen Allison/Nevada Appeal
Looking for a snippet of good news about the residential construction industry in Northern Nevada?
Try this: The Sacramento housing market is stirring back to life. Here's why the Sacramento market is important, housing analysts told members of the Builders Association of Northern Nevada last week:
Newcomers to Northern Nevada play a big role in driving the number of new houses that are started, and former residents of the Sacramento area account for the single largest group of newcomers.
If they can't sell their homes in California, they're not going to move. Katherine Boyce, a regional director for Hanley Wood, a housing analysis firm headquartered at Costa Mesa, Calif., said her company sees signs that builders are beginning to buy lots in preparation for a rebound in the Sacramento market.
"As Sacramento starts coming back, Reno will as well," Boyce said. Migration from California plays a role as well in two scenarios that Brian Bonnefant, an analyst at the University of Nevada, Reno, calls "silver bullets" for the local housing market.
In one scenario, the effects of the state budget crisis in California could send a wave of businesses or retirees over Donner Summit into Nevada, said Bonnefant, a project manager in the Center for Regional Studies at UNR.
In another possible scenario, Bonnefant said footloose Baby Boomers looking to flee California's high taxes may head to Nevada as a haven. He dubs that possibility "The Silver Tsunami."
Either of those scenarios could get a boost, Bonnefant said, as the sharp decline in home prices in Northern Nevada has made housing more affordable.
At recent prices, he said, about
78 percent of the homes on the market in the region are affordable for a family that earns the median income.
In Boise, by that measurement, about 72 percent of houses are affordable. In Salt Lake City, 70 percent of homes are affordable.
Migration of newcomers, many of them from California, is directly linked to the strength of the home construction business in Northern Nevada, the UNR researcher said.
In 2006, for instance, Washoe County's population grew by an estimated 12,241, and building permits were issued for 4,889 new homes.
In 2008, the population increased by an estimated 5,772, and only 2,038 residential permits were issued. This year, Hanley Wood has estimated that 1,072 permits will be issued in the region that includes Washoe, Douglas, Lyon and Storey counties and Carson City.
Given the slow pace of sales - 274 new homes were sold throughout the region during the second quarter, Hanley Wood reported - developers are pulling the plug on new subdivisions. Boyce said 24 percent of the residential developments in the region have been canceled, and another 12 percent have been placed on hold.
The finished new homes in the region that await sale could meet demand for nearly seven months at the current sales pace, Boyce said last week. As the market begins to revive, she said Hanley Wood analysts expect that local and regional builders will take a larger share of the market. Many large national builders have left the Northern Nevada market entirely.