By Frank X. Mullen
The nation’s housing bubble burst a decade ago, but in the last seven years Nevada real estate prices have steadily recovered, creating a new dilemma: we’ve gone from a housing collapse to a housing crisis.
Population and job growth have renewed a real estate boom across the Silver State, but as home prices climb, wages remain stagnant and few new homes are being built. At the same time, federal affordable housing assistance and incentives are falling by the wayside. The state has gone from a real estate crash to a heated sellers’ market where entry-level and middle-income buyers are being priced out even as fewer and fewer workers can afford ballooning rents.
“It’s ridiculous,” says Al Kinney, 41, a drywall installer from Reno. “One bedrooms (rentals) are going for more than $1,000 a month now and that’s for a hole-in-the-wall. When Tesla came in, everybody was talking about how Reno was going to be the next Silicon Valley. Well, we’re there when you look at housing costs.”
Not quite. The median home price in San Jose is more than $1 million, according to Zillow, a national real estate data base. The median 20 percent down payment on a house in metro San Jose is $192,320, according to Zillow, about equal to the median nationwide value of an entire house.
Still, the current Nevada market – with the median price in Las Vegas at $247,000 and the Reno-area median at about $350,000 and rising – is fast putting home ownership out of reach for many low- and middle-income buyers. At the same time, the demand for a limited supply of rental housing is causing monthly rates to skyrocket.
Kinney says he moved to Reno from Las Vegas in 1994 and rented an apartment in Sparks for $370 per month. He married three years later and he and his wife bought a 3-bedroom house in Reno for $135,000 with mortgage payments of about $850 per month. The couple divorced in 2010 and sold the house for about $6,000 more than they paid for it, he says.
“Luckily, we bought before the market went crazy (with high prices) so we were never upside down on our mortgage,” Kinney says. He’s engaged to be married again and would like to buy another house someday, but predicts “that’s not going to happen in Reno.” In the Truckee Meadows, real estate industry analysts expect the median home price to reach $400,000 this year, up from a low of about $140,000 in 2012, when the housing slump bottomed out.
Housing prices melted down across the country beginning in 2008 and Nevada, which had been experiencing a boom period, led the nation in foreclosures. Las Vegas was a major casualty. Housing prices plummeted 62 percent from their 2006 peak. Single-family home building permits crashed by more than 90 percent. Statewide, the unemployment rate hovered at 14 percent in 2010.
In Northern Nevada and in Las Vegas, property owners – often the victims of predatory lenders — faced foreclosure and their properties were auctioned off on the courthouse steps. Houses held by banks or purchased by speculators sat vacant. Neighborhoods withered.
The recovery gained momentum during the last seven years. This year, as house prices in the rest of the country have bounced back to 2006 levels, the Silver State has led the pack in increases. New workers and retirees moving to Nevada from California see Silver State housing costs as a bargain, which inflates prices across the board. That puts the most pressure on residents at the low end of the economic spectrum at a time when federal aid is dwindling.
Close to half of all renters in Nevada are “cost burdened,” according to U.S. Census Bureau data from 2016. That means they spend more than 30 percent of their income on rent or mortgage, including utilities. Federal housing vouchers and government housing traditionally provided some relief to lower-income residents, but those programs have been reduced and Nevadans who are eligible can wait years for a determination once their applications are filed.
In addition, a 30-year-old federal program that provides tax breaks to investors who back affordable rental housing has become less attractive with the recent federal tax bill’s reduction in the corporate tax rate, analysts say. The program is the largest national effort to support affordable housing across the country. In Nevada, it accounts for about 1,200 homes and apartments per year, a relatively small percentage but one that will add up to significantly fewer affordable units being built or rehabilitated over the next decade.
As federal help wanes, an interim committee of state lawmakers intends to introduce affordable housing bills in the 2019 Nevada legislative session. Some federal help remains.
Sen. Dean Heller says Nevada needs a housing market “that has long-term stability in which private capital, not the federal government, is the primary source of mortgage financing.” At the same time, Heller says he supports federal grants that help expand the supply of affordable housing to low-income families and provide assistance to homeless people. Last year, the U.S. Department of Housing and Urban Development awarded Henderson, Reno and Sparks a total of $5.5 million in grants.
“Fighting homelessness and building strong communities are priorities all Nevadans share,” Heller says. “… By assisting with the development of local neighborhoods and emergency shelters, these grants will go a long way for families and individuals who need help the most.
At a roundtable about affordable housing in Las Vegas last month, Sen. Catherine Cortez Masto stressed that cooperation among local governments is essential.
“The challenge I have found is how we come together, because we have so many people working on different aspects of (affordable housing),” Cortez Masto told participants. She says she plans to huddle with Southern Nevada officials to help develop a regional approach to affordable housing.
“If I can get them to come together and they’re not fighting for the same pot of money, that’s the key,” Cortez Masto says.