What happens when the Sky Falls?February 28, 2017

Mike Kazmierski’s opinion piece,”Reno’s Housing Sky is Falling,” received quite of bit of attention last week.   He brilliantly pointed out that these rising home prices in our area are not due to a bubble, but a direct result of the immense job growth we’ve seen – coupled with an inadequate amount of new housing.  At the same time as Reno’s home prices creep higher, the entire country is dealing with interest rates doing the same.  So when home prices and interest rates go up, what happens to the market?

What we will hopefully see first is a slight loosening of credit.  I say slight because there’s only so much lenience possible following the Consumer Financial Protection Bureau’s 2014 release of new mortgage rules.  Typically though, interest rate increases are met with a relaxation of credit standards because banks still need to make loans in order to make money.  When interest rates go up, their refinance opportunities start to dwindle.  Last year, mortgages made on single family homes were equally divided between refinances and purchases.  That’s not likely going to be the case in 2017.  So we may see some rules loosen in terms of getting pre-approved for a new mortgage.

That could lead to more buyers but doesn’t solve the problem of low inventory.  Worst case scenario for our local market according to Kazmierski, who is the CEO and President of the Economic Development Authority of Western Nevada, is that we fall into a local recession because we failed to address this lack of housing.  Hopefully that is not the case but the jobs have already been added by new companies in Reno and there are more people on the way to fill these.  Kazmierski called upon the local government and local builders to get affordable housing up ASAP.

One thing that has become apparent is that Reno is growing rapidly and it doesn’t have to be a bad thing!  So long as we come together as a community to be proactive about how this growth impacts our families and lifestyles, there’s really nothing to fear about adding culture and opportunity to our town.  Assuming we have the infrastructure in place to support it!  Reno is full of smart people who can make this happen, instead of freezing and resisting the inevitable.