Even though home prices are rising faster than incomes in the Reno-Sparks area, super-low mortgage interest rates are keeping home purchases affordable.
Eugenia Larmore, president of Reno-based Ekay Economic Consultants, reported a few days ago that affordability in Reno and Sparks improved slightly this spring.
The index looks at three factors that determine whether a buyer qualifies for a mortgage: the price of the house, the buyer’s income and the interest cost of borrowing the money.
Ekay’s housing affordability index estimates that a family would have needed an income of $87,189 to qualify for a mortgage on a median-priced home during this year’s second quarter. The median price of a new or existing home in Washoe County was $422,024, the firm reports.
In the first three months of this year, by comparison, a family would have needed to make about $9 a week more — an annual income of $87,661 — to qualify for a loan on a median-priced home.
A year ago, the firm estimates the minimum family income needed to buy a house would have been $88,687 — nearly $30 more on the weekly paycheck than the current requirement. In those seemingly long-ago days of early 2020, the median price of a home was $413,451.
Larmore’s analysis finds, however, that incomes by themselves haven’t been keeping up with fast-rising home prices in Reno and Sparks.
She says the median family income of $79,178 this spring was up by 4.46% from a year earlier. The median price of a home, however, was up by 5.5%. The gap between housing prices and wages was particularly pronounced this spring, when home prices went up by slightly more than 2%, more than five times faster than the 0.36% increase in the median wage.
But low interest rates — they’ve been just a hair over 3% in recent weeks — have kept working families in the game.
National analysts don’t expect any big increases in mortgage rates in coming months, but they project some gradual increases — increases that will reduce housing affordability in Reno and Sparks.
Bigger pressures on affordability will come as prices increase.
Mike Kazmierski, the president and chief executive officer of the Economic Development Authority of Western Nevada, has been sounding the alarm on the region’s failure to build enough new housing to support its growing economy and growing population. The resulting shortage of supply, he says, is almost certain to push prices upward and reduce the ability of families to afford a home.
In fact, the EDAWN chief said housing construction in the region this year is significantly lagging previous years’ activity and falling short of goals established for this year.
“With this decreasing supply and increasing demand we can expect housing costs and housing shortages to increase,” Kazmierski wrote EDAWN members last month.
