2009 has been a challenging year for all of us.  But it appears that the real estate market for land is at the bottom, and the future of Land Development is positive.  Despite what you may have heard, there were a number of transactions in Washoe County that took place last year as illustrated in the chart below.  During 2009, nearly 4,000 vacant lots transferred ownership.  A quarter of those involved bank-owned properties, almost 400 consisted of raw land, over 700 made up of finished lots, and approximatley 1,200 consisted of rough graded land.  The remainder were single lot transactions.

Who Bought Land in 2009?
   As listed in the table below, many developers have purchased land last year at rock bottom prices.  We believe that their motivation is to buy land because of value, assuming a 3 to 5 year hold to wait for the return of the homebuilding market or to buy more attractive properties.

   As you can see from the chart below, the prices for many of these transactions were low, but this supports our theory that we are at the bottom of this market.

   The average per lot prices are all over the map, but using the square footage price to normalize the data creates a more representative picture of the true cost per lot sold.
   It may be safe to assume that new home construction will remain flat, with mininal growth this year.  Homebuilders are expecting that most home buyers will be focusing their interest on traditional resales and REO properties throughout this year.  As the REO supply diminishes, the resale market prices will continue to increase and we anticipate to see the new home market begin to retrun in 2011-2012.

Current Status of the Resale Market
   How did the Single Family Residential market look in 2008 and 2009? Equity sales are the traditional home sales and as you might imagine, they have dropped from 2008. REO are your bank-owned properties or foreclosures that we have been hearing a lot about and as you might expect those doubled in 2009.  Short Sales are anything but short, and have been taking 6 months to complete, and those numbers tripled in 2009.

   In January of this year, the Reno Gazette Journal reported that Washoe home sales are up from 2008!  The article stated that “Home sales of existing homes in Washoe County ended 2009 on a record-breaking positive note as unit sales beat previous numbers….”. The article continued by saying that “Overall, Washoe County had 5,231 sales of existing single family homes in 2009, which is a 45 percent jump from 2008”.  The article further noted that “The other key market indicator for the housing market is median sales price, and it posted a 3% monthly gain in December. The gain is good news for a market that has pretty much stayed flat throughout 2009.”

Building Permit Activity
   Building permit activity also appears to have hit bottom in 2009; however one can make the argument that we can expect that the trend will slowly start to increase slightly.  The population in Washoe County continues to increase at a rate between 1.6%-2% annually depending on which report you read.  Because of the low number of permits and sales this past year, we can expect that pent-up demand is starting to build up, as you can see from the chart below.

   This next graph shows the history since 2003 of the number of new parcels created in Washoe County, the number of land transactions and the number of Single Family Residential (SFR) permits issued annually.

   The Red Line represents the number of new parcels created by subdivision and parcel maps. The Reno/Sparks/Washoe County area peaked in new lot creation in 2006 with over 9,000 new lots.  This supply of new lots dropped to just over one thousand for 2009.  In some cases, this is a result of subdivion maps going through a reversion to acreage process. Overall, fewer maps were recorded in 2009.  The Green Line represents the number of new Single Family building permits which peaked in 2005 with over 5,000 permits issued.  In comparison, only 504 permits for Single Family Residences (SFR) were issued in 2009.  The Blue Line represents the number of single lot transactions that have increased, almost steadily since 2003.  By looking at the lines for SFR permits and the number of new parcels created, it is very easy to conclude that we are at the bottom. 
   Current status of the resale market, building permit, and land transaction activities all support the theory that we have hit the bottom.  However, the market still has a long way to go before it fully recovers from the economic downturn. More needs to be done for job creation, but at least we can see the light at the end of the tunnel.  Let us stay positive and look forward to a better 2010.

(Scott Barnes, P.E. is an Associate-Land Specialist with Colliers International in Reno.  He is a Civil Engineer with a background in land development for engineers and home builders.  Contact Scott at Colliers at 775-823-6627, or email sbarnes@colliersreno.com)

Scott Barnes