How to win in The Reno-Sparks Real Estate Market: Existing Home Sales

Some of you might be thinking, " Why do you have to make it so complicated Ian?"  What is an existing home sale? Why do we have to study this?

I almost feel as if I want to say sorry to you my reader. But this is good for you. This information when understood and observed carefully, I believe, can greatly help you make a better investment decision in the Reno-Sparks area. And that is the primary reason why this blog exists. So I am taking my chances. Feel free to call or shoot me an email if you get confused. I will be more than happy to help.

Why Existing Home Sales is a vital indicator of market health:
This is an Excerpt from the book," Timing the Real Estate Market" pages 54 & 55
By: Robert Campbell. He explains it better than I can.

Home Sale activity is the best leading indicator of real estate price trends. This is because buyers create the demand for housing and as a result it is directly linked with price movement. When the trend in existing home sales is increasing, more and more buyers are coming into the marketplace. This increasing demand causes real estate to rise. Conversely, when the trend in existing home sales is decreasing, less and less buyers are coming into the marketplace. This decreasing demand causes real estate prices to fall.

This is not to say that sellers aren't a factor in the supply & demand dynamics of real estate trends, but only that buyers play the more dominant role. The reason for this is that sellers can ask whatever price they want for homes, but until a buyer is willing to pay the price, they don't have a sale. This explains why home prices tend to go higher with increased buyer demand, and prices tend to fall with decreased buyer demand.

The laws of supply & demand are the determining forces behind the price of almost anything you can think of. It is one of the few examples of practical,logical, and common sense principles to ever come from the study of economics.

For this reason, if you only track one vital sign indicator, pay close attention to the trends in existing home sales. This is one if the true cornerstones for determining the direction of real estate prices.

A key point to understand is that real estate prices don't go down because property owners decide to sell. Prices go down because people stop buying. That's why you should pay close attention to the volume of existing home sales, especially after a long market uptrend when real estate is high priced and expectations are that prices will rise even higher.

  -Robert M. Campbell, 'Timing the Real Estate Market' pages 54,55

After reading this from Robert Campbell's book. I decided to investigate the Reno-Sparks existing home sales for the past years. This what I found out.
(I created this graph yesterday with the numbers supplied to me by the Bureau of Business and economic research. Thanks for the info!)
The graph shows you the Reno-Sparks-North Valleys existing home sales between years of 1993-2006. Let's take a look.

• 1993-  3,315 sales
• 1994-  3,285 sales
• 1995-  3,498 sales
• 1996-  3,717 sales
• 1997-  3,432 sales
• 1998-  3,700 sales
• 1999-  4,070 sales
• 2000-  4,391 sales
• 2001-  4,795 sales
• 2002-  5,334 sales
• 2003-  5,939 sales
• 2004-  6,717 sales
• 2005-  7,384 sales
• 2006-  5,144 sales

Data provided by the Reno-Sparks Association of Realtors

It's hard not to notice the steep market fall from 2005-2006. This explains the FF:

• Why currently,The Reno- Sparks market is still going South.
• That the Reno-Sparks Real estate market topped in 2005
• Why the Reno-Sparks market was one  of the hottest cities in the United States in price appreciation in the years of 1999-2005.

I cannot help but wonder when the market will start to reach its bottom. No one really knows. But we sure will have a good look once if we continue to follow the Existing home sales numbers.

This is an invaluable tool for those of you who are serious in making the best possible decision in investing in the Reno-Sparks area. Feel free to call or send me an email for additional questions or clarifications.