Thanks to investor love and low supply, home prices are up. But is another bubble around the corner? The Nevada Housing Stability Index, recently released by the state?s Department of Business and Industry, may not answer that question, but at least it?s a thorough examination of the facts.
The agency partnered with UNLV?s Lied Institute for Real Estate Studies to gauge the health of the state?s housing market. Weighing 12 different factors, it assigns a grade for each and an overall grade for the market. Factors evaluated include: price movements, affordability, new construction supply and demand, investor purchase share, delinquency rates and underwater loan percentages.
The index isn?t fond of the fact that six out of 10 Nevada home sales are to investors; nor does it like our 10.6 percent delinquency rate. High foreclosure volume (4.5 percent) and underwater loan percentage (67.3 percent) also drag down the index. These categories received D or F grades.
The bright side is on the new-home front, where construction supply-demand balance received an A. The category indicates jobs are coming back, increasing demand, but that we?re not overbuilding?yet. New homes are selling at a rate of 134.8 percent of resales, earning a B-. That?s up from an F a year ago, when new homes were selling for 176.8 percent of resales.
Overall, Nevada?s housing market gets a D+ rating, up from a D a year ago. The good news is that an average market only requires a C grade. But whether ?average? actually equates to ?healthy? depends on whether you like C?s on your report card.