Yesterday I got another call from an appraiser asking me about the sale on Cinnamon Drive. Regular readers will remember this property as a relocation listing that started at $480K, dropped to $460K a few weeks later, then finally descended to $450K where it came into the realm of the reasonable, selling for $439K in December 2006.
When this home sold, it seemed like one of the new lows in Wingfield Springs. But the appraiser was telling me that it was now one of the higher comps. Incredible. He knew about the house down the street that sold for $410K, but I had to fill him in on how ugly it was inside… mauve carpets, brass fixtures, 80’s style pickled oak cabinets. So I think that helped him understand the difference.
Nonetheless, his dilemma is that very little has closed out there in the last few months, making it much tougher to value his subject property. He told me about a couple of new builder specials that had sold for $415K and $360K, the latter unloaded by a DR Horton employee who was transferred back Sacramento. Because he got a killer employee discount on the purchase of the house, he could unload it for whatever the market would quickly pay, and he probably got another killer deal in his new hometown, Suffering Sacramento, where one in five homes for sale are in distress. Meanwhile, his former neighbors are going to love the new low their comps are descending to.
My new appraiser friend had been hired by some FSBO to justify her overblown price, but he just wasn’t coming up with anything to support it. I suspect he was dreading going back to her with the universal truth that all sellers seem to resist in this market: that your house is worth far less than the fantasy number you cling to.
Then came the market shop talk. I thought Wingfield Springs was taking a harder hit, but he thought Double Diamond was with all the foreclosures and short sales going on out there, which is possible… man, I wish I had those foreclosure numbers!
| Qty Sold |
% Chg | Volume Sold |
% Chg | Average Sale |
% Chg | Median Sale |
% Chg | Qty Active |
% Chg |
| Spanish Springs-South |
| Current Period | 179 | 73,188,809 | 408,876 | 385,000 | 179 |
| One Year Ago | 305 | 133,575,893 | 437,953 | 420,000 | 347 |
| Increase/(Decrease) | (126) | -41% | (60,387,084) | -45% | (29,077) | -7% | (35,000) | -8% | (168) | -48% |
| Qty Sold |
% Chg | Volume Sold |
% Chg | Average Sale |
% Chg | Median Sale |
% Chg | Qty Active |
% Chg |
| Reno-South Meadows |
| Current Period | 310 | 128,387,884 | 414,154 | 389,000 | 310 |
| One Year Ago | 476 | 200,205,360 | 420,599 | 405,000 | 540 |
| Increase/(Decrease) | (166) | -35% | (71,817,476) | -36% | (6,445) | -2% | (16,000) | -4% | (230) | -43% |
Data courtesy NNRMLS, February 2007, 2006
6 comments
“My new appraiser friend had been hired by some FSBO to justify her overblown price, but he just wasn’t coming up with anything to support it. I suspect he was dreading going back to her with the universal truth that all sellers seem to resist in this market: that your house is worth far less than the fantasy number you cling to.”
Thanks Diane, for a wonderful illustration of where the market is right now. Asking prices have become so disconnected, they are now commonly referred to as fantasies, wishes, hopes, dreams, and so on. What they don’t represent is reality, or, more importantly, market value. There was once a time, not so long ago really, when it came time to sell your house, that you procured an honest and legitimate appraisal, and used it as a guideline to set the price. Of course, that went the way of all good things. Now, every homeowner/seller is the highest authority on real estate, and more specifically, their shining star of a home. You know, the one that is better than all of the rest. The one which is worth tens of thousands more than the highest price ever garnered in the neighborhood. With all conventional wisdom lost, greed is now the order of the day. It is the new breed of seller. One who jabbers incessantly about their special home for sale, the one on the terminal mls ride, with nary a price reduction. They lament, “Oh this stupid market is so slow”. But it’s not the price, and heaven forbid should you mention it. If you are brazen enough to do so, it’d be wise to step back a few feet first, for if not a swift hand, it’s a blast of hot air you’ll receive. 18 months on the market will do that. It remains to be seen what 20 years will do.
This house on Cinnamon Drive in Wingfield Springs sold for $595,000 in the middle of 2005. Then it sold last December for $439,000, taking a 27% haircut in 18 months.
And now that $439,000 sale is one the HIGHER comps in the neighborhood???
A year ago I suggested on this blog that prices in certain neighborhoods in Reno-Sparks could see a 25-30% decline in value. I was ceremonioulsy torched by the (now gone) REIC cheerleaders. It looks like I may have been low in my prediction.
The MLS seems to be adding inventory at the rate of about 200 listings or so a week. Since I don’t have access to the closed MLS I cannot say what the number is of expiring and withdrawn listings. But one thing is clear: the pendings:listings ratio remains dismal. I have some archived MLS links from a year ago. The pendings:listings ratio today is no better than it was a year ago. We all know that prices dropped 15% last year. Nothing in the pendings:listings ratio today suggests this year will be any better than last year. At least, not as of today. I think BanteringBear is right: this market downturn could take a long, long, long, time.
Properties advertised in Forclosure this week in the RGJ by zip code:
89509 - 5
89433 - 4
89512 - 2
89431 - 5
89436 - 7
89506 - 5
89521 - 2
89434 - 2
Total - 32
There are a couple more that I don’t have enough information to track, and I’m not sure everyone is advertising their forclosures in the RGJ. Of these 32, 10 were new this week, so about 2 homes are going into “hard” forclosure every day. The biggest surprize to me was nothing showing up in 89523 - Sommersett!
From today’s WSJ:
Countrywide Late Payments Rise
By JAMES R. HAGERTY
March 2, 2007
Countrywide Financial Corp., the largest U.S. home mortgage lender, reported sharp increases in late payments, including loans by borrowers with relatively strong credit records.
In a Securities and Exchange Commission filing, the Calabasas, Calif., lender said payments were at least 30 days late on 2.9% of prime home-equity loans serviced by the company, up from 1.6% a year earlier and 0.8% at the end of 2004. Countrywide said payments were late on 19% of subprime mortgage loans, up from 15.2% at the end of 2005 and 11.3% at the end of 2004. Subprime loans are for borrowers with weak credit records. A loan servicer collects payments.
The new data come amid growing anxiety about a surge in late payments on subprime loans, which accounted for about a fifth of all new home mortgages granted last year. While prime loans are performing much better and the vast majority of Americans are keeping up on payments, some analysts fret the damage is starting to creep up the credit spectrum and won’t be confined to subprime borrowers.
A house in southwest Reno came on the market back in late 2005 at $699,000. After receiving little interest, and no offers, the price was reduced to $649,000. In late spring of 2006, an offer came in at $599,000. The owners flat out rejected it as lowball, and didn’t even counter. The house then languished on the mls for months with hardly a visitor. It finally sold this winter. Selling price? $499,000. Think these people felt a little foolish? Their greed cost them over $100k. This same scenario is playing out time and again as an army of sellers compete for a handful of buyers. Only the motivated will make out ok. The greedy will cut their own throats.
More interesting news from today’s Wall Street Journal:
Subprime Crackdown
Regulators Seek
Tighter Standards;
New Century Probe
By JAMES R. HAGERTY, DAMIAN PALETTA and LINGLING WEI
March 3, 2007
Federal bank regulators announced a crackdown on loose lending standards on subprime home mortgages as two major lenders struggled to cope with losses and regulatory problems.
New Century Financial Corp., one of the nation’s largest subprime lenders, announced that it has been informed of a federal criminal inquiry into its accounting and trading in its securities. New Century also said that a failure to obtain waivers from lenders or find new funding sources could prompt its auditors to warn of “substantial doubt” over its ability to remain in business.
Another big lender, Fremont General Corp., said it plans to stop making subprime residential loans and is in talks with various parties aimed at selling that business. Subprime loans are those for people with weak credit records or high debt in relation to income.
A proposed policy statement released Friday by regulators comes after rising defaults already have rattled investors and forced subprime lenders to be more cautious in extending credit. “There seems to be a growing realization that not everybody can buy a house today,” said Scott Stern, chief executive of Lenders One, a St. Louis-based cooperative for mortgage-banking firms. Lenders will have to tell some borrowers to save for a down payment, he said.
Amid a surge in subprime lending in the past decade, many lenders have pushed home loans that carry a fixed rate for the first two years, then “reset” to a much higher rate that floats with the general level of interest rates. These loans — known as 2/28 mortgages — can lead to jumps of 50% or more in monthly payments after the initial period ends. Many of the borrowers refinance to avoid these “payment shocks,” generating more fees for lenders and mortgage brokers.