In contrast to yesterday’s doom-and-gloom subprime post, I offer this: a glimmer of hope for the Reno real estate market. Our sales meeting this week produced some very interesting charts. One shows pending contracts outnumbering solds for three months in a row. Another shows median prices leveling out. Feb07mediancontracts.pdf
Another suggests an uptrend in the number of homes sold, while the next illustrates diminishing inventory, at last dipping below the two-year average. Feb07unitsinventory.pdf
So am I drinking the broker Kool-Aid, or are we starting to hit bottom? Maybe you think these are just superficial, positive blips on a long downward spiral? Or are these, perhaps, the preliminary signs of stabilization?
11 comments
“So am I drinking the broker Kool-Aid, or are we starting to hit bottom?”
Diane, you just took an awfully large gulp. Please consider a few aspirin and a good nights rest. Then you should come back to your senses.
Seriously, how in the world could we be “bottoming out”? The effects of the shutoff of the subprime lending spigot haven’t even begun to show. A lot of these loans will be funded through the end of this month and then that’s it. Alt A is being hit as well. Some lenders are now starting to say no way to 100% and stated income loans for Prime borrowers. And, as the foreclosures mount, the banks will continue to tighten up their standards.
A slight increase in sales or prices or both should be viewed as only a temporary blip. After all, more homes do typically sell this time of year. To be cautiously optimistic at this point even seems foolish given the increasingly bad news the honest insiders are reporting daily. Reno won’t be “bottoming” for years.
As of 5 minutes ago according to the IDX version of the MLS:
8% of the SFR listings in the Old Southwest have an offer.
5.5% of the listings in the West-Southwest (Caughlin Ranch) have an offer.
4% of the listings in Old South Surburban have an offer.
Yep, this market sure looks like it’s turning around.
There has been some talk on this blog that prices have deteriorated only in the newer developments in places like Wingfield Springs, Double Diamond, and, of course, Somersett. It has been suggested that the older, more established neighborhoods are doing just fine.
Well, folks, take a look at MLS # 7003651. 1240 Greenwich Way. This house is located in the Cottages in Caughlin Ranch. Believe me, there is no more “established” neighborhood anywhere in Reno. The Cottages are inhabited mostly by fairly well-off folks in their 50s, 60s, and 70s who downsized from their 4500 sq.ft houses after the kids grew up and left.
This house just reduced to $449,000. It started off last year almost $100K higher. The last time a similar house to this (same model) sold in the Cottages was early 2006, for $500,000. So if this seller gets 97% of asking, that is $435,500. That is a 13% drop from the last sale of an essentially identical house in the Cottages.
So it appears that it isn’t just Wingfield Springs that is deteriorating. For all the coupon clippers in the Cottages, it’s a good thing Diane’s graphs show that we are near the bottom.
Here are some “stats” from the Wall Street Journal concerning subprime mortgages for Nevada.
1. 8.96% of all mortgages in Reno are subprime whereas in
Las Vegas that number climbs to 17.76%.
2. As of Dec. 2006, 8.9% of all subprime mortgages in Reno
are delinquent. In Las Vegas, the number is 10.82%
Will be interesting to see how these numbers change during 2007. Clearly, the Las Vegas housing market has a lot more exposure to subprime defaults.
Put the glass down and step away from the cooler.
The problem with those charts are the trendlines — they are completely deceiving!!! The only chart in there that listed all the data points was the # units sold. If you dump those numbers into Excel, there’s no way to produce a trendline chart that is turning up in Feb-07. (Because Jan/Feb-07 are lower than any other months in the past 2 years.)
So before you get too excited about what the charts tell you, make sure you’re looking at how they were created. Clearly these trendlines were drawn by hand to elicit a positive outlook.
The inventory numbers on the graph are from February, pretty old. This is more accurate http://www.housingtracker.net/old_housingtracker/location/Nevada/Reno/ Notice the big spike in inventory as we head into late March. And check out the big spike in inventory in Sacramento (one of out “feeder” markets) in late March http://www.housingtracker.net/old_housingtracker/location/California/Sacramento/
Thanks insider for that link to Housingtracker. Percent of income to buy median house in Reno has climbed from 18% to 31% in the last 3 or 4 years. I agree with you that the “buying surge” during the last few years in Reno probably came from folks in California flush with cash. Since their housing market has gone South, Reno should return to a more normal state of affairs vis-a-vis its affordability for local residents.
Ted, the trendlines were not hand drawn. They were calculated by the computer using spline interpolation: http://en.wikipedia.org/wiki/Spline_interpolation
One of my clients, a former demographer, used spline interpolation extensively in his work to help clarify trends:
http://www.findarticles.com/p/articles/mi_m0PCG/is_1_21/ai_n6155266/print
I agree with the charts - and I am a Californian still flush with cash. Most coastal markets still are going up 8%+ a year!
Oh yeah, I forgot to mention I am in a pending in the old Southwest.
“Most coastal markets still are going up 8%+ a year!”
This is an outrageous statement, and completely bogus. You might want to check the facts before you go throwing around such untruths. My guess is you don’t even know where to find them so I have provided a link which you will find most helpful. And what does “I am in a pending” mean? Are you renting a residence which the owner is selling? Are you selling your own, or do you have an offer accepted on a property? A very vague statement indeed.
http://www.dqnews.com/ZIPCAR.shtm