To see if my buyer’s experience was representative of all of Somersett I performed a quick search on the Active Somersett listings. Here’s what I got back: 94 Active listings (as of 4/22/07)

38 are owner occupied (40%)
8 are tenant occupied (9%)
48 are vacant (51%)

And, of course, these numbers do not include the unlisted Builder inventory.

So the original developer of the houses on Fairway Chase could buy them back for 16-24% less than they sold them for 18 months ago and they are passing up the chance? That’s a pretty powerful indication of where they think our market is at.

I remember back in the boom, when people started to get worried about the number of “investment” purchases, all the research said that only 10-11% of the sales were to flippers. You could infer from Guy’s experience that the number may be closer to 25%! Remember all those “ghost” children that didn’t show up for school as expected last year causing a huge funding shortfall? I think we have found where they live.

There is always room for the optimist - 2395 Ridgefield listed this week for $999,000, a whopping 68% over it’s sale price of $595,076 on 9/21/2005!

For the “South Meadows” area:
174 Active residential listings, as of 4/22/07 (excluding condos and townhomes)

115 are owner occupied (66%)
16 are tenant occupied (9%)
43 are vacant (25%)

“…a quick search on the Active Somersett listings…

: 94 Active listings (as of 4/22/07)

38 are owner occupied (40%)
8 are tenant occupied (9%)
48 are vacant (51%)

…these numbers do not include the unlisted Builder inventory.”

This is turning into a rout. 56% of the resale listings are not owner occupied. That is an enormous number for a supposedly upscale community. I am not surprised though. Driving around Somersett at night, it’s like a ghost town. And it’s going to get much worse before it gets better.

The major problem is the price points. Flippers drove up prices and paid amounts well beyond what people can afford believing they could always find a greater fool to unload their highly leveraged home onto. But the music stopped, they’re now the bagholders, and it’s clearly evident that most of the price gains seen since around 2001 were due to this rampant speculation and fraud. It is quite possible that prices will overcorrect since the bubble was so massive. It stands to reason that even people who purchased at pre-bubble prices could be affected at some point, should they need to sell.

People like Derrick, who bought right in the middle of the bubble, will soon realize that they grossly overpaid for their home while they watch in horror as their perceived equity vanishes like a thief in the night. The fact is, a 3/2 stucco sh!tbox in Spanish Springs on 1/3 acre should sell for around $175k max. The north valleys are really going to get hammered. And even worse can be said for Fernley, Fallon, Carson City, etc.

It won’t happen overnight, and there will be slight upticks in sales and prices along the way, but ultimately prices will return to historical levels, representing what local wages afford in the area, and not the amount of debt some greedy dimwit with no down and a suicide loan is willing to take on.

Good work, Guy. What extraordinary mining of the MLS database. You really ought to get in touch with the RGJ business editor with the data.

Of all the properties that I’ve mined at Somersett focusing on 2005, none were purchased with a 3/27 adjustable loan or a 100% total voodoo special. I suspect these products were not offered on Jumbo loans at the time (don’t take that to the bank). The loan package of choice seems to have been 10% down, 80% 5/25 adjustable at about 6.25-6.5% initial rate, and a 10% HELOC. I’ve seen a couple 20% down 5/25 loans at the same rates, but I have not seen a single 20% down 30 year fixed rate loan. Maybe Angie (if she is still talking to us) could shed some light on this.

Just call me a happy camper with my 15 year fixed at 4.875!

bantering bear so do you have any evidence that the RE bubble started in 1997 now? and you think a 3bed/2.5 bath 2,400 sq.ft easily 50k in upgrades all of which with the help of some friends installed myself, a 10k paver patio, on a .33 acre culdesac in spanish springs should sell for 175k? Or a Sh*T box as you put it. now that is funny. I would appreciate it if you stop with the personal attacks. bubble started in 1997? LMFAO!

Um, all the conversation here has been about the new developments. What about neighborhoods that have been around 10-15-20 or more years? How are they fairing? Vacancies? Are there older areas undergoing significant remodels? Old SW maybe?

Also, GUY it would interesting if you could do one of those sold, pending, active thingies for my neighborhood, old Southeast (generally from Virginia to Kirman, and from Ryland/Liberty to Vassar).
It seems like homes within the McCarren Loop priced under $300K are doing well. Virginia Lake Crossing’s lower price points are attracting a huge interest list of 1600+ people, and sales are strong at Brighton Manor (they are planning their 2nd and 3rd phases). I am told there is wide interest in Grant’s Landing as well. It seems like there is a huge difference between the inner-McCarran-loop, and the scenario in Wingfield Springs where Cosmic Village is offering free upgrades to get rid of its standing inventory.

RE: “with only 5% vacancy rate already for apartments, things could get tight in inventory for rentals.”

I doubt the 5% number. I live in an apartment complex near McCarran and Kietzke and in my eight-apartment building, three units are vacant right now.

Also, the complex has signs out front advertizing specials.

“Before we could say anything, they told us
builder incentives included 75K-85K right off the top (I think that could be negotiated even more), landscape & upgrade incentives also. How does this work? they just write you a check when you close escrow. Sort of like a rebate, only of major proporation. Therefore, sold prices reported are very close to the listing prices. Is it what the house really sold for? no. Does it keep the stats high? yes. Legal? yes. Ethical? you decide. It also
hyperinflates a buyer’s assessments and taxes they will be paying.”

While this is totally unethical, it should also be illegal. Not only is it artificially inflating prices, but it props up or increases property taxes for those in the neighborhood as the assessments come in too high. And, what sort of lenders are on board with this? If I am purchasing a $585k home with 10% down and receive $85k cash after closing, my lender is loaning more than the property is worth. In the face of declining home prices, skyrocketing foreclosures, and tightening lending standards, it makes no sense for them to take on the risk. The whole industry has become so sleazy it’s sickening. If I’m the buyer, I say no way, lower the stinking price.

Thanks to guy or gal who wrote in based on his recent trip out with Guy. For me, it was great to hear from someone in a similar situation to ours (maybe moving).

I’m here is Nor Cal, and we are very seriously considering(OK, really hoping) for a move to Reno in the next few months based on a job interview coming up. All cities have their problems, but we love Reno - the people, the attitudes, the outdoorsy stuff, our friends, (we used to live there). We want to move back and never leave again.

We haven’t seen Somersett since it was built after we moved, but honestly, it sounds freakin’ scary (the ghost town descriptions pretty much did me in). I have to say that the prices people seem stuck on are completely unrealistic based on nothing more than stats. You’ve all read the posts, and we can banter on about whether or not it’s rock bottom, but that’s getting old.

What I really want to know is if any one has any thoughts on Damonte Ranch - nice area, ghost towny, crazy flipper/short sales situation like Somersett???? Inquiring minds want to know.

Seems like that $75K rebate would be IRS 1099 income - so you have to pay income tax on it. Right? What a hosejob if so.

A couple of weeks ago, after living out here nearly two years, my wife and I drove out and through Somersett. Our initial reaction? “An awful lot of these houses look empty”. It is interesting that our initial reaction appears to have some merit.

GreenNv says, in referring to houses sold in Somersett in 2005:

“The loan package of choice seems to have been 10% down, 80% 5/25 adjustable at about 6.25-6.5% initial rate, and a 10% HELOC”.

Well, it that’s true, these folks are all upside down. Their 10% down has evaporated, their ARM is holding at about 6.5%, and the interest rate on the HELOC has gone from about 4% to 8%.

So they are now underwater on a house that continues to decline in value. Will they continue to make that ARM payment at 6.5% and that HELOC at 8%? As they watch the value of their house sink into the sunset?

Guy’s post answered that question with respect to at least two houses, on the same street, two doors down from each other.

From Harpers Magazine, May 2006:

“A real estate boom that began with the promise of “economic freedom” will certainly end with a growing number of workers locked into a lifetime of debt service that absorbs every single spare penny.”

“A modern equivalent of peonage, a lifetime spent working to pay off debt on a asset of dwindling value.”

Ok, Flippers I understand, ARM’s, vacant homes, builder incentives you say -

I understand the logic of everyone’s post - EXCEPT the doomsday analysis for the buyer. If you are a buyer moving to Reno like myself planning to live there for 15-20 years while I raise children, and I am buying the old construction is established neighborhoods, I don’t see how the flippers or vacancies effect me.

You couldn;t pay my wife and I any amount of money to live in new construction. With small yards, usually no consideration to view orientation, and large closed floorplans, the new construction makes us laugh when we have walked throough a random open house or two on our recent buying trip to Reno.

We see the new construction as garbage with new polymers, plastics and materials that will offgas PCB’s for years to come with stucco that will look like hell in 3 years. Just walk through any K&B development or even homes in Reno 5 years old and they already show signs of distress, cracked stucco. One of the new houses for sale off of Manzanita for 800+ had a million dollar view - the problem you ask? The only room utilizing the view was the garage!
Yes, we will get a 30-year fixed, but with a long term outlook and the right house we love who cares if we see 10% decline in the next year or three. What I do NEED is a tax write-off to balance off a large income.

For us long-term buyers who are looking for a home, not an “investment” there could not be a better time for the buyer. We have the pick of litter, and while there are many, many listings in our target of the Southwest - only 6 of all of the active listings warranted a walk through, and only two were real gems - not even considering price.

So if you want price concessions, repair work done on the home at the owners expense, a good interest rate, and a home to cherish and live in, for me, there has never been a better time to buy.

Josh

The March existing home sales report is out and it’s bad: largest drop in almost 20 years.

S&P is now publicly saying the downturn could last into 2009.

Apparently, Standard and Poor’s missed December’s NAR pep rally where Mr. Lereah declared “we’ve hit bottom!” and “the worst is behind us!”

Josh,

I have a question for you.

Under what market conditions, if any, would you consider it a bad time to buy?

No scarcasm intended here, Josh. I am genuinely curious.

Thanks.

I for one strongly believe in the huge appreciation potential for the Somersett community. Yes, it has suffered from the bubble when investors from the Bay Area flocked in to get a piece of Reno - but those who can hold on to the property for the next 7-10 years are going to make a very very nice profit.

Just IMHO.

Well then Kate 5000, there are foreclosures and short sales all over Somersett. Maybe you ought to go buy 3 or 4.