Sales slowed
in September, most notably in the over $500,000 range, with overall activity off
39% from the year prior. Meanwhile, the median price slipped to $275,000. Months
supply of inventory in the $500K-$1 million range is now approaching three
years, with five years supply in the $1-2 million range and an infinite supply
of homes over $2 million. Honestly it’s a pretty dramatic slowdown… Perhaps
the day of reckoning for our luxury market in Reno Sparks has finally come. full report
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76 comments
Diane, the day of reckoning may be here but sellers by-and-large still don’t get it.
Consider the following post on craigslist [PostingID: 436290688]: “this house will be on the market soon, but I must rent this five bedroom, three bath house [with]…views of Reno and Mt.Rose, 2 1/2 acres in country…until the market picks up. [So] I would like to rent it month-to-month” for $2,400/month.
Sellers of high end properties like this one still aren’t prepared to sell at whatever the market dictates - they’re not bona fide sellers. Instead, they think they’re capable of waiting out the market.
But they’d better be very well healed so they can survive the negative cash flow hit. No one’s going to pay $2,400/month for a month-to-month rental; they don’t want to be displaced because their landlord opts to sell. So will this seller be able to last six months? Maybe. What about twelve? Perhaps. But let’s see how long he/she is willing to wait it out after 1-1/2 to 2 years of big time negatives. That’s when things are going get very interesting and it helps explain why a market turnaround has a long, long way to go!
But maybe I’m being too hard on this seller? After all, his home is still worth $30K more than in 2003.
About a month or so ago I posted that our inventory was approximating THREE YEARS in significant market segments. I pointed out that the national media continues to cite the Florida markets as perhaps the worst in the country because there is, well, THREE YEARS of inventory in most Florida markets. If Reno had anything resembling an objective media, one not totally beholden to the local REIC, Reno would be getting the same press as Florida. But objective reporting is simply beyond the pale for the RGJ.
As far as the “day of reckoning” being at hand, well, not yet. There is still way to much Kool-Aid being consumed. One need not look too far for examples, such as the local “historical” Kool-Aid farm on Mayberry, now some 300 days on the market and still listed for at least twice what it is worth by any non-delusional valuation, and, of course, the $800K barn. No days of reckoning yet.
So there were a whopping 269 sales in september. When was the last time we had fewer than 269 sales. My guess would be in the year 2001. Dark times are ahead for the sellers who bought in 2004-2006 and need to sell(aka cant afford the payments) We will still see the wishful thinkers drinking the “kool-aid” on their overpriced houses that they will have to sit on for years to come. P.S.- I am a renter waiting out the market enjoying my newer 3br-2ba w/ 3 car garage in a very nice sparks vista neighborhood for around $1000 a month.
5 years of inventory in the over $1 million range?
5 years?
5 YEARS?
At what point does a so-called
“market” not even exist anymore? When we get to an “infinite” inventory like we have in the $2 million range?
Is it starting to become apparent that Reno-Sparks isn’t a $1 million market in any appreciable sense? Oh sure, a few extraordinary houses here are worth that, but the hundreds that are on the MLS? It seems if we take away the cheap easy Voodoo money, handed out to people willing to lie through their teeth, we don’t have all that many people here able to make the nut on a $1 million plus house. Now who was it here that suggested a couple of weeks ago that hordes of Californians were going to snap up all our high end houses?? It appears that all those Californians must have lost their way. 5 freaking years!
I’m not sure there is any housing market in the United States that has 5 years of inventory in any market segment, including Florida. But perhaps I am uninformed. Does anybody know of any market in America, anywhere, where there is 5 years of inventory? That is worse, I believe, than LV, or Phoenix, or the San Diego condo market, or Florida. This market, or at least this segment of the market, is truly one of the worst in the country. Maybe, after all, it IS different here. Different in that it’s far worse than most places.
Well Diane, as I look at the slide show of your listings, I see that they are all well over $ 1 million. Except, of course, the $800,000 barn. I see that out of 254 houses listed between $1 million and $2 million, four (4) of them sold last month. That’s actually 5.3 years of inventory.
I’m sure that it must be more fun representing buyers these days. But I see that in the entire $ 1 million and over price category, there were only 4 of them last month.
I see that the over $2 million range went 0 for 75 last month. What would you say the chances are that we might see an 0 for month in the $1 million-$2 million range sometime this winter?
“Now who was it here that suggested a couple of weeks ago that hordes of Californians were going to snap up all our high end houses??”
I believe the comment (inaccurately quoted) was that a number of Californians would be heading your way, although not a huge number and certainly not hordes. That limited migration will indeed happen, for I know families who are looking, so there must be others not known to me who are also looking. But they are people with options and you might call them picky buyers, who are also looking at places like Sedona, Arizona. You definitely will get a share of that segment of relocating Californians in your area over the next year or two. As to the comment that those parties won’t be able to sell their houses, thus cannot move–I have news for that comment-writer: they don’t have to sell. These are people who can let their adult kids live in the old family home for a couple years, it isn’t necessary to sell to relocate. Most will do something like that rather than renting the family home, in order to avoid loss of family residence classification for gain exclusion purposes. Tax costs of loss of gain exclusion would exceed the rental income by far. Once converted to rental property, and reported that way, claiming depreciation, reporting rental income, etc, the ability to exclude gain on disposition of the house as a qualified personal residence becomes problematic.
Some of the comments I have read here are highly focused upon middle class economic limitations, and statistically that is probably justified. But to do so to the extent of excluding from consideration all other scenarios is adopting a tunnel vision type of analysis.
The higher-end properties still seem to be over-valued, but once that starts to correct, perhaps by summer of next year, I think you will see some sales activity in that layer, attributable to relocating California retirees. Will it be substantial enough to measurably affect the market? Maybe not, but over time the presence of these people in the community will slowly change the demographics and purchasing habits of such communities. Those are good things, though, which add demand for nice amenities to a community.
Nobody knows what will happen, all of us have estimates and opinions. Lets try to share ideas here without some of the discourtesy I have read in a few of the comments posted on this blogsite.
Totally unrelated: But I hope you weather this storm Diane. I know it must be hard to keep your head up these days, but you’re hard work and tenacity will pay off. Just my 2 cents.
Yikes! I depend too much on spell check…which “wouldn’t've” caught my misuse of the contraction “you’re”
Remember we had a discussion a couple of weeks ago about the disparity [in Reno] in the cost to rent versus own? The criticism was that some of us were pointing to lower priced trash rentals which didn’t accurately reflect apple-to-apple comparison.
Well now Sean tells us: “I am a renter waiting out the market enjoying my newer 3br-2ba w/3 car garage in a very nice Sparks Vista neighborhood for around $1000 a month.”
I don’t know what the [bloated] asking price would be for Sean’s house if it were currently for sale, but I’m guessing that if it’s as nice as he represents [and I have every reason to believe it is], we’re probably looking at something in excess of the current $275K median price.
So there you go; another real world example of fair market rent being roughly half the cost to own [and the percentage drops as the value of the home increases].
smarten, you are making me laugh. Of course, not all rentals are rough around the edges but a lot of them are. Houses that are new rentals will look good at first but as the years go by fair wear and tear will show up. It’s a lot of work to maintain a house and most renters don’t care since they don’t own the property.
The house that Sean rents sounds a lot like the house on Moondust that RI thought could be bought for $238k. Frankly, I don’t care that most sellers have their heads up their rectums. The REO sellers will wheel and deal, and with the house vacancy rate about 40% a lot of wheeling and dealing will be going on.
I far as I can tell, you have not refuted my analysis that renting a house for $1000 is basically the same as buying the same house today for $238k, except the buyers gets all the joys and sorrows of fee simple ownership whereas the renters ends up with a paper sack full of cancelled checks.
Sure, Tom, sure, all your rich California retiree friends are just waiting to invade Reno once the housing prices crash. I just hope that they don’t all show up at the same time and start bidding up prices again.
Talking about Sean’s house, I wonder why the housedebtor is renting the place?? I also wonder how many renters in Reno will wake up one morning and find the Sheriff knocking at the front door telling them have they have 30 minutes to get out of the house because it’s been foreclosed? Might be tough getting back that month’s rent not to mention the security deposit.
I wonder why the banks don’t rent out their REOs.
When i started renting this spring the value was probably around 300k. They would be hard pressed to get 250k. The house was built in 97 and didnt become a rental until 2 years ago. It is in excellent condition with very nice landscaping and upkeep. I cannot say that about 99% of the other houses we looked at for rent. One down the street was only 3 years old but so run down and disgusting it was unbelievable. The same model home we are in sold for $355k last fall. They would be lucky to get 250k. I believe it was a flipper/investor too as it is a rental now. So they bought it for $355k and say at most are getting $1200 a month. Depending on thier loan they are way upside down. Anyone have any data on when the last time the reno/sparks area saw less than 269 sales in a month?
Regarding move 2 reno’s comment on being evicted. Several rentals we looked at before we chose ours i wouldnt be suprised if that happened in the next year. I have no worries about that. Our rental is managed by a property management company in sparks and the owner of the house owns several rentals(i believe 6 or 7) and he bought this rental for around $150k in 2000 or 2001 so i’m sure the $1000 is covering his mortgage if he even has one on it
I too rent in an area that sounds very similar to Sean’s. Established Sparks Vista area. My rent is $1200 for a beautiful well-kept home (that I intend to keep that way) that’s Zillow value is almost back to what it last sold for in 2004. In fact, if we were to have bought, which we could have, it would have been in this exact neighborhood, but there’s no way my payment would have been anywhere close to what my rent is. I, like Sean, looked at several homes that were absolutely trashed that I wouldn’t have touched with a 10 foot pole. It’s amazing how many people have the mentality of “it’s just a rental” and don’t really care what it’s condition is lik. People trying to rent their homes need to wake up and realize that just like when buying, people have choices. The best part of this market when looking for rentals is how picky one can be with not only the house, but the price as well. And also like Sean, I have no worries about being evicted. Sounds like Sean and I might be neighbors.
So there you go MTR. FMV [at least asking pricewise] is about $300K according to Sean. This represents a 15.5% loss in value in about a year’s time and according to Sean, if a comparable seller were realistic, the price would have to be $250K [which would then represent a 28% loss in value in the same one year period of time]. And even then with a further loss in value on the horizon, you think it makes more sense [financially wise] to own versus rent?
And I never said renting “a house for $1000[/month] is basically the same as buying the same house today for $238K.” Actually, it’s a far better deal renting - especially in today’s depressed market.
Besides, the initial discussion arose out of the comment that there were supposedly all of these well healed California seniors who would be retiring within the next two years and who would be relocating to Reno. Thus they would create additional demand which would prop up the $1M or more SFR market located along the Mt. Rose Highway corridor.
But these kinds of seniors aren’t interested in purchasing $238K cracker box homes. Rather, they’d much rather use their $1M or more nest egg as a result of former housing equity moving “up[scale]” to Reno.
So with this more realistic premise in mind, let’s take a look at another real world type of rental this relocatee might really be interested in. Again on craigslist [PostingID: 432119430], an “extraordinary [and]…stunning…Montreux home [at 6420 Zermatt Ct.] with 2 master suites, stone and wood floors, 2 fireplaces, gourmet kitchen with granite counters and sub-zero refrigerator, fireplace, coffee bar, jetted tub and steam shower in [the] upstairs master suite” with an asking rent of $3,500/month. As with the previous Montreux rental I spoke of on this blog [one in the Renaissance subdivision], I believe fair market rent is actually closer to $3K/month.
Now although I haven’t seen this particular property, I expect it would have a sales asking price of $1.75M-$2M because it is located in the more established portion of Montreux on a cul-de-sac. So you tell me MTR, “is…a [Montreux] house for $3000[/month]…basically the same as buying the same house today for” $1.75M-$2M? Or do you think one of those more healed retirees relocating to Reno with $1M or more in the bank from the sale of his/her/their previous California residence would opt to rent instead of purchase in Montreux[remember, 5.5% on $1M = $4,583/month]?
Hi Diane ~
Here’s the latest from Boise:
Just ran September stats for http://www.BoiseBlog.com (visit blog for detailed stats) and we closed 402 sales for all of Ada County in September.
That’s -45.5% closed units Y-O-Y.
Our median stands @ $225k now.
We have just under 5,000 homes (excluding condos and townhomes) for sale in the county now.
Prices are steadily coming down, but most resale sellers still don’t get it.
Most of the homes on the market are overpriced and not in good showing condition.
The ones selling are the ones that are “no apology” condition and priced aggressively.
They usually sell with seller-paid closing costs or other concessions.
It is common to see buyer agent incentives too.
It’s “well heeled,” not “well healed.” Sorry–I was able to ignore it the first time but not the second time.
Smarten, that Montreux home you mentioned with an asking rent of $3,500/month, and which you believe at a fair market rent is actually closer to $3K/month, is something of interest– thanks for pointing it out. It is good to know there are choices like that available.
That sounds like where we would want to rent while house shopping or waiting for a house to be built! That isn’t an exhorbitant rent at all, and interest income on sales proceeds of the house being sold would exceed that rental rate, even after taxes. That is a very nice area.
I agree that the people I referred to previously would probably not be candidates for houses in the Sparks area or even the Meadows area, for that matter. The Meadows area is so handy to everything, I wish that the builders wouldn’t jam things in so densely down there. It seems that all of the new houses in the Meadows area are too close together. But that’s just my reaction; after all, I have been working in jam-packed Los Angeles for forty years, and I am looking for some elbow room!
July 2005: $345K
August 2007: $275K
Even without accounting for inflation, that’s a whopping 20% drop - TWENTY PERCENT! - in the median price.
The good news is we’re halfway to the bottom. Just another 20% more to go.
Tom, how big are the lots in the Meadows area?
September in Somersett w/o Sierra Canyon
- SFR Foreclosures - 2
- SFR Resales - 1
- SFR New Construction Sales - 3
- Attached Sales (Village / Vue) - 0
Assessor’s figures are still dribbing in as usual, but you get the picture. Foreclosures outpacing resales. For the market in general this month, it looks like 1 foreclosure for every 4 or so resales. I’ll post a graph later this month once the sales figures are locked in, but the trend lines are pointing to resales = foreclosures 4-5 months out.
“Reno is a hidden germ in Northern Nevada.”
Say hello to another RATE-CUT come october 31st.. Likely a 1/4 point, but I wouldn’t be surprised for another 1/2 point cut.
Jason, I think that most people agree that these rate cuts are not going to help the real estate market very much. The problem is that many people bought houses they could not afford. That means that home prices have to retreat before the patient gets better. These rate cuts are for short term borrowing, so 30 year mortgages might actually go up.
RE: “Jason, I think that most people agree that these rate cuts are not going to help the real estate market very much.”
The last one, even as large as it was, didn’t help at all. Go look at bankrate.com … fixed rates went up after the cut.
Some finance professionals are claiming that the last rate cut scared away some investors who are now becoming worried about the dollar’s value on the international currency market.
I don’t know if that analysis is accurate, but if it is, then another rate cut might actually drive mortgage rates higher.
I completely agree with you that prices must continue to fall. That’s the only healthy way to revive this market.
Question re: rents in Reno area.
How would you determine if a SFR rental is fair priced? Is there a formula, per square foot? Whatever the market will pay? THANKS
I find this discussion of what the rich Californians moving to Nevada are looking for most fascinating.
First: the Californians I know who moved to Reno are not super wealthy. They are upper middle class/lower upper class working folks who were licensed professionals/owned their own business and got the money to relocate by selling their primary California home to large $. They moved to Reno, bought a smaller house and invested the balance.
Second, I also find it ludicrous to believe that a California family, having raised their children and slowing down are now going to buy an even bigger/more upscale house than they one they had. Again, based on my personal knowledge, most of the retired or near retired Californians I know who are relocating to Reno, are scaling down. They want a small house, a smaller yard, less maintenance.
Think about it for a minute. You are retired. What sort of asset/income base does it take to support a $2 million house? Thirty years ago, I was told that any house by the time you calculate expenses, lost income, etc, a house will cost you between .75 - 1.50% of its purchase per month. You got to crunch the numbers. Even though I make more money from my investments than I do from working, I know the minute I retire that I will lose a percentage of my income flow. That difference has to be made up somewhere. The easiest way is to cut expenses by getting a small house.
Just be glad you are not trying to sell a condo in Reno. There are currently 114 condos in Reno on the MLS listed at $300K or higher. 1 has an offer. It’s a Fleur di Lis that is showing “pending-house” so even that one is shaky. It does appear that the Palladio has put in another round of price reductions on some of the units.
To stjoe, this discussion about rich California retirees salivatng at Reno’s cheap prices is a charade. It is the Reno Realty Blog’s modern day equivalent of the medeival contemplation of how many angels can dance on the head of a pin. One needs only to review the numbers, contained in Diane’s report, to observe that there are NO rich California retirees, or Oklahoma retirees, or Serbian retirees, coming here and snapping up all of Reno’s upper end properties. Rather, as Diane reports, Reno’s upper end is dying on the vine, with price reductions far exceeding sales.
Annie, I don’t know of any set standard for pricing rental property. The best way to understand the rental market in Reno is by “comparative market analysis” which is real esate talk for visiting scores of rental properties. If you see enough of them you will get a good feel for knowing when a rental is over or under-priced.
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I enjoyed reading a recent post on this site. One of our commentators has posted that:
“I also find it ludicrous to believe that a California family, having raised their children and slowing down are now going to buy an even bigger/more upscale house than they one they had.”
This assumes facts not in evidence, that the hypothetical family I have mentioned is (a) slowing down and (b)is looking for something larger and more upscale than what they had in California.
First, there is in certain cases, no ability to slow down, although in my case, that sometimes sounds pretty good. Unfortunately, clients of many years won’t stand for it, and I have been sent back and forth to Reno in a Nevada client’s Citation directly to/from Van Nuys airport as a convenience, and probably will continue to do so. If not, I may earn some Southwest frequent flyer miles to come home to Reno/Tahoe on the weekends. There are a few others known to me who will remain professionally active through short commute travel plus fax/electronic file transmission. Your airport is handy and has frequent connections to Los Angeles, which helps.
Secondly, if we move to a 4,400 ft house in the Mount Rose corridor area, we will be scaling down. Any more than that and I will have a domestic revolt and an antiques auction to contend with(!)in such a move. There is only so much downsizing possible.
I also do not believe that it necessarily costs one to one a one-half percent per month of purchase price for upkeep. With no mortgage and no pool service, just your simple Nevada style mountain landscaping to take care of plus insurance and property taxes, it should not come to 18% of purchase per year to live there. Besides, the Los Angeles expenses will be gone, so those are “swapped” for budgeting purposes. We have discussed property taxes on this blog previously.
I guess I just disagree with the notion that in no way will you find California senior professionals heading your way. There are people known to me who are considering this, despite what the statistics might say.
I have as an example, a practice colleague who built a large house on 2 acres in Scottsdale, and commutes to Los Angeles for hearings.
You are probably correct that the number will not be large statistically speaking.
Tom:
The reason a house costs between .75% and 1.5% a month is because of LOST INCOME.
I have always paid cash for my houses. For example, if I had $2 million to invest, I could invest it in a bond mutual fund at 5% a year. The Fund would generate approximately $100,000 in income. Conversely if I bought a $2 million house, I will not have the $2 million to invest and I would NOT earn the income. This loss of income represents .5% of the purchase price per month.
Conversely, if I bought a small house for $500K and invested the remaining $1.5 million in the same fund, it would generate $75K in year income. Throw in all the other costs of owning a home including property taxes, insurance, heating and cooling (the bigger the house, the bigger the utility bills), snow shoveling (you may not have pool care but if you live up in the mountains, you need to take care of snow), and the like and your total monthly costs including lost income can easily equal .75 to 1.5% a month. I know this because I have run the numbers.
Further if a senior California professional buys a house in Nevada but continues to work out of California, that income is still subject to California income taxes.
stjoe
Stjoe,
Thanks for the response, you make some good points. For example, I am well aware of the opportunity cost factor. But that is not truly a measurable factor when speaking of a residence, since the same opportunity cost existed on the prior house. What should we do, move into a double-wide modular home half-way to Battle Mountain just to be able to put the balance into the Fidelity International Fund and earn their current big boasted rate of return? We all have to live somewhere, and of course there is an opportunity cost to owning a home, but that is only a truism of life.
As to allocation of income for California tax purposes, that is correct if you are a California-based salaried executive or other person locked into California-source income. But trust me on this, my firm has litigated allocation of income among states and won. If you have domonstrable Clark and Washoe County fee income, and the services are done by you (not your partners or paralegals) outside of California, your California non-resident income tax return should not pick up that income as taxable.
I acknowledge the snow removal expense as a legitimate counter-point. I will be at the bar at Harvey’s with a glass of chardonnay in my hand when the snow removal guy comes, and I will toast him for his services.
We are looking forward to the clean air, wide spaces between houses, the friendly people we have met up there, all have been very nice, and the area feels safe to us. I can fish streams and lakes within 45 minutes. Try that in Los Angeles! Your Reno airport has frequent L.A. service connections. But here is the clincher: Things like this — Diana Ross coming to Reno next month, and James
“Steam Roller Blues” Taylor also. Plus Artie at Harrah’s at the Lake…who let me sing the Temptations songs with him last summer. Now am I in heaven or what? We don’t have those things in Los Angeles any more. Our local live music venues are largely playing salsa or rap now. Not to be politically incorrect, but that is the truth of the matter–our area is changing, and your area is attractive.
Thanks for your response, to all.
We have a trial starting so I will be absent from the blog for a while…have enjoyed the input especially from the real estate professional folks.
stjoe,
You profiled me almost exactly. I ran an architectural office in SF for almost 20 years, sold my primary residence at an obscene profit, downsized economically if not size wise, cut corporate ties to CA as quick as I could to end the tax drain. Most of the profits are in other investments. I used to day trip to SF on Southwest, but these days I call it in or drive over the hill. My clients generally only let me have access to the Gulfstream for trips east due to ATC delays (true, but irony intended).
Are some of Tom’s cake-eaters going to venture over the hill to Montreux? Sure. As he’s stated, they are statistically insignificant. What is it with the upper crust that thinks Montreux has some sort of cache’, when the local plebes look down on it with ultimate distain? It is gated because we don’t want them let out!
But there is a lot of middle money that finds Reno attractive. Don’t look for the California invasion today, tomorrow, or next month. No buyers back home, and Reno’s prices aren’t realistic yet. But over time, I think you will see some of the Califonia transplants filling in the mid to upper-mid market here.
Over the last several decades San Francisco Bay Area housing has experienced massive appreciation in value. Some of the reasons are:
Restrictive zoning [unlike Reno] which protects large portions of open space from development.
The steady influx of people from all over the world which has now made San Jose the 10th largest city in the United States.
[Unlike Reno], very little undeveloped infill.
The dot.com boom which has created a lot of wealth concentrated in a small geographical area in a relatively short period of time.
As housing prices have increased rapidly in the Bay Area, by-and-large the rest of the country has lagged behind. When the differences in housing prices became so dramatic, it was almost as if the rest of the country [including Reno] woke up and began to play catch up. This catch up in part describes the rapid run up in Reno housing prices.
During this lag time, Bay Area residents who couldn’t afford to buy Bay Area real estate and felt they were being left behind, looked to distant geographical areas where they could become homeowners yet maintain their “connection” with the Bay Area [by (tele)commuting]. This explains why Bay Area expatriates migrated to places like Gilroy, the Central [San Joaquin] Valley, Sacramento, Roseville, Rocklin AND yes, Reno [it also explains to a lesser extent why some migrated to Southern California (because for several years while the Bay Area was booming, Southern California was in a recession)]. As these “expatriates” ventured away from home [just like Diane BTW], they created demand for local housing which created shortages and fueled price spirals [starting in 2000] in ALL of the non-Bay Areas I’ve identified.
I will never forget having a conversation with the former mayor of Saratoga; Victor Monia [maybe some of you know Vic?]. Five or more years ago Vic told me I’ve got to move to Reno. The cost of housing is 25% of the comparable cost in Saratoga! Well Vic was so impressed, he moved his company [no inventory tax, no state income tax and lower workers’ compensation premiums had something to do with his decision as well]; sold his home; and used the proceeds to purchase very high end Reno real estate [Vic also offered incentives for his employees to move with him, and many did].
Vic wasn’t the only one who saw the disparity in home pricing between the Bay Area and Reno and as a result, Reno became one of the fastest growing areas in the country! Reno wasn’t able to satisfy the sudden insatiable demand for new housing. And many Bay Area expatriates had money. So prices increased rapidly and massive [over] building didn’t take long to follow.
As prices increased, the disparity in pricing Vic was able to take advantage of began to diminish. Then with massive increases in the prices of oil products; roadways that connect Sacramento and the Bay Area becoming parking lots [ala Los Angeles]; and, an uptick in the economy which particularly benefited the Bay Area [Google, Yahoo, Apple, Cisco, eBay, etc.]; people who had left the Bay Area [primarily because of the cost of housing] began to return.
With the sudden drop in demand for San Joaquin Valley, Sacramento, Roseville, Rocklin and Reno housing, prices began to drop - and by very large amounts. And because these these places were unable to draw expatriates from other geographical areas to replace them, real estate prices continued [and will continue] to drop until the equation again changes.
So that leaves the baby boomer California retiree who has owned his/her home California home for 20 or more years; probably has $700K or more equity built up which he’s/she’s going to realize essentially tax free; and, who’s looking to upgrade his/her quality of life on lower fixed [retirement/social security] income.
With all due respect, this class of potential expatriate isn’t looking to retire to a $250K 2BD. Sierra Canyon patio home. He’s/she’s looking to take $500K or so of his/her housing equity [just like Tom and his friends] and parlay it [as did Vic Monia] into something that would cost $1.5M-$2M in the Bay [or Los Angeles] Area.
The problem is we can’t do that anymore because the sellers of high end Reno real estate have priced us out of the market [although we may be able to afford it, we’re not willing to pay the price]. That’s why I say that until a $1.4M St. James Village [or Montreux or Galena Forest] home drops in price to $750K or so, you’re not going to see a massive influx of California retirees eager to prop up a depressed Reno real estate market. However if upper end Reno real estate drops in price to the levels I suggest, rest assured you will see an influx of Californians [just ask DaveinLos Gatos, STJOE, MTR and Tom].
So does this mean California retirees with the kind of equity I’ve suggested won’t migrate to Reno within the next several years? Not at all. You’ve already seen there are quite a few contributors to this blog who are sitting on the sidelines and watching as RENTERS [me included] rather than owners. Because of the over supply of quality housing [much of it new] and [contrary to Mr. Murray] the depressed rental market, one can upgrade his/her housing environment living in Reno for a fraction of the cost to own, and an even lower fraction of the cost to own in California.
Until this disparity lessens [meaning housing prices drop], we renters will remain renters [and watchers]. And as I’ve said before, I think we’re talking years rather than months.
There’s no quarrel here that the Reno-Tahoe Area has a lot to offer [just listen to Tom]. However, it offers just as much to the renter versus owner. When Vic Monia moved to Reno it also offered cheap housing! Until that again becomes the case, I don’t think you’re going to see a massive influx of Californians prepared to prop up [as homeowners] Reno’s overpriced and depressed residential real estate market.
“Reno wasn’t able to satisfy the sudden insatiable demand for new housing”.
Surely, Smarten, you don’t suggest that all the houses built in Reno-Sparks over the past 6 years were purchased by people who intended to actually live in them, do you?
If the statement was that Reno wasn’t able to satisfy the sudden insatiable demand for new houses by flippers with Voodoo loans that never intended to live in them, it would be a lot closer to reality.
Almost 40% of the MLS inventory in Reno-Sparks is vacant. Guy posted on this topic a couple months ago. How does 40% of the inventory get to be vacant? Is it because the owners of 40% of Reno’s houses all left town and went back to California? Hardly. Most of these houses were never occupied in the first place. The remainder are vacant because the owners bought another house before they sold the first one. But those folks are not new residents. Many of these 1000s of vacant houses are now becoming the rentals you so accurately talk about.
There never was the demand for all the houses built in Reno between 2002 and 2005. Not as homes for people to actually, you know, live in. Remember three years ago when the WCSD grossly overestimated the number of new incoming students? Because it made the silly mistake of assuming that all the new houses being bought in Reno-Sparks were actually going to be occupied by the people buying them. How quaint a notion that was. It was a phony demand that will take years and years to work through. And as the developers continue to roll out new product, it will take all the longer.
RI -
I didn’t mean to suggest that the ONLY reason for the sudden demand in Reno real estate was California transplants. But if so many Californians had not relocated to Reno and become homeowners; and if the disparity in pricing between the Bay Area and Reno were not as great as it was in 1999-2000 [before the dot.com melt down]; you would not have seen the run up in pricing, and the massive over development that we see today.
Sure flippers, real estate investor wannabes and renters who should have never have become homeowners followed suit and have contributed to what we see today. However I believe the beginning of the problem was the influx of Californians priced out of their local real estate market who were able to become homeowners in Reno simply because it cost less to own than to rent [in fact, I personally lost two sets of Silicon Valley renters specifically because of this disparity].
And really, whether I’m right or wrong, the real import of this thread is when and if ever, will Californians [or California retirees] start buying upscale Reno housing which is basically a dead segment of the market? I think we both agree not until prices drop dramatically.
BTW, I don’t recall Guy posting that 40% of ALL MLS listings are vacant. I do recall something along the lines of 40% of all Sierra Canyon at Somersett listings being vacant. But certainly not 40% of ALL 5,000 plus MLS listings. Please correct me if I’m wrong Guy.
Here’s an interesting link relevant to this thread http://patrick.net/housing/crash.html
“That’s why I say that until a $1.4M St. James Village [or Montreux or Galena Forest] home drops in price to $750K or so”
Smarten - your comment above caught my attention. I have been stalking Montreux for the past year or so and am from CA looking to move to Galena. There are several classes of homes in Montreux ranging from 3.5 mil to 999k. The newest homes called Renaissance are simply over priced track homes with inflated prices because they are in Montreux. They start at 1.5 and go down to 999k for a brand new home. Then there is another class of homes such as Stonehaven, the Chalets, and Cottages. These homes start at 1.5 mil for over 4000sq ft. and head north to 3.5. mil. This is the type of home I am interested in because its not just an overpriced track home in the middle of a treeless part of Montreux. Are you suggesting that an over 4000 sq foot home currently listed at 1.5 and up in Montreux will eventually be on the market for 750K. or are you referring to the much lower quality homes currently available in Montreux such as Rennaissance. I would appreciate your input because I can tell that you know a lot about Reno real estate and we want to get the best deal we can in Montreux.
Well there you go. John’s another blogger sitting on the sidelines [probably from California] watching and waiting. He like others who have chimed in on this blog is looking to move to Reno. But John’s not interested in Somersett, Spanish Springs, Double Diamond nor Sparks Vista. As I’ve suggested, he’s looking to upgrade his current housing standard of living.
John’s not willing to pull the trigger simply because of the name “Montreux.” I think what John is saying is if he wanted to spend $3M for a home, he could stay where he is! Instead, John is telling us he’s waiting for prices to drop; and by hundreds and hundreds of thousands of dollars [if I’m wrong John, please correct me].
John knows a lot more about Montreux than I. He has surveyed Reno’s various neighborhoods and decided to concentrate on Montreux. John knows that Montreux [like much of the upscale housing in Reno] is grossly overpriced. In a previous post I quoted last month’s Montreux newsletter which proclaimed that notwithstanding the bad press Reno residential real estate has been receiving in recent months, sales are up [compared to last year] and “right on track.” Yet Diane tells us there have been ZERO $1M plus sales [and that includes Montreux] the past month. And I expect that number is going to remain constant for the next 4-5 [traditionally slow] months.
Montreux developers and agents [like many Reno sellers] are in denial. They think Montreux is different and special compared to anyplace else. It doesn’t matter to them what’s going on around their gates because of whatever.
Traditionally there has been a disparity in pricing between Montreux and let’s say St. James Village, Arrowcreek, etc. So as prices drop in these other communities [as they must], they must drop in Montreux. If they don’t, no one will ever purchase [but for existing homeowners looking to “move up” who’ve already bought into the hype] because the “premium” is just too great.
John asks whether my comments are suggesting that an over 4000 sq foot Montreux home currently listed at $1.5M and up will eventually be on the market for $750K? No, I was referring to the much lower quality homes currently available in Montreux such as Renaissance; sorry. But when Renaissance prices drop from $1.295M to $750K or so, Stonehaven prices will drop from $3.5M to maybe $2.25M or so [actually, isn’t this the segment of the high end market Diane states is already doa so they won’t sell at any price?].
John states, “we want to get the best deal we can in Montreux.” Well in my opinion, here’s the best deal: 6420 Zermatt Court - the Cottages. You do what I suggested Tom do: rent [http://reno.craigslist.org/apa/432119430.html instead of own. Instead of putting hundreds of thousands of dollars down and paying double digit monthly mortgage, tax and homeowner association payments, you rent for $3,500/month [or better yet, offer $3K/month because there’s virtually nothing else offered for rent in greater Reno (but for two exceptions) in excess of $3K/month]. You negotiate an option to purchase exerciseable anytime within the next two [or preferably three] years. You don’t set an option price now but rather, agree upon a mechanism that determines that price sometime in the future based upon THEN fmv [which we know IS going to be lower than it is today].
Now you’ve got the best of both worlds. You’re living in the community you want to live in. You’re paying far less to live where you want to live than you’d be paying if you were an owner. If prices drop, you’ve already negotiated the lower price. If prices rise, you can either walk away or pull the trigger because you already have secured a committed seller.
Had I not already found my “Montreux” [which as I’ve stated really isn’t located in Montreux], I’d be doing exactly what I suggest you do. And if you want someone to assist you in this endeavor [for a fee or piece of the action of course], assuming it’s not Diane nor Guy, ask Diane for my e-mail address.
When you’re successful, I hope you’ll invite all of us to your open house so we can all sit around the BBQ and share the benefits of being a Reno renter versus owner. Good luck and please keep us informed of your successes!
I searched and found info from the Census bureau last night that stated that the number of Californians outmigrating during 2000-2004 has slowed down by less than half of the outmigration from 1995-2000.
I wonder why that is…
At any rate, that affects Reno very much as the highest percentage of outmigrators 1995-2000 went to Nevada.
I’m still planning on moving out in about a year - and if the housing market continues to be in decline at that time I will rent temporarily or maybe buy a small new condo that can become a rental when the market gets well again and I buy a SFR.
John posts:
“Are you suggesting that an over 4000 sq foot home currently listed at 1.5 and up in Montreux will eventually be on the market for 750K.”
Smarten posts:
“No, I was referring to the much lower quality homes currently available in Montreux such as Renaissance; sorry.”
I’d like to respectfully disagree with Smarten on this, John. Why? An ebbing tide lowers ALL boats. While some neighborhoods may hold up a tad better than others, when the bubble priced $350k stucco sh!tbox in Spanish Springs is back to selling for $175k, your $3.5m Montreux dream home will be selling for $1.75m. Bet on it.
I would like to respectfully disagree with Bantering Bear. I have many friends that live in spanish springs, as well as redhawk in wingfield springs. I wouldn’t classify 90% of those homes as Sh*tboxes as you put. I think the area is somewhat desirable when compared to the rest of reno. Furthermore I dont think you will see homes selling for 175k in spanish springs or wingfield EVER!
“Furthermore I dont think you will see homes selling for 175k in spanish springs or wingfield EVER!”
The above statement is a sure sign this market has a long way to go before we reach bottom. When the NASDAQ was at 5,000 how many at the time thought it would drop to 1,200? Yes, we can compare this to real estate because they were both major bubbles and through out history, every bubble has ended with prices falling far below fair value. Why would this time be any different?
I agree with Jason on this one. I think that $175k would only be reached if the USA went to a huge Depression. Probably the low will be around $230k to $240k.
While we all talk about rich retirees from California, I suspect that there are plenty of poor retirees from California who would be quite happy to live in a $240k stucco sh!tbox in Spanish Springs. The fact that they are renting for $1000 a month helps put a floor on the down cycle.
You guys are funny. You don’t think prices in Spanish Springs will ever reach $175 unless we go into a depression? In late 2003, I was looking at homes in Spanish Springs for $169,000, NEW homes. We werent in a depression then. You people are forgetting that home values ’supposedly’ nearly doubled in only 3 to 4 years. I’ll say it again and again…there’s something seriously wrong with prices when in 1988 my home was worth $89,000, and then in 2003 14 years later it was worth $147,500, and then in 2006 it is supposedly worth $255,000? Riiiight sure. Show me another time in real estate history in Reno where home values rose that dramatically that quickly. Also, people’s wages strangely didn’t rise 40% as home prices did. Imagine that! Until prices come down enough for regular Joe Schmoe to afford a starter home, the housing market will be screwed…because guess what was fuelling the rush between 2003 and 2006? First time home buyers getting loans they shouldn’t have because home prices sudenly inflated! And how much is selling in the 350K+ range now? oh that’s right hardly anything. Maybe it won’t go down to $175,000 but by the time this mess is over, you’ll be able to buy a starter home in Spanish Springs for under $210,000K. Otherwise, the market will NEVER pick back up and will have permanently lost a buyer’s market…because in 2003 Joe Schmoe could afford to buy a new home for $169,000. Now Joe Schmoe can’t qualify for or afford that same $280,000 home today…why? Because his wages didn’t increase with the price of homes.
I am doing an ongoing exercise, where I find interesting homes on Realtor.com, then look up their “last-sold” price on Zillow. I am baffled by house after house after house where the “for sale” price is double or more what the owner paid under 5 years ago. Why??? What is the mentality at work here? Don’t people know the current market conditions? It’s mind-boggling, but also frustrating as heck. (Rhetorical questioning, more venting I guess.)
Hi People,
I rarely post, but all of the speculation on what people can “afford” has me thinking. So let’s take me as an example.
1st time homebuyer
NO credit card debt
205K a year income
100K in assets
660$ per month in auto payments
I imagine everyone will have different guesses here, but you “qualify” me for a loan by stating a loan amount, down payment, 1st or second combo, purchase price, and I’ll tell you all what happened in July and what I bought after we guess.
Anonymous Southwest Owner.
Mike Van H [and others] have written that: “until prices come down enough for regular Joe Schmoe to afford a starter home, the [Reno] housing market will be screwed.”
I have to respectfully disagree.
Again I refer to the San Francisco Bay Area where less than 10% of the population can afford to purchase a median priced home. Yet look at what’s happened to prices.
If rich California [or for that matter Chinese, Indian, etc.] retirees [or others] migrate to Reno; and they can afford [and are willing to purchase] a starter home or greater; what difference does it make that Reno resident Joe Schmoe cannot?
And that’s the real problem [IMO]. Whereas 5 years ago there was a steady stream of relocatees who could afford a Reno starter home [and were willing to become homeowners], that’s no longer the case.
When this stream returns [for whatever the reasons], I believe the equation will change regardless of what Joe Schmoe can afford.
Speaking of the impact of Californians on Reno real estate (and the security of people renting from amateur investors)–if you read to the end of this article you will see that another Reno home will be coming onto the market soon. http://origin.insidebayarea.com/trivalleyherald/localnews/ci_7070300
Somehow I don’t think this will be the solution to this couple’s problems.
Mike Van H., your situation where your home went from $89k to $147k in 14 years and then went to $255 in a couple of more years, shows that the real estate market doesn’t move evenly, year after year. The correct way of looking at your situation is that it took 16 years for the price of your home to go from $89k to $255k.
Anybody who bought a new SFR for $170k in 2003 got a very good deal.
smarten,
As of this morning here’s how the current Active listings breakdown:
56% owner-occupied
37% vacant
7% tenant-occupied
- guy
The Bay Area has a tech economy that can support the overpriced housing. Reno does not. There is no industry here that pays for people with engineering or tech degrees.
Until that happens Reno is way different than the bay area.
Someone asked when Reno real estate has gone up like this before. I bought a 3 BR 2 1/2 bath 1600 square foot house off lower King’s Row in 1978 for $40K. I sold it (job transfer) in 1980 for $89K. This was the period when the MGM Grand and other large casinos were moving into town.
I just posted home sales stats on our blog for Incline Village. What a difference 30 miles makes (and cash buyers). I would note that the average sales price is scewed due to a $13 million and $9 million sale this summer. Average single family price is up 30% to $1,888,372 year to date through Sept. 30, and median price is up 15% to $1,215,000 from the same period last year. Read the rundown here http://buytahoehomes.com/blog/incline-village-real-estate-sales-07q3
Sorry Lexi -
I don’t mean to pick on you but what you’re preaching is exactly what I’ve been talking about for months. The lay person listens to statistics and conclusions spouted by real estate professionals in a vacuum; or he/she reads recent Montreux monthly newsletters that proclaim “we’re right on track and ahead of last year;” and, he/she thinks the market is going gang busters [what a difference 30 miles makes] when in reality, IT ISN’T!
The facts reveal there are about 7,800 SFRs/condos in Incline Village/Crystal Bay. Currently, there are a little less than 500 for sale on the local MLS [well over a 2 year sales absorption rate and that doesn’t even include the hundreds and hundreds (or possibly 1,000 or more) of other Incline Village sellers who’ve simply thrown in the towel in desparation by taking their properties off the market]. Yet YTD, there have been but 208 sales [compare this number to the approximately 350 local real estate board members] - only 107 of which were actually SFRs.
For the last two years [the sales stats are almost identical YTD for 2007 compared to 2006] 2/10ths of ONE PERCENT of all residential properties listed for sale are actually selling in Incline Village/Crystal Bay and we’re supposed to conclude the market is immune from what’s going on around it? Throw out the two mega sales you mention in your post [and what about the other $9M and $30M sales in the last three months; 521 Silvertip which sold last month for $3M; and, 863 Lakeshore which sold the month before for $2.4M? (and these are just the sales I know about and can rattle off of the top of my head)] and what’s really, really left over?
The fact of the matter is that the overwhelming majority of properties listed for sale at $2.5M or less in Incline Village/Crystal Bay during the last year [many hundreds if not 1,000 or more] HAVEN’T sold notwithstanding the fact they’ve spent many, many months on the market. Every day Don Kanare [http://www.insideincline.com reports on price reduction after price reduction; most resulting in nothing more than seller frustration and ultimately, another long term rental offering! In fact, Don recently recounted on his web site of the success one of his clients had on a property reduced in price TWICE in a week [and by some 21% no less] which his client was able to snap up for LESS than the seller paid two years ago. And what about the owner of a $2M plus Lake view property on Fairway which isn’t selling and is rumored to be in foreclosure?
And since I am a renter, I can tell you that my wife and I have scoured over virtually EVERY Incline Village/Crystal Bay rental to hit the market in the last year so we know what’s really out there. I find it simply amazing how many rentals are really unrealized sales [in fact, many were simultaneously being offered for sale (and most of the time, their owners’ agents didn’t even have a clue)].
The Incline Village market is in a tailspin and professionals who have a disincentive to share the truth are themselves in denial because they point to virtually meaningless statistics [there just aren’t enough sales to make any meaningful conclusions other than, there aren’t enough sales]. Is the Incline Village market holding up for truly special properties offered at $5M and up? Yes. What about POS condos at under $400K? Yes. But for virtually everything else in between [and we’re talking at least 10 times the number of properties that have actually sold in the last 10 months], it’s a graveyard and I think you know it.
Also as we’ve discussed on this blog, when you have only a couple of lower priced sales; a couple of statraspheric sales; and virtually nothing in between; median prices increase notwithstanding the fact that fundamentally, there virtually aren’t any sales. This phenomena describes Incline Village/Crystal Bay to a “T.”
So just like Reno’s high end residential market, sellers in Incline Village/Crystal Bay are by-and-large in denial. Sure they’ll sell if they get their unrealistic prices. But if they don’t [and the statistics for the last two years prove that typically, they don’t], they’d rather take their properties off the market than sell them for what the marketplace truly dictates.
The day is coming very shortly, when Incline Village/Crystal Bay sellers must face the same fate $1M plus sellers are about to face in Reno [in fact, it’s already started on the California side of Lake Tahoe’s North Shore]. Let’s see what happens to median prices then.
Jason posted:
“I dont think you will see homes selling for 175k in spanish springs or wingfield EVER!”
Really, Jason? Hmmmm. What sort of FUNDAMENTALS are you basing your opinions on? Or, is this just a case of wishful thinking on your part? I’m curious to find out where this logic comes from.
Mike Van H posted:
“In late 2003, I was looking at homes in Spanish Springs for $169,000, NEW homes. We weren’t in a depression then.”
Exactly. And prices had already begun their bubble ascent at that time. I know plenty of people who purchased in Spanish Springs pre-bubble. They’re hard working middle class types who bought what they could afford. Many paid a little more than $100k.
Smarten - It’s John the Montreux stalker again. Thanks for your feedback about renting a cottage in Montreux. I think its a great idea and let me tell you why. We looked at a very nice Stonehaven house early in the year. Its been on the market for a long time. Don’t know exactly how long. Listed at 1.75 or so. It was purchased in 03 for 1.20 by the seller. The realtor says the land alone is worth 800k, and that replacement value is above the asking price. We just put in a ballpark verbal offer of 1.3 to 1.4 to test the water and were basically told by the owner, via the agent, forget about it. The owner is prepared to wait out the winter even though he had to move to another city months ago and has two mortages to fund. I am honestly surprised by this given what is going on in Reno right now, and how the future looks.
Don’t get me wrong, this is a beautiful house built by Lake Crest Development, and in the Bay Area would cost twice the price or more. But I am thinking, if the land is really worth 800k (doubtful, but just assume so for comparison sake) then just buy land directly across the street from this home in Galena forrest, where there are many lots for sale for 200k, hire Lake Crest to build an even bigger nicer home at 200-250 per sq foot, and come out way ahead. Granted you will not be in Montreux, but you can join the club with all the money you save, and walk right on over to the pool. Its only 1/2 a mile away.
What do you think? Are these high end resales ever going to get realistic, and if so when, or is it just time to rent or maybe even better, build. Builders must be as hungry as realtors right now.
Once again, your expert advise is appreciated as its hard to judge the market from California. By the way, we currently rent in CA, are serious buyers, and can close and move in matter of weeks.
Sure, it would be great to turn back the hands of times to 1999 or whatever but we can’t. Time moves on. Check out the price of concrete or plywood or land. Builders just can build for the prices they charged pre-bubble. Of course prices got ahead of themselves during the bubble what with speculators buying and ordinary folks suckered into homes they couldn’t afford but it doesn’t mean that the market is going back to the 1999 or 2003 prices. The way i see it is that during the next 12 to 18 months excess inventory will be taken off the market at about 2/3 of the bubble top. Which, btw, will be an excellent buying opportunity.
After all, Reno has a great location.
well said MTR. I agree 100% with you.. While we may have seen an unrealistic run up in price the last 5 years or so… Construction costs have gone up as well. Like you said all one needs to do is compare the costs of raw building materials from 1999 to present.
we will NEVER I repeat NEVER see 1999 prices again. with today’s construction costs profit margins wouldn’t support those of 9 years ago.
I would LOVE to see what houses in spanish springs were selling for 169k in 2003.. Since you claim that you saw “MANY”. Please offer some proof.
We have been looking at Montreux for 2 years now. We are California professionals looking to retire in about 4 years. Our in-laws have lived in Incline for over 20 years, so we know the whole area very well. We like to ski and golf, but don’t want to put up with Tahoe snow. We also prefer high-quality medical care nearby–and a major airport–and no state income tax. A Montreux condo property like the Cottages would be perfect for us. With a Silicon Valley apartment, we could just fly back and forth at will.
Regarding Montruex in denial. The realtor with the most listings also lives there! Talk about a conflict of interest in representing either buyers or sellers in wanting to keep prices unrealistically high! About 30% of Montreux owners are mega-wealthy tax expatriates. Another 30% are older Tahoe/Incline emigrants who are tired of the bad weather. These people are immune to prices. The last 40% are from Reno who appreciate the quality and amenities of Montruex. So only about 40% of the residents are price-sensitive when in comes to selling their property. The bottom line is Montreux prices are sensitive to what is going in the Reno market but are, in fact, partially insulated from it.
The Cottages are the lowest end of a very high quality market and by my count 7 or 8 of them are on sale (some for well over a year). Their prices are being threatened for Reno market buyers by the Renaissance development which offers more house but lower quality for the same money and the same amenities. One of the very large Cottage homes just reduced its price from $2,400,000 to $1,999,000, which is the first big crack in the ice that I have seen. We’ll see what happens to the rest of the market as we go into the dead season.
Not only are the numerous Renaissance homes for sale putting pressure on the other properties for sale in Montreux, so are properties such as Diane’s new listing in today’s blog which has 3800 sq feet on the golf course in Somersett for 699k. Renaissance homes in Montreux with the same sq footage and of the same quality, some not even on the golf course, are asking 1.3 and were selling early in the year for 1.1 mil. Yet they are still asking 1.3 for the largest floor plans. In addition there is a release of newly built and under construction homes in Montreux called Chalets. Currently there are 5 or so in MLS with more under construction. Not one has sold as far as I can tell and according to the Washoe County Assessors site, and they have been already been reduced by 100k in the past 6 weeks. On top of that earlier this year 5560 Lausanne at 5017 sq. feet in Montreux on the golf course sold for 1.45. In addition, 5700 Dijon at 4100 sq. feet sold late last year for 1.5. Both of these homes are in the older established section of Montruex in the trees surrounded by large very expensive homes. There are currently 50 homes for sale in Montreux. The cool aid well may run deep in the real estate office at Monteux, but no matter how much spin the resident realtor applies to the current situation, things are only going to get worse and the deals are only going to get better so don’t cave in now. Is this market really justifying a 500k return over 4 years on a 1.2 mil Stonehaven, as John points out? Only time will tell, but my bet is no.
Okay Anonymous Southwest Owner; since no one else will bite, I will [besides I want to keep this thread open because if I’m not mistaken, it now represents the most comments of any previous on this blog].
I think you “qualified” for a $999K ARM at 6.25%. But I don’t think you spent $1M on a Reno home, and I don’t think you came up with a downpayment. I’m guessing a $797K purchase price; 1st and 2nd combo loans [either a seller (probably builder) carryback for the downpayment and a new 80% 1st mortgage]; and, combined monthly mortgage payments of about $5,000.
Now can you tell us all what happened in July when you bought [and where]?
BTW, what’s your line of work in Reno that generates $200K/annually in salary?
In fairness to Montreux, their facilities are much better than Somersett’s and the setting near the tree line is much less high-deserty. How much of a premium that should command remains debatable. The construction quality in the Cottages, the Manors, and Stonehaven is absolutely top end. Again, how much is that worth? Renaissance is just infill of their least desirable setting with homes of distinctly lower quality, but access to outstanding facilities.
Montreux’s problem is that the mega-rich aren’t interested in any of those offerings. The people who are potentially interested are not going to buy at unrealistically inflated prices.
Montruex’s problem is that is inconviently located (Derrick can get to RNO faster), an architectural characature of poor taste and excess, full of Nouveau’s and wanna’bes, way over priced, and yet some buyers are still putting a value on buy into there. I SO don’t get it. Quick drive down to Dillard’s is an asset for this class of clientelle?
You got mega bucks and the big “schwing”? Why are you hanging with the trash in the south meadows? The are much better properties here.
To the commenter above who wanted me to provide proof of those prices, that’s nearly impossible to do considering it was 2003 and I visited dozens of new home developments looking for a new pad. I can tell you there were three developments at the time all West of Pyramid Highway (turning West on tha tstreet by Albertsons). And all three had their smallest models priced at about 169-172K range. I should also say though that 4 months later when I looked again, prices had risen by $40,000 and there were waiting lists and camp outs at every development. So those prices were short lived. Strange, no one camps out at developments waiting for model releases anymore.
Also isn’t Montreaux on County Land and not City Land? Is there a benefit or drawback to that?
Again I find this discussion about the collapse of Reno real estate prices both fascinating and Again I find this discussion about the collapse of Reno real estate prices both fascinating and hilarious.
As someone who lived through earlier localized booms and collapses in Honolulu, the Inland Empire Philadelphia, and San Diego, I can assure you from personal knowledge that the prices for even high-end real estate can collapse and collapse quickly. I remember price cuts of 40-60%
Those who say it will never happen need to remember the wise words of George Santayana said:
Those who cannot learn from history are doomed to repeat it.
Those who do not remember their past are condemned to repeat their mistakes.
Those who do not read history are doomed to repeat it.
Those who fail to learn from the mistakes of their predecessors are destined to repeat them.
Alright,
Anonymous Southwest owner.
I bought an older home, paid 695K, actually never asked “what” I would qualify for, as we already had selected a home listed, did a 80% 1st, bought down to 6.025 by paying points, and a second of 20% at 9.8%. You are right on combined payments, however, both loans are 30 year fixed NO ARM here.
Thanks for playing…
Thanks Mr. Anonymous:
A 30 year $140K fixed rate second at 9.8%? What was the thought process behind this decision [not behind the 100% financing decision but rather, 30 years at 9.8%]? Was the second a seller carryback? If not, did you pay loan origination fees on the second [and if so how much]? Finally, does the second provide for a pre-payment penalty and if so, for what period of time and how much?
Where is the house located [and how much “older” is “older”]?
And you didn’t share what you do in Reno that generates $205K annually in income. At least one inquiring mind wants to know.
Thanks Anonymous.
Anonymous Southwest here…
response to Smarten:
A 30 year $140K fixed rate second at 9.8%? What was the thought process behind this decision [not behind the 100% financing decision but rather, 30 years at 9.8%]? Was the second a seller carryback? If not, did you pay loan origination fees on the second [and if so how much]?
–NO loan orig fees, fixed and no pre-payment. My thinking was that with a large bonus compensation, I would chunk at this and pay off in a 5 year- period.
Finally, does the second provide for a pre-payment penalty and if so, for what period of time and how much?
See above
Where is the house located [and how much “older” is “older”]?
Built in 61, 1/2 acre, 3760 sq feet
And you didn’t share what you do in Reno that generates $205K annually in income. At least one inquiring mind wants to know.
Sales executive and Western Region Manager for Silicon Valley firm.
The price in Carson City is also coming down quickly. The seller asked for 1.2M a few months ago and just lowered the price by OVER $300,000.00 (Yes, over 0.3M)
Hi,
I will like to rent this house for 15 days for friends who will come there for honeymoon it’s my gift to them since I cannot attend their wedding. 15th Dec 2007 to 30th Dec 2007 is the suggested time frame advice.
Regards,
David Graham.