As you know, once in a while I love sending new contributors into the lion’s den to see if they’ll survive whatever carnage may ensue. So please welcome Chase Agent Michelle Sturge, who bravely decided to take the plunge and give blogging a try. Michelle actually grew up in Nevada, so she brings a unique, local perspective. -Diane
Something
like fifty years ago, while I was attending UNR, I would drive down South Virginia Street heading home to Carson City for the weekend (okay, so it was only twenty years ago). I would drive past Zolezzi Lane and think “who would live
all the way out here in the middle of nowhere?”
Well, ironically, now I do. And
here I sit in my home (notice I didn’t say house?) watching the market sit and
sit and sit. On my
street alone, there are six houses for sale, four of which are spec homes. These properties are becoming evidence that
the months supply of inventory in the $1-2 million range is three years.
Apparently though, the sellers plan to wait out this
storm. Two of the properties still
haven’t seen a price reduction, with days on market at 639 and 336: helpful to my property value, but it’s painful
driving by the for sale signs every day. One of the other two listings is well into the $2 million range. Apparently, despite the infinite supply of houses for sale in that
price range they still wanted to test the market. And finally, one house realistically priced
under the $1 million range. But I’ll probably have to
have to wait a few more years for that new neighbor because the property has
only been listed about 100 days. At this
point, I wouldn’t mind some significant price reductions at the expense of my
equity just to have a few more warm bodies in the neighborhood.
You see, I
purchased my home to be just that… my home. Not a house to flip for bigger bucks, not an investment to line my
portfolio, just my home. Kind of sounds
like I was born fifty years ago, doesn’t it? Those were the days of starter homes, family homes and dream
homes. Not the days of lining up at the
door to take a number and hope your name gets picked in a lottery because this
is “the best investment” in town. (That
was sarcasm).
This has become the market
for buying your dream home… (keep reading because I know what you’re thinking.) I’m not singing that horrible song of “now is
the time to buy”. I’m merely saying that
if you are a buyer in this market, I’m hoping you are buying a home, not a
house. A home that you love and want to
live in, and most likely, one you will get a great deal on.
31 comments
Hi Michelle, welcome to blogland.
I see what you mean. However you always just buy or sell a house. It´s a house, nothing else. Sure, you can use the house as a home, an investment, etc. A home is what you and your family make it. For anyone else it´s square footage and walls.
When making financial decisions it´s in my opinion a good thing to keep the property and it´s use apart, because you will be on the housing market. Always.
If you turn your house into your home, great. I personally agree with your feelings on that point. But the moment you move out, it will be a house, not a home.
Gr. Walther
Michelle, welcome. I was with you all the way until your last 8 words. Allow me ask you, Michelle, what are the standards that you tell your clients define a “great deal”? For example, what would you say constitutes a “great deal” from a rent v. own perspective? What do you tell your clients is a “great deal”? 150 times rent? 200 times rent? 300 times rent? 350 times rent?
How about from a income:debt ratio standard? At what level is a purchase a “great deal” and at what level is it not? 3:1? 3.5:1? 4.1? 5.1?
Michelle, I observe that so many realtors throw around the term “great deal” quite loosely. This is a “great deal” and that is a “great deal.” But really, what is a great deal?
Because one can buy a house today for 15-20% off a Voodoo money fueled 2005 price, does that make it a “great deal”? No sarcasm intended here, Michelle. Just curious as to what rent v. own and income:debt ratio criteria you employ to conclude what is a “great deal”?
Because examples are such good tools, perhaps you might pick out 3 or 4 current listings on the MLS and cite them to us as an example of what you consider to be a great deal?
Thanks.
Diane, when you post an entry, do you sit back and time how long it takes for the first comment to appear? It can’t be very long. Also, I cringed when reading your introduction–you weren’t saying that the local perspective is unique, were you?
Michelle, I enjoyed your post. My husband and I have talked about picking out our dream home and waiting until we can get a really good deal and then grabbing it. We have all the time in the world because we’re already in a HOME we own and would not move unless we found something a lot better. We might or might not sell our current home at that time.
Reno Ignoramus, a “good deal” to us means that we would have to try to time the market and get the best price possible before prices start going up.
From what I am reading here and elsewhere, I’m not expecting the market to turn around for a long time, probably not even next year, so to put myself into the end of Michelle’s post, I would have to say I’m “a potential buyer in some future market.”
The “you are here” chart for which Diane posted a link a while ago has been haunting me. I tracked down the original source, which is an International Monetary Fund report published in September. You can read it here: http://www.imf.org/external/pubs/ft/gfsr/2007/02/pdf/chap1.pdf
If you never went to Diane’s link, scroll down to figure 1.7 in the report. It shows mortgage rate resets, and it shows far more next year than we saw this year. (This year it’s been the subprime loans; next year it will be the option ARMs.) The only way I see to interpret that is that house prices will be going down a lot more.
RE: “At this point, I wouldn’t mind some significant price reductions at the expense of my equity just to have a few more warm bodies in the neighborhood.”
In a normal, healthy market, your neighbor’s selling price affects your home’s value.
In an unhealthy, unstable market, such as this one, a market inflated and distorted by speculation and easy, stupid money (and now, deflating and correcting) comps are pretty much meaningless.
ps: Welcome to the blog, Michelle.
Welcome, Michelle. As one of the occasional “headshots” that appears here, I know what sort of guts it takes to go public.
I’ve got to agree with Walther - the day you list your abode it becomes bricks and mortar (stucco and Pergo?). Hearth and home goes out the window, and it’s all business.
Just curious if 525 Lakeshore was a nesting “home” or an investment for you? Nice flip in any case - $200,000 plus in 14 months. I’ve known Wayne for more than 20 years, and it must be killing him that he didn’t wring every dollar out of the market.
Ann O, I was the guy who sent Diane the “you are here” chart on impending loan resets. Pretty interesting indeed. And, I think very much related to what constitutes a “good deal” in today’s market.
If you and your husband figure out a way to time this market, or any market, please let me know. I could devote substantial sums to a joint venture, and oh, how much money we all could make…..;)
CORRECTION. My face is red. I just started to show that chart to my husband and immediately saw that I’d described it wrong. It shows even more subprime loan rates resetting next year, a relative lull in 2009, and THEN the option ARMs resetting in numbers similar to the subprimes in 2010 and 2011. (I’m sorry!)
RI, you don’t want my help with timing–I sold my stock mutual funds at the bottom of the market a few years ago (when it was about 9,000). But at the moment I’m feeling kind of good about not getting back IN to the market.
Green NV wrote “just curious if 525 Lakeshore was a nesting ‘home’ or an investment for you? Nice flip in any case - $200,000 plus in 14 months.”
Was that Lakeshore as in Incline Village? And based upon your post Michelle, I must conclude your purchase was a “home;” correct?
And just out of curiosity Michelle; why would you ever trade Incline Village for Barren Hills? I mean according to your colleagues Mark and Lexi, you would have gained hundreds of thousands more in unrealized equity had you remained in your home.
Whatever the answers, welcome Michelle.
Ann O: Guy came from Chicago, and I moved here from Silicon Valley via Truckee… what I love about Michelle is that she grew up here and knows things we don’t about the evolution of Northern Nevada. That’s what I meant by unique, local perspective.
“RI, you don’t want my help with timing–I sold my stock mutual funds at the bottom of the market a few years ago (when it was about 9,000). But at the moment I’m feeling kind of good about not getting back IN to the market.”
At 9,000!!! OUCH! that was quite a run you missed! Did the crash of 2001 scare you? I think so.
“but at the moment I’m feeling kind of good about not being back in the market” Sounds to me like you are leaning towards a market correction? right? Thats easy then just short the exchanges and make your money off the upcoming downturn!
you said it not me!
stocks dont have to go UP for you to make money.. tssk tssk tssk
Why do realtors always talk about “dream homes”?
Anyway, now is not the best time to buy in any of the “bubble markets”. Wait until the sellers quit talking about “sticking it out” and slash their prices.
If you do have to buy your “dream house” now, make ridiculous low-ball offers with a “take it or leave it” attitude.
As an apartment bound pre-home owner stuck on a particular neighborhood let me assure you that waiting for bottom is frustrating. Looking at houses overpriced by more than $100k and 250 days on the market without price reductions… I don’t think sellers know what is good for them. I’d love a “home” but I’m not going to provide a $100k bail out for someone who bought in Jan ‘06
I and my siblings inherited a four bedroom house in Reno’s southwest area. The house has been listed for almost a year and is currently priced in the $350,000 range (having started at $425,000);however,so far the only “offers” the real estate agent has brought the trustee are clearly from investors not buyers looking for a home. We are now contemplating a $340,000 offer from such a group and though close to the ask price, it includes “buyer” incentives such as the seller paying closing costs and all commissions so the the actual cash out is $303,000. Please comment if this type of negotiating is typical. In fact, any comments on the Reno market and or this situation would be helpful as we live in the East and have limited real estate experience.
Suzanne, how many sq. ft in the house? How big is the lot? How old is the house? What condition is the house in?
A lot of factors to consider. What is your realtor saying about the offer?
The house is 2300 sq ft and is 25 years old - not sure of the lot size but has a fenced backyard. My aunt occupied the house until her death and it is in very good condition. I’m not really questioning the pricing but rather the nature of the offers we have gotten to date and the most recent idea of paying all closing fees and commissions as an incentive to the buyer. I am not in touch with the realtor - the house is in an irrevocable trust and the attorney/trustee is handling the negotiation. Thanks for your comment.
That comes out to $132 net cash per sq. ft. While that is lower than most of the new construction in the Reno area, your house probably has a better location. The fact that the house has been on the market without a lot of offers indicates that most current buyers are looking for newer construction.
It appears to me that housing prices will continue to decline in the Reno area for the foreseeable future.
Having the sellers pay closing costs and commissions is nothing new. Just another way of lowering the sale price without affecting the *actual* sale price. In other words, the neighborhood comps will not take as big as hit.
Suzanne:
The dirty (not so much anymore) secret is that the housing market in Reno-Sparks is as bad as almost any market in the country. In the price category of your house, there is one and half YEARS of inventory. Today, there are 25 houses listed at $350,000. Every month, only 5% of all houses listed for sale actually get sold.
The local real estate industrial complex encourages the kind of offers you are talking about. This is because, as Move to Reno correctly says, it creates the illusion that the market is better than it is. The “official” sales price is higher and the comps don’t take as big a hit. And the REIC can say the median price is holding steady. I would not be the least bit surprised if the realtor who has the listing for your house is not totally complicit in this arrangement. And boy, the realtor has the perfect situation here: real parties in interest he/she doesn’t even have to talk to, and a lawyer/trustee client who most likely really doesn’t care.
“I’d love a “home” but I’m not going to provide a $100k bail out for someone who bought in Jan ‘06″
Or $200k or more, as is the case with the bulk of listings I see. That’s not a bail out. It’s extreme hopefulness.
And if my circumstances allow me to move there, I’m buying a new home with all the upgrades, or a 2-year old one never lived in, LOL. I feel very sorry for anyone with an older home in need of updating that you’re trying to sell in this market with the glut of newer homes available.
“On my street alone, there are six houses for sale, four of which are spec homes. Apparently though, the sellers plan to wait out this storm. Two of the properties still haven’t seen a price reduction, with days on market at 639 and 336: helpful to my property value, but it’s painful driving by the for sale signs every day.”
They can’t burn through cash forever. I am betting that after the spring swoon fails to materialize, many will cut and run. They’d be stupid not to. Without even looking at the homes, they’re likely burning better than $4000 per month, given that they are high end specs. Only fools would try to service that debt indefinitely. Either they’ll wise up and take the hit, or go BK.
This is NOT helpful to your property value. A plethora of vacant homes for sale on your street might actually harm its value. Furthermore, these fantasy prices are no indication of your properties true value. Most of these houses will NEVER sell anywhere near the listing price.
“This has become the market for buying your dream home…”
Uh, no, this is a fools market. Buying now would be a horrible financial decision, one which most people can ill afford to make.
“A home that you love and want to live in, and most likely, one you will get a great deal on.”
What constitutes a good deal in your mind, Michelle? Surely, overpaying by hundreds of thousands of dollars for a depreciating asset isn’t what you mean.
Hey BB, yesterday I invited Michelle to explain to us her thinking on what constitutes a “great deal.” I invited her to share with us her thinking on what is a “great deal” from a rent v. own analysis and from a income:debt ratio analysis. I invited her to share with us a few listings on the MLS that appear to her to look like a “great deal”, since she says these days if one buys one is “most likely” to get a great deal.
I trust Michelle understands that my questions are not hypothetical and that I am quite genuinely interested in her thinking.
I also hope that Michelle does not turn out to be like Jeff the mortgage guy who came here, made some comments, and then disapperaed after we asked him some questions.
Michelle?
RE: “I am betting that after the spring swoon fails to materialize, many will cut and run.”
I agree; that’ll be the knee in the curve. Where prices fall off the cliff.
Gina, you are thinking about buying a house in Reno?
Why don’t you announce that you will be accepting offers from home sellers on a designated day and time. Invite them to camp out overnight in order to be first in line to make you their best offer. Tell each one that they have 15 minutes only to present what their best deal is, or else you will go to somebody else. Tell them you will accept hand written letters from them explaining why you should buy their house and not somebody else’s. Tell them that they better make truly their best offer up front, as everybody knows that prices will be lower next week, and if they really want to sell, they better sell now or get priced in forever.
“I also hope that Michelle does not turn out to be like Jeff the mortgage guy who came here, made some comments, and then disapperaed after we asked him some questions.
Michelle?”
While we’re at it RI….ahem, Jeff? Hello, Jeff? Although you’re awful quiet, I’m sure you’re reading, and we’d really like to hear the inside scoop on those suicide specials you were slamming people into. The ones which didn’t interfere with your sleep, if I recall correctly. Perhaps you’re busy picking up some extra hours at Arby’s, as the mortgage market isn’t what it used to be?
Wow! Didn’t think I would cause such a stir. Sorry it took me so long to respond, but I’ve been out in the rural world of dial-up. Maybe I should’ve stayed out there… Anyway, I think the point of my short story is that if you are a buyer in the market right now, I would hope it would be for a home that you are planning on staying in and enjoying for a long time, perhaps with the intention of forever. I also would like to respond to RI regarding a great deal. The term to me is very subjective depending on a persons intent. Ann O. has her own opinion of what a good deal means to her. And even if she doesn’t time the market perfectly, when she does choose to buy will most likely be the right time for her personally. Every individual has the right time to buy for them, and depending on their reasons for the purchase, a great deal to one may not be so to another.
I like what an earlier poster mentioned about putting up the deal of the week or something along those lines. It would be interesting to get feedback on specific properties from the various readers.
It seems there are a lot of posters here that feel homeownership is stupid but there must be a price somewhere between free and what people are currently asking that makes sense.
I was looking at the home at 780 Rosewood in Southwest Reno. I really liked the house and the location is good. While it is a time capsule it has been maintained very well. When my wife and I went through it was priced at $419k (it’s been lowered twice since). I commented to the agent showing us the house that I thought it was worth about $290k but honestly I’d feel more comfortable paying $250k. While these numbers sound ludicrous in today’s market am I completely off base?
Any thoughts?
I like what an earlier poster mentioned about putting up the deal of the week or something along those lines. It would be interesting to get feedback on specific properties from the various readers.
It seems there are a lot of posters here that feel homeownership is stupid but there must be a price somewhere between free and what people are currently asking that makes sense.
I was looking at the home at 780 Rosewood in Southwest Reno. I really liked the house and the location is good. While it is a time capsule it has been maintained very well. When my wife and I went through it was priced at $419k (it’s been lowered twice since). I commented to the agent showing us the house that I thought it was worth about $290k but honestly I’d feel more comfortable paying $250k. While these numbers sound ludicrous in today’s market am I completely off base?
Any thoughts?
“I would also like to respond to RI regarding a great deal. The term to me is very subjective depending on a persons intent.”
That’s it? You are simply going to ignore the rent v. own analysis? And the income:debt ratio analysis? You won’t offer any examples from the MLS of a “great deal” that you might recommend? If that’s the best you can do, I won’t even say any more, and allow all here to reach their own conclusions.
Thanks Michelle.
Perry:
I don’t think owning a home is stupid. Not at all. I am a homeowner. What I do think is stupid is paying a Voodoo money fueled price for a house. This house has been owned by the same owner since 1988. I would suggest finding out the purchase price in 1988 (you may have to do some investigative work here…perhaps there is an old DOT of record that reflects the purchase price)and then offer the 1988 price plus 20 years of inflation. Real inflation (not the phony CPI inflation) since 1988 has no doubt been 100%, or more, so you will probably have to offer double the 1988 price, or more. Interesting that you say you would be comfortable offering $250K. Well, that’s twice $125K, which is probably more than what this house sold for in 1988.
But if the owner has a realtor telling her that, you know, houses went up in value 15% a year from 1999 to 2005, and, you know, that’s the way it is, and, you know, surely somebody is going to come along and pay 4 times what she paid, you probably won’t get it for a non Voodoo money fueled price. Don’t worry about making a ludicrous offer. Ludicrous these days is how to describe asking prices.
RI, while I generally agree with your analysis of looking at the affect of price inflation on housing prices in order to determine a ballpark estimate of “real value” (certainly the case in the rural Midwest/South), there is another factor that should also be considered, to wit, the impact of supply and demand. Land and its location is limited so the market uses price to allocate resources. Probably in the Reno/Sparks area the location factor is constrained but it still plays a role. In a down market like this, it is a good time for people who eventually buy to place location at the top of the list for home qualities since the location premium has lost some of its value due to an over-supply of housing.
No kidding, michelle surely you have some type of data to support your “good deal” comment? like other have noted what about the rent vs. own, income, debt/ratio analysis?
I know of more than a few ways to judge a “good deal” when it comes to buying stocks and rules of thumb as well.
I guess none of that matters when it comes to housing? give me a break that was such a halfass answer I cant even believe it .