Sales remained steady through November, with overall activity
off 46% from the year prior. Meanwhile, the median sales price increased slightly
to $285,000. Months supply of inventory in the $500K-$1 million range is still two
years, with nearly five years supply in the $1-2 million range and an infinite
supply of homes over $2 million due to yet another month of zero sales. Full
report.
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Diane Cohn
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53 comments
Read the article and comments at
http://blogs.marketwatch.com/greenberg/2007/12/straight-talk-on-the-mortgage-mess-from-an-insider/
It will scare the heck out of you.
SJ
Interesting article Stjoe, I especially loved this part.
“he has been short a number of mortgage-related stocks”
Diane the numbers don’t look half bad I would say, overall pretty decent all considered.. So when are you going to show me around montreux? ok maybe wingfield springs instead
Hi All -
I know this is O/T, but I could use your advice.
I’ve been offered another D/T investment [3 BD/2 BA, 1,645 square feet, 1.72 acre lot size, 12% interest only, 5 year term] on Plata Mesa Drive [I think it’s in Sun Valley]. I don’t particularly care for this area but the asserted fmv is $230K and the new first d/t investment amount would be $100K - thus a 44% LTV.
I personally think fmv is closer to $200K and if you think prices are still going down, it might be $175K in a year. But still, that’s still $75K of protective equity!
It’s just I don’t like to invest in something I wouldn’t be comfortable owning and I wouldn’t be comfortable owning this property.
But in your opinion is there just so much protective equity I need not be concerned? Or should I pass? Thanks in advance for the help.
For another scary article see
Like Subprime Mortgages, Some Construction Loans Are Delinquent at
http://www.nytimes.com/2007/12/08/business/08charts.html?ref=business
IMO, if you’re not comfortable owning the property, don’t do it. I’m not terribly familiar with that street, or property, or even Sun Valley, but I know the few times I was through there, it was pretty rough around the edges to put it mildly.
Raw land prices are in a freefall. Lennar just unloaded nearly 10,000 lots for around $.50 on the dollar, some of which were in NV. That’s a good sign of what’s ahead.
I bring this up because the property you mention is on small acreage. That’s a nice sized parcel, but that’s about all the property has going for it. IMO, most homes in the Sun Valley area should be well under $100k when prices bottom. Is the lot premium worth the extra $75k? I don’t think so. It’s desert scrub, to me. Besides, real estate is all about location. Why flirt with something you don’t want to own. If it were me, I’d look for something different. JMHO.
If It were me! I would seek the advice of a professional!
Sun valley is a DUMP and thats put LIGHTLY! I wouldn’t touch that area!
As far as homes selling for 75k. I don’t think that is at all likely. Do the math. You can’t even build a house for 75k unless its a double wide trailer, or possibly a home that is VERY small with zero upgrades, while using the Cheapest building materials possible.. Not going to happen.
I realize your view on Real estate Bantering Bear and of course its ugly, But were not going to see 1950 prices (being sarcastic).
There is an interesting article about a high-end property auction in Sarasota, Fl. $200 million of trophy homes (including a number over $10 million) went on the block.
You can see the article at
http://online.barrons.com/article_print/SB119707815088217940.html
(subscription may be required).
A lot of homes did not get a single bid. Here is a quote:
“One person who analyzed the reported sales concluded that, for the properties sold “absolute,” the median sales prices was just 45% of the original asking price, and that 35 properties didn’t even get an acceptable opening bid and so remained unsold at the auction.”
Enjoy
SJ
Derrick states I “[sh]ould seek the advice of a professional” before I purchase a D/T.
Didn’t a “professional” bring this investment opportunity to me? Wasn’t it supported by a different “professional’s” certified appraisal of the fmv of the note’s security? How many “professionals” does it take?
This to me is a prime example of how one can’t simply look at a bunch of numbers on a piece of paper and conclude he’s/she’s done his/her due diligence. It’s also an example of why one should NEVER invest in a pool or fund of diversified mortgages assembled, marketed and administered by so called “professionals.” And it explains why I was looking for the opinions of “other” kinds of professionals - you guys. I thank you.
Gee sorry smarten no need to be brash.. Just because a professional shows you an investment doesn’t mean you should take his word for it, furthermore it should be someone you know and deal with personally so you KNOW your best interests are being taken care of.
You really don’t need to cry about everything I say smarten.
Gee sorry smarten no need to be brash.. Just because a professional shows you an investment doesn’t mean you should take his word for it, furthermore it should be someone you know and deal with personally so you KNOW your best interests are being taken care of.
You really don’t need to cry about everything I say smarten.
All in all, the sales numbers were stronger (less weak) in November than I would have guessed. TD’s actually ticked down, but I think it was because it was a short month with a 2 day holiday. TD’s for the first week of December were a historical record for Washoe County - 32. But I see that Diane has 3 properties in escrow, and there are 3 houses over $1 million in contract in Somersett. There are a lot of mixed signals out there.
Has anyone given any thought to if this proposed Teaser Freezer will have any inpact here? I’ve run a bunch of numbers, and would be surprized if 2% of our local subprime distressed properties would be eligible for any assistance. And I think anyone eligible would be criminally stupid to accept extending what is already an impossible rate on a property still decreasing in value. It goes against everything this Midwestern boy was ever taught or stands for, but mass foreclosure looks like the only solution. Jingle mail.
- My prediction? At least 40% of all subprime loans in Washoe made in 2005-6 will end in foreclosure. This will drive down prices another 20% from todays prices, already down 20% from the peak. And this will happen fast, within the next 6 months.
- The tom-toms have banging around the net about the Alt A and Prime ARM adjustments. This could still be a major problem on the horizon, but these loan packages are generally LIBOR +2.25-2.75%, or 12 Month Treasury’s plus the same margin. This will translate into a 1-1.5% point increase in the rate, far less then the average 3% rate increase facing the Subprime loans. If your stated income was true, you can probably hold out. Do but do you really want to?
- If you took and Option ARM and have been making minimum payments, start looking for a bankruptcy attorney now - waiting list’s are forming.
Alan, a question for you as a rental property owner. What sort of bump in rent do you give people with a BK or TD in their recent past? I think they will become the majority of the rental pool in short order.
And you should hear me when I’m being negative!
I have to agree with Green on this. I find the proposed freeze to be nothing more than a smoke and mirror scam. While it appears to do something, it does nothing. The terms are so restrictive that very few “homeowners” will qualify and those that do would be better off not paying the mortgage for a few months, saving the money and then rent an apartment by offering to pay the first 6-12 months rent in advance.
“I see that Diane has 3 properties in escrow, and there are 3 houses over $1 million in contract in Somersett. There are a lot of mixed signals out there.”
These are equity nomads, or qualified high end buyers. These sales mean nothing as far as a “recovery” goes. While they may help skew the median higher, it’s more pertinent to pay attention to the average homes.
“At least 40% of all subprime loans in Washoe made in 2005-6 will end in foreclosure. This will drive down prices another 20% from todays prices, already down 20% from the peak. And this will happen fast, within the next 6 months.”
A bold prediction, and one I wouldn’t totally disagree with. But, I’ve given up on time predictions and I believe this correction will be long and painful. As far as how low the median goes, again, the median is a faulty calculation in my estimation. Same sales are a better indication. I say the house that sold in 2000 for $150k, easily comes full circle in inflation adjusted dollars, and possibly in nominal dollars. If the economy crashes hard, we’ll be talking about $40,000 homes in Sun Valley.
One of my favorite authors tells the following story:
————
I bought a 3,000-foot condo in a luxury Miami building directly on the Bay in 1993. Three bedrooms, four baths. I bought it from a bank that had loaned $250,000 against it, only to see the owner default. Years had passed. Did I want to make an offer, my real estate agent asked? No, I said – I already had a place to live; and as a rental, it couldn’t possibly carry itself.
“Aw, c’mon – make an offer!” she said. (We had become good friends by this point, as I had bought several investment properties from her.)
“OK — $79,000,” I said.
She recoiled before getting the joke – obviously I was joking – and reminded me that the bank, on the hook for $250,000 plus years of carrying costs, had just a few weeks earlier rejected a nearly-as-preposterous offer of $105,000.
But I held firm at $79,000 and that’s where the deal was done. The bank had had enough. Sure it was worth more – sort of. But if no one wanted to pay more right then – and no one did – that’s what the bank would have to take if it wanted to sell.
———-
The moral of the story: when times get tough, there are bargains galore!
SJ
So Diane has three properties in escrow and there are 3 houses in escrow over $1 million in Somersett. What does this info, by itself, tell us?
I would be far more interested in knowing whether these deals, assuming they close, will raise the comps (ok, a little seasonal humor), will maintain the comps, or will lower the comps. Perhaps Diane and GreenNv can share that info when these deals close?
To ask BB’s question, will any one of these deals be an increase, or a decrease, from the previous sale?
While it’s a helpful piece of info, it really means very little to know only about sales volume. If suddenly the number of closed deals shoots up to 350 next month, and every one of them lowers the comps, is this a sign that the bottom is near? Would 350 closed deals, a huge increase in sales volume, every one of which sends the market lower, be an indication that the market is turning?
I have said many times that the only way the market can decline is through sales. If nothing sells, how does the market drop?
In the first sign that 2008 will see the turnaround of the Reno housing market, did you all see where the City of Reno has agreed to allow developers to abandon their unfinished projects?
Seems Centex, Silverstar, and West Haven have asked the City for the right to abandon their dying on the vine developments. According to the RGJ, none of these builders actually plans to abandon their projects, of course. They just asked for the right to abandon them if they should feel like it in the future. Like in a couple of weeks or so.
Yes, surely this must be a sign that the bottom is coming in 2008. Developers, famous for being able to project “years into the future” are asking for the right to walk away on their projects and not have to pay on their construction surety bonds. Yes, surely the local developers must be looking at 2008 as the year of the bottom. Yes, surely.
And isn’t is going to be lovely having these half built developments all around town?
“According to the RGJ, none of these builders actually plans to abandon their projects, of course. They just asked for the right to abandon them if they should feel like it in the future. Like in a couple of weeks or so.”
LOL! Ahhh, Lindie, your dry sarcasm gets me laughing.
As for Centex, Silverstar, and Westhaven asking to “opt out” on their bonds caught my attention also. Interesting the local fish wrap (RGJ) shuns reporting the real R.E. market in general, but headlines a Sunday on line edition: “Reno Developers abandoning projects.”
[Article written by Susan Voyles and states the full story will be in RGJ.com tomorrow]
If my information is correct, Silverstar is Montreux, West Haven took over what MDG left behind in Somersett, and not sure about Centex?
quote: “John Hester, Reno community development director, said he expects some developers to use the option.” Duh!
Morgan Stanley predicts 3-year housing slump:
Home prices may see 3-year fall: M. Stanley
Thu Dec 6, 2007 3:51 PM ET
NEW YORK (Reuters) - There is a “substantial” risk that U.S. home prices will slide for the next three years or more, in a downturn that could be unlike anything seen before on a national level, Morgan Stanley said on Thursday in a report.. . .
See http://today.reuters.com/news/articlenews.aspx?type=businessNews&storyid=2007-12-06T205103Z_01_N06211722_RTRUKOC_0_US-REALESTATE-INDEX.xml for complete article
There is an article in Monday’s RGJ on the municipal action taken to allow the conditioned abandonment by developers of unfinished projects, with lots to be “secured” then surety bonds released.
This is an unfortunate event for the community, and allows the escape of the bond which would otherwise complete the basic representations the builders made when their final plans were approved. The result of project abandonment is typically a crazy-quilt pattern of finished and unfinished lots, disappointing the bargained-for expectations of adjoining homeowners and giving a helter-skelter look to the affected community. Erosion control, dust control, slope maintenance, landscaping, largely falls unexpectedly and prematurely upon the homeowners’ associations, and with fewer members to split the costs.
Were I an affected homeowner in such a community, I would assert that I was not a party to or bound by any such release contained in the City’s action, and instead I was entitled to rely upon my reasonable expectations that the builder would complete the structural part of his new community in a reasonable time.
In California this would be a sustainable cause of action, and you could demand a jury. I think in Nevada, though, a bench officer would try such a case, and the developers might have a better chance of defending. I would be interested in reading what a Nevada real estate attorney thinks on this point.
Interesting article in the RGJ. Maybe the reporter has been reading this blog and decided to interview somebody besides the president of the NNMLS. I particularly liked the quote from the appraiser who predicts that 2008 will see entire developments go into foreclosure and become REO. There is, of course, the obligatory quote from Bambi at the Builders Association who says the downturn will all be over by Spring. But for the first time in a long time, the RGJ runs a story that has some semblance of balance.
Hi GreenNV, I think you asked me above what kind of bump in rent I give to prospective tenants with bad credit. I’m not sure if a landlord can charge higher rent for people with bad credit, at least not openly. To be honest, I haven’t raised my rents in 10 years, nor do I check credit I currently only have 3 rentals as I have sold them all off in the past few years. Because Nevada’s landlord/tennant laws are very landlord friendly, I generally cover myself by getting a good deposit and filing for eviction and the soonest possible day. I can tell you that as a landlord, I was getting higher quality tenants before anyone with a pulse could qualify for a mortgage. The last 3-4 years has been brutal as a landlord since all the good quality tenants became buyers. I believe that is starting to change, although vacancies are up.
On a side note, I just got back from Miami Art Basel where they were hosting the biggest art show/sale in the world. There was an interesting article in the Miami Herald on Saturday about how the sales of high end art have not fallen off despite the economic downturn. Dealers were actually surprised by the high sales prices being paid by mostly American collectors despite the weak dollar and competing European collectors. As the article points out, the stock market crash of ‘87 wasn’t felt in the art market until 2 years later in ‘89. So, do these high end art prices mean that the big money isn’t worried about a recession, or is this due to recession lag? Only time will tell. I can tell you that I wouldn’t want to be Trump right now, he seems to have about 8 major condo towers under construction near South Beach, and I think Miami is on of the worst hit markets in the nation in terms of falling prices.
On a second side note, I am thinking about building 16 condos on my property near the University similar to 8 on Center. I think there might me a niche hear for that modern loft style architecture here in Reno, especially near the University. What do you guys think about $350K for a 1000 sq. ft unit? Am I crazy??=) I figure about $3.2m to build-worth $5.6m completed. I’m looking for investors.
“On a second side note, I am thinking about building 16 condos on my property near the University similar to 8 on Center. I think there might me a niche hear for that modern loft style architecture here in Reno, especially near the University. What do you guys think about $350K for a 1000 sq. ft unit? Am I crazy??=) I figure about $3.2m to build-worth $5.6m completed. I’m looking for investors.”
That’s quite possibly the most foolish plan I’ve ever heard of in my entire life. In the face of the biggest real estate meltdown in the history of this country, to be considering entering the weakest segment of the market (condos) at this point in time, with aspirations of prospering, is so hopelessly delusional it defies words. Moreover, building high end condos in a transient area of student housing is on par with envisioning section 8 rentals on the coast of Big Sur. Wrong location. Good luck finding investors. You’ll get more laughs than cash.
BB, I’m glad you aren’t holding back, haha. I guess that’s what makes me an entrepreneur and you not. 8 on Center each sold for $450K to $500K each 6 mo ago. Same architect is building 4 similar units off Wells Ave, all sold in the $400k range I believe. I think this is a special niche that is not being covered by any of the other condo units in terms of design, and I have a unique location 2 blocks from the University. Also at $350/sq. ft, I am at the very lowest end of the comps. I actually already have a line of some money, I’ll keep you posted, perhaps you’ll want to reserve one??? Also, if you haven’t been by 8 on Center or those others under construction off Wells, go check them out, you might change your mind.
Alan, I’m sure you have been following Cedar Dwellings http://www.cedardwellings.com/Cedar/Sales.html . It couldn’t get any traction going, and the lot appears to be back on the market. And 8 on Center was money loser from what I’ve been told.
That said, you are spot on about the lack of modern dwelling alternatives in the Reno area. The market is really there if it can be delivered at a competitive price point. I am looking at building a SFR version of 8 on Second on spec (that’s me digging on the west end of Mayberry) and the level of interest has been very high, even though I have been in stealth mode.
“BB, I’m glad you aren’t holding back, haha. I guess that’s what makes me an entrepreneur and you not.”
Huh? I can’t even make sense of that statement. Nevertheless, Alan, you know NOTHING about me. It’s always best to speak from a position of knowledge, rather than wishful thinking. You lose credibility otherwise.
As far as your $350 per square foot number, by the time that project was finished you’d be the highest around. 18-24 month old comps mean nothing. Of course, from your rose colored perspective, you haven’t accounted for that. It would appear from your post that you have done little, if any, market research. Very unimpressive.
Green, thanks for the info, I didn’t know about the status of Cedar Dwellings. We are in agreement that there is pent up demand for this type of design in the lower end. The nice thing about my project is that if they don’t sell, I can rent them out and break even or even be slightly positive. As you know, it will take 6 months to get a project designed and permitted and another year to build them, so my bet is that in 1 1/2 years I might have a cash machine. The SFR spec market is still pretty scary but if you have little or no debt burden, it might be worth a shot. I know a guy sitting on a $3m spec in Arrow Creek with ultra contemporary design….he’s not a happy camper. Maybe BB will want to rent one of my units while he is waiting for the market to come back???
BB, I’m definitely not trying to impress you. I post thoughts on this blog because I enjoy the mostly educated but varied points of view. The thing that is funny about you is that you are a hypocrite. You reveal absolutely nothing about yourself and yet seem to know me well enough to call my plan foolish. You have no idea where I am coming from, yet I can predict your every response…..now thats an unimpressive Bear=)
Insofar as today’s article in the RGJ re: termination of SFR developer construction surety bonds is concerned, I read things a bit differently. For instance,
1. It would ONLY apply to developers who own their lands the subject of final subdivision approval free and clear of encumbrances. In the real world [especially major developers and public companies using OPMs], I cannot imagine there being any of these animals other than the occasional small mom and pop landowner who decided to self-develop his/her/their family farm.
2. As a condition, the developer must give up his/her/its entitlements. It’s generally very difficult, costly and time consuming to secure subdivision approval and I can’t imagine the prospect of going through the process a second time with no guaranty of success [nor for that matter the number of housing units that might subsequently be approved] being acceptable to anyone other than Mrs. mom and Mr. pop. Even the RGJ recognizes this would be a “risky proposition.”
3. Although the article didn’t clearly address this issue, I can’t imagine the county permitting bonds like these to be terminated once construction has actually begun. So I don’t think the hypothetical concerns Tom has raised are realistic [the county’s not going to permit a partially constructed street to end abruptly notwithstanding the fact the subdivision extends beyond the street’s end].
So although there may be a new surety bond “policy” in place, bottom line I don’t think it means much in the real world.
However, there were a couple of additional matters raised in the article I throw out for comment.
1. There are 110 SFR subdivisions currently under construction in Reno-Sparks [I wonder what’s the median number of lots/subdivision?]. This to me seems like a big number.
2. John Wright expects a number of those subdivisions to be foreclosed upon by their mortgagees next year; and,
3. Only 36% of existing homes on the local MLS are vacant. I thought Guy’s figures were closer to 40%?
In any event, an interesting article.
Allen Murray states “I am thinking about building 16…1000 sq. ft…condos on my property near the University…I figure about $3.2M to build…[And] the nice thing about my project is if they don’t sell, I can rent them out and break even or even be slightly positive…so my bet is that in 1-1/2 years I might have a cash” cow.
Let’s assume Allen owns the land free and clear [which I’m sure he does not]. $3.2M to construct 16 condos works out to a cost of $200K/unit. Let’s assume Allen can secure 100% permanent financing after build out [an interesting proposition given FNMA and Freddie Mac guidelines mandate that no more than 50% of a condominium project be non-owner occupied], and he can get 6.5% fixed rate thirty year loans with zero points/closing costs [all unlikely assumptions].
You’d need to generate $1,500/month in rent assuming zero vacancies just to break even! Given the depressed SFR rental market in Reno/Sparks [a subject we’ve discussed before] and the fact you don’t own your land free and clear [meaning your rents would have to be closer to $1,750/month to break even], I don’t think so!
If I were you Allen, I’d stick to being a contractor and let someone else become the cow!
“Maybe BB will want to rent one of my units while he is waiting for the market to come back???…BB, I’m definitely not trying to impress you. I post thoughts on this blog because I enjoy the mostly educated but varied points of view. The thing that is funny about you is that you are a hypocrite. You reveal absolutely nothing about yourself and yet seem to know me well enough to call my plan foolish. You have no idea where I am coming from, yet I can predict your every response…..now thats an unimpressive Bear=)”
First off, I do not live in Reno, nor do I have any intention to. I might someday buy an SFR with land in Tahoe, if the price and property suit me. So, count me out as a renter on a spec condo.
Next, I have never pretended to have any virtues, beliefs, or principles that I don’t actually possess, nor have I feigned some attitude which my private life belies, other than the fact that I am perhaps more charming and a tad more reserved. So, your calling me a hypocrite is completely unwarranted and without merit.
Your decision to charge onto a blog as some sagacious real estate investor, and make your business public was entirely your choice, and one which you have to live with. Just because you decide to do so, doesn’t mean that everyone else who writes into the blog need follow suit. While you proclaim you aren’t here to impress, a compilation of your past posts would suggest otherwise.
Bottom line, you asked what everyone thought, I gave my honest opinion. It’s not personal, in stark contrast to what you claim. If you had talked of buying multi-family dwellings with high cap rates from wannabe investors or banks for pennies on the dollar, my response would have been quite different.
Smarten, point taken, although again you assume too much. Although I do currently have small mortgages on the properties I have the cash to clear them. I’m just curious what makes you think I’m broke? I just sold the duplex and house next door to a guy who is now renting the duplex for $1250/unit and the house that I am remodeling for him will rent for $1200, none have garages. I don’t think it is unreasonable to get $1500-1700mo for brand new units by the university with garages. Remember that the rental market by the university is not your typical rental market, walking distance is the key since parking is expensive and hard to find in that area. There is a housing shortage as the university continues to grow in size. I know this market well sice I have owned rentals there for since ‘96. Plus, if we believe that the market will start to come back in the next 1 1/2 to 2 years, my timing will be ideal. Remember, I may be one of the few on this blog that have made 100% of my income my entire professional life in building, buying, and selling real estate in this area. Maybe you’re right, but so far I have done pretty good. Fortunately or unfortunately for me, I am willing to put my money where my mouth is and time will tell if I’m right.
BB, I don’t quite understand why someone who doesn’t live in the area and doesn’t plan to live in the area in the near future devotes so much time to spewing negativity, but to each his own. My guess is that you wont tell us where you are coming from as usual. Maybe I should find the SF 49ers blog, use a fake name and tell everybody on it how much they suck even though I’ve never been a fan and don’t plan on being one. When they ask what motivates me, I will tell them nothing….hmmm sounds like fun=)
Allen:
The fact that you cannot comprehend why I am here makes not a difference in the world to me. This blog is a place for people to talk about Reno real estate. I know it just burns you up that myself and others aren’t interested in parading ourselves around as you have, but you’ll just have to get used to it.
Just as you are perplexed as to why I might be contributing to the blog, I am equally confounded as to why someone would be so desperate for attention as to submit a hopelessly flawed business plan to hundreds of readers, asking for feedback. But then again, you posted:
“Maybe I should find the SF 49ers blog, use a fake name and tell everybody on it how much they suck even though I’ve never been a fan and don’t plan on being one. When they ask what motivates me, I will tell them nothing….hmmm sounds like fun=)”
I suppose therein lies the answer. As smarten has astutely pointed out, it’s probably best to stick to pounding nails.
Allen, I never thought nor meant to suggest you were broke [besides even if I did, why should you care?]. All I said was I doubted you owned the property you propose developing into 16 condos free and clear.
Why?
Because I think you know that one of the key attributes that makes long term real estate investing a better vehicle than anything else, is the leveraging you can rather easily accomplish in conjunction with low cost, long term financing.
Thus why would you pull a Derrick and buy a piece of bare land free and clear when you could easily put a little amount down and use the balance for projects like…your home?
Insofar as Reno-Sparks SFR rents are concerned, it’s a very, very soft market. And future prospects are that it will continue that way [or in fact become even softer] for sometime to come; especially as more and more sellers give up the idea of selling at their prices and look for some means of covering debt service so they can hold out until whenever.
If one can rent a brand new 4,000 square foot Toll Brothers home in Somersett for $2,100/month; or a Montreux cottage, brand new 3,000 plus square foot Renaissance house or brand new 4,615 square foot executive home on Montreux’s 17th Fairway [Craigslist posting #505132049] for $3K/month [O.K. the new Montreux listing asks $3,950/month but the agent will NEVER get it! Tom, you should snap this one up; I think it’s a keeper]; or an incredible 2,600 square foot 4 BD/2-1/2 BA Rolling Hills home for $1,800/month [Craigslist posting #505208259]; or Ann O’s nice 2,100 square foot 4 BD home for $1,200/month [I hope my recollection of her specifics is accurate]; or a 2 BD house within walking distance of the University for $750/month [Craigslist posting #505206793]; why pay $1.5K-$1.7K/month for a 1,000 square foot condo? I just don’t think it’s realistic.
Good luck in whatever you do with the property.
I love you BB=)
Smarten, I agree with you on most of your points. Your are correct about cashing out real estate, especially in these uncertain times I prefer to have cash over free and clear real estate. The university rental market is a micro market of its own. Remember, I’m not interested in owning rentals by the university, I’ve been selling out, but that would be my backup plan if I couldn’t sell the condos upon completion, I think they will sell. Thanks for your input, is there anyone out there that thinks I have a good idea? Have any of you actually been in 8 on Center and know what I am talking about in terms of the uniqueness of design?
Allen:
The biggest flaws in your plan are, in order: the prices, the product (condos), the timing, the location.
The market going forward is going to be about having the best product for the best price. You can’t compete on price with the big guys. Your inability to foresee, IMO, what the market will be like 18-24 months from now will be your downfall. Yesterdays prices, relative to incomes, are not coming back in our lifetime. $350 per square foot will not be competitive, especially in that location. With even the deep pocketed developers already in trouble, you should heed that warning.
Do yourself a favor and park your plan for a few years to let the supply overhang work itself out, then work out the kinks, and move forward if things look promising. Go talk to the guys who have already broken ground. I bet many of them wish they hadn’t. I don’t deride you for wanting to create something, it’s just not the right time or place for such thing.
I’m betting a lot that it is EXACTLY the right time and place for this sort of thing. I agree that the projected price point is significantly aggressive, but have no qualms about the general location or a condo product there.
I don’t think that Allen is trying to compete with the big guys, but offering an antidote to them. Going forward, who wants or really needs a 3500 SF villa? I hope part of the current shake up in the market will make buyers question what they CAN get versus what they need and SHOULD get in a house. The big guys are simply not offering the product that will fit the new market. And you bet, the indie can compete with them on construstion costs is this market!
So far 2 yeas and 2 nays…anyone care to break the tie? Green is right in that you cannot compare my idea with the current casino condo conversions. Us smaller guys can react to the market faster than the big guys, thats about our only advantage. I also believe I will have a price and location advantage. There is hardly anything similar in terms of design. Even though I don’t personally care for this type of architecture, I also see pent up demand. Its not like I have to go out and buy the land and hire a contractor to build this, I already have both. I definitely can’t afford to wait till the big boys figure this out. Its just like a big game of Monopoly isn’t it? Bantering Bear, are you still playing Checkers?
I think West Haven wants out of their community (Highland Place) at the corner of W. 7th and Robb drive. There are cluster homes just across the street where the resales are plummeting to the $250k range. West Haven is asking nearly $100k more for similar houses. I’m betting Silverstar wants out of that project across from Renown that was supposed to be a mix of affordable housing for staff and market value for whomever. I have my doubts about Grant’s Landing as well. I know that Centex has started on Sterling Ridge but I bet they’re wanting out of that one. Who wants to buy a three story condo On McCarran or El Rancho for the mid $200k’s?
Allen, I really like the idea you propose with regard to the lofts. The idea is great but I think price will still be a major problem. I look at socketsite.com (San Francisco) and see the modern choices that San Franciscans have to choose from and I’m envious. I think Reno is still too suburban oriented and people have a hard time justifying the prices. I know it’s not all about giant houses, big yards, and big water bills but people still need to think they’re getting something for their money. Until we have horrendous commute times, people for the most part will choose the 2300sq’ tract house for soon to be $270k over $350k 1000sq’ modern dwelling. I’d really be curious to know the professions of the people that bought into 8 on Center. I went through them and thought they were really cool. My problem was they were all oriented towards DINKS or well of singles. I just couldn’t imagine being single and dropping $480k - $500k on a 2 bedroom town home. How many singles are there in Reno that make the kind of money needed to afford such a thing?
“I definitely can’t afford to wait till the big boys figure this out. Its just like a big game of Monopoly isn’t it? Bantering Bear, are you still playing Checkers?”
With your fatuous nature, I’d love to see you plow ahead with the project. Unfortunately, it’s so flawed, you’ll never secure funding to get it off the ground. A shame, since it might have instilled some humility in you.
Chess is more my style, honestly. You should try it sometime. Perhaps, upon learning, it could help you overcome your myopic tendencies.
Perry, I don’t really understand it either, but if everyone did, it would have already been done right? I understand that these condo projects are falling like flies, but show me one like 8 on Center 2 blocks from the University. I’m in the very preliminary stages of this project, but it doesn’t hurt to hype it up here and gauge the response. Maybe Diane can presell them for me=)
BB, you’re starting to sound like my mother =), funny you bring up chess and funding. My buddy’s brother that I met in 7th grade chess club happens to be a partner in an equity firm in San Diego that specializes in funding in-fill projects in redevelopment areas such as mine between $2-20M. I’m still a long ways from getting the cash, but don’t count me out. Check.
Great idea, Allen, and good luck.
I look forward to buying one of your units.
As soon as it goes to REO auction.
Smarten… just for you buddy..
PMI + 30% ( 3 days) Wow what a return!
ORI +8% (3 days) wow what a return!
38% return in 3 days! OUCH!
Allen:
I admire your spirit. There are not too many Mississippi River Boat Gamblers around these parts.
Whether or not this proposal of yours goes boom or bust in 2009 depends, of course, on where the public mentality is with respect to buying condos at that time. We all can pontificate endlessly about that, but in the end it comes down to the fact that we all to some extent wager our financial salvation on untested prophesies.
As you know, I fall in the camp that we are nowhere near the bottom, and that 2008 will bring further deterioration in the market. The fact that developers are getting ready to bail on their projects suggests to me that they do not see any bottom in 2008 either.
My .o2 is that by the time we get to the end of 2009, $350 a sq. ft. for a 1000 sq. ft. condo by UNR is going to look pretty rich.
But if you can make the bet and pull an inside straight, I will be the first to offer my compliments.
Thanks Derrick -
I’ve linked your remarks to an e-mail I’ve sent to a friend who works in the Utah office of the IRS. Sure hope you declare your gains and pay your federal income taxes [ouch!]. Let’s see, with $75K in annual earned income for you and the Mrs., a healthy short term stock market gain may be just the ticket you need to push you into the 30% federal income tax bracket! And of course with no real estate tax deductions because you were savvy enough to purchase your Spanish Springs charmer without a mortgage; and your standard deduction being greater than your yearly ad valorem real property taxes; you get to pay full boat [ouch again]!
True stock market investors retain their positions for years, not days. If you follow suit, let’s see how much you’re up in 10 years. Assuming you’re in for the short haul, let’s call as spade a spade; you’re a player who lives and will ultimately die by the sword [ouch again!].
Sweet dreams buddy!
Smarten, it is not uncompleted roads in the new neighborhood which concern me with partially finished planned developments, obviously the regulatory agencies will be interested in avoiding that circumstance. But I have seen unfinished projects elsewhere at which perimeter landscaping, highway noise diffusion berms, slope maintenance, and construction rock rubble piles have become problems for homeowners and their associations. In some cases, developers have long owned the land, bought cheap way before the development process started. I have always believed they should be required to finish what they started, or else be compelled to pay for whoever must do so.
In my opinion, allowing a “conditioned” abandonment of project completion checkpoints is not a positive development for homeowners in an affected community.
Unfinished projects damage the aesthetics of a neighborhood. I was looking forward to Grant’s Landing being built next to the automobile museum. What was there before was a simple dirt lot with some trees on it. Now that they have torn up the lot, installed partial streets, have metal fencing up around it, and exposed landscaping pipes everywhere, does one think that is pleasing to look at while walking on the river path now? Hell no. They ‘conditionally abandoned’ this project. Whatever. Letting developers do this just gets them one step closer to permanently abandoning certain projects. Give an inch, take a mile.
Hey Buddy -
Don’t want to turn this into a publicly traded stock blog but PMI was down 12.12% and ORI was down 4.63%; both in just one day [ouch]! Guess you didn’t see that one coming, did you? Oh, forgive me. You’ve “invested” for the long term, right [that’s because you were so quick to tell us how much you were up in only three days]?
Good thing you didn’t leverage your positions by borrowing; cause if you had, you probably wouldn’t have had enough time to cover [the big drop occurred at a little after 2 P.M. E.S.T.].
As I said before, live by the sword die by the sword. But I guess there’s always tomorrow.
Sleep tight buddy!
smarten your not too bright sometimes are you.. when I buy a stock like most people do, I set a sell limit, therefore limiting my downside risk and being able to sell before any substantial drop in the stocks price..
Given the fact that pmi was extremely overbought in the first 3 days, It was in my best interests to set a limit to the downside..
Yes pmi was down 12% today. did I give back 12% in gains? No I didn’t instead I had an automatic trigger to sell before the fed’s announcement on interest rates.. once again you are sadly mistaken smarten..
Well Mr. Buddy -
The overwhelming majority of long term stock investors; or for that matter your “professional” mutual fund managers; simply don’t do what you do. Rather, they hold onto their positions for at least a week or a month or a decade and watch exactly what has happened to your PMI. Guessing in the short run [and that’s exactly what you’ve done] is about as prudent as attempting to call the bottom of the Reno-Sparks SFR market.
The only people who do what you assert you’ve done are DAY TRADERS! And that’s you Buddy. As I said before, live by the sword die by the sword.
Don’t know what your limit order was but now we know you DIDN’T make a 38% return [exactly what did you make?]. The rest of us are content with with our investment real estate income tax depreciation deductions which shelter our 12% deed of trust interest income returns which will continue for years to come while you chase the market.
BTW, glad your $39K/year 9-5 job [”between my wife and I we make about $75K/year in earned income”] gives you enough time to “play” the market; and, now we know your gain was ordinary short term income added to your earnings for inceom tax purposes.
Oh for Pete’s sake, ignore our faux day trader, nouveau riche millionaire, crackerjack home repairman and contracting specialist.
He’s already been outed as an Administrative assistant.
A quick trip to zabasearch will tell you everything you need to know.