Many recent comments on this blog have been made regarding how the reported median home prices don’t tell the whole story when it comes to home values in Reno. For this reason many of our readers have expressed a desire to see $/sq.ft. sold price data – the idea being that the $/sq.ft. data might be a truer indicator of where home values are today compared to historical highs.
With this in mind I set out to uncover this information. Unfortunately, our MLS is not set up to automatically break out historical $/sq.ft. price data on a monthly basis. So, I had to pull the home sales for each month separately and then determine the median $/sq.ft. price for that month. What I found was quite interesting. [Note: My original intent was to record data back to 2001, however I quickly realized that $/sq.ft. was a field that did not exist in our MLS prior to 2004. In fact, many of the listings for the beginning months of 2004 have no data for this field; so I determined the median from the listings based upon where data was available – beginning in January 2004.]
Technically, $/sq.ft. prices peaked in October 2005 at $214.29/sq.ft. However, a price of $213.49/sq.ft. was reached in July of that year and held relatively flat (±1%) for four months until the decline began in November 2005. FYI, July 2005 was also the month when median sold prices peaked in Reno – Sparks.
Today, $/sq.ft. prices are $152.31/sq.ft. (April 2008), and have now receded to April 2004 levels.
Looking at the graph below the meteoric rise to the peak looks to have been a smoother ride than the rocky fall back to earth.
Here is the raw data:
| month – year | $/sq.ft. | units sold |
| January 2004 | 129.09 | 432 |
| February 2004 | 133.85 | 441 |
| March 2004 | 146.96 | 600 |
| April 2004 | 153.25 | 635 |
| May 2004 | 163.32 | 600 |
| June 2004 | 164.35 | 655 |
| July 2004 | 173.14 | 674 |
| August 2004 | 174.03 | 662 |
| September 2004 | 178.73 | 765 |
| October 2004 | 181.81 | 572 |
| November 2004 | 182.93 | 440 |
| December 2004 | 184.24 | 549 |
| January 2005 | 187.38 | 412 |
| February 2005 | 189.51 | 453 |
| March 2005 | 193.35 | 719 |
| April 2005 | 199.81 | 705 |
| May 2005 | 204.89 | 775 |
| June 2005 | 209.26 | 847 |
| July 2005 | 213.49 | 724 |
| August 2005 | 212.26 | 747 |
| September 2005 | 213.79 | 661 |
| October 2005 | 214.29 | 608 |
| November 2005 | 209.77 | 502 |
| December 2005 | 209.81 | 421 |
| January 2006 | 212.43 | 353 |
| February 2006 | 211.54 | 360 |
| March 2006 | 207.45 | 494 |
| April 2006 | 205.77 | 458 |
| May 2006 | 212.59 | 470 |
| June 2006 | 207.87 | 523 |
| July 2006 | 204.32 | 454 |
| August 2006 | 201.49 | 436 |
| September 2006 | 192.17 | 444 |
| October 2006 | 193.42 | 457 |
| November 2006 | 189.06 | 355 |
| December 2006 | 194.42 | 375 |
| January 2007 | 200.41 | 352 |
| February 2007 | 188.22 | 348 |
| March 2007 | 190.18 | 404 |
| April 2007 | 193.42 | 423 |
| May 2007 | 189.81 | 464 |
| June 2007 | 181.94 | 397 |
| July 2007 | 184.21 | 386 |
| August 2007 | 177.08 | 389 |
| September 2007 | 173.38 | 301 |
| October 2007 | 168.08 | 285 |
| November 2007 | 166.93 | 252 |
| December 2007 | 165.01 | 266 |
| January 2008 | 170.23 | 204 |
| February 2008 | 154.29 | 233 |
| March 2008 | 149.57 | 259 |
| April 2008 | 152.34 | 350 |
| May 2008* | 147.81 | 106 |
* The month of May is partial data.
Note: Data includes all residential sales reported to the Northern Nevada Regional MLS database (NNRMLS) for MLS area #100 – Reno-Sparks. It does not include FSBOs (sales made "By Owner") or most new home sales, which do not participate in the MLS system.
Grand Wazoo
Excellent data Guy, just excellent.
Could be well south of $125 after all the REOs are flushed out of the system.
Sully
Good info. To bad it doesn’t tell you about landscaping, hardwood floors, high end kitchen, etc.
And then the real stickler – views and location.
I’m still at a loss to see how view lots (partially blocked and/or winter only) and location get so much credit here.
As one of your last articles said we have an average commute time of 15 minutes (which I find to be true), being close to everything isn’t much criteria for location.
So, who comes up with the extra 200K – 300K for view and/or location. I mean whose big idea was this?
Even in Silicon Valley the premiun is rarely that much.
Guy Johnson
Sully,
You are correct that finishes, landscaping, views, etc. all impact $/sq.ft. My point simply was to graph the medians over time. Given the monthly sample sizes (700+, in some cases), I’m confident some value can be gleaned from the exercise.
Regarding view premiums, yes they can be quite high, however I have seen these [view premiums] come down quite a bit since the peak of the market. For example, I can recall when two houses (same model) on opposite sides of the street [in ArrowCreek] would easily command a $100K differential based on view only. Today that same view premium is more likely to run $40K – $50K. I have no hard data to support this statement; this is just from personal observation.
smarten
Interesting data Guy. But I don’t know how useful it really is.
First of all, let’s remember your numbers represent AVERAGE [rather than MEDIAN] price/square foot data for all MLS sales; correct? Thus a whole lot of sales at the lower end of the price spectrum; and virtually none at the higher end; can easily skew the numbers [and vice versa].
Second, it’s pretty tough to build at the high end of the market for $150-$200/square foot [correct Allen?]. So applying a $150/square foot number for that segment is unrealistic.
So just like we speak about what’s going on in different market price tiers [there’s a lot of talk here that we may have reached bottom in the lower end (pricewise) of the market even though we expect the median sales price to fall in future months because the upper end of the market is primed to implode], I think we’d need to adjust our price/square foot barometer based upon the particular price tier we’re looking at.
Now just for fun [and comparison purposes], I happen to have the price/square foot numbers for every SFR that has sold since the first of the year in Incline Village/Crystal Bay [and remember, 50% of those sales were below $1M]. And the answer is…
$571!
And if you think this number is high, remember that today’s price median in Incline Village/Crystal Bay is about 25% lower than it was at the end of last year [can you imagine what the price/square foot was back then?].
So when Sully asks who comes up with the extra $200K-$300K for view and/or location, it’s the marketplace.
Guy Johnson
Actually smarten, I purposely determined the median rather than the average, just for the reason you cite. My methodology was to pull all sales for a given month; sort by $/sq.ft.; and then choose the middle value.
Interesting Incline Village $/sq.ft. comparison. $571!? Wow.
RoyalFlush
Both measures of central tendency are not immune to skew. You have taken the median of a segment of the market (that segment being the most active).
stjoe
I have an unblockable view of downtown Reno and the mountains north of the city from my house. Between my backyard and the backyard of the house facing it is a large unbuildable gully. I don’t know how much these two items are worth, but it is surely worth something. Surely far more than a house that looks directly in the neighbor’s backyard.
SJ
Allen Murray
I agree with Smarten, I’m not sure how useful price per sq. ft. is. It is interesting that the curve roughly follows the median sales price, so I guess one could deduce that as median sales price falls, you get more for your money, but I think everyone knows that. I’ve noticed over the years that smaller condos/and houses tend to sell for a higher price per sq. ft. than larger houses (>4000 sq. ft.) Price per sq. ft. is most useful when comparing similar homes in similar market segments.
Smarten, as for construction costs, I am currently building a medium to low end custom (granite, tile, stucco etc.) for a client for approximately $134/sq. ft. This doesn’t include land or interest/loan fees, just to give you an idea, and that’s with a relatively low contractor profit/overhead margin of 10%. My house for sale is probably high end for Reno, (Diane thought is was Montreau quality) and I am currently priced around $250 sq. ft. Let me know if you want something built, I’m available=)
BanteringBear
Allen-
Since you love talking about yourself so much, perhaps you could answer a question regarding your “Montreux quality” abode. If it is indeed such high quality (I have my doubts), then why on earth did you build such a house, in that neighborhood, and on a tiny lot no less? It boggles the mind.
Allen Murray
Bantering Bear, I think you like talking about me more way more than I do, but I will give you a brief answer to a long story. I was standing on my vacant lot with my fiance and private lender (a personal friend) discussing our target market. I wanted a 3000 sq. ft house and borrow about $500k. Keep in mind this was in 2004 when things were really cranking up. My money man suggested we step it up a notch since the average home size in my neighborhood was over 4000 sq. ft. (plus I think he wanted to loan more money). My ex wanted her dream house. So I take my 3000 sq. ft. concept to my architect and tell him this is what I want but its ok if he goes a bit over. Well, his first draft came back at 5300 sq. ft. My fiance is now my ex, my money man died suddenly and now I have a nice McMansion. I’m not making excuses, I allowed myself to overshoot the market a bit. My biggest mistake was waiting for my 2 year rule before selling to avoid capital gains. If I would have sold it right off the bat, we wouldn’t be having this conversation. Fortunately, I sold 3 other properties during the same time, so again, I can’t complain. So why don’t you tell us your story BB, why are you so angry?
BanteringBear
Allen-
Thanks for answering. Waaaaay too much information, by the way. You opened yourself up for a couple blows to the lower trunk, but I’ll refrain for now. Angry? Not me. You? Perhaps…
P.S. I’ll give up something real estate related. Waiting for rightly priced 10 acre Puget Sound parcel to turn into garden nursery. Will be a few years down the road to be sure.
Allen Murray
Good luck with your venture BB, if you think that’s too much info, you definitely don’t want to know the whole story, I just gave you an honest answer. When you are in my business you have to have balls of steel, so I’m not afraid of blows to the lower trunk. Let me know if I can educate you on anything else…….
ThomasV
Thanks Allen for those memories of 2004……..when “debt was wealth”, and a mortgage was “an investment.” Ahh yes the absurdity of it all. Why buy for just $500K and only see the “value” go up $100K a year, when one could pay $600K and see the value go up $120K a year. That REIC guaranteed 20% a year was sooo great. What a fool one was to not offer more than the asking price. In fact, the more in debt one was, the wealthier he was.
MikeZ
More data = more better. Thanks, Guy.
Reno Ignoramus
Grand Wazoo, there are already houses below $125 sq. ft. And they aern’t in Cold Springs.
1803 Laurel Ridge in Somersett. 5,782 sq. ft. for $695,900.
$120.35 a sq. ft.
MikeZ
Why buy for just $500K and only see the “value” go up $100K a year, when one could pay $600K and see the value go up $120K a year.
That sure was a crazy time.
Every new soon-to-be-millionaire believed that “the more you buy, the more you make!” and “real estate NEVER goes down!”
And then there were the people who somehow convinced themselves that we had entered a new market paradigm, where housing would forever cost 60%, 65%, 70%+ of net income …after all, who needs to save when your house is cranking out 10%, 15%, 20% per year? And the really smart people bought with no money down to maximize ROI. Wow! Infinite ROI!
So go ahead and buy that $500K home with no money down and an Option ARM. Spend 75% of your net income on the interest only mortgage, it’s Ok!
Next year your house will be worth $50K more and you can extract that with a HEL/HELOC.
Wow! You’re rich! Wasn’t that EASY?!
A lot of (otherwise) smart people drank that get-rich-quick Kool-Aid.
Sully
Thanks Guy. I agree with the 50K premium for view, its reasonable.
I guess the rest of the house will have to come down to 100/sq ft to get into the reasonable range. 🙂
smarten
Thought you’d all get a chuckle out of this one. Page B5 of today’s RGJ – see the advertisement by two Incline Village [“IV”] Intero agents [Davidson & O’Donnell]:
“Market Update…The Housing Crisis is Over…it is very likely that April 2008 will mark the bottom of the U.S. housing market…Translation for the Tahoe [IV] Market. This is the ultimate buyer’s market. Call us now while home property prices are within reach.”
Sully
Thats interesting. Buy now while the prices are still within reach.
What happens when you want to sell when the price goes up?
relocating buyer
housing crisis is over neat who believes or trusts realtors anymore? why insult buyers…..do not understand nevada thinking
Guy Johnson
Is this [$/sq.ft.] data useful, I suppose it depends on how it is applied. Certainly each property is unique and should be valued on its merits (lot, finishes, view, etc.) – all of which impact a property’s price per square foot.
My goal was to gather, record and present the data, and then to allow readers to draw their own conclusions. That being said, what *can* we determine from this data? Well, one thing I notice is that the decline in price per square foot has been greater than the decline in median sold price. Let’s look at the numbers:
For the month of July 2005 there were 724 residential sales [all property types: condos, town homes, site/stick built, manufactured, etc.) in Reno-Sparks recorded to our MLS. The median sold price for these 724 sales was $339,450. From the table above we see that the median price per square foot of these July sales was $213.49.
Last month [April 2008] there were 350 residential sales recorded to our MLS. The median sales price was $263,085. The median sold price per square foot was $152.34.
So, since July 2005, median sales price has declined 22.5%. Price per square foot, however, has declined 28.6%. What can we infer from this? I believe it is fair to say that a home buyer purchasing a home today at prevailing market prices would get proportionally more home than the buyer would have gotten paying prevailing market rates in 2005. If that statement is confusing perhaps some real numbers will demonstrate my point.
Let’s say a homebuyer bought a $500,000 house in July 2005; paying the then median price-per-square-foot price of $213.49. Such a house would presumably be around 2,342 square feet. Today, discounting the $500,000 price tag by the decline in median sales price yields $387,500. Presumably, a homebuyer could by that same house for $387,500 today.
However, today’s median price-per-square-foot price ($152.34) tells us that the home buyer’s purchasing power with $387,500 would produce a 2,544 square foot house. 2,544 vs 2,342: That’s 8.6% more house today at prevailing market prices.
smarten
I hear what you’re saying Guy, but I can’t agree with your conclusions.
Here’s where I think the data is useful. Regardless of the price of a home today, I think the closer you can get to your median price/square foot figure, the greater the represented “value.” Does this mean other factors don’t mean more? Of course not. It’s just that a lower price/square foot, everything else considered, is another factor that indicates value [and vice-versa of course where the price/square foot is exceptionally high].
Let me point you to that home on Londonderry in St. James I previously referenced on this site. Only $184/square foot. But that’s primarily because of over 5K square feet. But 5K square feet isn’t important to me. And I don’t like the orientation nor asthetics of this home. So the fact it’s a low price/square foot, isn’t important to me.
But if I did love the home, the $184/square foot number would be another compelling factor; maybe even a factor that overrode the excessive square footage that I don’t care about.
Just my two cents.
GreenNV
In the back of my mind, I look at PSF. But way back. It only serves as a check number for me.
What do I want? Location. View (hard not to have a view in most of Reno!). Not icky. No HOA or CCR’s. And I’ll pay for those assets.
What I NEED is about 1200 SF. A place for a bed or two, a couple alternative locations for “body maintenance”, a place to cook, a place for my dog to dump. I don’t need anything Toll Brothers would ever consider building. I don’t golf and look down on those who do. Where I’m from, “stucco” (officially cement plaster) is the DOWNGRADE exterior finish, not an upgrade.
So what I want will be at a much higher PSF than the mean. And where do I find it around here? Somersett, Arrowcreek, Montreaux, Incline? Not a chance.
The opportunity to create a home customized to you desires and lifestyle needs to be factored into the PSF numbers.
Reno Ignoramus
I see where the GSR has a 558 sq. ft. “condo-hotel” unit listed at $330K. That’s $592 a sq. ft. Is that what you mean, Green, when you talk about one not caring much about PSF in order to get the condo-hotel of your dreams?
Paul
Guy, could we get a similar graph ($/sf, volume) for Incline Village SFR’s. It would be greatly appreciated. BTW smarten we have a similar ad running in the Bonanza (May 16 p. 8-D) by Coldwell Banker “ITS OVER! Three credible sources say the real estate market has bottomed out.” One of the sources is Realty Times, a trade publication , another source is “The Village Eight” the realtors in Incline who took out the ad. Im not making this up. Absolute insanity. Don’t these people remember David Lereah, the Baghdad Bob of real estate?
smarten
Interesting Paul.
Quite coincidentally, after I alerted everyone to the subject advertisement, I received an e-mail from a Bay Area friend of mine. He had received an e-mail from an IV agent basically feeding him the same garbage. My friend forwarded a copy of the e-mail he sent as well as his response which basically blasted the agent [for analytical reasons].
Then this evening I received an e-mail from a different agent in Truckee, who fed me the same line of garbage citing the very same sources.
I’m actually surprised Chase COO Craig King didn’t publish the same garbage on ChaseNation!
I really, really believe that some national real estate source has cited these same authorities in support of the argument the market has bottomed, and told local managing brokers to motivate the troops by getting them to mine the masses. It just seems way too coincidental to all of a sudden hear the same spiel from so many different sources.
Of course maybe all of these gurus are correct and we’re the ones out to lunch?
Riston
Is it really so hard to understand this? We are closing in on the end of May, and the end of the “spring selling season”. It hasn’t been a great spring. The realtors are getting desperate as we move out of the best time of year to make deals. All the realtors have left is hype and spin. I don’t mean to get political here, but this is the realtor version of “we are behind in delegates, we are behind in votes, we are behind in states, but we are closing in on the victory”.
Marla
You’ve got me chuckling Riston. I would say that there is about as good a chance that prices in IV will not go any lower as there is of Hillary winning the nomination.
But it doesn’t hurt to spend a few bucks in advertising to try to create the appearance. In real estate, as in politics, the appearance is everything.
ThomasV
This is entirely predictable. I lived in Hawaii in the 90s and watched the market there drop for basically 10 years after the Japanese bubble burst. There was a group of realtors on Oahu that called the bottom about every 3 months for years. It became a farce after a while.
It isn’t different this time.
Paul
On a different note, observers of the Reno real estate market might be interested in the Washoe County Planning Commission meeting this Tuesday, May 20th at 6:30 PM in the commission chambers at 9th and Wells. On the agenda is the Forest Plan “Update” which stealthily up-zones several large parcels in the Callahan Ranch area under the guise of “smart-growth” and “green building”. The 620-Acre Matera Ridge (MR) property, currently entitled for only 41 parcels averaging 2.5 acres each is slated to be approved for a whopping 620 residential units if planner Eric Young’s recommendations are adopted. MR is located at the end of Fawn Lane, south of Mt Rose Highway, and east of Callahan Ranch. Neighbors are angry at the radical change in land use as well as the manner in which it is being put fourth. Ordinarily, developers seeking a change in zoning would have to apply for a comprehensive plan amendment, pay a costly set of fees to the county and supply detailed engineering studies analyzing factors such as slope, water availability, traffic impact and proximity of utilities. However, Washoe County is leading the up-zoning in this case. Politically connected developers meeting with planners behind closed doors have evaded the standard process for up-zoning, skirted the required analysis, and essentially are having their projects marketed to the Planning Commission and County Commissions on the taxpayers’ dime.
Sully
Guy, do me a favor. Post a note up at Chase:
LOOSE is how your shirt fits; LOSE is what you do at the casinos.
RoyalFlush
Paul, Please provide links or point me in the right direction so I can follow the issue.
Paul
Royal,
Here is a link to the Planning Department’s staff report. http://www.co.washoe.nv.us/comdev_files/bc/bc_pc_2008_agendas/052008agw_sr.pdf
The RGJ is going to cover the Washoe County Planning Commission meeting Tues. night.
RoyalFlush
I read the article and thanks for the link.