I found a report yesterday that tracks housing values and transaction counts for 25 of the largest MSAs (Metropolitan Statistical Areas) in the country. The report, compiled by radarlogic.com, compares (among other metrics) housing values on a $/sq.ft. basis and tracks M-o-M and Y-o-Y percent changes.
Of particular interest is the year-over-year percent change in housing values. It probably comes to no surprise that every area tracked experienced a decrease in house values in June 2008 compared to June 2007. The 25 MSAs and their one-year % change can be found in the table below.
|
|
MSA |
price/sq.ft. |
June ‘08 vs. |
|
1 |
Las Vegas, NV |
$121.17 |
-30.8% |
|
2 |
Sacramento, CA |
$155.71 |
-27.8% |
|
3 |
Phoenix, AZ |
$115.28 |
-26.9% |
|
4 |
Los Angeles, CA |
$289.15 |
-26.5% |
|
5 |
San Diego, CA |
$235.76 |
-25.6% |
|
6 |
San Francisco, CA |
$340.51 |
-25.0% |
|
7 |
Miami, FL |
$155.61 |
-21.9% |
|
8 |
Tampa, FL |
$112.36 |
-18.5% |
|
9 |
San Jose, CA |
$398.18 |
-17.0% |
|
10 |
Washington, DC |
$197.02 |
-16.0% |
|
11 |
Detroit, MI |
$90.71 |
-15.2% |
|
12 |
St. Louis, MO |
$102.23 |
-13.5% |
|
13 |
Boston, MA |
$220.01 |
-10.2% |
|
14 |
Jacksonville, FL |
$112.43 |
-10.2% |
|
15 |
Minneapolis, MN |
$143.92 |
-10.0% |
|
16 |
Chicago, IL |
$184.46 |
-10.0% |
|
17 |
Denver, CO |
$137.68 |
-9.4% |
|
18 |
Cleveland, OH |
$88.55 |
-9.0% |
|
19 |
New York, NY |
$283.36 |
-8.3% |
|
20 |
Seattle, WA |
$216.79 |
-7.9% |
|
21 |
Atlanta, GA |
$97.34 |
-6.6% |
|
22 |
Philadelphia, PA |
$152.14 |
-5.1% |
|
23 |
Milwaukee, WI |
$124.97 |
-2.0% |
|
24 |
Columbus, OH |
$100.26 |
-0.7% |
|
25 |
Charlotte, NC |
$100.62 |
-0.2% |
Note: the data in the table above taken from the RPX Monthly Housing Market Report - June 2008.
Notice that Western cities took that top six spots. I wanted to see where Reno ranked, so I compared all sales in June 2007 to all sales in June 2008. The percent change over this period was ~15%, which ranks Reno, NV somewhere between Detroit, MI and St. Louis, MO.
Take a look at the complete report and the associated site. Lots of good info here for the data fans.
22 comments
Wow, between Detroit and St. Louis. Hold your head up Reno!
YOY statistics really don’t tell the story anymore. Remember, our peak median was in July 2005, over 3 years ago, and some REOs are listing at Q4 2003 pricing, 5 full years ago.
I don’t know where you are pulling your numbers from or I’d do check it out, Guy, but YO2Y and YO3Y statistics would really put how far Reno has fallen into perspective.
If you believe in Zillow, my house peaked out at $543K approximately 2 years ago. Now Zillow says it is worth $355K. Down approximately 35%. According to my eyeball observation of houses sold in my neighborhood, these are reasonable figures. By the way, I bought my house in 1998 for $277K
According to all the real estate gurus, the Reno market was always driven by the “rich guys” from Sacramento to San Francisco. I guess this was always to account for the skew of prices vS. median income.
So I guess now, our price decreases should be tied closely with the S.F. & Sacramento market….. so that means another 11% discount from yesterday’s price and things will start selling.
Tommorow doesn’t count… cause then a buyer should expect a 12% decrease!
Interesting report. The fact that it’s comparing price per foot is much more useful than average price since the volume much more substantial at the lower price points in the market. Median and average price readings are too easily skewed. Of course since real estate does not have uniformity of individual asset value so we’ll never be able to have a truely accurate reading on the market representation and how that translates to individual owners. That of course raises the issue of the apples to apples comparison lost in the price per foot since “distressed” sales are now approximately 50% of the Reno market volume and “distressed” property is often an inferior housing stock. Radar Logic’s data seems to support this evidenced by the motivated seller trend line.
Another caveat to the radar logic composite report is that it’s weighted almost 25% to the New York MSA which I’m guessing isn’t highly correlated to the Reno MSA. Nonetheless it’s a brilliant idea that those guys have developed with an exchange traded derrivative for various real estate markets.
Dovetailing on Kevin’s post, if we assume:
* sub-prime loans are the hardest hit today in terms of foreclosure and
* sub-primes were skewed toward entry level homes, and
* Alt-As and Prime with resets have not yet hit the fan, as the scary graphs show, and
* Alt-As and Prime with resets were skewed toward middle and upper end homes, then:
no wonder we are seeing great distress in the low end but not much distress in the high end, at least not yet.
Despite much talk of incomes, ‘rich Californians’, etc. there is really no hiding the fact that driving the fear in the markets is the hangover from the debt party. Capital markets, housing markets, builders’ and lenders’ stock prices, etc. are all on hold until the effect of the Alt-As and Prime resets are known. But middle and high end homes are in no way immune to the declines we’ve seen in other strata.
Nothing groundbreaking here, but get ready for the opportunity to come.
By the time things settle down, my credit will be healed enough to get a mortgage again.
billddrummer posted:
“By the time things settle down, my credit will be healed enough to get a mortgage again.”
Better plan on having 35% down. The lenders aren’t going to want to touch you, otherwise. I think they’ll have learned their lesson after the dust settles.
Here’s an article from a San Francisco publication which readers may enjoy. From the article:
“Susan Fallis, a communications professor at Saint Mary’s College in Moraga, so far seems to fall into the “get the loans off the books” camp of Wachovia customers. In 2004, she sold the Santa Cruz parking lot her father bought in the 1960s for his mobile home business. She reinvested the approximately $3 million into 20 single-family houses in and around Reno, with a 40 percent down payment on each one. Sixteen of the loans were Pick-a-Payment mortgages from Wachovia. Because Reno rents dropped as her minimum payments climbed, she is now losing about $7,000 per month.”
Uh-oh, looks like there’s some future REO inventory waiting in the wings. With her 40% down, the banks are going to move fast to take those houses back. Another one bites the dust.
Good for you Bantering; I wondered when someone on here would raise this story. I have been to the Assessor’s site as well as the Recorder’s site and reviewed Ms. Fallis “investements.” I looked at 10 of the 20. Most of her purchases were in Sparks in new or newer subdivisions and all were purchased in the first two weeks of May 2005; could she have chosen a worse time? Using Zillow, which I think is high for these areas, it looks as if she has lost approximately about 100K on each home or about 2 million to date. Hey, what the hell, she still has a million in equity; however, by next May that should be gone.
You can find her under her business name: Fallis Properties,LLC. Some of the addresses, if anyone is interested:
7265 Heatherwood
4154 Pillary Court
4075 Ventian Ct.
1130 Forest Knoll Ct.
14315 Ghost Rider
Casa
Sad to see anyone go thru bad times, but had she put the $3M hard-earned, dad’s career inherited money into a cost efficient (economies of scale) and easier to manage apartment community rather than masses of one-off houses, I envision the numbers would have looked like this:
* $3M equity
* $7M debt (70% LTV, 1.20 DSC, maybe 1.15x at the time. lower LTV in CA, so my numbers would be a bit skewed, but still…)
* the rate, fixed, non-recourse, for 10 years with first 5 years of I/O at the time, then 30 year schedule thereafter, would have been around 5.25%-5.5%
* $10M purchase price would net maybe 111 unit, class A apartment community in Reno, 55-60 units in Silicon Valley. More units for class B.
* She would have bought at around 5% cap in Silicon Valley, 6% ish cap in Reno.
* Rent growth since then in Reno maybe flat at this point, but in Silicon Valley up 20% increase ‘ish’ from 2005.
* Occupancy would be 97% in Silicon Valley today, maybe 93% ish in Reno, so she’d be quite healthy and very adequately debt-servicing.
* A third party magagement company would be managing for her, efficiently, professionally, with little invovledment or worry from her (caveats of course).
* Her debt would be NON-RECOURSE, so she’d rest a bit more comfortably. Hmm, sleeping well at night.
* Her values in Reno or CA would be flat or up, not down, and besides, she’s be plenty cash-flowing so she could hold for years and years probably yielding 7-10% cash-on-cash today, higher if she’d done some light rehabs or effective expense management.
Tell me again why people buy a bunch of one-off single family homes and think they can get them to adequately cash-flow?
Cash flow? This had nothing to do with cash flow; this was a bet on the Come Line and now it’s, “Seven, line away!”
Casa
CL - that was my first thought when I read the post. Who in their right mind would buy 20 houses in the same area at the same time.
But, then again, that Silicon Valley thinking: its just gonna keep going up and never come down.
Yeah right.
I took a quick look at all 19 properties. All were second tier resales purchased between April 15 and August 15 2005. All were Option ARMS, 16 with Home Savings (Wachovia) and 3 with WaMu. Purchase prices ranged from $320,000 and $441,000, most around $350,000. She made some Realtor rich!
I have never seen such a bone-head real estate strategy (well, two others, in a minute). She was basically competing in the Sub-Prime market using Option-ARMs with a lot of equity. Can you say train wreck?
Would buying highly leveraged new homes at a higher price point be even dumber? Check Rios, Edelmira and Myers, David G. (with Hoffman, Terry) on the Recorders site. One has sent 11 homes into TDs, with a couple more on the way (a local Realtor, no less - 10 more TDs from her immediate family). The other continued to buy into 2007, but hasn’t defaulted yet and is starting to get out.
Could those be high leverage, cashed out mortgage fraud situations?
My apologies as I forgot to include the link for readers. Here it is:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/04/BU2F12NEBN.DTL
There’s got to be more to the story than we’re getting. With that sort of cash, she could have qualified for prime loans. It just doesn’t make sense, that somebody could be so stupid. That said, this massive bubble is taking down some old money as well. I’ve seen plenty of seasoned old timers grotesquely overpaying for land in the very areas they’ve lived in their entire lives, believing that things are “different” this time around. There goes the farm.
Not to disrupt the thread, but GreenNV you asked about Yo2Y and Yo3Y numbers. Although the radarlogic report does not report Yo3Y numbers, they do report the five biggest gainers and five biggest decliners for Yo2Y, as well as Yo5Y.
The five biggest losers (based on a 2-year annualized % change) are:
Sacramento, CA -20.4%
Las Vegas, NV -19.3%
San Diego, CA -18.0%
Phoenix, AZ -16.0%
Los Angeles, CA -14.6%
Again these are annualized percentage losses.
How does Reno compare to these biggest losers? If my fuzzy math is correct, I get the following using June’s numbers:
Annualized Yo2Y: ~ -11.2%
Annualized Yo3Y: ~ -8.0%
If we look at peak to current, the median home sales price peaked in Reno in July 2005 at $345,000. July 2008’s median was $247,000. You can do the math, but today we’re 28.4% off our peak sales price.
“Tell me again why people buy a bunch of one-off single family homes and think they can get them to adequately cash-flow?”
As Casa de Dolar states, these SFRs were not purchased for cash-flow purposes. Although income tax consequences should have been of no consequence [given the stepped up basis of her inherited property] to Ms. Fallis, let’s assume for the moment they were.
I see nothing wrong with a 1031 exchange of investment land in California for multiple SFR rentals wherever. Given what would have probably been a 9.6% California state income tax on the sales gain [there’s no reduced capital gains income tax rate for state purposes], Ms. Fallis could have sold her exchanged SFRs on a regular installment basis and saved herself the 9.6% state income tax even if the SFRs did not sell for more than what she paid.
And I see nothing wrong in investing in multiple SFRs versus the stock market [look at what it’s doing now - which BTW is what it ALWAYS does insofar as most of us are concerned] or multi-family housing.
I do have a problem with where she purchased; her lack of diversification; the kinds of purchase money loans she secured; the amount of down payment she came up with [although the relatively low LTVs suggest this very well might have been an exchange]; the potential negative cash flow she set herself up for; and agree with BB that there are probably some additional twists to this story we’re just not privy to.
But overall, I like the global strategy. In fact in the coming years I may very well be making the same type of lateral 1031 exchange I’ve alluded to. But hopefully, I’ll avoid some of the pitfalls Ms. Fallis got herself into.
Three additional points.
I find it hard to fathom that Reno/Sparks rents have gone down by any appreciable amount in the last two years. They were low before, and they’re low now.
I find a $7K/month negative cash flow for a combined twenty SFRs to be pretty good [the depreciation write offs alone should have been at least 150% of this number]. In other words, Ms. Fallis should have anticipated this kind of negative cash flow when she initially purchased. So again there’s more to this story.
Finally, what happened to good ole Michelle Plevel. This is the Chase agent who counsels that if the borrower approaches his/her lender with honesty, logic and honey, he/she will probably be successful in convincing his/her lender to modify a recasting ARM [you can read about it at http://www.chasenation.com/profiles/blog/show?id=2000642%3ABlogPost%3A5961 ]. A Plevelism indeed!
I thought mortgages in NV were all recourse, not non-recourse (like CA)?
To BB,
I’ll stay a renter if I have to put 40% down. It’s not worth the hassle.
To homepop,
You’re right.
[…] 9 Reno’s housing price decline compared to other markets by Guy Johnson Last June I posted a report by Radar Logic that tracks housing values and transaction counts for 25 of the largest MSAs (Metropolitan […]