Reno Sparks Real Estate Market Update

Sales in November 2008 were up 16% from the year prior. The under $300K saw its average price drop to a new low of $184,241. Activity in the $300K-500K range held steady on nearly all fronts. The $500K-1 million category faltered with 50% fewer sales and now features five full years of inventory. The $1-2 million range perked up a bit, dropping to 32 months of inventory. The $2 million plus range had no sales again this month. Together these two price ranges represent 40 months of inventory. Pendings dropped again, normal for this time of year, and nearly half of those were offered for under $200K. Properties under $200K continue to sell through with an average price of $141,623. Looks like I’ll have to restructure my price band reporting after the first of the year to better reflect current pricing conditions. Full report.

Data courtesy of NNRMLS, November 2008. Report includes Stick-Built Single Family, Condo/Townhomes, and Real Property Manufactured Housing in Reno-Sparks (Area 100).

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16 Responses to Reno Sparks Real Estate Market Update

  1. Avatar billddrummer says:

    Diane,

    Great data as usual! Thanks so much for this resource!

  2. Avatar smarten says:

    Sorry to be off topic but…

    Allen, are you lurking out there? Remember some months ago I voiced my opinion that long term mortgage interest rates were out of whack with the Federal Cost of Funds rate and massive adjustments were in order? Remember I predicted 15 year fixed interest rates would hit 4.75%? Well today the DID. Not with all lenders mind you, but with one of the several I’m monitoring [penfed.org].

    Furthermore, with this lender there is no premium assessed for a jumbo [up to $750K] OR super-jumbo [up to $2M] over conventional [$417K] loan amounts; not only incredible, but it puts to bed the disparity most lenders/mortgage brokers are assessing!

    So now I’m going to make another prediction – rates are going DOWN. I can’t imagine them going down a whole heck of a lot further but my fixed rate target [and hope] has now become 4.25%. If Treasury approves this rate for conventional loan amounts purchased by FNMA or FHLBB, that’s where I see mortgage rates heading within the next 60 days.

    Given the “cost” of a home [when one includes mortgage costs over a 30 year term] is 2.5-3 times its purchase price, the interest rate on your mortgage becomes very important; oftentimes, nearly as important as the price you pay.

    You doom and gloomers out there can [and will] do whatever you want and that’s just fine. But IMO if you’re looking to purchase anything with OPM [like the government’s], you’ll likely never, never see lower rates in your lifetime than you will see within the next 60 days.

    So with the median sales price dropping, and I know many of you doom and gloomers out there think this condition is going to continue for years, you’re seeing the “perfect storm” develop right before your eyes. To those of you willing to act on what your eyes are telling you, the time is almost here. And for the rest of you…

  3. Avatar BanteringBear says:

    I’m starting to think Smarten’s a realtor. The whole “hurry up and buy” routine is nauseating. I agree that low rates are a good thing, but whether or not now is a good time to buy depends on many variables, with the most important being the price of the house. Sure, low rates translate to lower payments, but some homes still carry a ridiculous premium sure to have the legs kicked out from under it, especially in the environs which the Incline Oracle so desires.

    Furthermore, in 2003, I heard “you better buy now”, or “you better refinance now” because “rates will NEVER be this low again”. Guess what? Five years later, and they’re right back where they were. Nobody, including Smartradamus, can say with certainty where rates will be in another 5 years. There is absolutely NO REASON TO HURRY to buy a house.

  4. Avatar smarten says:

    BB and several others of you know I’m NOT a realtor. And I can tell you one thing; if fixed mortgage rates on jumbo loans drop to 4.25%, you’ll NEVER see them lower in your lifetime! As evidence of this observation, why don’t you ask BB when in HIS lifetime were they ever that low [the answer’s NEVER]?

    And unlike many of you, NO I don’t think the Reno/Sparks SFR median sales price is going to drop below $200K [this is just my opinion just as BB and others have theirs]. I don’t know how low it’s actually going to get but today’s median sales price is now within 10% of $200K and the rate of decline has slowed.

    So if you’re considering a purchase of a Reno/Sparks median priced SFR, it seems to me to make more sense spending between $200K-$218K IF mortgage rates drop to historical lows compared to waiting a year or more for prices to possibly [and I say POSSIBLY] drop to let’s say $188K if mortgage rates end up being 1%-2% higher than I believe they’re going to be within the next 30 days.

    That’s why IMO you have a perfect storm forming; declining sales prices; declining interest rates; a $7,500 federal income tax credit; and, increased inventory [a greater selection than generally available].

    Do “some homes still carry a ridiculous premium sure to have the legs kicked out from under” them? Absolutely! But no one is saying anyone should make an indiscriminate purchase just because long term mortgage rates drop.

    And BTW, thanks for the “Incline Oracle” moniker BB. But this time, this oracle was correct [insofar as long term mortgage rates are concerned] and he was one of the few to go out on a limb on this subject.

  5. Avatar Marla says:

    Smarten, what you are doing is saying you can predict interest rates. I suggest that’s no different than saying you can predict the stock market. Or the housing market. Which, if I recall, you have actually done here.

    Are not you the guy who said we would reach the market bottom on January 11, 2009? In other words, in 30 days? Now please don’t tell me you were just joking and didn’t really mean it.

  6. Avatar BanteringBear says:

    It’s obvious where the IV Oracle and I differ. He thinks prices have pretty much bottomed out, choosing to ignore the ugly inventory overhang, the horrific mortgage reset chart, skyrocketing unemployment, declining wages, tightening credit, and on and on and on.

    I choose to pay attention to all of these details, and what they all say is: LOWER PRICES. You can’t buy a house without a job and money! And no, a housing market CANNOT be carried by “investors”.

    As another poster mentioned on another thread, we’re starting to hear forecasts for double digit unemployment nationally. These are the same conservative “economists” who originally said that home prices would never fall nationally, that the worst markets would see maybe a 10% decline, yada, yada, yada. We all know how that turned out. If they’re calling for 11% unemployment already, that’s NOT good news, and housing prices are going to crater worse than ANYONE ever imagined.

    I think the IV Oracle’s got on rose-colored glasses with Kool-Aid pumping straight into his veins.

  7. Avatar Reno Ignoramus says:

    The best leading indicator of a housing market is the pendings:listings ratio. That ratio for Reno-Sparks is now, and has been for well over a year, about 6:100. By any standard, that’s dismal.

    There are YEARS and YEARS of inventory, ranging from just over one year at the under $200K price segment, to more than 5 years in the high end.

    Half of all houses on the MLS are vacant.

    More than half of all sales are now foreclosed properties.

    Foreclosures are predicted, by every reputable source, to continue to increase. Really, find me one source that says the foreclosure tsunami is abating. But I said reputable, not the NAR.

    The recession is getting worse, not better. Really, just read ANY reputable source of financial information. Who, anywhere, suggests we are closer to the end than the beginning of the recession?

    So, the reasons to believe that housing prices are close to the bottom is……….??

  8. Avatar smarten says:

    Predicting interest rates is a lot easier than predicting the stock market [which consists of a bunch of cheaters in a game of poker]. If you read back to what I said how many months ago, mortgage interest rates were artificially high at the time compared to the Federal discount rate [even though there is no direct correlation between the two]. Although I didn’t know why at the time [it turned out to be the drying up of credit (even though BB was quick to point out I wasn’t being truthful with my personal credit experiences)], I knew they were out of whack and hopefully would adjust. That’s what’s happening now. And the proof is in the pudding.

    Why am I holding out [NOT predicting] for 4.25% fixed mortgage rates? Because the Treasury has already leaked its balloon that it intends to bring down those rates [at least for conforming loan amounts] to 4.5%. There’s even talk [but I don’t believe it] of 3.5%! And given the cost of funds to the government is now less than 0% [note the latest T-Bill auction], it can still make a good little profit loaning out at 4.5%. Thus if credit starts flowing again [which we’re all hoping it will], I believe lifetime low mortgage interest rates are around the corner and they will prime people to start buying real estate. Maybe not the Reno out of work casino employee, but people nonetheless [just read what Mike reports to us about trustee’s sales, and what Guy reports to us insofar as the percentage of sales which are short sales (after all, in a short sale someone is actually the buyer)].

    So predicting interest rates is NOT equivalent to gambling. And if you disbelieve me, why don’t you just see what happens to mortgage interest rates over the next 60 days.

    In the meantime, many of you doom and gloomers AREN’T really home buyers. You’re sitting on the sidelines, many from remote locations, taking pot shots in a vacuum at anyone who doesn’t echo your outlook. Some of us actually want to purchase locally. For the last two or more years I too have been down on the local SFR market, and I’ve said so. I’m still down on the higher end of the market, and I’ve said so.

    But I like a few others who read this blog, actually want to make a purchase and for us the perverbial question is “when?” All I’m saying is that for me, I see a number of variables aligning together which for me, means the time is near [remember, I’ve said within the next 4 months]. Will this time period turn out to be the absolute bottom of the market? I have no idea. Will it turn out to be CLOSE to the bottom of the market? Although I think so, I very well could be wrong and if I am, so be it.

    So if you’re really a buyer, you can sit and watch and take your chances or at some point in time, actually pull the trigger. All I’m saying is that for me, if things keep playing out as they are, the time is near. The rest of you can do whatever you’d like.

    Has essentially everything in the news been bad for local SFR real estate? Of course. But if you think the news is going to continue being bad, in the doses we’ve been experiencing for the last two years, then we’re talking depression and not recession. It’s like what I told my Wells Fargo banker when he told me I should pull my money out of Citibank before the recent bailout; my money’s FDIC insured up to $250K [actually, infinity] and if Citibank goes, because of its size and international entanglements [Citibank is much, much larger than Bear Stearns or Merrill Lynch were], everything’s going to go and then it really doesn’t matter – does it?

    Did I predict the Reno/Sparks median sales price bottom would arrive on January 11, 2009 at 4:00 P.M. at the Lone Eagle Grille in Incline Village? Sure. But RI, Allen and others of you know that technically, the call was just for fun. Had we not experienced the evaporation of credit we now see in retrospect was in play at the time, I might even have been right. Even now, just 30 days away, I STILL may be right. Or maybe I won’t.

    But what I DO know is that we’re a heck of a lot closer to the bottom than to the top. I know that mortgage interest rates can’t go a whole heck of a lot lower. And I know that a lot of people far smarter than I are working 24/7 to do whatever is in their power to stabilize the SFR market.

    And I know that if I can find a home I want to own and live in for some period of time; it’s cost is dramatically lower than what it sold for at the height of the bubble; I can get historically low purchase money financing [which brings down my cost to own] to make ownership a reality; and I can get a federal tax credit to boot; it really doesn’t matter what anyone else thinks may happen in 2010 or 2011. It also doesn’t matter if in a vacuum, the median sales price continues to drop; or that mortgage interest rates may go lower than I believe they will go; or that the sales absorption rate dismally remains where it is.

    We’re all entitled to our opinions and these are mine. Since you’re entitled to yours, let’s just see where each of us is living in April. Cheers!

  9. Avatar CommercialLender says:

    Fine, I’ll jump in.
    1) Nobody but nobody can predict rates, period. and I’m in that business daily. But of course its fun to try.
    2) If you are planning to own the home for the long term, then buy the house. If the market continues down and you maintain your ability to pay the mortgage, then fine. Might be upside down for a while, but all’s fine if you are not overextended.
    3) Nobody but nobody can market-time, either, any better than flipping a coin. Sometimes you get it right, sometimes wrong, but making investment decisions on market timing is a great way to lose repeatedly. Read the tea leaves, but don’t cross the fine line into market timing.
    4) Like Buffet, ‘buy when nobody is buying’, like now and the months to come. You have leverage and could get a comparatively good deal.
    5) Don’t let anyone tell you that a mortgage or interest rate is a REASON to buy a home or investment property. We are swimming in a pool of foreclosures for this very reason, people who thought because they could GET a mortgage, somehow they should. Same with rates: a 4.25% or other rate is not in and of itself a reason to put yourself into debt, otherwise you’d go buy 20 Fords or other cars offering 0%. Its a nice to have, but not a reason! My industry is about to get hit for some of this very reason…
    6) that said, I just re-upped my lease yesterday. Sitting on cash, no debt, great job (uh, knock on wood), housing in my area coming down… but I feel oddly complacent and somewhat OK with waiting another year. Certainly its a low-risk, sleep-at-night option for my family.

    Good luck, all.

  10. Avatar inclinejj says:

    The biggest fools in every market are the ones trying to find the top and bottom

    5) Don’t let anyone tell you that a mortgage or interest rate is a REASON to buy a home or investment property. We are swimming in a pool of foreclosures for this very reason, people who thought because they could GET a mortgage, somehow they should

    People didn’t care about rate or purchase price they only cared about the monthly payment..get us in for the lowest payment..no one cared if the payment amount was going to rise in the future cause housing only went up..never went down

    sounds alot like the auto dealer when he says..where do you want your monthly payment

  11. Avatar smarten says:

    CommercialLender, there’s a big difference between having put no money down and secured your SFR purchase with a toxic 2/28 ARM negatively amortizing purchase money mortgage just so you could “afford” to get into a home you really couldn’t afford, versus putting 20% or more down and securing your SFR purchase with a 15 or 30 year 4.5%+/- fixed rate mortgage [assuming you can qualify for and afford the monthly payments].

    So it’s not an issue of “getting” a mortgage just so you can afford to buy something you really can’t afford. It’s one of getting a mortgage at a discount [by historical standards]. You’re right; interest rates/terms in a vacuum aren’t a reason to buy. However, when you combine the right SFR; in the right location; at the right price; funded by the right mortgage; we’re talking about something completely different.

    And not that I disagree with your observations about “timing,” if we’re all fools for attempting to time, why ever “lock” in a quoted mortgage rate/loan commitment? Or buy [or choose not to buy] a CD? Or renew the lease on your home for another year term? We all time decisions. It’s just that some of us are better [or luckier] than others – but that doesn’t make us fools.

  12. Avatar SmartMoney says:

    You do have to realize that at the end of bubbles prices have a tendancy to go a lot lower than anyone would believe. As a matter of fact, all bubbles end this way. Just look at the Nasdaq. When it was at 5000, no one thought it would go below 3000. Surely at 2500 it was a great buy, a “lifetime opportunity” at 2000. Well it bottomed at 1200. No one would have believed it.

    When real-estae is done collapsing it will be the same effect. Sure, there is some value out there right now in real-esate. But when the bubble is done collapsing, and on its final stage of the collapse, prices will be well-below fair value. We are not there yet.

    Sadly, all bubbles end this way. Just look at history. I highly doubt it’s going to be different this time.

  13. Avatar CommercialLender says:

    Smarten,
    So, then go and buy, that’s what I’m saying, but as long as the decision is not solely based on market timing or on the debt terms. Sounds like your decisions are well balanced per your comments. Let us know what you end up buying and the debt terms you get.

    SmartMoney,
    I have studied bubbles and their aftermath just enough to recognize the same trend in most all cases, and I call it a pendulum. It will swing from ludicrous bubble to abnormal low, then end right back up on the long term regression line (if graphed) afterall. (Sorry, this is hard to describe verbally and I’ve mixed my methaphors anyway). That’s why market timing is not that critical: sure its nice to be lucky, but that’s not a sound investment plan. Basically, if you buy when it hits the regression line or after it dips below it for a while, either way if you are a moderate or long term hold, both are ‘in the money’ for you as the graph does slope upward each year after the bubble is corrected. This is also why people who wait for “the bottom” will never buy there, because the trend will come up and settle on the long term trend before they could recognize there was even a bottom.

    I believe, but am open for comments, that corrections in the equities market have returned immediate and significant profits in the short term (months, few years) much more readily than housing corrections in the past. This can be in part explained by the mass of liquidity in the equities markets rapidly driving up values, and by the ability to invest in that market with much less cash outlay and therefore perceived ‘risk’ than typically one does in buying a house or investment real estate. So, again while not market timing but by observation, housing prices will increase again after the ‘bottom’ at a much slower pace than will, say, the equities market.

    If I’m correct, and maybe I’m drinking my own CoolAid, there’s zero reason for me to rush in again. I will buy again when it makes more overall sense for my family, income, career, etc. and hopefully attractive debt terms will by happenstance be on my side at that time. Thus I re-upped my lease.

    Now, had I only sold my other house off Robb drive 2 years ago…..ah! the market timer I would have been!

    Have a great weekend all.

  14. Avatar Move to Reno says:

    Now is not a bad time to buy because one has the pick of the litter of the market and, for those who don’t pay cash, mortgage rates are historically low. Get a 30 or 15 year fixed rate and you are in like Flint.

  15. Avatar Zen says:

    Smarten,
    I don’t really give a rats behind whether or not I just got the lowest interest rate I’ll ever see if in 6 months or 5 years I’m upside down on my house. It’s about the principal. I want to be able to sell the damn thing without writing a big check.

  16. Avatar MikeZ says:

    3) Nobody but nobody can market-time, either, any better than flipping a coin.

    “No one can time the market!”

    Well, that’s a ridiculous cliche.

    People who pay attention can see crashes coming and get out. I did. Not at the perfect peak, but 4 mos. before, and I’ll close 2008 up between 10% and 12%.

    Now compare that to the buy-and-holders who think you can’t time the market. They’re down 40%.

    You can also time housing markets, contrary to the cliches. You just need to pay attention.

    Warren Buffett? BRK-A: $150K to $100K. Maybe he doesn’t know as much as you think.

    It’s not luck nor coincidence that Robert Shiller accurately called the dot-com collapse, the housing collapse and this current market collapse.

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