Reno Ignoramus is strange, old friend. Though I’ve never met him, seen him, or even know his real name, as my second commentor ever on this blog (behind Gotlots who mysteriously disappeared) he has this uncanny ability to interpret my actions or in-actions with remarkable prescience. Not so long ago he noted in some comment that I’d lost interest in this blog.
Ouch… but dead-on accurate. Why? Because I personally don’t think residential real estate in the US is worth looking at as an investment until 2013-2014. Sure, there are exceptions, but I’d guess I’m more bearish than even Bantering Bear himself.
If there’s one thing this blog has taught me that I’m absolutely most grateful for, is the ability to recognize the voice of truth. I have learned to give critics and contrarians a fair shake, digesting what they say in all seriousness. Because often, even if their opinions go against conventional lemming wisdom, when you take an objective look at a message supported by facts that make sense, it can be truth.
Data is data, and facts are facts. If accurately tracked without bias, we’re talking laws of nature that don’t lie. And the interpretive conversation about what these objective events mean make us all smarter about how to best prepare for a potentially tumultuous future.
So many people want to believe whatever it is they hold dear, despite ramifications, because it’s easier and less painful in the near term to shoehorn crappy news through existing mental framework aka defensive happy-filters that make them feel better. "No problem, it’ll all work out because [insert personal savior or government entity] is looking out for my best interests, and I will receive the [insert favorite entitlement benefits prescribed by ideological belief system] that I deserve."
The world is what it is. Accept or deny it, the universe doesn’t care. Those who recognize reality and take appropriate actions are those that prosper. Those who don’t fall by the wayside.
I am in a short sale taking my licks. When we bought this house we could afford it, but now the tide has seriously turned. We will pay penalties for whatever happens, which is okay because, tritely, that’s life. Time to put ego aside, stop pointing fingers, embrace reality and move on.
The meek shall inherit the Earth? Not so different from Darwin’s message that those who adapt, survive.
21 comments
Nice to hear from you Diane.
But having just returned from another stay in the Bay Area, we’re sooooo happy to be gone. I pity the fact that you/your family had to return.
Are you selling real estate in the Bay Area? If not, are you going to? Will you be starting the EBRB [East Bay Realty Blog]? Do you think you will be returning to Reno in the future? I hope so.
Please stay in touch. Many of us miss you.
Hi, Diane! More bearish than me? Come now, are you running a fever? LOL. As far as real estate as an investment, I don’t even look at SFR’s that way. They are SHELTER. Funny thing is, most people are still drinking the Kool-Aid, dreaming of when “the market turns around”, believing yesterday’s prices are coming back. They’re not. That’s over. The largest financial mania in history can not, and will not resurface. Glad you got religion.
Regarding your house- I know several people have chastised you for the short sale. F*** them. What do they know about you? You bought a house you could afford at the time, and the market took a dive and you now owe more than it’s worth. You need to move, for the good of your family, and short sale or foreclosure is the only path to allow for that. There is absolutely nothing wrong with that. Many who bash you would do the exact same thing. Your contract with the bank states that you will pay back what’s borrowed, or they will exercise their interest in the house. If the short sale falls through, then perhaps it’s time for them to investigate that. Good luck with your future.
PS- It sounds like the Bay Area is where you love to be, and it’s great you’re heading back there. Don’t let others negative experiences cloud your view. Only you know what’s good for you.
After the pathetic display by the goons down in Carson this last week, I would say Nevada is going to be heading for a world of hurt going forward. So the difference between the SF Bay Area and Reno will be little. An alternative that might fair better are places in TX because they are running smaller deficits and have a stronger economic base for future sustainable growth. Moreover, real estate valuations are in-line, even with their higher property taxes, versus the misaligned pricing in California, Arizona and Nevada.
Three stages of grief: denial, anger, acceptance. Seems like the grief administered by a short sale has led Diane to the acceptance of the reality of this market.
Diane,
Great to hear from you.
Guy was kind enough to forward me all my posts since I began contributing to this blog. I’m working on a book entitled “It’s Always a Full Moon in Reno.” Some of the posts will find there way in, and for that I’m grateful.
As far as your personal situation, remember that no situation will defeat you as long as you keep the faith that God plants in each of us.
I pray that your family finds peace wherever it lands.
I don’t know why Diane is so bearish on real-estate as an investment. There are now properties under $200K that cash flow. This is something a good investor looks for. But now Diane is bearish? It’s interesting watching the psychology at work.
Honestly if Family didn’t live in the Bay Area the only reason why I would come down is to watch my sports teams..Other then that..No real reason to be in the area
Diane- glad you continue to write even if it’s for a limited time. I couldn’t agree more, RI still posts the most insightful comments.
Anyone attend the Comstock auction today?
Brain, do you mean the auction at the Riverwalk?
I had a friend who was present, who reported that it was pretty much a trainwreck for the developer. Some units went for well under $100 a sq. ft. Many bids were so low, and obvioulsy so much under the reserve, that the auction company called off the auction on some of the units.
Understand that I was not personally present, and this info comes from a friend who I believe to be reliable.
It appears that it was overall a black day for the downtown condo cheerleaders. It also appears that all the so-called “doom and gloom” of the “hostile pessimists” predicted right here on this blog about the downtown condo market is coming true.
On the other hand, $65 a sq. ft. may be about right for most of these downtown condos.
Slowly, but surely, the bubble mentality is deflating.
Diane,
While you have posted a lot less in the last few months, your recent posts have been insightful (if somewhat pessimistic).
Oddly, we are just now getting to the point where some properties can cash flow. Buying real estate that will cover its own carrying costs is what I really consider investing in real estate. Buying real estate because it’s expected to rise rapidly in price is speculating (or trading on insider information).
3niner, although I agree with your basic statement, trading on insider info is always speculation whereas speculation is not always trading on insider info. Example: expecting oil to rise (anyone can come to this conclusion) - buy DXO; your next door neighbor is a Cisco exec and he tells you they are going to sign a 500 million dollar contract with China for routers - this would be a spec buy on insider info.
Also, how would this apply to real estate, as I never met a realtor that was ahead of the curve!
To 3niner,
While I agree with you that buying a property that will cover its costs is the ideal, there’s a missing piece: tenants.
With the number of vacant homes, condos and apartments, even if you make a good deal on a property doesn’t mean that you’ll find someone reliable as a tenant, who won’t trash the place and leave you cash flow negative when they move out unannounced.
Just a thought…
Does anyone know about the results of the auction on 5/29 for the bulk lots in Somersett?
The NOS had a $5.4 million balance, or $180,000/lot. Now I understand there are homes built, but wondered whether anyone bid.
Sully, when I referred to “insider information”, I was thinking of a (second) cousin, who made a great deal of money “investing” in real estate, in the 1960s - 1980s. All of his deals involved road construction.
On more than one occasion, he was able to buy cheap farmland, that became valuable after a freeway interchange, or major intersection, was planned for the middle of his property. (He never did any farming.)
On one occasion, when he was bragging about a deal, I asked him about how he knew the land would become valuable. He told me that he had learned about the road project before any other investor. He didn’t go into detail, but made it clear that he was receiving insider information from someone in county government.
Billddrummer, you’re right that it takes a lot of intestinal fortitude to be a landlord. I’ve had the kind of experience you describe, and decided that I didn’t have the stomach for it. That was many years ago, however, and I may try again.
Right now, there is the additional problem that rents are falling, so it’s important to make conservative assumptions about rents and/or vacancy rates.
Brain, there is a write-up about the Riverwalk sale over at Downtown Makeover. It was indeed a trainwreck. The first bidder watched the value of his unit drop over 15% in less than an hour!
My house is a home, first. And although I have taken a hit in it’s investment capability, it is still my home.
I am in the process of a refi (<5% money is just too good to pass up, and if I get layed off I can still afford the payment). Yes the appraisal was rough to take. I am still cash positive in the home however. But could I find a buyer even at the appraisal? I can only wonder….
I can only wonder what it would take to rebuild my house today if it burnt down. What are the actual construction costs? How close to $100/sq ft? I wonder if the approx cost of a custom home is (quoted to me previously at about $200 sq ft)? I am beginning to think I may be over insured. It seems to be some of the sales out there would be impossible to build the home again new.
Now would i have been better off waiting, instead of buying in Oct 06? Yup! And if I knew the extent of the fall, I would have waited. But I do enjoy my home and these couple years have given me much enjoyment. I am not going to lose any sleep over it.
People will still need homes. And one day in the future our oversupply will start to be worked off.
Diane you said….
So many people want to believe whatever it is they hold dear, despite ramifications, because it’s easier and less painful in the near term to shoehorn crappy news through existing mental framework aka defensive happy-filters that make them feel better. “No problem, it’ll all work out because [insert personal savior or government entity] is looking out for my best interests, and I will receive the [insert favorite entitlement benefits prescribed by ideological belief system] that I deserve.”
This is so true. We vote for people who will give us the biggest kick-back. it is like people running up credit cards with no sense that one day someone will pay for it.
Flat tax anyone? Make everyone pay for this mess. And then see who wants to give away money to banks, companies, and undeserving people who have no clue what work is!
Make everyone pay for this mess Phil?
I can hear my ultra liberal friends now - well that’s a regressive tax - it taxes those least able to pay. You know, the ones who pay nothing now.
Good idea but with this administration in power, no chance whatsoever! It goes absolutely contrary to its “share the wealth” mantra.
Diane, what on Earth is that a picture of? Some kind of bug?
Does anyone know about the results of the auction on 5/29 for the bulk lots in Somersett?
The NOS had a $5.4 million balance, or $180,000/lot. Now I understand there are homes built, but wondered whether anyone bid.
Which builder is this?