The RGJ kicked off their Reno 2020 series of stories today, with the headline of this morning’s print edition reading "Is Reno on track to be Detroit of the West?". Though the article won’t be online until Tuesday, the report the RGJ commissioned from the Center for Regional Studies is – you can read it all here. It is sobering.
This photo essay on the Ruins of Detroit (thanks, Andrea, I’ve been saving it) is really quite beautiful, though also quite depressing. One of my great interests is Industrial Archeology, and Detroit is becoming one big dig. Hope Reno can avoid this fate.
MikeZ
tofu_mary: “California metro area price peaks won’t return until 2025”
Is that supposed to be bad?
Let’s see, we’re down 40% … if Reno returned to 2005 prices in 2025, that would be 66% growth over the next 15 years : 3.5% per year, compounded. I’d be fine with 3.5%/yr appreciation over the next 15 years.
bob_c
The bond market is screaming at everyone that there will be NO recovery for 5-10
years because our government has been clear it will buffer the pain (ala Japan circa 1987) for at least that period.
There will be no dramatics…..just a lost decade
bob_c
I’d love a total washout (i have the cash) where assets are seriously undervalued,
but the government is not going to let it happen.
TX grad
Texas has great schools and an educated workforce in the major metros like Houston, Dallas, and Austin. Dumb Texas is the rural boonies just like Nevada’s boonies or anywhere else for that matter. Since Texas is so large, there are a lot of rural boonies compared to the educated areas, likely dragging down the state. I’m glad I have an undergrad and postgrad degree from the UT system rather than UNR! Those degrees do sound impressive to prospective employers.
Norton
We are down 40%?
We are down by significantly more than 40%.
The median topped out at $365K in January of 2006. I believe that means we are down by 54% from the all time high.
The median will have to increase by more than 100% for it to get back to its high.
MikeZ
The median will have to increase by more than 100% for it to get back to its high.
Thank you; correction noted. Recalculating, a return to peak by 2025 would be even better growth: 4.7% per year. If I could count on 4.7% over the next 15 years, I’d buy right now.
The original poster thinks a return to peak by 2025 is doom-and-gloom, but I think it’s a bit too optimistic.
Reno Ignoramus
No doubt somewhere in Reno-Sparks there is a person who bought a house in January of 2006 for $365K. We can engage in a theoretical exercise and assume that this house has mirrored the median price exactly since 1/06, and is today worth $170K.
Will this house be worth $365K in 2025?
I doub it also, unless we return to the frenzied days of the bubble and return to making $500K no doc stated income loans to food servers claiming to earn $200K a year salary plus tips.
Guy Johnson
R.I., your last comment piqued my curiosity. I tool a look at the residential sales from January 2006. Of the 274 houses sold that month, two sold for precisely that month’s median of $365,000. Both were 3BR, 2-bath, 1,700+ square-foot houses located in Spanish Springs.
I then looked up any subsequent sales for these two properties. One house has not been sold since. The other house, however, sold earlier this year (January 2010) for$170,000…or $98.30/square foot.
Tracked the median pretty well, I’d say.
Btw, I updated the median table while I was pulling numbers. A few more September sales have been entered into the MLS. The current September median is $169,950.
Rory
As a proud and educated graduate of the University of Nevada, I have no debt and a $75,000 year job here in Nevada. I bought a house not long ago while my Bay Area friends who attended Colorado and UCLA are still trying to make ends meet and service $60,000 in student loans…LOL!
My decision to attend Nevada was partially predicated on costs of the UC system and but Nevada’s the Sierra’s and Reno’s many other attractions are something no UC can even compete with. I feel like the education I received is comparable in every sense to my high school peers who attended the Davis’s, San Diego’s and Santa Barabara’s of the world, only it cost my 1/10th of the price.
And in the end, employers don’t care where you got your diploma, they care how hard you work and how resourceful you can be. Those are traits often lost on the privileged and entitled classes of America.
Rory
EGADS! Pardon my grammar…maybe I should have gone to a UC? 😉
my comment should have read-
“and Nevada’s proximity to the Sierra’s”
Reno Ignoramus
Hey Guy, thanks for the info. That’s very interesting that this actual house has tracked the median perfectly. So with respect to at least one actual house, it is not a theoretical exercise to observe that this house has lost 54% of its value from $365K to $170K.
Thus the question: when, if ever, will this house again be worth $365K? How long will it take for this house to more than double in value?
smarten
RI asks, “Thus the question: when, if ever, will this house again be worth $365K? How long will it take for this house to more than double in value?”
The last time the stock market tanked [was it two years ago?], over night many retirement plans lost half their values [mine sure did]. Back them the pundits were pointing out that the market had to double in value just to make it back to where it was before the crash and as such, we’d have to wait 10 or more years.
Coincidentally I received a third quarter retirement plan statement the other day and guess what? I’m just about back to where I was just before the crash. In other words, I didn’t have to wait 10 years, nor until 2025 [referring to Reno residential real estate].
I share this story only to suggest that rebounds can occur at far faster rates than conventional wisdom dictates. Furthermore, I don’t think my experience is unique to the stock market. So am I saying that it will take 2 years for the mythical example Guy has provided to again be worth $365K? No I’m not. But on the other hand, I expect it won’t take 15 years either.
skeptical
How’s that Nasdaq portfolio from 2000 holding up for you Smarten?
Fact is, the housing/credit boom was a bubble of epic proportions, dwarfing even the dot com bubble if you measure number of participants and amounts of dollars involved.
Nasdaq sits at half its all time high 10 years on. This housing collapse isn’t a normal correction within a secular bull market. It is a collapse of a bubble of historic proportions.
Throw in the ongoing mortgage fraud mess, historic levels of unemployment, and the secular shift away from gaming in Nevada, and I am stunned that you have such a sanguine outlook for the market. It’s downright dangerous to be making some of the assumptions you make.
OBTW, the new median of $169,500 does take out your previous “bottom” of May 09 as well. FWIW…..
Raymond
Guy’s example is not mythical. He is referring to an actual house that sold in January of 2006 for $365K and sold in January of 2010 for $170K. This REAL house has thus tracked the median precisely….down 54% from the top to present day.
There are houses all over Reno-Sparks that are down 54%, some even more. Nothing mythical at all.
smarten
Skeptical –
I never said my retirement account was invested in the NASDAQ [nor any other] index. I merely said that the value of my account [which is a mutual fund BTW] is about back to where it was two years ago.
And as to your other comment – it’s stupid. There’s essentially no difference between a $169,950 [not $169,500] and $170K median sales price [out of close to 450 monthly sales], and you should know it. We continue to bounce within a median sales price range of $170K-$180K. That may change next month, or it may not. But the fact remains that for nearly 1-1/2 years now, that has in essence been the case – a fact I thought you had acceded to.
billddrummer
To Rory,
When you’re referring to the mountain range, there is no comma after Sierra. It’s Sierras. Unless you’re speaking about the Sierra’s climate, location, etc.
I learned English grammar in the Washington DC school system, before it crashed and burned.
MikeZ
OBTW, the new median of $169,500 does take out your previous “bottom” of May 09 as well. FWIW…..
Oh. My. God!! Down another $500?!
skeptical
Careful now there Mikez, before you pump that chest too hard. Oct-Dec numbers could be ugly. If so, you ready to eat a bit of crow?
Skippy
billddrummer,
A comma does not equal an apostrophe. Perhaps the D.C. school system “crashed and burned” a little earlier than you thought?
billddrummer
To Skippy,
My apologies.
billddrummer
Sometimes I wonder why I bother.
MikeZ
Careful now there Mikez, before you pump that chest too hard. Oct-Dec numbers could be ugly. If so, you ready to eat a bit of crow.
Oh, I expect them to be bad. RE sales are seasonal, median typically drops 5-10% during the winter, then comes back in the spring.
I’m curious: have you now accepted the median price? Or are we going to see a return to denial when it rises again, next spring?
Carlo
MikeZ,
Why would the median price drop in the winter months? I can understand that sales volume falls off, but why the median price? Do people buy cheaper houses in the winter months?
Weller
Good point carlo. There is no evidence that the median price dips in the winter months. Sales volume dips, not median price. If we go back before the bubble, we can see that the median price in the winter months was not much different than the summer months for 1998, 1999, 2000, 2001. Once the bubble started inflating in 2002, the median was actually higher in the winter months than in the preceeding summer. And once the bubble started deflating, the opposite was true. The inflating and then bursting of the most epic housing bubble in history skews everything, but the data before the bubble shows there is no difference between summer and winter.
People do not buy cheaper houses in the winter and more expensive houses in the summer.
bob_c
The rich dont shop in the snow.
MikeZ
If we go back before the bubble, we can see that the median price in the winter months was not much different than the summer months for 1998, 1999, 2000, 2001.
There are always outliers, but … lowest median price by year, pre-bubble: ’98/Feb/Winter, ’99/Mar/Winter, ’00/Feb/Winter, ’01/Apr/Spring, ’02/Mar/Winter, ’03/Jan/Winter. And post-bubble: ’09/Nov/Winter, ’10/Jan/Winter.
MikeZ's Vanishing Credibility
Interesting, MikeZ. I was not aware that winter lasted five months. Sure, we can reasonably include both December and March, giving us four months of ‘winter,’ as at least a portion of those months fall between the winter solstice and the vernal equinox, but I am sure that the calendar publishers would be shocked to find out that November is winter as well.
Now, how about this — highest median price by year, pre-bubble (used loosely as the median increased $54,000 from January to December of 2003, which isn’t what I would call “pre-bubble,” but I digress): 1998/Nov/fall (unless you are MikeZ, and then it is winter); 1999/Sept/summer; 2000/June/spring; 2001/Dec/winter (or at least 1/3 of it is).; 2002/Dec/winter; 2003/Dec/winter. And “post-bubble”: 2009/Jan/winter; 2010 (to date)/tie – July and August/summer.
Oh what to do! On its face, my worthless data set tends to contradict MikeZ’s worthless data set, but neither data set tells us anything about whether median sales prices typically drop +/- 5% in “winter” months, which was the original assertion.
Weller
So here it is folks, MikeZ calling a 5-10% decline in the median at some point in the next 6 months.
MikeZ says: “the median typically drops 5-10% during the winter”.
So then, according to MikeZ, this winter the median will drop from 5% to 10% from where it is now, which is $170K.
So MikeZ advises us that we can expect the median to fall anywhere from $161K to $153K at some point this winter, which he defines as November-April.
Smarten's Vanishing Equity
MikeZ posted:
“Oh, I expect them to be bad. RE sales are seasonal, median typically drops 5-10% during the winter, then comes back in the spring.”
This is nothing more than a steaming pile of crap from somebody desperately trying to manufacture credibility for their Kool-Aid fueled regurgitation’s.
Smarten's Vanishing Equity
MikeZ posted:
“There are always outliers, but … lowest median price by year, pre-bubble: ’98/Feb/Winter, ’99/Mar/Winter, ’00/Feb/Winter, ’01/Apr/Spring, ’02/Mar/Winter, ’03/Jan/Winter. And post-bubble: ’09/Nov/Winter, ’10/Jan/Winter.”
November is Fall, not Winter. Furthermore, Winter lasts only three months, but you have included three of the four seasons- Fall, Winter, and Spring- with a range of six months in your cherry picking. Best to not post anything at all if this is the best you can do.
Stacio
This is a great prognostication from MikeZ.
He is saying in effect:
” I predict that sometime in the next 6 months the median price will drop as little as 5% to as much as 10%”.
Quite the real estate analyst he is.
smarten
Not to defend Stacio’s interpretation of MikeZ’s median sales price comments, haven’t the permabears on this blog been making the same predictions when the first time homebuyers’ tax credit [initially] expired? If so, aren’t they quite the same quality “real estate analysts?”
Not that I want to start any flame war but remember I have stated that I wouldn’t at all be surprised if the SFR median sales price actually increased over the next several months. Sales volume historically falls after October of each year making it easier for a lesser number of sales above the previous months’ median sales price to actually pull it up. I’m not saying this is going to happen; just that I wouldn’t be surprised if it did.
Of course if it does, we’ll be hearing from Skeptical and his crew “that sometime in the next 6 months the median price will drop” because of…[feel free to fill in the blanks].
MikeZ
Interesting, MikeZ. I was not aware that winter lasted five months
Sorry, should have written fall/winter.
MikeZ
Of course if it does, we’ll be hearing from Skeptical and his crew “that sometime in the next 6 months the median price will drop” because of…[feel free to fill in the blanks].
Giggle. 🙂
MikeZ
Now, how about this — highest median price by year: … 1998/Nov/fall (unless you are MikeZ, and then it is winter); 1999/Sept/summer; 2000/June/spring; 2001/Dec/winter (or at least 1/3 of it is).; 2002/Dec/winter; 2003/Dec/winter.
The problem with your chosen data set is: an appreciating market you would you expect the highest median prices at the end of a 12-month period (Nov/Dec/Dec/Dec). Seeing what is expected tells you nothing about the other, more subtle trends, like the seasonal median price changes.
Still confused?
Ok, try this: Why do you think real estate prices are typically measured year-over-year (YoY)?
Smarten's Vanishing Equity
MikeZ posted:
“Sorry, should have written fall/winter.”
But you included Fall, Winter, and Spring in your cherry picking.
Then:
“Still confused?
Ok, try this: Why do you think real estate prices are typically measured year-over-year (YoY)?”
Median September 2009- $185,948
Median September 2010- $169,950
YOY decline = 8.7%
How’s that for stability? Bwahahahahahahahahahahahaaaaaa!!!! Keep diggin’ big boy.
MikeZ
YOY decline = 8.7%
Yup, no argument, Sept is down, but I never claimed otherwise.
DownButNotOut
I thought I’d check in on the site but is this what it’s come to? Great Real Estate comments. I especially noted the similarity between Smarten’s Vanishing Equity and Bantering Bear: Bwahahahahahaha???? Well, a rose is a rose after all.
Keep on trucking.
Smarten's Vanishing Equity
MikeZ posted:
“Yup, no argument, Sept is down, but I never claimed otherwise.”
Oh, but you most certainly did. You’ve been yammering on about how stable the market is for nearly a year now. A decline of 8.7% is NOT a stable market. Cop to it- you’re wrong.
MikeZ's Vanishing Credibility
MikeZ,
Egad! You mean the data I said was worthless is in fact worthless! The horror! The horror! Perhaps the satire was too subtle for you (well, “perhaps” is not the right word, as you have failed to grasp satire on a number of occasions, but we do try to keep up the charade of politeness when possible). However, I will stand by the meat of the message, which is the data you chose to represent a seasonal decline in median sales price was worthless to show any such decline, especially on the scale purported.
Now, if you were to look at the average monthly median in Q1 and Q4 of each year in the given data set (1998-2003; 2009-2010), you might be able to support an assertion that in four out of the eight months the average monthly median sales price in Q4 and/or Q1 (of the following year) are 1.5% to 3% lower than in preceding Q2 and Q3. However, even with this there are some issues we must bear in mind: a ratio of 1:2 does not make a phenomenon “typical”; a 1.5% to 3% drop is a far cry from 5% to 10%; and we have to somewhat torture the data to obtain the desired results.
So, let’s just agree that your original assertion was fallacious on its face, and that the subsequent data presented are orthogonal to your original assertion, and go from there. Nah, you won’t let that happen. You will just keep bailing your sinking dingy, which we shall christen the “Untenable Assertion,” until we all move on to a new thread, thereby enabling you to leave the hapless “Untenable Assertion” to sink quietly on its own.
billddrummer
@DBNO,
I know what you mean.
Anonymous
Oakland California has that title "Detroit of the West" because it once has lots of auto manufacturing plants. Today, it's for a different reason. Does Reno REALLY want that title?