If you didn’t catch the Special Report on the front page of today’s RGJ, you should check it out.  Among other things, the report states just how big is the economic impact to the local economy due to the housing downturn.  According to one luminary, the financial impact from defaulting residential developments in the area add up to more than $250 million just for notices of default and actual trustee’s deeds.

And who is this source? None other than Reno Realty Blog’s own Mike McGonagle.  Mike went on to say, "While the construction loans are probably not tapped out, this is still a huge figure and will substantially impact the local economy.  I don’t think I have ever seen anything this far-reaching before with the magnitude of the properties failing."

Check out the entire story here:  Housing drop puts builders in a bind

Over the past few days I have had occasion to visit a few of the new home developments throughout Reno.  This morning I was sorting through assorted brochures that I had collected and noticed I had accumulated quite a few builder price sheets.  Because these latest prices are not always available on the builders’ online sites, I thought I share them here for any interested parties.

A couple things to note: (1) Although these price sheets are current at the moment, they can and do change; (2) Some of the prices shown are “base” pricing; upgrades and options may change the price reflected; and (3) these price sheets are in no way intended to be an exhaustive representation of all the builders who are currently building in Reno.  There are many more.  Like I said above, I just thought I’d share the info I’ve collected over the past few days.

And one final note, if you see something that interests you, give me a call and we’ll check it out and size it up against the other comparable properties in that neighborhood.

• Centex Homes - Cyan - Sierra Meadows.pdf
• Centex Homes - Cyan - Sierra Rose.pdf
• Lakemont Homes - Canyon Pines - Vintage and Reserve Collection.pdf
• Monterey Development Group - The Village at Somersett Town Center.pdf
• Monterey Development Group - The Village at Somersett Town Center - model pricing.pdf
• Pulte Homes - The Vue at Somersett.pdf
• Pulte Homes - The Vue at Somersett - model home pricing.pdf
• Ryder Homes - Talon Pointe at Somersett.pdf
• Toll Brothers - Mountain Crest at Somersett.pdf
• Toll Brothers - Saddle Ridge at Damonte Ranch - price list.pdf

A bunch of little items for the short week.  It will be a little out of order, since I can’t figure out how to enter any text after the "Son of Creep"  chart, so I had to move it to the closing position.  And remember, if you have questions or comments about specific areas, the Forums are always open.  We need to start using them more.  I promise at least 2 scoops there next week.

NOD/NOS/ TD for June

NODs dropped to 552 from 554 in May.  2921 YTD.   NOSs dropped to 337 from 374.  1709 YTD.  TDs dropped to 216 from 233, though 27 more were recorded by noon today.  1076 YTD.  NODs filed by HOAs are definitely on the rise, but the net number of properties receiving default notices appears to have peaked, at least for now.

Developer Sales

Here is how many new houses have actually closed so far this year per the Assessor’s office in a few of our higher profile developments.  A few more sales may dribble in.  If there are specific developments you want a health check on, just let me know.

-  Grand Sierra Resort - 9.

-  Village at Idlewild - 7.

-  Belvedere - 36.

-  Virginia Lake Crossing - 9.

-  Sierra Canyon - 8.

-  The Vue - 7.

-  Sterling Ridge - 40.

-  Cyan - 78.

Fruitman and the Moon Tour

The fruit stand at Mae Anne and Sharlands most afternoons is awesome!  Pick up a couple baskets of cherries for $5 and do the Moonscape Tour.

The backdoor to Somersett opened Friday at the roundabout on the East Verdi off ramp.  Great to have a second way out, just in time for fire season.  So with cherries in hand, drive west through the ‘Sett until you hit the Sierra Canyon Rec Center.  Turn right (west) for the full effect, and follow Del Webb Parkway to the new Somersett Parkway extension.  Ever wondered what over 800 vacant lots looks like?  To the moon, Alice!  Seriously, it is a grim and scary sight (site).

Notes to Listing Agents

-  It is July.  You are not inspiring confidence in your commitment to you listings when the photographs are drifting snowbanks over your REOs driveway (especially those "new listings" of yours).  Is it to much to ask for updated photos?  And with a camera, not your cell phone?

-  If you reduce the price of a listing, make a comment in the first line of your revised listing comments.  Searchers only see the first line or so, so making a comment at the end of the comments is wasted.  Noting the date of the reduction is also an interesting concept!

-  Get your listing address correct.  Lots of folks search by zip code - get that right, too.  89519 used to be part of 89509, and  a lot of the residents have been resistant the change.  But there is no excuse to be finding Somersett listings there.

-  PSST - if you post on Craig’s List with Postlets, the date of the original posting shows up on the bottom of the listing.  You can look a bit befuddled if your new, reduced listing is from May.

So finally,

Son of Creep

I could track 32 of the 337 June NOSs by zip code.  The rest are duplicates, developers, and commercial properties.  I’m not sure any real patterns are developing, but it’s interesting.

I received the following announcement this morning from the Director of Marketing for Somersett.  Stop by for a chance to win a Vespa…

————————————————————————-

Somersett is proud to announce the addition of a weekly Farmers Market to their event calendar.  The Farmer’s Market will take place in the Somersett Town Square every Wednesday evening from 4 p.m. – 8 p.m. from June 11 through August 20.  

Attendees can enter to win a Vespa from Freedom Cycle in Reno at each of the Farmers Markets to be given away at the final Market on August 20.  The drawing is completely free and there will be weekly prizes as well.  Complete drawing details will be available at each market.  

The market is open to the public and will feature fresh produce as a Nevada Certified Farmers Market, packaged food vendors, local artists and vendors, food specials by Roundabout Market Everyday Gourmet and drink specials by Whispering Vine Wine & Coffee Company, free live music and activities for the kids.  

The June 11 will feature live music by the The Rusty Strings, June 18 will be The Beat Freaks and June 25 will be The Mark Sexton Band.  For more information on the Somersett Farmers Market or for a calendar of events, click here http://somersett.com/whatsnew/calendar.php , visit somersett.com, or call 775-787-4500.  

To visit the Somersett Town Square, take I80 to Robb Drive and turn left on Sharlands Avenue, which turns into Somersett Parkway. Follow Somersett Parkway into the community and turn in at the 2nd roundabout.  

One Block looked at the financial health of a group of fairly upscale houses on Dancing Aspen in Damonte Ranch.  Average purchase price was about $420,000 at the peak.  I was pleasantly surprised that most of the loans were pretty good (5/25 or better),  and at least 70% brought 10% or better to the closing table.

I just repeated the exercise on a decidedly below median neighborhood.  Thought I would be able to get snarky about the ignorance of the first time buyer, suicide loans, predatory lenders, the whole shebang.  Meet Ginkgo Court in Woodland Village Phase 13.   20 homes that sold new right at the peak in mid 2005 for an average of $280,000 when the median was hitting $335,000.

I’ve referred to Woodland Village as being the Sam’s Club version of Somersett in the past, but I actually admire them for for creating a livable, family oriented community for the entry level buyer.  And bar none, Woodland does the best job of explaining upfront the buying process, what you get, what you don’t, and what you need to know of any developer I have run into. 

70% of the buyers on this block brought at least 10% to the table.  65% of the first loans were at least 5/25.  If anything, the naive first time entry-level buyers on Ginkgo brought greater down payments and have generally more conservative loans than the sophisticated move-up buyers on Dancing Aspen.  Even so, one of these 20 homes is an REO today, and 2 more have NOD’s (one typical 80/20/out on a 2/28, one HELOC abuse, and one was the most heinous sub-prime reset I’ve ever seen).

So what’s my point?  The below median homes like Ginkgo have been hammered with defaults and falling values despite the owners having pretty sound initial equity and decent loans.  Woodland Village is actually holding up better that the train wrecks of Eagle Canyon and Sky Vista.  The volume of sales in the below median sector is starting to stabilize that market.  I can’t help but  feel that above median neighborhoods like Dancing Aspen are going to follow Ginkgo down the the slippery slope, and are next in line for a bruising.  Sure, there are some isolated deals, REOs and short sales happening in the upscale neighborboods, but nowhere as sweeping as what has happened in the entry level neighborhoods.  The sales statistics above $300,000 have been pretty pathetic.  Is the next trend the "move down" buyer?

Hey, I don’t want to get the rep as Mr. Negativity Man here.  You have to understand my primary information sources.  I track and research new MLS listings which leads me to a lot of "must sells" and troubled properties.  And my public records searches are aimed directly at properties going down the tube.  Negative seems almost normal to me, but my source material is admittedly tainted.

So for a reality check, I wanted to look at a random chunk of property and see what is really going on with the buyer’s financial situations.  Are the assumption I have been making equal to the reality?  Do people have skin in the game?  Are they really refi’ed / HELOC’ed into oblivion?  My only screen was to find a short block (so I don’t go blind on this post) and that the block was new construction that sold out near the peak.  It only took 3 hits on the Reno MapServer to find the winner …. Dancing Aspen  in Damonte Ranch.  22 homes that originally sold between late 2004 and late 2005.  Officially Centex’s Villages at Damonte Ranch 18B, probably Copper Creek.

The street is about 80% owner occupied.  Most folks are move-up buyers from other Reno properties.

The buyers brought an unexpectedly large amount of equity to the table for the market at the time.  4 bought with 100% financing, 3 with 95%, 3 with 90%, 8 with 80%, and 4 with greater than 80%.  The loan types were also more conservative than I expected.  1 subprime 2/28, 2  3/27, 11 5/25 or 7/23, 7 30 year fixed, and 1 15 year fixed.  NO Option ARMs. No NODs have ever been filed on any properties on this block.

And what have these folks done since their original purchases?  10 have done nothing.  2 have refi’ed to reduce their principal balance.  4 have refi’ed to balances under their original purchase price.  6 have refi’ed to balances over their purchase price.  My guess is if they had to sell, 5 or so of these homes would end up as short sales or foreclosures in this market, but it isn’t happening yet.  There are 2 current listings on the block - one of the "no action" home listing at 15% over their purchase in 11/04, and the other basically "no-action" home listing at their 9/05 purchase price.  Both started with 95% financing.

It certainly isn’t the Street Of Dreams, but it might just be the Street Of Reality.  The financials on the properties are much better than my "Jaded" assumptions, and yet about 20% of the houses seem like lost causes if the owners get into "must sell" situations.  It seems like owners with skin in the game are holding on, right or wrong.

That pile of dirt and half finished house next to yours may be staying that way for a while.  Individual homeowners are not the only ones defaulting on their mortgages - the developers are starting to default, too, and the dollar amounts are staggering.

Anyone looking to purchase a home in a new development owes it to themselves to understand the "health" of the developer and of the project.  Just enter the legal name of the owner / developer in the "Grantor" line on the Recorder’s site.  If you get a huge number of hits, just go to the last couple of pages.   Make sure you are using the legal name of the seller - for instance, PN II is the legal seller of Sierra Canyon, not Pulte or Del Webb.  Beyond just NODs and NOSs, Mechanic’s Liens are also a pretty good sign that things are going south.

I’m currently tracking over $150,000,000 worth of  projects in some level of default.  (more…)

I’ve been out with several buyers these last few weeks. All have been sophisticated internet shoppers with very clear ideas about what they’re looking for: views, space, upgrades, location. But at the top of everyone’s list is a great deal. Because when you’re buying in a market that isn’t so stable, you want to give yourself the biggest cushion possible, as things will probably get worse before they get better.

Why are they buying rather than renting? Various reasons, but usually it’s about control. They want to own the property so that they can decorate, landscape and upgrade it however they want. And they are often planning to stay in the property for years, which gives the market time to work itself out before they have to worry about it again.

My buyers are mostly folks from out of town, looking to relocate. They usually have 20% down, high credit scores and are coming to the table with plain old vanilla 30-year fixed loans. They’ve got so much to look at, it can really be daunting. So we focus on the best values, as in, homes offering the most bells and whistles for the least amount of money.

Grossly overpriced? We’ll never see it. But we’ll see lots of other houses. One couple looked at 30 houses per day for four days straight before making their decision two weeks later. If your house doesn’t stand out, we won’t even remember it.

I was particularly struck by how much prices have been slashed by new homebuilders. Talon Pointe in Somersett used to sell those beautiful little view homes on the ridge for $650K+… now they’ve scaled back pricing to the high threes, for a quality-built, panoramic view home in Somersett. Allegedly these prices are just above cost. I imagine Ryder is pushing onward to keep the machine going and finish out the subdivision. The neighbors can’t be happy, but what can they do?

 Toll Brothers has taken similar action at Dorado in Damonte Ranch. Where once, these beautiful decked-out duets sold for the high fives and up, now they’re starting in the high threes. I hear the guy who paid $800K for his highly upgraded special unit is furious, but what can anyone do? Markets go up and markets go down. Hopefully he’ll enjoy the property and maybe even retire there.

We saw a lot of empty houses. Judging by the dead bugs, ice cold temperature and little rodent poops, some had been vacant for a very long time. Many were in South Meadows and Northwest Suburban, but we also found them in the Old Southwest, Galena Estates and Caughlin Ranch. No neighborhood seems to be entirely immune.

Not a short sale! has become a badge of honor for any well-priced listing. We saw many short sales. Some were with agents who knew the bank and seemed to have the process all dialed in, others were with agents struggling to understand the process, and some were with experienced agents dealing with difficult, non-responsive banks.

After inquiring on several such properties, I’ve come to the conclusion that unless you have all the time in the world to wait for a response, it’s probably better to let the house go through foreclosure and back to the bank. Once the banks own them, they seem a lot more willing to make a deal.

So as foreclosure sales exceed resales, as 96% of standing inventory lingers on, and as banks reduce prices on their properties in the MLS, Centex Cyan sells 20 homes a month. The banks and builders are leading the way, along with the occasional smart seller who prices her home to move no matter what the market is doing.

We have a long way to go.