Does the media drive the real estate market? This guest post from a reader responding to some recent commentary on what buyers care about weighs in:
"I’d like to think that I’m not in that 19%. I do gather some of my information from the media but I let the listings do the talking. I currently would love to move to the Mountaingate homes that Ryder is building. Currently though, my 3500 sq ft Northgate home is worth about $500k or less. This I base on the fact that similar homes are listed in the $550k range and are just sitting there and have been for some time. I see that of all the homes in NW Suburb over $500k there are 32 and only 1 pending. My house won’t sell and that is my reality. Media or not.
"I could lower it to a point at which it would sell which I would be fine with because that is the reality of the market. The problem is the majority of the sellers/builders are living in a place I like to call da’nile. It’s not just a river in Egypt. Ryder Homes is asking $680,000 for the 3000 sq ft home I like in their community. Now I know the neighborhood is nicer than my NW neighborhood but is it nearly $200k nicer? No way. Maybe $80k nicer tops. When you run the comps on the Grandview homes near there the numbers sound reasonable but when you see how many aren’t pending you realize that perhaps the numbers don’t make sense at all.
"With regard to the what buyers care about, I agree. People I work with talk to me about interest rates driving home sales etc. but I say maybe in the extreme entry level area where every dollar counts they might. Right now, I’m looking at a $680k house. You could tell me the rate is 4% or 8%, not that big of a deal. If you tell me the house is now $580k not $680k, I start packing my bags. The media would have me believe that interest rates are driving the housing market, I don’t think so.
"I don’t believe there is a shortage of buyers. I just think the majority of people have reached the point where they say these prices don’t make sense. I can’t think of any home in Reno/Sparks that you could put down 20% and rent it at a break even price. Will there be a future rental home shortage as no one is willing to tie up $200k on an entry level home to rent out only to break even? I could invest the money and not get phone calls from the stock in the middle of the night about the toilet breaking.
"If the market is to pick up again prices need to come down or there needs to be an inventory shortage. The builders may do this somewhat by reducing their output but there is no way to get the collective of home sellers to back out of the market for the ‘good’ of all. I’m afraid this one will have to take care of itself and my Mountaingate home will just have to wait. "
– Patient Buyer
Todd Tarson
I think to some degree that sellers will have to give in to the competition within the current market, meaning lower prices and neighbors be damned.
Or, that the builders will reset the market when and if there is some kind of strong signal that the market has bottomed out.
Realtors do not set the price… buyers and sellers do. Right now it seems that buyers and sellers are speaking two different languages and don’t understand each other.
I’m telling would be selling clients to stay put unless they need to move. And I’m telling buyers to stay put… unless they need to move.
Need and want are two different things right now.
Reno Ignoramus
Patient Buyer makes an excellent point. Several actually. He says that he can’t think of a property in Reno where a buyer could put 20% down and make it cash flow as a rental. In the MLS today is a “new” listing for a house built in 1948 at 175 Bartlett Street in Reno. MLS # 60027750. This is up by UNR just north of the Judicial College. The listing realtor describes this property, on the market for $234,900, as ” a wonderful investment.”
If a Ignorant Investor were to put 20% down, he would have to come up with $47,000. If he were to then finance the balance of $188,000 at 6.25% over 30 years, his monthly P&I would be $1,157.00. Add to that say, $200 a month for taxes and insurance. The monthly nut is thus $1,357.00. Plus the predictable outgo for the the toilet repairs as Patient Buyer describes.
The listing realtor offers the information that this charmer is actually already rented and generating $900 a month. Sounds pretty good for a 59 year old 1000 sq. ft. 2/1 house on an old uneventful street.
So, this “wonderful investment” is guaranteed to be at least $450 negative every month. I won’t even comment on which direction the value of this house is heading in the next 2-3 years. What do you all think?
So here is your chance to fork over $47 grand on a depreciating asset and lose about $500 a month. Every month. A “wonderful inventment”?? It is comments like this that make so many realtors look foolish.
Diane Cohn
Not to mention that this property backs up to a regularly used train track and is in UNR’s long term path of progress, so who knows what that means in terms of buyout in the future…
Lindie
Diane:
Help me out here. This house on Bartlett Street. $235 a square foot for a 1000 sq.ft. 2 bedroom, one bathroom, 59 year old house with a one car garage that backs up to an active railroad track in an old fairly run down neighborhood?
Is this where we are in the market now? Is this what $235 sq./ft. get you??
ap
Now is the time to buy a Mountaingate Home.
Transplanted from California 4 years ago, we currently live in Grandview. We are purchasing a new home in Mountaingate because we love the location and the architecture of the homes. We also think the current price tag at Mountaingate is a great investment for the long run of 5-10 years. Coming from California and watching the Reno market for the last 4 years, we think the base prices at Mountaingate are reasonable. Keep in mind they include a lot of upgrades such as granite counter tops, tile floors (no linoleum) and stainless steel appliances. Ryder is taking the current market into consideration. If Mountaingate had it’s Grand Opening 1-2 years ago, the prices would start at 50K-100K more than they are now.
When the Southmeadows area is completely built out, there will be no land to develop new homes–which will greatly reduce the supply of new houses and resale prices will go up in the South Suburban/South Meadows area. Making NOW the time to purchase a Mountaingate home.