Well, it’s been a busy couple of weeks in the real estate/subprime lending meltdown world. Are we headed for recession? Unless another miraculous investment bubble saves us, I’d guess yes.
Citi Ceases 100% Stated Income Loans
S&P Says Home Prices Worst Since 1994
(A strange comparison to NAR’s recent report on surprising gains…)
Beazer Homes Faces FBI Investigation
Housing Slump Pressures Employers, Workers
Three in Ten Homeowners Blind to Mortgage Terms
Lennar Profits Slide on Housing Slump
From Inman News: "Nevada registered the nation’s highest state
foreclosure rate for the second month in a row thanks to a 24 percent
increase in foreclosure activity from the previous month. The state
reported 3,124 foreclosure filings during the month, up 77 percent from
February 2006 and a foreclosure rate of one foreclosure filing for
every 278 households — more than three times the national average,
according to RealtyTrac."
19% of Nevada Homeowners have Subprime Loans
Nevada Realty Agent Numbers Shrink
Study Expects 1.1 Million Foreclosures
Fremont Gives Workers Two-Month Layoff Notice
Safe Ground in a Housing Market Meltdown?
Toll Brothers Predict a Spring Bust
Mortgage Problems May Slap Housing Prices
Foreclosures May Hit 1.5 Million
Lennar Asks Contractors for Money Back
From Loopnet: "Global Investors Fuel Record Deal Volume. Commercial real estate investing worldwide reached a record $682 billion last
year, up 38% from 2005, according to a Jones Lang LaSalle report.
Significantly, the brokerage firm’s ‘Global Real Estate Capital’
report found that globalization is fueling the world market growth and is a
growing factor in
fueled by investors’ increased allocations to real estate as an asset class and
by private equity investors’ increased attention to opportunistic acquisitions.
JLL sees no immediate end to the investment surge worldwide."
What’s the Deal With Conflicting Housing Reports?
714 Foreclosures & Pre Foreclosures in Washoe County
Despite Doom & Gloom, Wealthy Still Like Real Estate
As always, thanks to my usual contributors for these many fascinating links. Most of all, of course, voracious reader Reno Ignoramus.
Prime
I wonder why the Reno Gazette Journal has not reported that Nevada now has the number one foreclosure rate in the United States and that there is a huge spike in foreclosures in Washoe County.
Traditional media is really becoming outdated.
Reno Girl
Real Estate advertising is probably the number one source (or is pretty high up there) of revenue for the RGJ. When Real Estate boomed for during the last several years they saw this revenue continue to increase. I’d say it’s probably in their best interest to protect that source of income. I think that this conflict is one of the main problems with the MSM today. They don’t accurately report what is truly going on for fear of losing revenue sources. Instead, to get the real story we depend on bloggers like Diane. It’s ironic that a Realtor is more honest in reporting the true state of things, than the newspaper, when it’s the Realtor that personally has much more to lose. Thanks for your integrity Diane!!
BanteringBear
Diane,
Thanks for the good laugh! Your opening sentence is hilarious. I love your candid, no-nonsense approach. I nominate you for President of the NAR.
I agree with you. I think a recession is imminent. And I believe it will be severe, and due, in large part, to the housing crisis. Many are unaware of the potential danger of the current situation. As buyers have disappeared, the market is faultering badly. Subsequently, job losses are mounting. Many realtors, mortgage brokers, title company employees, construction workers, appraisers and the like are/will be in need of new jobs. Finding any work will be a difficult task, but nearly impossible at the same rate of pay. A lot of these individuals may become sellers of homes as well as they look to get away from crushing mortgage payments, only adding to the current glut of homes. The job losses will not be limited to the industry, as many businesses which cater to it will also be badly hurt.
And then there is the issue of the banks. Many people anticipate some large banks folding. They have lent out too much money that will never be repaid. And not only to homebuyers, but builders as well. When you look around at all of the failing/failed construction projects, most are heavily backed by some financial institution. With prices falling on homes and land, as these individuals/companies fail, the banks have little chance, if any, of recouping their funds. The government will most likely have to step in to help.
This is a very simplistic overview of course. The problems run very deep, which is what is so troubling. There’s never been a better time to have job security, little debt, and cash at hand.
Move to Reno?
Things in the Reno housing market are adjusting to the new reality of increased foreclosures and fewer buyers but housing has always been an industry that moves in cycles. The USA economy is so large and diversified that it is like a battleship that can handle some stormy weather. The problem is that the housing boom in Nevada went on for too long so it will probably take longer than normal to wring out the excess valuation.
If the economy in Reno keeps moving along as it as the last few decades, the down cycle will last for at least a year or so followed by a period of stability before the next upward cycle starts again. To change that prediction would require a major unforeseen event like oil going to $125 a barrel, the federal gov’t suddenly getting fiscal religion, or Nevada outlawing gambling.
i bought a CD at the bank today and my banker told me that Bank of America is coming out with a no-fee 100% mortgage. That should help some buyers sign on the bottom line.
Reno Girl
“If the economy in Reno keeps moving along as it as the last few decades, the down cycle will last for at least a year or so followed by a period of stability before the next upward cycle starts again.”
Before the housing boom, there wasn’t much moving the Reno economy along that I can remember. When I moved here in the late 90s there were headlines about our depressed economy thanks to Indian Gaming taking the revenue, suffering tourism, and record hotel vacancy rates. What do you think is going to happen if/when the Real Estate industry here really takes a hit?
“i bought a CD at the bank today and my banker told me that Bank of America is coming out with a no-fee 100% mortgage. That should help some buyers sign on the bottom line.”
I don’t want a no fee 100% mortgage. What I would like is a house that has a price point in line with fundamentals. My wages have risen significantly in the last several years, but there’s no way I’m going to spend my hard earned money for something that is so obviously overpriced. Affordability isn’t a problem that can be solved with this product or that product. You can always refinance a loan, you can’t refinace the purchase price of your home.
Mike Van H
Whoops not to be persnickity, but in the link above ‘Study Expects $1.1 Million in Foreclosures’ you incorrectly label the 1.1 as a dollar amount, when that is actually the number of homes expected to be foreclosed…and the dollar amount loaned in adjustable rate mortgages actually exceeds 2 trillion.
Diane Cohn
Hi Mike, thanks for catching that. It was way past my bedtime when I posted last night.
As for reporting on the market, I’m just an agent on the street trying to decode a changing situation so that I can best advise my clients. Buying or selling a home is major undertaking, and my goal is to get people the best deal possible in an unstable climate. Whether the news is bad or good, we have to deal strategically with the situation in front of us, eyes wide open.
Diane
MikeZ
Kudos to you, Diane, for your candor.
When I’m ready to buy a home in this area I’ll call you. An honest and frank realtor is a rare find. Too many of your colleagues see only blue skies and rosy scenarios and I find it impossible to trust that type of person.
MikeZ
Prior response:
“If the economy in Reno keeps moving along as it as the last few decades, the down cycle will last for at least a year or so followed by a period of stability before the next upward cycle starts again.”
Prices in Reno need to drop by at least 25% (33% is probably more realistic) before any upturn can occur.
Look at median family income ($43K) and median SFH price ($380K) to get an idea of just how badly inflated and out-of-balance the SFH home prices are.
Reno Ignoramus
“a no fee 100% mortgage”.
These are not new. In fact, these are the very loans, made to anybody who could fog up a mirror, over the past 2-3 years, that fueled the speculative frenzy in 2003-2005, and that kept the market going through 2006.
Now if the BofA really wants to keep the lending business/re market going, it might consider the 100% NO PAYMENT loan. You know, the new version of a payment option loan, that allows the debt owner the option of not making any payments at all. Just think about this. Valet parking runners can buy a Toll Bros. $900k McMansion without the anxiety of ever having to worry about whether they can make the payments, because they could elect to not make any payments!
Truly, prices would again be on the rise!!!
Diane Cohn
For the record, the median sales price in the Reno-Sparks market since March 1, 2007 is $299,900. This includes condos, single family and manufactured homes. The average price during the same time period so far is $352,231.
Move to Reno?
“Prices in Reno need to drop by at least 25% (33% is probably more realistic) before any upturn can occur.”
That sure would be nice. However, the market would have to trend down for quite some time for that to occur. Sellers will try to avoid selling at 75% of what they think is the true “value” of their property as long as possible. Looking at the MLS, I sure don’t see any major change yet…..perhaps you do. Realtors want to get the listing and one way that do that is to list the property at what the sellers think it is worth even if it isn’t.
As far as the no-fee mortgage is concerned, this is the first I have heard about it. The problem is not the 100% mortgage but rather the subprime people who got an ARM. Those who can’t handle the debt load will get flushed out fairly soon as their rates get jacked up.
“Look at median family income ($43K) and median SFH price ($380K) to get an idea of just how badly inflated and out-of-balance the SFH home prices are.”
Yep, things are out of whack in Reno. That ratio should be more like 2 or 3 to 1 instead of 8 to 1.
If the housing boom was the only thing driving the economy in Reno and was caused primarily by very loose lending practices, you will see that 25% to 33% price adjustment.