Last week I had the opportunity to attend two housing
forecast presentations: One by Leslie Appleton, Chief Economist for the
of Realtors, and the other by Ted Jones, Chief Economist for Stewart Title.
for
price would probably drop for the year by 2%. She also predicted that prices
would be flat for the next 2-3 years.
markets differ throughout the state. While
supply. Leslie addressed the subprime situation, estimating that in
affect 5-15% of the market. The
region is leading the state in number of foreclosures, and she is estimating
that totals statewide will reach only one third of the number reached in the early
90’s. Current job growth in the state is the difference this time.
first time
buyers went the no-down route for a total of 750,000 loans, or 14% of total
loans made. The key question in any market? How many of the homes listed for
sale are vacant? In Vegas that number is 50%.
will not derail the economy. Housing has been 23% of job growth since 2003, and
even with -1% growth in the next couple of years, other sectors are growing and
expanding, picking up the slack. Her biggest concerns for the economy overall?
Financing our country’s debt.
sound. Jobs are coming back to
sales around the Bay are flat to up. Sure, there’s a bit more inventory than in
years past, but unit sales have shown resilience. She also commented that the
generally sound for the very same reasons. This is good new for us as these
markets feed our market.
Sacramento and other
to an over abundance of new construction. Sales down 19% in February 2007.
Knowing that there were some Northern Nevadans in the audience, she briefly
touched on our market, noting that sales in
off by 34% during that same time period. But she wasn’t worried about health of
our housing market because of the above-average job growth continuing here.
and appreciation at minus 2% (for the first time in ten years).
group of local real estate agents, brokers and lenders here in
issue, stating that 10% of loans originated in 2006 fell into this category. He
also pointed out that 87% of them are performing just fine, so the subprime
problem is not as big of deal as the media makes it out to be. Given current
market dynamics, nationwide, he is predicting a 6-11% decline in housing units
sold.
were historically tied to 30 year mortgage rates, to the point where you could
pretty accurately predict rates base on what oil was doing. That all ended in
2002. (About the time that exotic loans became popular?) Materials prices
worldwide are high now due to demand from China as they build infrastructure,
and considering trade imbalances, the value of the dollar, and the federal
deficit, Ted’s take was that now is the time to get a fixed-rate loan. He is
predicting that interest rates will be up 60-80 basis points by July 2007 and
that 30-year fixed rates will be up to 7% by the end of the year.
US job growth is strong, currently running at 18.5% above the 10-year average.
That translates into almost 2 million jobs in the last 12 months. Most of the
growth has been in medical, so these are good, well-paying jobs. Reno-Sparks is
growing at 3.31% which is double the national average. We’ve added 7200 net new
jobs in the last 12 months. Also, each new housing dwelling built typically
creates 1.25-1.5 new jobs.
for the rest of the market. With vacancies at 7% (10% is the US average) and
strong rents, our regional economy is strong and poised for future growth as
more and more businesses come online in major developments such as the
Reno-Tahoe Industrial Park.
nationwide, Ted has come up for this rule of thumb for determining what type of
market you are in: Less than six months of inventory equals a seller’s market, 6-12
months makes it a balanced market (with nine being normal), and over 12 months
equals a buyer’s market. Less than six months? Prices go up in the
double-digits. More than twelve months? Prices go down in the double digits.
my March Report on the local market, with a nine-month supply of homes in the
under $300K range, this segment is normal. With a 12-month supply of homes in
the $300K-$500K range, this segment is balanced but close to slipping into
buyer market territory. With over 20 months of inventory in the $500K-$1
million range, we are definitely in a buyer’s market, but will there really be
double-digit declines? With over 30 months of inventory in the $1-2 million
range, there just has to be some double-digit downward dives, probably more so
in the higher end of that spectrum as the average sale is around $1.38 million.
And in the over $2 million range? With over four years supply, I’m guessing
some of these will come down with a serious reduction, if the sellers are truly
serious about selling, that is.
he uttered his famous quote, urging us to sober up our sellers. The minute he
described them as road kill on the verge of dying, with the buyers as buzzards,
circling, waiting for them to die, I knew it was true. I’ve even said so before
in this blog. Just about every buyer I work with has this mindset. Most aren’t
in any hurry at all. They’ll even rent and wait if necessary. When one seller
finally cracks by setting a new low price bar, the smart buyer swoops in on the
deal, scoops it up, sometimes amidst multiple offers, and is thrilled to have
scored a great house at a great price.
bubbles exist like Miami, for instance (he categorized us as a minor bubble),
time bomb loans, terrorism, inflation and declining cap rates, pandemic (every
30 years the world has one, and we’re past due) hedge funds that will fail, and
oil imports.
asked about affordability in our region, he said he wasn’t worried about it. He
said this is a beautiful place with easy access to incredible amenities, and, coupled
with strong job growth, people will make sacrifices to live here. Nobody moves
to
said, for the amazing beauty there, so prices are low. But people do move here
for the lifestyle it affords, even if it costs more.
Someone also asked about prices at Lake Tahoe, which
continue to buck national trends by holding strong, even performing at
historical highs in the super high-end (over $10 million). Ted’s response
acknowledged that it’s a different world up there, primarily a second home
market. Second home sales are driven by income and inheritance. Income is up in
our coastal feeder markets, and baby boomers are about to start receiving the largest
wave of inheritances in history, so it’s a great time to be investing at the
buy. We’ve had our big drop, interest rates are heading up later this year, the
job market is strong, and this is a desirable place to live. Given all the
positive redevelopment going on in our community, I tend to agree.
Derrick
Good article, Hence my point 2002 prices arent coming back you hopefulls. Unlike some peoples perspectives that reno isn’t as desirable as northern cali. Im not sure why people discount reno so much. Reno and the surrounding areas are among the most beautifull in the world. With World class resorts, skiing, nightlife, outdoor activities anf ofcourse the downntown makeover are all going to major contributors in reno’s growth going forward and have been for years now. I have to agree that people will stil move here despite the higher than normals prices because of the qaulity of life reno has to offer. also to banterbear you mentioned reno doesnt have the high growth tech job growth like northern cali. when in reality that isnt true it does! Many firms firms and corporations are relocating to reno because of its favorable tax climate low lease rates and desirable location. Im not saying prices in reno wont go down further because evidence suggest we have a small amount of downside risk from here. but 2002 prices? I believe someone mention they were wating for 1999 prices? these are just pipedreams. btw Love the downtown makeover webpage very informative and I as well love to see how the development of downtown is coming along. seems like that competition of indian casinos and vegas have forced reno to become a more viable downtown with more culture, safety, and more desirable business climate. all pointing towards a more healthy and robust downtown in the years to come.
Josh
Diane,
What a great article, and it sounds like an excellent forecast presentation. As a Californian purchasing a home in the Southwest I identify with all that was said. Reno is such a great place to live with recreation to fill a lifetime it is hard to imagine that the influx of retirees and Californian Information workers will not continue to effect the local market.
I am happy to pay today’s prices given low interest rates – and I know given the population growth that Reno will continue to surpass anyone’s growth expectation. It is very hard for most people to think 20 years ahead, yet by all measures when populations double, Reno will become all that more attractive: see this table by the US census for top 10 state projections in 2025. http://www.census.gov/population/www/projections/ppl47.html Most independent sources agree that this is the “conservative” estimate for growth.
Table B. Projections of the Top 10 States, Ranked by Population
Size: 1995 and 2025
(In million. As of July 1. Series A and B reflect different
interstate migration assumptions.)
_________________________________________________________________
1995 2025 2025
Series A & B Series A Series B
Rank State Pop. State Pop. State Pop.
1 California 31.6 California 49.3 California 41.5
2 Texas 18.7 Texas 27.2 Texas 28.2
3 New York 18.1 Florida 20.7 Florida 20.1
4 Florida 14.2 New York 19.8 New York 19.4
5 Pennsylvania 12.1 Illinois 13.4 Illinois 13.7
6 Illinois 11.8 Pennsylvania 12.7 Pennsylvania 12.9
7 Ohio 11.2 Ohio 11.7 Ohio 12.3
8 Michigan 9.5 Michigan 10.1 Georgia 11.0
9 New Jersey 7.9 Georgia 9.9 Michigan 10.4
10 Georgia 7.2 New Jersey 9.6 North Carolina 9.9
Lindie
So with this avalanche of Good News, I guess it will be only a matter of a couple days before your $1,325,000 Killer Deal on Pepperwood at Somersett recieves an above-asking offer.
Please let us know when it sells, and for how much, OK? I’m sure your sellers will be delighted to know they won’t have to make any more price reductions, since we’ve had our big drop, interest rates are heading up, the job market is strong, and everybody wants to live here.
BanteringBear
Thanks for the recap Diane. I don’t even know where to start given all of the tripe these industry shills spewed. Leslie Appleton Young has zero credibility. She has contributed some real gems in her speeches. Here are a few:
“Despite rising interest rates, a growing for-sale inventory and a slowing sales pace, the county’s shortage of housing will prevent prices from dropping steeply.”It’s Economics 101,” said Leslie Appleton-Young, chief economist for the California Association of Realtors. “It’s demand and supply.””
So, in her mind, rising inventories and slowing sales mean housing shortages? Her lack of deductive reasoning is frightening.
“In her forecast, Appleton-Young predicted a 2 percent statewide decrease in single-family home resales next year. She anticipates a 10 percent statewide increase in the cost of a median-priced resale home.”
So slowing sales equal higher prices? Hmmm. Possibly if the median is skewed by a lack of first time buyers, but my guess is that was not her theory.
“Leslie Appleton-Young is at a loss for words. The chief economist of the California Assn. of Realtors has stopped using the term “soft landing” to describe the state’s real estate market, saying she no longer feels comfortable with that mild label.”Maybe we need something new. That’s all I’m prepared to say,” Appleton-Young said Thursday.”
Waffling at its finest. After beating the soft landing drum for years, she’s now having second thoughts.
“The Sacramento region is leading the state in number of foreclosures, and she is estimating that totals statewide will reach only one third of the number reached in the early 90’s.”
Given the level of unaffordability in todays market, and the sheer volume of suicide loans over the last 6 years, I find this to be the most outrageous statement she has ever made. Some areas have already reached the levels seen in the early 90’s and we are just getting started. Time will prove that this was an egregious oversight on her part.
“Sacramento and other Central Valley locations are a very different story due to an over abundance of new construction…Knowing that there were some Northern Nevadans in the audience, she briefly touched on our market, noting that sales in Reno were off 9.2% and in Carson City off by 34% during that same time period. But she wasn’t worried about health of our housing market because of the above-average job growth continuing here.”
So the overabundance of new construction will affect Sacramento, but the overabundance of new construction in Reno isn’t a concern since job growth is strong? What?? And then she conveniently overlooks the fact that these new jobs by and large don’t support current prices? She is either a bald faced liar, or completely unqualified for the position she holds.
And from Ted Jones:
“When asked about affordability in our region, he said he wasn’t worried about it. He said this is a beautiful place with easy access to incredible amenities, and, coupled with strong job growth, people will make sacrifices to live here. Nobody moves to Houston, he said, for the amazing beauty there, so prices are low. But people do move here for the lifestyle it affords, even if it costs more.”
I think he better start worrying. Less affordability translates into fewer sales, and less money for him. This whole “its special here” argument is happening in every bubble city and town in this country. It’s a weak and futile attempt at justifying outrageous home prices. I’ve lived in several cities throughout this great country, and let me tell you something, Reno/Sparks is NOT one of the most beautiful. Nobody wants to go on record admitting there is a huge problem. I hope people like him really get hit in the pocketbook.
“Income is up in our coastal feeder markets.”
So let me get this straight. The coastal markets are feeders for Reno/Sparks, but not Sacramento and other northern CA cities and towns (since they’re tanking hard, of course)? I don’t buy that for one second. This is pure nonsense. Sacramento was speculation city, as was Reno/Sparks, Las Vegas, Phoenix, you name it. The price appreciation had everything to do with this speculative mania, and nothing to do with fundamentals. When asked about the vacant housing, none of these shills have an answer. They just beat the “things are going to turn around” drum. It’s all based on hopes and dreams.
“His overall assessment of our market? This is the year to buy. We’ve had our big drop, interest rates are heading up later this year, the job market is strong, and this is a desirable place to live. Given all the positive redevelopment going on in our community, I tend to agree.”
I’ll agree to disagree.
BanteringBear
“Materials prices worldwide are high now due to demand from China as they build infrastructure.”
BS, Ted. You’re full of it.
http://www.thenewstribune.com/261/story/40968.html
BanteringBear
From Leslie Appleton Young:
“The Sacramento region is leading the state in number of foreclosures, and she is estimating that totals statewide will reach only one third of the number reached in the early 90’s.”
The Union Tribune from San Diego:
“A record 433 owners lost their homes in San Diego County to foreclosure last month, more than six times the March 2006 figure, DataQuick reported Monday.”
“The previous record was 337 in March 1996 at the tail end of the 1990s real estate recession, after which foreclosures dropped to as low as just four in December 2004.”
From the LA Times:
“Nearly 900 Californians a week are losing their homes because they can’t afford to pay the mortgage, up from about 100 a week a year ago, providing fresh evidence that the housing market’s troubles are nowhere near over. The 11,033 foreclosures in the first three months of the year represent an 800% increase over the same period a year earlier.”
From Leslie Appleton Young:
“But her bottom-line assessment was that subprime failures will not derail the economy. Housing has been 23% of job growth since 2003, and even with -1% growth in the next couple of years, other sectors are growing and expanding, picking up the slack.”
From Chris Thornberg, an economist without ulterior motives:
“‘For this rise in foreclosures to be happening in the midst of a strong labor market is truly unique and scary,’ said economist Christopher Thornberg. He predicts foreclosures will top out at four or five times the current level, enough, he says, to either induce a recession or at least bring the economy to the precipice.”
Anyone who believes a word this woman says has been duped.
BanteringBear
“…also to banterbear you mentioned reno doesnt have the high growth tech job growth like northern cali. when in reality that isnt true it does!”
When and where, pray tell, did I post that?? You seem to be confused, as is evidenced by your redundancies.
Derrick
Sounds like alot of people on here are just upset they didnt buy 5 years ago. I know its a horrible feeling to be priced out of the market. give it another 6-12 months and just maybe you will get in on something you can afford. meanwhile Reno will continue to grow at a torrid pace and californians will continue to move here and be more than happy to pay the current prices. sure they may feel the prices have more short term downside risk, they are more than making up for that with the property the more than likely already own or are sellig in ca as we speak. oh yea lets not forget the HUGE tax break they will get by moving to reno. SO what is considered a ripp off to many local reno residents is considered a steal to many californians.doesnt Ca have the 2nd highest taxes in the country? Dont expect reno’s RE market to be crashing anytime soon as long as california prices are extremely higher than reno’s. and the best part ? we can take a short 3-5 hour drive to our favorite bay area destinations. Since prices are in some eyes still 25% overinflated and noone in reno can afford housing who is it then thats buying the current inventory we have? I think Diane and Guy have a pretty good idea on who that is and will continue to be
lumberlittle
Bear said:
“”Materials prices worldwide are high now due to demand from China as they build infrastructure.”
BS, Ted. You’re full of it.
http://www.thenewstribune.com/261/story/40968.html
”
It’s obvious from bear’s post above that the reason he hasn’t bought is that he’s looking for a home made entirely of lumber.
You know the one that sits on the wooden foundation, with the wooden driveway, and a wooden shake roof. He’ll brag about how much money he is saving using his wooden outhouse, and cooking outside.
He’ll have to build it himself though, he wouldn’t want to pay any increasing labor costs.
Forget the price of concrete, steel, copper wiring, or anything else. The price of lumber is falling…
http://enr.construction.com/features/coneco/recentindexes.asp
MikeZ
Step away from the Kool-Aid, Diane!
LIndieGee
The suggestion that some posters here are “upset” because they are “priced out of the market” is, quite frankly, absurd. Why? Because NOBODY was “priced out of the market” for the past 3-4 years. People used to get “priced out of the market” back in the days when lenders used to actually require a borrower to demonstrate creditworthiness. You know, like be able to verify income and have a down payment.
Derrick must be unaware of the subprime mortgage industry. You know, the people who would lend $600,000 dollars to any cocktail waitress who was willing to lie about her income. It was called, Derrick, a “stated income” loan. Otherwise known as a liar loan. All anybody had to do was state whatever level of income they were confortable lying about, and VOILA, they got whatever amount of money they wanted to borrow.
The concept of being “priced out of the market” simply did not exist for the past 5 years. It may be coming back now as the subprime industry implodes as lenders tighten up standards. But the Voodoo lenders made the market available to ANYBODY.
Also, according to Diane’s very own numbers, the median price in Reno-Sparks has dropped 16% in the last 12 months. Just what would it take for you to call it “crashing”??
MikeZ
Let’s revisit Ted’s and Leslie’s predictions in 6-12 mos to see how right (or wrong) they were.
Remember David Lereah’s 2005 book: “Why The Real Estate Boom Will Not Bust?”
Remember what’s-his-name’s “10% is in the bag” prediction for 2006?
A lot of people drank that Kool-Aid. They look like fools now.
BanteringBear
lumberlittle said:
It’s obvious from bear’s post above that the reason he hasn’t bought is that he’s looking for a home made entirely of lumber.
You know the one that sits on the wooden foundation, with the wooden driveway, and a wooden shake roof. He’ll brag about how much money he is saving using his wooden outhouse, and cooking outside.
He’ll have to build it himself though, he wouldn’t want to pay any increasing labor costs.
Forget the price of concrete, steel, copper wiring, or anything else. The price of lumber is falling…
From your link no less:
Materials Cost Index
For the second consecutive month, increases in cement and steel prices were offset by lower lumber prices.
April 2007
Index Value % change Month % change Year
MATERIALS 2551.45 +0.2 -1.0
Oh, what’s this? Overall material costs DOWN! What was your point again?? When you intend to deride someone, at least be sure you can back it up.
MacNV
Touche’, lumberlittle!
The short term (2 or 3 month period) decline in the median is interesting. It tends to indicate that other than just prices deflating, the low end (entry level) of the market is performing better than the high end. Diane’s and Gus’s market reports bear this out. So unless the evil hordes of Californians are feasting on Stead now, the local probably 1st time buyers are qualifying and closing, even with tighter lending requirements. I’ll feel a lot better when the May numbers are in and sub-prime loans are flushed from the system.
When a bubble bursts, the less credit worthy entry level buyer is the first to be pushed out of the market. The low end dies first. This ironically tends to push UP the median and average sales prices. It is going on in LA right now, and probably in a lot of other markets. But not here.
Diane, great, provocative post. Something for everyone to love or hate, but certainly to have an opinion about.
Posters, before you trash Diane, 1. meet her and 2. read the “Sellers Information” page on her web site. It will take you 2 clicks from here. You might be impressed at her candor and market knowledge.
BanteringBear
“So unless the evil hordes of Californians are feasting on Stead now, the local probably 1st time buyers are qualifying and closing, even with tighter lending requirements.”
Are you kidding? A lot of the subprime loans were funded through the end of March. There hasn’t even been ample time for the effects to be reflected in the data. Methinks you’re a bit premature. Of course, maybe that’s nothing new…
Mike Van H
Oh I don’t think anyone is bashing Diane, and we all know her market knowledge or else we wouldn’t hang out on this blog.
I think they are bashing each other. What’s fascinating is the polarizing points of view on this topic, and how strongly everyone feels. I’m just happy I DID buy in 2003, and I really don’t care if my home value goes all the way back down to what I bought it for, because (shock of all shocks) I didn’t buy it to sell it 1,2,3 or 5 years later. Remember when people actually bought homes to live in and raise families in, and possibly pass the home on from one generation to the next? Remember when homes weren’t promoted as a short-term investments, but a long-term investment to help ease the pains of retirement costs? My aunt, who was a realtor in the sixties, seventies and eighties, remembers those days.
SkrapGuy
I suggest you all google Ted Jones, Director of Investor Relations for Stewart Title. Mr. Jones job is to go to Portland, and Kansas City, and Austin, and Memphis, and Seattle, and Minneapolis, and Reno, and all over the United States. Wherever he goes, he sees a strong local economy. Wherever he goes, he sees reasons for optimism for the local housing market. Wherever he goes, he tells his local audience, composed entirely of real estate brokers, agents, loan officers, and title people, the future looks great.
Mr.Jones’ job is to hype the real estate industry wherever he goes. His employer, Stewart Title, is a multi-billion dollar corporation doing business in most of the 50 states, and a major player in the REIC.
Mr. Jones simply brought his shill speech to Reno.
Reno Ignoramus
One of the things that has been most commendable about Diane’s blog has been it’s function as something of a clearing house of information on the Reno-Sparks market.
I suggest readers take some time and go back through the archives of this blog. Diane has them back to last July. (I wish they went farther back than that.) It gives an interesting sense of where this market has been the past several months, especially Diane’s Pendings posts and monthly summary posts. For example, the pendings:listings ratio for the whole market has been pretty much 1:10 for over a year now. Not very good, certainly, but not any worse today than it was a year ago.The median price has been eroding steadily, with no sudden collapse. But clearly the trendline from a year ago has been down.
I think what we have here is evidence that housing markets just don’t move rapidly on the way down. It really is like watching paint dry.
If it is possible, Diane, I would request that you keep the archives up for a longer period of time. It would be very interesting, for example, if we could go back and see what was being posted on April 18, 2006. But alas, we cannot. Give this blog another year or so, and it will be a terrific resource to measure the market’s behaviour.
Grand Wazoo
Diane is well regarded with everyone who posts here – no question about that.
Our new friend Derrick, on the other hand, complete with his copious grammer and spelling errors, is coming off as a bit of a troll. I’m not sure he is really adding anything useful to the discussion other than providing a kool-aid swilling version of the local housing market.
Derrick – old buddy – lemme lay it out to you like this: My wife and I arrived in Reno in the summer of 2005. At that time a very nice place in sync with our housing budget, after selling a house we lived in for 21 years “back there”, was going for about $300 sq/ft. Right now, the same kind of house is closing for less than $200 sq/ft, and the trend is going down. Way down.
As it should be, IMHO.
Good luck with your own properties.
Diane Cohn
Okay, regarding the archives… I’m finding Typepad to be a semi-lame blogging platform that can’t seem to display more than eight months of history at a time. So I’m contemplating a move to WordPress to improve functionality. That way you can see every dumb thing I said a year earlier and pick it apart, piece by piece… 😉
Insider
With current interest rates house prices need to fall another 20% to get to fair value http://www.marketwatch.com/news/story/gross-credit-squeeze-force-feds/story.aspx?guid=%7B79073F6D-DF3B-4805-A234-7F4C4B8D9C3D%7D I personally sold my house in October 2005 becuase I knew it was over-valued. The realtors were laughing at me when I told them the house was going to drop in value a lot. Well, 18 month later I’m the one laughing all the way to the bank. The “investors” that bought my house rent it back to me. I never even had to move! Would I consider buying now? No! It is still a lot cheaper to rent than to buy. House prices are obviously headed even lower. At least another 20%. I predict the bottom won’t be reached at least until 2009. Just a little advice from some smart money that sold at the top when all the sheep were buying. So for all those that think now is a great time to buy, it is not. Only becuase prices have dropped doesn’t mean there is value. Based on historical rent/buy ratios it makes no sense to purchase. It’s amazing that some people don’t care that their house falls to 2003 price levels, because they are in it for the “long-term”. Yet they care that gas prices went up a few cents. Who want’s to lose a $100k + in house value when they don’t have to? Just use a little common sense.
MikeZ
RE: Move to WordPress
PLEASE do. This format is extremely limited in terms of formatting and visual content.
Todd Tarson
Nice synopsis of the two presentations you attended.
I still feel that nobody can predict the changes in the market and only two people can set the market price of a property; the buyer and the seller.
For now the buyer and the seller speak a different language and I don’t blame the buyers for not wanting to learn how to speak ‘seller’.
It will just be nice again one day when buyers and sellers are willing to understand each other.
reno buyer
“Unlike some peoples perspectives that reno isn’t as desirable as northern cali. Im not sure why people discount reno so much. Reno and the surrounding areas are among the most beautifull in the world. With World class resorts, skiing, nightlife, outdoor activities anf ofcourse the downntown makeover are all going to major contributors in reno’s growth going forward and have been for years now.”
I have to disagree with this comment. Growing up in N. NV and then moving to CA and now back here, I definately see the difference between N. CA and N. NV.
Yes, the quality of life is a little better. If you the outdoorsy type of person, Reno offers more unrestricted access to those sorts of activities than the SF area could ever offer (although most of these lakes, ski resorts, camping areas, etc.. are technically in CA). This is a big reason why we moved back. Unless you surf, S. Ca recreational activities are limited to going to the movies or sharing a small lake with 1000 other boaters at a ridiculous price.
However, the quality of people here are much different. Its lacking a lot of the soccer mom family atmosphere that many Californias want and have. There isnt a large middle class. I have found that most people are either pretty well off or they are living paycheck to paycheck. People here are either dressed in LL Bean or Nordstroms clothing, while the rest are wearing the latest walmart trend and look like they havent been to the dentist in 20 years. Not to mention the overwhelming smell of cigarettes. There is a lack of educated individuals and an abundance of casino and warehouse workers.
In addition, no matter what anyone says about downtown Reno, it simply cannot compare to other cities. It has improved over the years, but it just doesnt have the ammenities and atmosphere that other downtown areas have to offer.
Mike Van H
So if the market is so bad right now, how could home sales jump 125 percent in the first quarter of this year, and traffic through model homes increase substantially? http://news.rgj.com/apps/pbcs.dll/article?AID=/20070418/BIZ12/704180447/1071 Just curious as I don’t know much about real estate.
LIndie
Well Mike Van H,
Let me help you out as it appears you don’t know much about new home builder spin.
FIRST,
There is a well-established game new home builders play, both nationally and locally. They announce “sales” that are not really sales. They are contracts signed, not closed deals. One-third to one-half of these “sales” will never close because the buyers will cancel. Many of these “sales” that are not really sales are contracts to purchase the new house contingent on the sale of the buyer’s existing house. So take the spin number, discount it by one-third to one-half, and that’s how many new houses will actually close in the coming months.
SECOND,
The new house builders are actually crucifying the resale market. You think Mr. and Mrs. Joe Sixpack with their “charming” stucco crib in Wingfield Springs or Double Diamond can compete with Lennar and Horton and R&B on the incentives and upgrades? How many Joe Sixpack’s you see offering to pay closing costs, HOA fees,a years’s worth of mortgage payments, club memberships, plus brand new granite, brand new SS appliances, and all the other now standard upgrades? This is a massacre that is only going to get worse as the big builders lower their margins and drop their prices.
THIRD,
So if the builders are going to actually close on 450-500 houses in the next 2-3 months, that is 450-500 resale houses that didn’t get sold. Do you think it is just a coincidence that Diane and Guy have been hawking the new developments on this blog the past few weeks? At least they are honest enough to acknowledge that there is agent cooperation at these new projects, and they make money if they can deliver a buyer who will close a deal. Fact is, realtors now can actually make a larger commission delivering a ready buyer to builder than they can having to split the ever shrinking commissions on resale properties. So don’t celebrate the RGJ story as great news for the resale market. It isn’t.
Mike Van H
What kind of amenities do you need for a downtown to be good? We have three theaters, a movie theater, whitewater park, tons of small locally owned retail, some of the best restaurants are downtown, more are opening all the time, we’re starting to get a nice collection of bars and lounges, we have a beautiful riverwalk, a great university within walking distance of Downtown. It’s not fair to compare downtown Reno to NYC, L.A, or even Portland. Hello, we have 210,000 people in this city, not 1,000,000+. I urge you to compare downtown Reno to OTHER cities with roughly 200,000 people.
And quality of people? The people in Reno are some of the nicest around. Try asking someone in San Francisco for directions or help riding Bart, then talk to me about quality of people. To base quality of people on how much they make is ludicrous. Reno has more of a middle class than SF or L.A., I suggest comparing median incomes and home prices of those three cities. People working in warehouses and casinos here are the bread and butter of this economy, and warehouse workers by the way make $15+ an hour. I find your comments udderly offensive.
And then for you to be as shallow to classify people by what kind of clothes they buy, is ludicrous. Sure, S.F. has well dressed people, but it’s median housing prices are in the $800,000 range too. Try taking a tour of Oakland, Berkley, Richmond etc and see how many people you see wearing Nordstrum. Do us a favor and move back to Northern California and stop insulting the intelligence, friendliness and fashion sense of the people that live here.
Mike
Ok well I might have a been a LITTLE harsh in the last comment, people around here know me as Defender of Downtown, sometimes overzealously but hey I have passion, that’s good LOL. I certainly don’t want you to move if you are happy here….BUT, you can’t bash what makes Reno/Sparks thrive. It IS a distribution, logistics and manufacturing based city. However, you will find a LOT of SUCCESSFULL local business owners here, more than the usual, perhaps why Reno consistently is on the top ten lists of best places for small businesses. You can open a business fairly easily here, the tax climate is great, compared to California, and word-of-mouth is still amazingly powerful in this town. Most of my friends fall into the small business entreprenuer category….certainly not well off, but not living paycheck to paycheck either. I guess that would be middle class?
Mike
Thanks for the education, Lindie! The article DID seem awfully out of whack from the usual tone of figures on here. Just last week I think Diane reported only 10% of all available inventory is selling. That seems much more sobering.
Grand Wazoo
Mike:
Your comments really detract from the quality of your downtown development blog, which I check daily. There is a fine line between being a cheerleader and being an irrational booster.
The bottom line is that the downtown projects that have actually moved forward to completion (Palladio, Montage, 8 On Center, etc) are simply not priced for the local dual-income no-kids professionals that these projects (I thought) were developed for.
There is no way we (my professional wife and myself) would drop one half million dollars on a condo downtown, no matter how much we want to live there, paying $400 -$500 a square foot, and being responsible for the maintenance of the building via HOA fees until the end of time, rather than paying something south of $200 a sq/ft with a view in NW Reno, and no condo politics to deal with.
Until the local condo developers understand this, downtown just isn’t going to be fully populated with full-time residents and the essential business they bring to downtown.
I think this is a shame.
Mike
I wouldn’t consider myself an irrational booster. Trust me I know downtown has its problems, I live downtown and work downtown. What’s funny is everyone seems to be focusing in on the two most expensive condo projects, Palladio and Montage, and forgetting about the affordable downtown projects that first-time home buyers can actually purchase, such as Grant’s Landing, Belvedere Towers, Colonial Garden Court, Arlington Towers, Village at Idlewild etc. It’s important to remember there IS a balance of expensive and non-expensive downtown as far as these projects go.
Besides, most of my above comments didn’t concern downtown but Reno as a whole. Sorry, I will and always will get defensive when someone bashes the service-industry folk that makes this town run. In my eyes, no one is above or below anybody else, and that poster really made themselves seem ‘above’ 80% of Reno.
Reno Ignoramus
Grand Wazoo:
Is the Palladio really moving forward to completion? Is anything happening there? It has been weeks now with no discernable progress. The interior walls in most units still do not have any texture on the sheetrock.
The workcrew on the project appears to be 2 or 3 guys. Who appear to being doing very little.
Anybody have any info?
And Grand Wazoo, you are spot on with your comments about the pricing of these downtown condos. The developers are apparently looking to pass these off to “investors” or “second home owners.” Neither of which will do much to revitalize downtown. Or maybe they thought the Voodoo lenders would be around long enough so that downtown casino workers making $5.15 an hour plus tips could go get a no doc nothing down, interest only, liar loan for $500,000 to buy an 850 sq. ft. apartment.
Tom
Someone posted the following:
“SO what is considered a ripp off to many local reno residents is considered a steal to many californians.doesnt Ca have the 2nd highest taxes in the country?”
Take it from a life-long Californian considering a move to Reno:
1. Our property taxes, grandfathered in under Prop 13, on a $1.5 million home are about $3,000 per year. Duplicating our house in your area would boost property taxes to about $12,000 per year.
2. The income tax difference is highly overstated, because those of us with retained investments in California or doing consulting work for California clients, will have to file California Non-Resident Returns. It is not that easy to escape to a tax haven state, unless you are limited to being a local wage-earner without home-state source income.
3. Health insurance and homeowners’ insurance we have priced is similar to ours in California.
4. Utilities through the DWP in Los Angeles are similar to our expected costs in Washoe County.
5. We don’t have to hire snow removal services or maintain 4×4 vehicles and chains in suburban Los Angeles, whereas we would in the Galena area along the Mount Rose Highway where we are looking.
6. California no longer has an estate tax, inheritance tax or pick-up tax based upon use of state death tax credit on a federal Form 706.
In total, for many retiring boomers, the move to Nevada is at best a `push’ on taxes. The attractions are your mountains, streams and lakes, the friendly people, and open space between homes. But when houses are built side-by-side on postage stamp sized lots, as in your Truckee Meadows communities and even the more upscale semi-custom communities in the southwest part of town, the distinction begans to fade.
Our conclusion: there are a few nice areas from Saddlehorn, up the Mt. Rose Road into Montreaux, where the lot size and homes justify the move. The rest of Reno is a pass.
Tom
Michael Nakamoto
“Our property taxes, grandfathered in under Prop 13, on a $1.5 million home are about $3,000 per year. Duplicating our house in your area would boost property taxes to about $12,000 per year.”
Prop 13 also says that the person who buys your house won’t be getting that $3,000 property tax bill, either.
GreenNV
Kudos to Tom for the reasoned analysis of some of the pros and cons of moving over the hill.
If you can sever ties completely with CA, then the lack of state income tax is is a great attraction. A Bonus-Jack-and-Fries is escaping CA capital gains taxes on the sale of your residence there, as long as you establish residency here befor the close of escrow.
Our Regional Plan is seriously flawed. It pushes “cluster” development to maintain open space, and minimize infrastructure cost (just a thought, any upside for the developers here?). So you get places like Somersett, with houses on 6000 SF lots in kissing distance of each other, and the vertically challenged portions of the site as “open space” to balance the density out.
Tom, make the leap. You will find very friendly people who fail to do what they say they will, as opposed to obnoxious ones in CA who dis you and STILL don’t perform.
This is a good place to live. I’m glad I’m here.
MikeZ
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RE: “So if the market is so bad right now, how could home sales jump 125 percent in the first quarter of this year?”
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1. That’s new-home sales only
2. That’s a Q4 (traditoinally the slowest qtr) to Q1 increase, not YOY
3. The figures does not account for cancelations
Remember that the RGJ has a vested interest[*] in presenting the local market – including the RE market – in the most optimistic light possible without actually lying.
* Advertising revenue dwarfs subscription revenue. The RGJ doesn’t serve the readers, it serves the _advertisers_.
sean
GreenNV- Do you have anymore info on what you said about not having to pay california cap gains tax if you establish a residence in nevada before close of escrow on a california home? Thanks, Sean