April showed slight signs of improvement in the resale market. Though more inventory came into the mix as is traditional for spring, absorption rates improved to 14% from just under 10%. The under $300K arena exhibited the most strength, as the over $500K price point generally languished. read
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Reno Ignoramus
“The under $300K arena exhibited the most strength, as the over $500K price point generally languished.”
Need say no more. All the spin in the world cannot change the reality that Reno continues to have a major affordability problem. The strongest segment of the market is the bottom. Imagine that. This has been true now for well over a year.
What never seems to get mentioned is that as the market has deteriorated over the past 18-20 months, more and more houses have fallen into the below $300K segment. Houses that would have sold for over $400K in May of 2005 are selling for less than $300K today.
Diane, can you tell us what the overall median was for the entire market?
Lindie
So sales were 16% worse in April of 2007 than they were in April of 2006. I like the way you try to put lipstick on the pig by noting that the April decline was not as bad as the March decline.
Actually, besides the ever expanding-bottom of the market holding on, and keeping the numbers from being awful, what exactly is the good news here??
Insider
Good aricle on why you should be renting right now rather than buying, especially at today’s over-valued prices in relation to historical price/rent ratio http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/WhyRentToGetRicher.aspx
Reno Girl
I just signed a 2 year lease on a 1700 sq. ft. house in exactly the location I would have bought. So, the location is superb. The house is realtor owned as an investment and the rent is a whole lot cheaper than what the flippers turned floppers are asking for comparable houses that are languishing on Craig’s list. According to Zillow, the house lost $20K last month. Zillow isn’t perfect, but obviously this house is depreciating (just like most of the rest of Reno). I have excellent credit and an awesome job, and could easily qualify to buy something comparable, but it just doesn’t make sense to me when my payment would be about double what my rent is and I would have to take care of maintenace as well. It used to be that renting was like throwing money away, but with the rent/buy ratio so out of whack, I don’t think that’s the case anymore. I get to live in a wonderful home AND save money. What a concept!
Allen Murray
I have questions for Lindie and Reno Ignoramous. You both seem to revel in the fact that the local real estate market is in delcine. Why is it that you seem to put so much energy into pointing this out? Are you bitter because you bought at the peak and are stuck? Are you just really caring people and want to make sure nobody makes the mistake of buying in a declining market? Or are you old retired people who are really bored? Are you guys married to each other? Do you realize alot of people have gotten rich off the local real estate boom in the past few years, me included? Right before and during the 30% appreciation years, were you recommending people buy, or did you say not to buy then also? Do you currently own real estate, or are you renters? I don’t mean any disrespect, just curious as to what angle you both are coming from.
Southwest JP
Hi Reno board.
Well it’s done – my escrow papers are signed (thanks Ticor) and my home sale will record Wednesday.
I bought a home that was listed for 200+ days at 730K, then 699K and expired. I saw it just before expiration, fell in love, and made a low ball offer. They came back, and final numbers were 695K. It’s an incredible house in the SW, great view, and has a pool, ~1000sq ft inlaw/separate garage for a combined SQ of almost 4000. The home advertised only 2760, and as such the separate guest house was a happy accident.
Some like to hear who is buying, and Guy asked that I post. I am a Californian who can’t justify 1% property taxes on a 1.5MM home, and currently have a home worth that only 1460SQ ft!
I need the tax write-off as my salary is very healthy, and I am the Western Regional sales director for a software company in Silicon Valley.
Reno has it all for us, and with a family of 5, our kids will injoy the half acre to spread thier wings. Unlike many anti-Californian comments, I value education, nature, and the Sierra’s. We don’t own a TV, HATE Bush, don’t smoke, our cars have mufflers, we don’t do drugs, and we don’t blast music or think of school as a day care. In fact my wife is an at home mom, and I chose a career where I could work from home to participate in the process. (Who are these meth-head California’s people write about and where do they live?) We both have master’s degree’s and value the school district we are moving into. While we can afford private, public seems like the “right” thing to do – we want to get involved.
The Southwest spoke to us, and we are buying for the long haul to raise our family in a better environment. That said, so what if the home depreciates 10% over the next year or two – I need a 80K write-off in Fed taxes a year, and will be putting close to 100K in improvements this year. I’m confident that over a ten-year period our equity will outperform other investments, even in the down market we see today.
Rent vs. own is a great model, but when your income hits AMT and your making real money, rent vs. own no longer is a fair argument in any segment I can afford.
I am thrilled to be in Reno and cut my Californian ties. P.S we are CA natives born and bred. This board has been great, and even you nay sayeers didn’t scare us.
P.S. 30 year-fixed traditional mortgage.
Doofus
The Boom/Bubble was not a “global” event. Salt Lake just sort of clicked along, as did many (most) of the SMSA’s I track. So why Reno? Housing was underpriced here going into the run-up. Quality of life here is outstanding. We are 3 hours away from the Bay Area, so Reno is a good 2nd home market, as well as an investment market the amateur Californian could actually visit and kick the tires. And what Reno had to offer kicked ass over Benicia!
There is a huge dicotomy going on between affordable “workforce housing” and what is on the market. EDAWN has done an absolutely miserable job of attracting anything but $10 per hour logistics jobs. (Why do we keep funding these Bozo’s?) The guy driving the fork lift at Wal-Mart’s distribution center isn’t going to be sipping Chardoney at Wispering Vine in Somersett Town Center any time soon. He is hoisting a few brewski’s in his double wide in Wadsworth.
I am really happy to see the re-emergence of the under $300K market here. It gives me hope that the people that contribute to our local economy directly may find a (30 year fixed, pray god) path to home ownership.
RI, I’d love to do some numbers on the properties that were worth $400,000 at the peak and are now “selling” at under $300,000. Give me some APNs and I’ll go to work. I give you the benefit of the doubt, but sense you might be blowing a little smoke here on this one.
Reno is going to be intersting for a while. You have an investor market whose investments are going south FAST, a huge backlog for affordable housing for the real folks who work here. The City/County is clueless on how to make it right.
15 year fixed at %5.875. AAAAH!
Move to Reno?
The article on renting instead of buying was interesting but left some things out. For example, the author assumed that the stock market will continue to grow 7% a year after deducting inflation gains. That assumption is pure speculation, the stock market could drop 50% in one year and then stay at that level for 20 years. The world economic system is complex and totally dependent on stable and cheap petroleum. Remove that from the equation and the house of cards topples. Of course, housing prices would also go down but since housing has a utilitarian function (whereas stocks don’t) there is a floor for prices. That’s why prices in Reno have not yet dropped 40% from their highs, because housing prices tend to move more slowly.
The author also states that real estate just keeps up with inflation. That is certainly true in some real estate markets, but since home prices are a function of supply and demand, if the demand is great enough home price appreciation will far exceed inflation. Just take a look at real estate in Silicon Valley. The old saw in real estate that location is everything is certainly true.
While I agree that renting in Reno right now is the best course to take, home ownership as a number of intangible benefits such as control of the property. In some parts of the country rental homes look inside like rental homes. Renters don’t have “pride of ownership” so interior and exterior things go down and the landlord has no economic incentive to improve the property. Sure, apartment complexes are usually reasonably maintain but the SFH quality of life is way, way above apartment living. That is true especially in the upscale neighborhoods. People can rent in Somersett right now but eventually demand will drive the renters out and replace them with homeowners. Hopefully, those renters will detect the inflection point and become buyers (if they can).
BanteringBear
Allen Murray posted:
“Do you realize alot of people have gotten rich off the local real estate boom in the past few years, me included?”
Of all the wealthy, successful people I have known throughout my life, not one of them has ever spoken openly, much less smugly, about their financial successes. It says a lot about them, and even more about those who like to gloat.
Southwest JP posted:
“I bought a home that was listed for 200+ days at 730K, then 699K and expired. I saw it just before expiration, fell in love, and made a low ball offer. They came back, and final numbers were 695K.”
With all due respect JP, it appears as if your lowball offer was roundly rejected so you just payed full price, no doubt making the sellers day. While the term “lowball” is certainly subjective, anything more than a 75% offer is not even lowball IMHO. I personally think 70% of list price or less is lowball. Nevertheless, it sounds like you can afford your house, and don’t care if it depreciates 40%, so good for you. It’s a rarity to find individuals like yourself who don’t value their money.
Move to Reno?
Southwest JP, thanks for that informative post. Congratulations on your home purchase. Sounds like you know what you are doing. $173 a sq ft with 1/2 acre lot sounds reasonable to me (without seeing the property).
However, the number of working folks from California with high-paying tech jobs who can work from home has to be limited, so it would appear to me that you are one of the fortunate few who can take advantage of the current market.
MikeZ
RE: “[Reno] Housing was underpriced here going into the run-up.”
It was? Show your data, please.
MikeZ
RE: “Renters don’t have “pride of ownership” so interior and exterior things go down and the landlord has no economic incentive to improve the property.”
Maybe that’s true in a slum rental, but not elsewhere. I take pride in the upkeep of my apartment and the owners do also.
And as far as pride in ownership, there is no pride in losing 10% per year in equity on a massively leveraged, depreciating asset like a SFH home in Reno.
That’s not even “ownership,” it’s renting from the bank – only you get to pay all the other bills, too, like water, sewer, upkeep, taxes, repairs, fees, etc.
If it’s pride you want, wait the collapse out, buy at the bottom and get better value for your money.
Being a smart consumer … that’s what makes *me* proud.
Allen Murray
Bantering Bear, I should have included your name when I asked what point of view the hostile pessimists such as Lindie and Reno Ignoramous were coming from on this board? I don’t think saying that I have been succesful in the local real estate market despite our recent decline is any worse than you, day after day, throwing out your doomsday forcast. Worse yet, you say to Southwest JP, who are very happy with their recent purchase and move to Reno, that they don’t value their money. I would rather be a gloater than a butthole. Why don’t you tell us why you are so angry? Do you live here, and how long have you been in the real estate biz? And if you dare, use your real name. Allen Murray
Move to Reno?
MikeZ, re-read my post. I was talking about SFH, not apartments. Rental SFH usually decline because of “fair wear and tear” whereas apartment have frequent inspections and regular maintenance. Didn’t mean to imply that renters are slobs.
Rental SFHs are many times “fixer-uppers” when they are put on the market.
DERRICK
Anything more than 75% is not even lowball imho
And that is why you will never own real estate.. IMHO
2sleepy
I don’t know what period you consider ‘before the run-up’ but I sold a house in Northern California, within decent commuting distance of San Francisco for $103 per sf, and bought one here for $111 per sf – so I don’t get this underpriced thing unless that was prior to 1999 when I moved here. In fact, I was surprised that housing was so high in Reno, given that my husband took a job here for $25k less than he was making in San Francisco
Move to Reno?
Good article about a possible glut of rental properties because of the high vacancy rate of properties that flippers bought at the height of the boom and are now unable to sell without taking a loss.
http://origin.denverpost.com/economy/ci_5823796?ref=patrick.net
MikeZ
Somewhere in this blog is a speculative claim that tony areas like Lake Tahoe are immune to price drops.
In rebuttal, I present the affluent NY suburbs, which have historically been immune to housing declines and which are dropping quite significantly :
http://tinyurl.com/2aj3k6
Home Prices Fall in Rich New York Suburbs Once Immune to Slump
…
“Prices fell as much as 18.8 percent this year in 15 of the 24 areas in which data was collected.”
BanteringBear
Allen Murray posted:
“I would rather be a gloater than a butthole.
Classy.
“And if you dare, use your real name.”
Not in a million years because of people like you.
Derrick posted:
“Anything more than 75% is not even lowball imho
And that is why you will never own real estate.. IMHO”
That you are unaware of the fact that real estate can routinely be purchased at these sorts of discounts says a lot about your negotiation skills as a so called investor. Then again, I don’t believe you are.
DERRICK
Bantering bear the doom and gloom poster of the board, who is more than likely upset he didnt make alot of money during the boom when any “moron” as he puts it could of bought a house. funny… I have family moving from california (sonoma county) soon and are looking at a few places already. So far we have looked at the following areas:
Cloud peak drive (top of disc drive, and amazing views)
eagles nest (wingfield springs neighborhood very very nice)
first house We looked at together was a 5bed/4bath 4,687 sq.ft
corner lot home on eagles nest priced at 799k
2nd home we looked at was on cloud peak drive I believe., With an absolutely untouched view of downtown Reno
4bed/3.5 bath 4,000 sq/ft priced at 725k
we have looked at a few others but so far the eagles nest has caught our eye with a nice $170.00/sgft not bad at all.
Bantering Bear Im still waiting for you to find a comparable sale to my house in wingfield for under 350k .. still having trouble..
Reno has been great for my family and more to follow soon. it has pretty much all we need. great neighborhoods, great schools, Love the weather, the short drive to the bay area if we ever have the urge. lake tahoe is fantastic, and a little gambling can be fun. considering I was paying 11k/year for property tax in Santa rosa Ca for a tiny .50acre lot absolutely slayed me..
As for you bantering bear once you know what its like to pay taxes 5 times a year let me know…
Move to Reno?
Regarding low-ball offers, usually sellers don’t accept them soon after a market changes direction. Their property has to sit for a couple of years before they finally accept the fact that the value of their home is not what they thought it was. If the Reno real estate market doesn’t improve over the next year, prices will continue to drop because more and more sellers will give up. During these periods when the market is in flux, there will always be buyers if their individual motives for buying immediately outweigh the possibility of buying at a lower price at some unknown point in the future.
On the other hand, some major company might announce that they are re-locating to Reno and the sellers would get a second-wind thinking that all is not lost yet.
It would be interesting to see a profile of the current buyers, that is, the number from out of state, those that are retired, those who are moving up, etc.
Derrick
When you know what its like to pay quarterly taxes let me know..
how are things going in your slum apt?