Buyers Are Getting More for Their Money

Every time I take buyers into a neighborhood I haven’t been
through lately, it seems as though they’re getting a lot more house for a lot
less dough.

Last week I took a buyer out to Wingfield Springs, where I
hadn’t been for a few months. We were looking at custom homes in the mid-to-high
fives, production homes on the golf course at six, and even a waterfront
foreclosure in the low fives with a dead lawn and a fantastic setting. Two
years ago, many of these homes would have sold for well over $700K.

Like the majority of my clients, this one is an
internet-savvy shopper who has already seen hundreds of properties online. She
and her husband are relocating after an assignment overseas, she knows the market
is super soft, and she’s looking for a killer deal. Her purchase timing is flexible.

A search for four-bedroom, three-bath homes yielded over 80 possibilities
for sale. We saw 21 of them in four hours, or one quarter of the available
inventory. Of course we only looked at the best-priced homes. As for the rest,
why bother?

A couple of weeks ago I was touring another buyer through
the neighborhoods around Rancho San Rafael. The client’s budget was up to $300K, but he
preferred to spend less. We were seeing nice, 1300 square-foot, 3/2/2 starter
homes backing to open space in the mid-twos. A couple of years ago, this particular
house he was considering would have probably sold well into the threes.

Many who comment on this blog have wondered if people are
getting more for less these days despite any ongoing, slight increases in median
price. The answer to that, I would say, is generally yes. Out of sheer curiosity,
I went into the MLS to see if I could substantiate what I seemed to be seeing
out in the field.

The result? Just about every neighborhood I picked had lower
year-over-year, per-square-foot sales prices, with the notable exception of
Southwest Suburban, the one area of town where values seem to be holding the
best.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	6/05–6/06		6/06–6/07
	Number Sold	Avg Price/SQ	Number Sold	Avg Price/SQ
Somersett	58	$243	81	$226
North Valleys	120	$196	79	$184
Spanish Springs East	106	$242	56	$224
Old Southwest	216	$250	206	$242
Southeast	230	$190	199	$185
Hidden Valley	158	$223	108	$216
Southwest Suburban	195	$294	117	$314

Yes, in most cases the per square foot differential doesn’t
seem that dramatic. But if a mere 9% of our standing inventory is selling
through, only the best-valued homes will actually close. And I imagine those best
values will slowly lower per square foot values as time goes forward, even if
medians continue to hover in the high twos and low threes.

Will the median price drop further? Maybe some. But then
again, it might hold. Why? Last I looked, the under $300K market was selling
through more than 43% of new listings, better than any other price category. Perhaps
as sellers come to their senses, homes that need to sell drop below the $300K
mark, offer better value, and finally close.

Here’s another interesting snapshot. Look at the difference
in numbers of units sold and price per square foot comparing June 2005, 2006
and 2007:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	6/05		6/06		6/07
	# Sold	$/SQF	# Sold	$/SQF	# Sold	$/SQF
0-300K	350	$189	238	$191	205	$179
300K-500K	372	$214	198	$215	115	$198
500K- 1 mill	98	$230	74	$239	54	$219
1-2 mill	26	$323	12	$291	13	$307

What does this mean to buyers? If you need to buy now, you have
many choices and room to negotiate as the excesses of years past continue to
work themselves out. If you don’t need to buy now, then you can afford to look
at your leisure until you find that perfect property at the right price. Just
keep your eye on interest rates. Even the slightest increase could kick some
out of the Reno Sparks real estate market entirely.