Just as we saw with last quarter’s numbers vacancy rates again increased across the board. However, a reshuffling of the ranking has occurred. Somersett has once again regained the top spot as having the highest proportion of vacant listings. And with 63% vacant and 8% tenant-occupied, only a 29% of Somersett’s current listings are owner-occupied. 29% owner-occupied represents the lowest level seen since I began tracking the data (see links below).
The West-Southwest takes over the top spot for highest proportion of owner-occupied listings, with 74%.
| MLS Area | Vacant | Owner | Tenant |
| Somersett | 63% | 29% | 8% |
| Northwest | 59% | 32% | 9% |
| North | 55% | 30% | 15% |
| Old Southwest | 49% | 43% | 8% |
| Southeast | 48% | 35% | 17% |
| Sparks | 47% | 39% | 14% |
| Sparks – East | 45% | 45% | 10% |
| Southwest | 45% | 45% | 10% |
| North Valleys | 42% | 50% | 8% |
| Spanish Springs | 41% | 57% | 3% |
| Southwest Suburban | 40% | 56% | 4% |
| South Suburban | 39% | 57% | 4% |
| South Meadows | 34% | 52% | 14% |
| Sparks – Suburban | 31% | 62% | 7% |
| Old South Suburban | 26% | 67% | 7% |
| West Southwest | 24% | 74% | 2% |
The vacant listing rate for the entire Reno-Sparks MLS now stands at 42%. This is up from 38% in October and 34% in July. Forty-two percent! Where have all these homeowners gone? Was anyone ever living in these properties to begin with?
Add in an 8.1% tenant-occupied rate, and less than 50% of the listings on our MLS are currently owner-occupied.
The home stagers must be doing a brisk business around town.
| Vacant | Owner | Tenant | |
| All Reno | 43% | 49% | 8% |
| All Sparks | 40% | 53% | 7% |
| Entire MLS | 42.0% | 49.8% | 8.1% |
Find 2007 "Vacancy" figures at the following links:
October 2007
July 2007
May 2007
Data courtesy of NNRMLS February 2008.
Reno Ignoramus
I suspect the reason that Somersett is 63% vacant is because the builders have put a lot of their dying on the vine inventory on the MLS in the last couple of months. Add to that all the bank owned properties in Somersett that are vacant.
My hunch is that most of the 8% of the listings with a tenant are owned by the unintentional landlords who haven’t been able to pass off their badly timed flip since almost all of the Greater Fools are gone now. (Although there are still a few around).
“Was anyone ever living in these properties to begin with?” Well Guy I suspect that you would be in a good position to evaluate that since you are out there looking at them. What is your observation? My guess is that many of them never were occupied. They are just the part of the phony and artificial “demand” that was created in the bubble hype. Remember when the WCSD overestimated the number of students that would be enrolling based upon house sales? The students never appeared because nobody ever moved into the houses.
So how long can the owners of these 42% vacant properties continue to carry the monthly load? Oh what fun it must be to pay on a mortgage and taxes and insurance on a property that yields back zero. Add to that fun the knowledge that with each passing month the value of the property dissipates into thin air.
MIke Van H
So we know 63% of the listings are vacant, does anyone know what percentage of Sommersett is listed for sale?
CalBoomer
Didn’t Diane comment in a blog a while back that she considered Somersett a better “value” than Montreux or Arrowcreek??? That would not apprear to be the case now.
Perry
This kind of goes along with the article in today’s WSJ. “Speculators May Have Accelerated Housing Downturn” This was a bit from the article but I think says plenty…
Roughly 20% of mortgage fraud involved “occupancy fraud,” or borrowers falsely claiming they intended to live in a property, according to an analysis by BasePoint Analytics, a provider of fraud-detection solutions in Carlsbad, Calif. Another study, by Fitch Ratings, looked at 45 subprime loans that defaulted within the first 12 months even though the borrowers had good credit scores. In two-thirds of the cases, borrowers said they intended to live in the property but never moved in.
GreenNV
In really rough numbers, about 9% of Somersett / Sierra Canyon is for sale on the MLS (+/- 1500 units ((50% complete)), 142 listings). RI is correct in that the numbers are highly influenced by recent builder listings of existing or oncoming inventory. A wild guess is about 50 of the 142 units listed are builder listings. Overall, I think about 4% of the sold listings on the MLS are builder listings.
Perry (damn you for getting to D with the Level 5 Countrywide reference before I did), I have seen people close on 6 houses on the same day with the same lender and title company and never has the “second home rider” been checked. The lenders just didn’t care. As an owner who just made an offer on a property that I “could” occupy as my primary residence, I was prodded by the lender to identify the new property as my new “primary” residence and save .25% on the loan and make their approval process easier. Their only requirement? A proposed rental agreement on my existing home!
brain surgeon
If you take out all the builders’ standing inventory and unbuilt inventory (i.e. The Ledges, listed by Plummer, is 30 lots that are just dirt at this time) then you’re down to 25 vacant listings, which by my calcs means Somersett actually has the lowest proportion of vacant listings. If you delete the builder listings from all the Somersett listings then Somersett has the highest proportion of listings that are owner-occupied. The builder listings really skew the numbers.
Derrick
“the builder listings really skew the numbers”
WOw I thought I had heard it all! lmao
Brain surgeon are underwater on your house in somersette?
Derrick
.. wow cant even make a post.. why? Everytime I try to it tells me I am duplicating a post!
WOW nice format guys! I give up
Derrick
.. wow cant even make a post.. why? Everytime I try to it tells me I am duplicating a post!
WOW nice format guys! I give up
OMG did It work this time> ? WOWIE WOW
Derrick
sorry for posting the same info 3 times guys.. honestly I had no idea I did.. it was telling me otherwise.
Diane Cohn
So I went into the MLS this evening and found 140 homes for sale in Somersett. Then I went through and deleted the obvious builder listings: Pulte/Del Webb, Meritage Homes, Toll Brothers, Monterey & West Haven. There were 84 left.
I’ve been with a lot of buyers lately showing property in the $300K-$500K range. Whenever we tour through Somersett, if I had to make an educated guess, I’d say one third of the vacants had never been lived in and two thirds had been occupied at some point.
Short sales are common, with a few bank owned properties thrown in. It seems like two thirds of what I show are vacant, the rest, occupied. These are anecdotal guesstimates.
FYI, I tend to show the best-priced properties. Overpriced stuff I ignore, which may skew my observed results.
So Guy corners me in the office the other day, and he says, hey, Diane… you know you have this thing called a blog? Yes, I know. I will post again. The monthly report is almost done.
Buyer activity is picking up, which seems to rippling through my entire office.
The Super Bowl is over, which traditionally signals the start of the real estate season.
I think there’s been enough bad news for long enough that people are starting to come out and shop around.
I hear loan applications are up, finally.
The investors are out there, and I consider them a leading indicator.
Maybe I should start using twitter.
There’s so much going on out there right now, but hardly enough time to report on it.
nvmom
Can anyone tell me if a tenant has any rights when the property they are renting is up for sale?For example how much notice should be given if someone wants to see the house? Any info would be greatly appreciated!
Allen Murray
Diane, glad to hear you’re busy and that things are picking up a bit. I’m getting ready to build a house for a client and my contractor buddies seem to be staying busy with remodel work. It is definitely slow going, but things are picking up a bit. I was just curious, has 8 on Center been getting shown much?
Allen Murray
NVmom, I have owned rentals for years and can tell you that it depends on your rental agreement. Normally 24 hours notice is required. Otherwise, I believe the buyer of your property has to abide by your current lease agreement. For example, if there is remaining time left on the lease, the new buyer has to honor that assuming that all other lease conditions are met.
SmartMoney
I think the “pick up” in activity as Diane states is nice, but keep in mind that in 2005 there was lots of activity. What happened to real-estate? It went down in value. Why? Because it was over-valued. Currently, real-esate is still over-valued relative to rent, income and historical price appreciation. Not as over-valued as it was, but still not fair value. “things” always adjust back to fair value in the long-run. Just keep that in mind for the future 🙂
Alan
Try Reotrans.com….
Reno Ignoramus
Well said SmartMoney.
Things are looking up? Really?
Say there was a month, a hypothetical month,
wherein the number of sales was low, really low, like 171. Like in the worst month in years.
Say that in the next month sales went up to 200. Would that necessarily mean things are looking up? Even if every one of those sales lowered the comps in the neighborhood?
I have said before that sales activity, alone, in no way signals an improving market. Heck, increased sales activity can just as easily mean that the march to the bottom is accelerating. If every sale just drives down the market, how can you say things are looking up?
I realize that there are a lot of folks who make their coin off of sales. And I understand that for those folks, sales, any sales, even driving the market down sales, are good. But that’s another topic.
I have said before: how else does a market decline other than through sales?
Want to know one way we could say, absolutely, that the market did not decline in a month?
Just imagine a month wherein nothing sold. Prices cannot decline if nothing sells.
Allen Murray
RI, I believe you’ve indicated in the past that you will need to see many months (6-12?) of increasing sales or median price before you would feel comfortable buying. I’m not saying that we are at the beginning of that trend yet, but I am saying that for us down in the trenches (contractors, realtors, and lenders) the people I’m talking to, many are saying things are picking up a bit. Anybody can predict a trend 6 months after the fact. The fact is that mortgage rates are near an all time low, prices have fallen dramatically, and we are coming into spring. I’m curious, what criteria will you be using to pull the trigger on a home purchase? Do you agree that purchasing 6 months after the upward trend is equal to purchasing 6 months before assuming interest rates remain at an all time low? Cheers!
smarten
I somewhat disagree with Mr. Murray.
There’s no way to tell if we’ve reached a bottom in the Reno SFR market [even if we have]. It will take some months after the fact – something Allen suggests.
Until unit sales and MLS listings both increase; and the median sales price decreases; IMO we have a ways to go. Given I predicted some months ago that unit sales would continue to decline until April or May [based upon Guy’s historical figures], I’m curious to see if the increase in “activity” Mr. Murray states those in the trenches are sensing, actually translates into anything tangible. To me, February’s numbers will be telling.
Reno Ignoramus
As I have said before, the best leading indicator of a housing market is the pendings:listings ratio. That ratio for Reno-Sparks remains around 4:100, which is dismal. When I see the percentage of listings with an offer get off the mat from the miserable place it is now, and stay there for 4-5 months, I will start to pay attention.
I have never tried to time any market. So, as I have said before, I will certainly miss the bottom by a few months. Iv’e done pretty good, for an Ignoramus, selling a bit too soon and buying a bit too late over the years. In the housing and the stock markets.
In the meanwhile, I observe:
There are YEARS of inventory in all market segments in the Reno-Sparks market.
4% of inventory is selling every month.
100 or more NODs are now being recorded every month. Nothing suggests this trend is slowing down. In fact, it is increasing.
There were 171 sales last month, the worst showing in years.
40% of the MLS inventory is vacant. (Thanks to Guy for the update). Can these mortgage paying owners hold out forever?
When I look at the new listings coming on the MLS every day, a substantial percentage are short sales. (Diane comments about this).
Entire developments around Reno-Sparks are in foreclosure (as GreenNV has ably shown us).
There may well be all kinds of chatter on the street. I know that all the players in the game are an optimistic lot, and I understand that. You really have no other choice. But none of what I observe suggests that “things are looking up.” In fact, all that I observe suggests, to me, increasing downward pressure on prices.
And yes, how in the world are 3,000 agents surviving on 171 sales a month?
Allen Murray
Smarten, where do I suggest that we have hit bottom? In fact I specifically say that we I’m not saying we have hit an upward trend yet. I agree that none of us will know for sure until 6 months after the fact. I will be very surprised if we don’t see increased activity coming into spring. Is this the beginning of a continual upward trend? Nobody knows. My point is that I believe that we are close enough to bottom that a prospective buyer isn’t going to gain much by waiting for a 6 mo upward trend.
RI, I agree with all of your observations, my question is how much worse can it get? Perhaps a bit? The risk you buyers face by waiting to see upward data is possibly higher interest rates if you choose to finance, and dwindling selection. If the market picks up, the best deals will go first and you will be left with seconds. Just a thought.
Reno Ignoramus
How much worse can it get? Well, that’s the question of course. That’s just another way of asking when will the bottom arrive. Like I said I will no doubt fail to time the bottom. For all the reasons included in my post above, I see nothing to suggest the bottom is near. And as I also said above, even an uptick in sales activity, if it really happens, in no way necessarily signals an improving market if every sale just drives comps further down.
Allen Murray
RI, I agree an uptick in sales does not mean we have reached bottom. How much worse can it get is the correct question. I say because of all the reasons included in your post above, it can’t get much worse, you seem to think it will, or want to see many months of improvement before you take action. My point is that if we are “near” bottom, you aren’t going to gain a thing by waiting for 6 months of positive data, and may lose in terms of selection, interest rates, and definitely time. Its the same old equation of risk vs. return, only time will tell. Perhaps you will gain peace of mind knowing you didn’t purchase in a declining market, but if you plan on living in and keeping the house long term, you will be fine purchasing now.
SkrapGuy
Once the market does hit bottom, (which I do not believe to be at hand), then what?
I personally don’t see any need to even worry about timing the bottom because I believe that once bottom is reached that prices will stagnate for a long time. A long time. I just don’t see prices hitting bottom and then immediately taking off right away such that one could really lose out in any significant way if he doesn’t buy in the first six months following the bottom. The only time in history that the price of houses in Reno went up 8%, 10%, 15% a year were the cheap money bubble years. Those days are gone forever.
Once we do hit bottom, price appreciation will return to historical norms. The no doc, I/0 liar loans, which fueled everything, are not coming back. When people have to verify income and employment, demonstrate money in the bank, have a down payment, and meet sensible income:debt levels to get a loan, houses will not ever go back to 10% annual appreciation. 2001-2005 was the abberation, not the norm
I see absoluely no sense of urgency at all. If I miss the bottom by 6 months, and the price of houses goes up 1% in that time, so what? To me, that’s a much easier paid price than to mistime the market and buy now, only to see the market lose another 10-15% over the 1-2 years.
Just my 02.
Allen Murray
Skrap, the “so what” to your equation would be interest rates and house selection. It sounds like you are predicting another 10-15% market loss and then a year or two worth of stagnation. I sure wouldn’t want to gamble on what interest rates will be in 3 years, or be a renter for that length of time. But I guess everybody’s situation is different, perhaps you will be paying cash, and aren’t looking for the best selection. If you plan on financing your house, I would bet that in 3 years interest rates won’t still be near 40 year lows like they are now, and a couple percentage point increase in rate will translate to more than you are saving by waiting if you plan on keeping long term. But us landlords do appreciate you renters for sure! My .02 cents.
smarten
Sorry Mr. Murray. Have to disagree with you again.
Three years ago interest rates were hovering similar to where they are now. I assume you’re saying that if we asked you then if you thought interest rates would be the same now, your answer would have been no. If so, you would have been wrong.
I’m not saying interest rates are going to remain where they are now for the next three years. But I wouldn’t be making predictions based upon prior experience.
Nevertheless in the short run, most financial gurus expect interest rates to go LOWER. In fact for all of you out there keeping score, my target is 4.5% on 15 year fixed rate conforming loans.
And speaking of conforming loan [amounts], I read in the RGJ that Congress has passed President Bush’s economic stimulus bill that increases the conforming loan amount to as high as $729K. Now I don’t think the conforming loan amount will be quite that high in Reno, but it will be higher than the current conforming loan amount [is it $417K?].
So when sales start to pick up, the median will start to drop. And as you and I both believe, that should happen sometime this year. Then with interest rates at historical lows and the conforming loan amount considerably higher than Reno’s SFR median, that IMO will be the time to buy.
Allen Murray
Smarten, don’t apologize for not agreeing with me, I know that few here think now is the time to buy and I am fully prepared to get blasted for saying so. This blog has been a bit dry lately and I have a little extra energy today to liven it up.
So let me understand your line of thinking. You say when (if?) 15 year conforming goes to 4.5%, sales starts to increase and median starts to drop is the time to buy? I think we’ll see the later two this spring/summer, and I think 15 year conforming is now about 5.07 so I guess 4.5 is possible. And you are correct, I would not have predicted 3 years ago that rates would be as low as they are now. I’m still not convinced that the .57% interest rate decline that you are waiting for is worth it, but I think we are on the same page if not the same paragraph. Cheers!
SkrapGuy
Just to clarify, Allen, I am not a renter. I own my house, in fact I own two of them, both free and clear.
As for the ability to predict where interest rates are going to be in 3 years, or six months, or whenever, I am going to have to step aside and let you prognosticators with far greater understanding of the financial markets take over.
debo90
Conforming loan amounts for our market are going nowhere. The stimulus packages states that the increase will be the LOWER of 125% of the median sales price, or $729,000. Based on Guy’s posting of median sales prices, my only hope is that they do not decrease our conforming limit to approx $350K (don’t think it will happen, just making a point). Actually, I read that this will affect approx 10 markets (New York, Orange County, Boston, etc) and that’s about it. So, for everyone out there who is waiting for an interest rate sale on their >$417K mortgage balance, it’s time to give up those dreams.
Allen Murray
Like I said Skrap, everyone is coming from a different angle. As an investor, it doesn’t make sense to own real estate outright since I can do much better than 6% on my money (current mortgage rates). I’m just curious, if you are considering buying, are your looking to upgrade your primary residence, looking for rental income, or looking for future appreciation?
RDJ
Saying that you can predict the interest rate on mortgages three years from today is akin to saying that you can predict what the coupon and yield on the 10 year treasury will be in three years. Since they essentially move in lockstep, predicting one is the same as predicting the other. That’s as silly as saying that you can predict where the DJIA and the Nasdaq will be in three years. Sometimes it gets pretty deep on this blog.
Allen Murray
RDJ, part of the problem with this blog, and a possible reason it has been dead for a while, is that whenever someone has an opinion about anything, there are 10 people there to tell them how dumb they are. I opined that I doubt mortgage rates will not be near 40 year lows 3 years from now, of course nobody knows. Smarten thinks we might get to 4.5% on 15 year mortgages sometime soon, which I agree is a possibility. Why don’t you go out on a limb and give us an opinion on something real estate related instead of stating to obvious? Hopefully this blog can get back to having informed discussions about local real estate.
MikeZ
The fact is that mortgage rates are near an all time low, prices have fallen dramatically, and we are coming into spring.
Allen, all recent economic signs indicate that we’re coming into a recession, a massive, protracted recession, the likes of which we haven’t seen since the 1970s.
The credit orgy is over. The days of interest rates and cheap money driving the real estate market are over. There will be no turnaround for real estate until we start creating new jobs and generating real income growth again.
And that’s a couple of years away, at best.
MikeZ
I sure wouldn’t want to gamble on what interest rates will be in 3 years
Who cares?!
If interest rates go up, prices will come down more. Once all the suicide financing is wrung out of the system, affordability sets the prices and higher interest rates act to drive prices down.
For people in conforming loans, with a suitable down payment, there’s very little bottom line difference between 6% and 8%.
Sonju
Do you really think that buyers are sitting on the sidelines because mortgage rates are 5%? And that they will jump in if rates drop to 4.5? Oh come on. This housing market meltdown hasn’t been about interest rates. You really think that $125 a month on a $300K loan is what’s keeping buyers away? What’s keeping buyers away are all the reasons somebody posted above: excessive inventories, skyrocketing foreclosures, anemic sales, a looming recession. There are many reasons to believe that prices have nowhere to go but down from here. There are few, if any, to believe they are going up. It’s about sentiment, people. And the sentiment now is clearly that we are still on the way down.
Bob
Duh.