Last week the Telegraph UK ran an article about the Royal Bank of Scotland’s recent red-alert to investors on the state of global credit. They are predicting a full-scale stock and credit meltdown as central banks worldwide are paralyzed by inflation. I know to some this may sound extreme, but the article make some good points, and the comment stream that follows is pretty insightful. I’m curious to know what you guys think about the current state of affairs. (And yes, you can talk about oil.)
Noah Rosenblatt over at Urban Digs, who watches Wall Street like a hawk on behalf of Manhattan real estate, is also seeing signs of deterioration.
Even ritzy Aspen, Colorado, has begun to feel the pain (minus the $36 million sale to the Russian oil tycoon, of course).
The State of the Nation’s Housing Market 2008, courtesy of the Joint Center for Housing Studies at Harvard University. The summary in a recent California Association of Realtors newsletter, courtesy of my good buddy Jeff Brown, summarizes as follows:
"HOUSING DOWNTURN SLOW TO REVERSE, BUT DEMAND EXPECTED TO CLIMB OVER NEXT DECADE. Record numbers of foreclosures, coupled with tighter lending practices, will make it more difficult for the country to recover from the current housing slowdown, but immigration growth is expected to create a demand for more homes over the next decade, according to a new study released Monday by the Joint Center for Housing Studies at Harvard University."
American Express says late payments on credit cards are on the rise (thanks, RI).
Caleb Mardini
Begging people to get on the soap box huh? Well OK then.
Most of our recent economic expansion has been as a result of a growth in credit, mostly directed at housing, but also other areas.
In the mean time in other sectors we’ve shipped economic production elsewhere without really replacing it.
Because our most recent expansion has yet to be paid for, and nothing on the horizon indicates that it will be, all of that perceive growth in wealth is likely to disappear.
It’s like maxing out your credit card after you lost your job. Eventually it catches up with you, and when it does you either get a job that can help you pay for it all quickly, or you default and loose everything.
So again, IMHO, It’s big. 🙂
BanteringBear
We are in a full scale global economic meltdown. The greater depression scenario for the United States seems almost unavoidable at this point. Our standard of living is eroding at a rate which is alarming. Here’s a story (investigated by UK reporters) about ordinary middle class Americans who, as a result of poor housing choices and bad luck, find themselves homeless and living in their cars.
http://www.guardian.co.uk/world/2008/jun/25/usa.subprimecrisis
Funny you should mention oil. It seems as if the stucco oracle has gone into hiding yet again as another of his “predictions” has gone terribly awry. Apparently he forgot the mantra “the market can stay irrational longer than you can stay solvent”. I’m in agreement that oil will fall dramatically, but I couldn’t tell you when and what the peak price per barrel will be. Housing took longer to crack than I thought, and oil is no different.
stjoe56
This is why I am seriously reconsidering my intent to move into the Montage later this year. I currently have a house paid for. Do I really want to move into the Montage and take on a new mortgage when (1) my business is slowing down and (2) the value of my current house is deteriorating daily?
Add to this equation are (1) interest rates are slowly going up (what is affordable at 5.625% becomes harder at 6.5-7%), and (2) I know that the monthly condo fees will go up.
A long time ago, I learned it was better to cut your losses earlier than later. Is it better to walk away and lose my 10% deposit or risk living in a semi-empty condo during an economic meltdown.
Heck if I know.
SJ
billddrummer
Diane,
That article is spot on (to coin a British phrase). Getting defensive with portfolio selections is the only logical course right now.
Another thing that isn’t mentioned in the article, but is looming in the background, is the rising cost of food for the entire world, not just the U.S. For example, in the U.S., the average American spends only about 10% of his/her disposable income on food. By contrast, Brazilians pay 20%, Chinese pay 30%, and Kenyans pay 65% of their income just for food!
A lack of food begets an angry populace. An angry populace promotes instability, which provokes violence.
Civil unrest may increase if food prices remain high. And with the spike in commodity costs (oil, chemical fertilizer) food costs worldwide may stay high for years.
The U.S. is the largest food producer in the world, yet we’ve diverted 20% of corn production for ethanol, not feed. It’s now widely assumed that the ethanol ‘experiment’ has been an abject failure, as far as weaning Americans away from fossil fuel consumption.
What’s needed is to increase the supply of grain products to less developed countries, either through direct gifts or grants, so that food prices for the poorest nations can decrease to the point where citizens aren’t faced with starvation because of higher costs.
NAS
Well, this thread ought to bring out the prognosticators! I’ll try to be both brief and tedious.
IndyMac Bank’s stock is trading around .84 cents a share. A few years ago, they couldn’t get the Alt-A’s written up fast enough!! .84 cents a share??!!
We have friends in the U.K. and very little to be happy about in that part of the world.
The sky isn’t falling, but we may have to take cover for awhile. When families start making decisions to put gas in the car or food on table, who cares about making a
payment on their upside down mortgage or buying a McMansion?
ps: Diane, I think you receive large responses to your posts for a number of reasons; One being you integrate life, finances & economy existing beyond Reno city limits. Anyone who believes their lives are insulated from Global markets is naive.
Tom
NAS, those choices are already turning up, but not quite at the food-or-gas level yet.
In visiting our local county animal shelter, hoping to replace our Lab who died at age 15, we noticed a great number of owner-surrender tags on kennel doors. In inquiring of the staff, we were told that those owners repeatedly had the same reason: “Our gasoline costs are so high now that we don’t have money left for pet food.”
Knowing that it may take $35 a month to feed a large dog, that shows how closely some families have budgeted their spendable funds. Eating out, going to the amusement park, other discretionary spending will also fall into the same choice dilemma. This creates downward pressure on those businesses, in turn.
Giving up the family dog to pay for gas– that is a sad commentary on the state of our economy.
billddrummer
To NAS,
Good points about how intertwined we are with what happens in NY, LA, London, Shanghai, Dubai and Sao Paulo.
As far as the credit markets, I tend to think that the stigma attached to foreclosures is starting to recede, and people who are faced with either paying their mortgage or their car will opt to let the mortgage go late but keep up the car payments. Same with credit cards.
Unfortunately, the credit card companies are looking at something called ‘universal default.’ If you go delinquent on one credit item, some companies are cutting credit lines back, boosting rates to the default rate, or freezing lines altogether if that information gets reported back to them. Citibank pledged that they wouldn’t do that a year ago, but the company is looking at revoking that pledge.
It’s truly going to continue to be an interesting period in the financial history of the world.
Rescuere
“living in a semi-empty condo in an economic meltdown.”
The downtown condo market is imploding all across the US. People are bailing out of their deposits left and right from Miami to San Diego to Chicago to Portland. New condo towers 10% occupied in LV.
Somehow, is the idea of paying $350,000 for a 700 sq.ft. shoebox in an “urban village” losing its appeal?
But maybe it’s different here in Reno. Maybe everybody wants to live here. In a shoebox in an “urban village” at $500 sq. ft. Reno is special the realtors tell us. Reno is a hidden gem, you know, and they aren’t making any more condo towers.
stjoe, think hard.
Don Cooper
If everyone is going to be gloom and doom crybabies then as a country we are in for some very bleak days.
But it hardly has to be that way. Just keep these things in mind and then suck it up and do something:
1. Inflation is really a problem because of oil consumption and medical costs. (Even with medical costs core inflation is moderate to low and wage inflation is non-existent).
2. Our financial problem at the federal level is due to the war in Iraq.
3. The war in Iraq is — as Alan Greespan observed — only about oil.
4. We can dramatically cut oil consumption without breaking a sweat. 2/3 of our oil consumption is for transportation, and most of that is for single cars. Not only are there plug-in hyprids and so forth due in 2010 which will dramatically cut this consumption, but there are technologies available now, like the Paulsen electric car kit, that would dramatically cut consumption for existing vehicles. When you realize that moving consumption from 10mpg to 20mpg cuts ALL consumption in half (you have to eliminate consumption entirely to get the other half), reducing consumption is not that big of a deal.
5. There are no real impediments to stopping our throwing a trillion dollars down the rat hole we call Iraq and using the savings to eliminte the addiction to oil. All we need is a little leadership. Former CIA Director James Woolsey drives a Prius which has a bumper sticker that says “Osama bin Laden hates the driver of this car”. He’s right. And the obverse is that all those F-150’s that you see driving someone to an office job should have a bumper sticker that says “Osama bin Laden loves the driver of this vehicle”. That would be right too because despite the big American flag decal in the window all that guy in the F-150 is doing is sending dollars to Saudi Arabia so they can set up radical Islamic madrassas in Pakistan.
So be patriotic. Dump the gas guzzler or figure out how to double its mileage. If you can’t afford it, demand the federal government get serious about promoting oil independence with subsidies and the removal of the goofy import tax on viable flex-fuels like ethanol from Brazil (GM cars can handle flex fuels today). Then sit back and let the economy take care of itself.
End Of Rant (Sorry but this entire situation gets my blood boiling).
Royal Flush
Don Cooper +1
BanteringBear
I’m with you on a lot of that Don Cooper. Personally, I need my truck. If I didn’t, I would get rid of it. To share a little, I’ve already cut my own gasoline consumption by nearly half, saving myself a little money, but there are consequences to that as well. The many day trips I would take each month, which I have now foregone, are breaking the backs of the small businesses I would patronize on those jaunts. I live in a rural area with no public transportation.
Thirty years ago was the right time to get serious about fuel efficiency, and a sound energy policy, but our “fearless leaders” missed the boat. Now it’s time to pay dearly.
We have an extraordinary situation in this country in which the government has failed it’s citizens miserably on more issues than I can even recall at one time. It starts with piss poor trade policies, bogus immigration laws, lax employment verification, and swiss cheese borders which have subsequently outsourced jobs, and driven down wages, effectively squeezing the life out of the middle class.
The rot continues into corrupt campaign finance, which produces lifelong politicians, interested only in themselves and their lobbyists. We end up with bogus tax laws, set up to facilitate poverty amongst the masses, and protect and enhance the lives of the very wealthy. And let’s not forget the crooked banking industry, and the financial sector as a whole, which preys upon the unsuspecting and unsophisticated.
The country needs an overhaul. If I had to pick one spot, it’d be campaign finance reform. We’ve got to break the stranglehold which these career pols, and their masters the lobbyists, have on power.
Where we go from here will depend on how much people want to get involved. It starts with organizing, and pressuring politicians. Good things can happen, but it’s not easy.
MikeZ
The State of the Nation’s Housing Market 2008, courtesy of Harvard University (jchs.harvard.edu)
Diane, that’s not from Harvard University, it’s from Nicholas Retsinas’ Joint Center for Housing Studies.
Check out who runs the show at the JCHS: http://tinyurl.com/5j4s6u
a reader
hmm, interesting thread.
the credit “tightening” won’t be felt uniformly:
a) US/UK will suffer the most. do you know anyone who still keep their *liquid* networth in dollar or pound denominated asset?
b) EU will be a wash. they suffer from high energy cost just like us, but EU’s central bank is doing a good job in strengthening their currency thus attracting investment.
c) BRICs are actually suffering from too much credit. recent estimate put the amount of hot money at $1.5T in china alone. more is flowing into B&R as we speak.
d) oil/commodity exporters, well, they’re the creditors.
none of these have much to do housing in general, or housing in reno in particular. do you know anyone who can afford a loan was denied a loan? it’s just that housing is going the way of dot com stocks. been hot, had a bubble, and the real money have moved on.
MikeZ
The greater depression scenario for the United States seems almost unavoidable at this point.
Care to explain why you think so?
Funny you should mention oil. It seems as if the stucco oracle has gone into hiding yet again as another of his “predictions” has gone terribly awry.
LOL.
Don Cooper
BB – take a look at the Poulsen Hybrid. It’s intruiging since it’s basically a low cost retrofit for any vehicle using well established technologies. That’s key since doubling the gas mileage of low mileage vehicles saves far more gas than doubling the mileage of high mileage vehicles. (I’d post a link but see below). And yes, I think gas prices have hurt retail. But I think the bigger problem is that they’ve unnerved people.
Diane – I posted a link to the 2008 Joint Center for Housing report last week but it kept disappearing, I’m assuming this means we can’t post links?
In any event, the point I was trying to make when I posted the link was that the Reno area may have a problem with excess inventory but it’s not the same problem that areas like Ohio have. In these areas job losses are cutting demand AND there is overbuilding. Problems in areas like Reno are a whole lot easier to deal with.
Finally, I was wondering if anyone was as surprised by the foreclosure feature on Hotpads.com (thank you Diane for sharing this link) as I am. Sometimes it takes me a while, but I just realized that you can identify foreclosers by simply selecting the “Foreclosure” checkbox, which gives you a visual of where the foreclosures are. Very cool.
I was blown away by how many foreclosures there were in my neighborhood. I had no idea.
Dave
disagree on oil falling dramatically.
I mean at worst I think we see $100 a barrel again, but taking a look at the price action of oil vs other markets (now and historically), and you’ll see what a strong trend is in place.
It is the strongest current market out there.
The dollar sucks, bonds suck as they are practically done or should be raising rates, stocks suck due to the financial/credit/housing and inflation worries, you can only put so much into grain and livestock futures….
If there’s any global turmoil/wars/etc oil will shoot up overnight. Peace doesn’t exactly take place on a dime…
So where would you put your $$?
Yep, oil.
DERRICK
I was wondering if any you regular posters would like to offer/share your advice on a few listings that my wife and I have been looking at? We have already been inside these homes, so we have a pretty good idea and what we like and dislike..
Heres the list:
#80006833- No interior photos online, but this house is highly upgraded.. with a fabulous view overlooking the golf course. priced at 379k (120/sqft) problem is, 2 banks are selling this house! I’m thinking it would only be a headache to even pursue..
#80009228- this house is right down the road from the last house, priced at 350k (130/sqft). The reason we like this place is because it a private seller, therefore we feel would be MUCH easier to get a deal done and at a decent price. This house however does not have the great views of the golf course! Great floor plan though with a casita guest house thats not attached.
there a few others, but I was wondering what you guys think is the better option.
first time buyer...waiting
Now for a real estate question:
With all that is about to and currently going down in our world, would any of you buy a primary residence now?? (Assuming you have good credit, could qualify and afford the loan)
Some of the good SW neighborhoods are down to less than $250/sq ft for customs and low 200’s for semi-custom. The good houses still move quickly in the SW and the foreclosures/short sales are not that great anyway. For example:
Taos Ranch Ct, 5000+sq ft, 3 level with pool but they forget to mention the pool leaked and flooded the whole bottom level.
Quail Springs in Saddlehorn-very poor floor plan and very dark.
Cedar Trace Ct:strange floor plan, house not placed well on lot
Just need some sound advice from some of you experts! Aprreciate the help!
stjoe56
First time buyer:
—–
but they forget to mention the pool leaked and flooded the whole bottom level.
—–
Walk away as fast as you can. If they misled you about this, think of what else they are hiding.
I have a general rule: never do business with a gonif. And if you do, don’t be surprised when they screw you.
SJ
first time buyer...waiting
what is a gonif??
we did walk right away from that!
DERRICK
200-250/sqft? thats rediculous… !
Especially when you can buy a beautiful 3000 sqft+ home over looking the golfcourse in wingfield springs for 120/sq/ft or 350k
stjoe56
a gonif is sharp operator who works on the border of illegality or impropriety without exactly crossing the line.
When you knowingly do business with a gonif you have no one to blame except yourself when you get screwed.
SJ
MikeZ
would any of you buy a primary residence now??
In this town, right now? No. Maybe next year. Even if Nevada wasn’t officially in a recession, prices are trending only one way: downward.
No falling knives for me, thank you.
first time buyer...waiting
StJoe56-thanks for the info
Mike Z:even if you found a house you love and plan to stay in for the next 5-10 years??? not to mention the tax break compared to throwing rent away each month
No offense Derrick but I really like the SW, for us it’s convenient, schools are good, Mt Rose is close and most of our friends live around here.
Dave
first time buyer: I’d *ONLY* buy a house right now if I got a significant discount to the current ‘market’ value (not just the asking price) and I knew that 100% for sure, with out a doubt, I’d be living there for at least 10 years.
The repricing of credit is going to take a while, not to mention it will also take a while to restore the psychology towards owning a house. I haven’t even begun to mention how long or when the economy may stabilize / improve.
Over the summer, since it historically is the best time of the year to sell a house, you may see a blip or 2 upwards that will get spun as a ‘housing bottom.’ There’s just far too many cheerleaders out there.
I personally would wait at least a year and reassess, if nothing else.
first time buyer...waiting
what would you say is the current market value of Arrowcreek? again, this is a house that would be around 225/sq ft and it would be a home for us for 5+ years
first time buyer...waiting
what is prices are lower but interest rates are back above 10% in 1 or more years??
BanteringBear
first time buyer:
First, et’s clear up the misconception that renting is “throwing money away”. Everybody needs shelter, and that’s precisely what renting provides. Furthermore, unless you are paying cash, you are “renting” money from the bank. Yes, there can be tax advantages, but only when houses are priced correctly. The rent:buy equation is so whacked that you are essentially “throwing money away” buying, not even taking into account what you will lose as prices continue to deteriorate.
While everybody waiting on the sidelines should applaud those who are buying now and taking one for the team, it’s astonishing that these buyers do so in the face of such steep declines in home prices. One literally save thousands per month by waiting. What the rush is, I haven’t the faintest.
MikeZ. To answer your question regarding the greater depression scenario, it comes down to jobs. I have lost faith in the ability of this country to create new, well-paying jobs in the short term. Things are so jacked up, I’m afraid it’s going to be years before they’re straightened out. If you pay attention to the news, which I’m sure you do (and no, not that local or national TV garbage), the numbers of people losing employment are staggering. Each and every week, tens of thousand of cuts are being announced, and mostly of the well paying variety. Where are all these people going to work? It’s getting ugly out there.
Paul
Dave, there was no greater “pricing action” or “trend” than in Reno real estate in 2005. Just as housing prices have a fundimental intrinsic value (based on rents), so to do other asset classes and commodities.
Previous performance statistics might be a good way to bet on college football, but a terrible way to value assets and commodities. Television shows like “Fast Money” with the middle-aged armchair quarter-backing financial pundits and gyrating backround graphics are entertaining for the masses and generate ratings for CNBC, but they create destructive pools of misplaced speculation and mania. The “Fast Money” set are tireless cheerleaders for oil speculation based on previous price trends.
In any event, oil one year ago was less than half of today’s valuation. It was well known last year that India and China were rising economic powers, and that the US could potentially go to war against Iran. The only fundamental supply / demand factors to have changed in the past year are(except for a 10% dollar devaluation) negative for oil fundamentals. EG 1) Domestic demand is cratering due to high fuel prices, airlines are cancelling flights, businesses are reducing deliveries. Consumers in rural and suburban areas are eliminating extra driving while urban residents are ditching their cars en mass for public transpotation.
2) The slowdown or recession in the US will soon be felt in India and China, reducing output and energy demand(or at a minimum, reducing the rate of growth) in those countries.
3) Drilling for oil off the California coast and in ANWAR, once a political impossibility, may happen as voters revolt against high fuel prices.
Oil prices will collapse, just as they did in the early 1980’s, as speculators realize that prices have rocketed far beyond the sustainable demand-based market value.
first time buyer...waiting
BB-what if interest rates climb above 10%, I know some people that bought back when rates were 17% yet prices were down, what’s better??
Again, I’m looking for a home not an investment that I can flip n a few years.
what is a fair price for SW-Saddlehorn, Arrowcreek area???
smarten
First time buyer…waiting…
Why do you care what’s TODAY’s fair price to purchase a Saddlehorn or Arrowcreek SFR when:
1. The vast majority of today’s listings are unfairly priced compared to mid-2005 pricing and what’s going on in the rest of Reno/Sparks; and,
2. Based upon growing inventory, future sales prices are destined to decrease?
Based upon today’s marketplace I would suggest you ask what will be a fair price 8-12 months from now?
When you can rent your Saddlehorn or Arrowhead home for 30%-40% of the comparable cost to own; and prices are destined to fall; why would you buy? If you rent, you will: become more integrated within the community in which you intend to make your semi-permanent home; be primed to monitor every new listing and sale, up close and personable; become your own expert in answering the question you pose; and when it appears, you will be able to move on a moment’s notice.
In the meantime look at all the thousands of dollars you’ll save; and, spend the time pre-qualifying for that purchase money loan you’ll need when the time is right.
And as BB states, renting is not “throwing away money” when:
1. It costs so much less to rent versus own; and,
2. Purchase prices are falling or remaining stagnant?
Go to craigslist and look. Today there are 35 Arrowcreek rental listings [and most are offered for less than $2,500/month]. Good luck!
Future Buyer
Last summer we had to work hard to find a house to rent in Arrowcreek and I almost lost the house to three others that were willing to pay more! Now there are so many houses for rent in Arrowcreek, I’m thinking the sellers who think if I can’t sell at the price I want, I will just rent the house, are going to need to rethink that decision. First time buyer–I am in the same situation, we could buy a house now, but are so afraid we will be able to get a better house for the same amount of money next fall that we are waiting it out, UNLESS we find a good deal. I ask myself if it was a good deal in 2003, then it is probably a good deal today. I try to erase 04-06 when the houses peaked. As far as interest rates are concerned–historically when interest rates rise, housing prices decline and become more affordable. Just two cents from someone who has been watching this market for longer than I’ve wanted too.
Future Buyer
First Time Buyer–in addition, as far as individual neighborhoods are concerned–I’ve watched Caughlin Ranch take a hit, now Saddlehorn, and do I think Arrowcreek and Montreux are going to follow? Definitely yes! That is a guess because I haven’t seen high end budge that much, but the sellers have the resources to “hold out” longer. I’ve never watched houses sit quite so long. Good luck and I’ll see you at the Arrowcreek pool with the rest of the renters!
Don Cooper
Whether to buy or rent should usually be based on personal factors not investment strategies. Houses are more like cars in that while they are assets you use them every day. So keep in mind that first and foremost a house is a place to live.
The rent versus buy decision is of course a valid one. But when looking at Hotpads.com the rent/buy ratio for Old Southwest is between 10-12. That’s a very reasonable ratio and suggests buying would be appropriate. I’m not from Reno so I may be looking at the wrong area, or the Hotpads info may be wrong, but run the numbers yourself and see what you think the ratio is.
Finally, your question about interest rates is interesting. Yes house prices go down when rates go up, but that hardly ends the matter. How that affects you depends on your time horizon. If you expect to stay in the house for ten years or so, and you expect interest rates to go up, then a good strategy would be to buy and lock in a low term rate. You’ll be locking in low cost money, and higher interest rates means there is an expectation of higher inflation which, among other things, means higher nominal house prices in the future. (At one point my parents had a 3.5% mortgage and a money market was paying 10% — that’s quite a float).
If you wait for higher interest rates the savings on the house price ends up going to pay higher interest rates (if you can pay cash the analysis is no different since you end up foregoing the higher returns).
Of course timing is important. But the reality is that it’s very hard to call a bottom, and buying on the way down or on the way up is the same.
With all that hot air, the bottom line is that my advice would be to look at the rent/buy ratio where you want to buy. If they look good, buy. If they don’t, don’t. (In looking at Reno there seem to be some very large variaions).
first time buyer...waiting
future buyer:I have not seen Saddlehorn take that much of a hit. Friends of mine were price out of a house that sold for 1.3+, the foreclosures are awful. The few OK priced homes are “self-declared architects” or outdated. The homes along Mt. Rose HWY are still over-priced. What does Saddlehorn offer? Yes, it’s a lovely neighborhood with beautiful homes.
Yet for basically the same HOA, Arrowcreek has the resident’s center that will be greatly improved by the golf-course buy out plan. There will only ever be 1100 homesites, no more semi-customs are planned. A great school is outside the gates as well as a future fire station.
Galena/St James are quite an investment with the rising propane and gas prices, adding hundreds to monthly costs just for living there. Not to mention the fire danger. The older homes are still over-priced and great need of costly up-grades.
don-thanks for the advice, yes this will be our home for quite some time. My parents still live in the same home I grew up in and I hope to give my children that same sense of security.
The area I’m talking about is Southwest Reno not old SW. I will check out Hotpads, thanks.
Thanks to all for the advice, it’s a very hard and scarey decision during these times! I really appreciate experienced advice you all have to offer. We are a hard-working family and don’t want to make any major mistakes.
We already “saved” our money from the falling stock market managing to come out ahead but now where with the money??..
EdBear
So, what’t a good price per square foot for a 1,300 to 1,600 sf home with a view in Somersett? I’m thinking of the $250K to $275K range. Do you think sellers will come down to this range or sit on the property hoping for better times or an unsuspecting buyer?
Thanks for your advice,
Ed
MikeZ
Z:even if you found a house you love and plan to stay in for the next 5-10 years???
Five to ten years out? I have no idea where I’ll be then.
I was fat, dumb and happy in New England in ’02, having lived there my entire life, convinced I would be there for the rest of my life, when my job suddenly went away.
12 mos later, I was in Reno. Surprise!
not to mention the tax break compared to throwing rent away each month
We view rent very differently.
first time buyer...waiting
Mike Z- sorry about your job in New England! I can’t imagine you were ever dumb.
I can’t fine a rent/buy ratio for SW more tuned into Arrowcrrek/Saddlehorn on hotpads, maybe someone else has a better idea?
Can you explain why you view renting differently??
I feel our jobs are quite stable and I chose to move here, so I hope that helps somewhat…but you are right, you never know.
Future Buyer
First Time Buyer–It is hard to track house values right now because zillow is still using comparables based on 07 prices. I’ve seen Saddlehorn “asking” prices decline, but I’m not looking there. There is no question that Caughlin Ranch has taken a huge hit on zillow–but that might change with gas prices high and the proximity to downtown. I track prices by what has sold versus what zillow says they are worth. Most of the Arrowcreek sold homes have been way below what zillow says they are worth and have not posted yet. There have been some houses at 3100 sq.ft. in Arrowcreek zillowed at over 750k selling for under well under 600k. It is a personal decision to buy vs. rent, but it was the best financial decision we ever made NOT to buy a house when we moved here last year and houses are selling at the same rate this year. I realize most realtors say Zillow is not the “end all”, but it’s all I’ve got, and has been an immense help! In any case–housing prices are not going up. You said previously that you are buying a home to stay for a long time, which makes a big difference. Sounds like you want to buy, so don’t second guess yourself and do what is best for your family. The “selling season” is coming to an end and I think sellers will be more likely to deal in September than May. Good Luck!
Sully
EdBear; You can find these houses right now for the price range you’re looking at. Views are not city lights, more of the mountain type.
Mostly in the Del Webb community.
first time buyer...waiting
Future buyer: thanks for the reply. Regarding those houses in Arrowcreek : were they semi-cusotms, like Desatoya or Granite pointe?
An interesting website that we all have access to is the Washoe County Assessor/ property appraisal. It tells you the history of the property, the quality, floor plans, etc. look under parcel summary to find all that.
Again, a lot of the 1+million $ custom homes are over-priced and need to come down but there are some decent deals to be had now. remember if you are financing, rates may go up.
Future Buyer
First Time Buyer–I will give you some specific examples of why I think Arrowcreek will be taking a hit on Zillow once the data catches up–
MKchick
I already contracted new construction this year. I *could* still walk away before closing and lose my earnest money deposit, but I’ll tell you why I won’t:
1. We love Reno, and we’re not moving away unless something disasterous happens. Family is retiring out here. And I know some of you will chuckle, but it is the best place to ride out an economic downturn we found so far! Forget it if you are in LA, NYC, Chicago, or SF. We’ve done that before, and it left scars. You couldn’t pay us to go through that again. Our other options after escaping the Bay Area were Idaho, Colorado, or Texas.
2. We bought one of the last lots in the subdivision. It is completely built out, no empty dirt lots like most of the recent construction in Reno. One of the best elementary schools in the state. FIFTEEN MINUTE COMMUTE TO WORK!! (This is coming from someone who had to commute at least 1hr in either direction for 10 yrs). If we passed this opportunity up, we’d have to wait at least 2 years to get a similar opportunity, and I have no idea if interest rates will remain as low as they are now.
3. The price we paid was one we could more than afford with traditional financing, and we couldn’t find anything resale or foreclosure that compared to the amount we were paying in terms of views, no rear neighbors, square footage, and floorplan. For personal economic disaster protection, we made sure we could afford to rent it out at a declining market rate without too much loss. Because the cost of construction labor went down, we got some construction options at half the price they were six months ago.
4. We’ve rented for approximately 10 years, waiting for the RE bubble to pop. Renting from “unintended landlords” wore us down. They are the worst: completely unprofessional, and treat their rental customers like criminals while we’re paying their mortgage and keeping their house spotless. We’re tired of playing musical chairs with housing, as that is an expense we can never recoup. Some say that is the same with buying our home, but at least I know what my mortgage payment is — and it will be lower than what we’re currently paying for rent.
So, some may laugh at me saying I’m a fool for doing what I’m doing right now, but like other first time homebuyers on this blog, I’m buying a place for my family to live in, not an investment.
As for economic stuff, I always buy when there is panic. And there is a lot of panic in the markets right now.
Future Buyer
First Time Buyer–I accidently submitted without the examples–3365 Forest View Lane is zillowed at 762k, but sold last week for asking of 580k, Some REO’s were corner of Copper Cloud and Arrowcreek sold for low 900k and another on Nambe was way below zillow. Also, take a look at 3639 Silver Vista sale pending at an asking price of 775k zillowed over 1m. All the Via Solano’s–check out 10044 Via Solano asking 780k zillowed at 1.043m. The examples go on and on–but if under 800k is your price range there is a lot of downward spiral right now that the news will be reporting in a few months time. You can hear the air deflating from Arrowcreek as I’m writing this–zillow.com just doesn’t know it yet! Thanks for the other website–I will take a look at that too! The over 1m range is taking quite a bit longer to reduce in price, because with nothing selling there are no comparables–that is my frustration though! Hope that helps…
Sully
first time buyer, you mentioned the great tax break you get buying versus renting. Have you heard of the alternative minimum tax?
It seems like just about anyone with an income qualifys for it.
By the time you add in repairs, improvements, landscape upkeep, etc. – that tax break should not be the reason, or even near the top of the list of reasons for buying a house.
Don Cooper
Sully — the AMT doesn’t impact a first mortgage. (Perhaps you’re thinking about a second or refi that is used for other purposes?). Also if Obama is elected, which seems just about certain, the AMT will probably die in its current form.
On the other hand questioning the value of a tax break is valid. If you have the money it just isn’t much of a break unless you have a better investment. For example, say you have $200,000 in the bank and can buy a house for #200,000. Let’s also say the loan rate and a guaranteed investment both are at 6%. If you take a loan for the $200,000 you get a tax deduction of $12,000 BUT you also have income of $12,000. You add in the $12,000 income on Schedule B and deduct the $12,000 interest payments on Schedule A. This nets to zero. Compared to buying the house it’s a wash from the tax perspective since if you just bought the house you’d have no income. In this case you’d end up at the same point but would avoid all that adding and deducting.
first time buyer...waiting
Future buyer-I know a granite pointe sold at asking around 900.
A Chantelaine/cour st michelle just sold for over a million
Indian summer sold in the mid 800’s
I’ve been in a lot of the house you mentioned and disagreed with the Zillow prices anyway for various reasons.
Forrest View is on Arrowcreek Parkway-no thanks
Silver vista is in a ditch
copper cloud was awful-no yard, awful interior
Are the Via Solano houses the Bella Terra ones that you have to up[grade to finish??? If so, that’s a base price for no land, very close neighbors.
Nambe-didn’t check out yet
They are selling expensive homes and will continue to do so as long as people pay. I would not but there apparently are people who will.
Nottingham Ct=asking 1.05mill, sold 1 million CASH
Another St James sold for 2 million-CASH
I also remember at least 3 cycles in So Cal, when my parents home was worth over 1 million-wow!! that 1954, 2500sq ft, 10,000 sq ft lot they bought for less than 50,000 in 1972. They also are under prop 13! So, this is just a cycle, how long things will down?? I don’t know..I know we have horrible years behind us and ahead of us but I don’t think the United States of America is doomed forever, we have bounced back before. That’s why people still come to this country.
Sully-thanks for the info, I will check that out!
My dad always said that our house is like painting the Golden Gate Bridge, “you get to one end then have to start at the other again”, but it was my home and great memories were made there in good times and bad.
ThomasV
For those of you are are “certain” you will be in your house for “at least 5-10 years”, I suggest you contact the hostess of this blog, Diane Cohn, and talk to her about that.
Diane is contemplating at least a $100,000 loss on the sale of her Somersett house, probably more, that she was certain she would be in for 5-10 years.
Life is, by definition, uncertain.
And also, for those of you who think that a housing market cannot decline for 10 years straight, think again. I lived in Hawaii in the 1980s and 1990s. I assure you the Oahu market declined for ten straight years. But hey, that was Hawaii. Who wants to live there? I’m sure it’s different here.
first time buyer...waiting
thomas v-what else was going on in Hawaii at that time?? I love to visit Hawaii but would never wnat to live there. It’s paradise for a few weeks/maybe months
People are still relocating their businesses here from all over, we have a lot to offer here. I moved from LA and would never go back…crime, pollution, higher taxes, less pay, worsening school systems, traffic, no space. It takes hours to get out of LA to ski, etc. LAX is a nightmare. NO thanks, not worth it.
Don-again thanks for the info
MKchick
ThomasV: We lived through both the bloodbaths the NY and California housing markets took in the 80s and 90s. The prices always came back up after a crash; just took time. Unless Nevada turns into Michigan, chasing all the businesses away with insane taxes, I don’t see why it wouldn’t come back. I don’t think you’ll see 2005 hysteria again for at least 50 years.
Yes, it could take as long as 10 years for the market to come back. One of the many differences between Diane and us (no offense Diane!!) is that we are NOT buying at the peak of the market… I think we can all agree on that.
We’re buying on a downward trend, which is pretty much the same as buying on an upward trend, as another poster pointed out.
The problem I’m seeing in the financial markets is that interest rates are going to continue to trend upwards long term, so I agree with another poster where it is going to be a wash if we decided to wait. However, the decision to buy now and have less equity when the market comes back in 10 years? No thanks.
Other people can continue to rent for a few more years and try to time a bottom we’re a long way off from seeing, and I wish them the best of luck. We’re financially, mentally, emotionally not ready to continue playing that game any longer, and we’re also prepared in a similar fashion if the house declines in value by 25% in the short term.
But the doomsday scenario is if those houses in Arrowcreek sell for $350k. Owners selling at 75% original purchase price declines? You all really think that is going to happen?