Sales in May 2008 were off 24% from the year prior, again. Activity in the under $300K range held steady with 10 months of inventory and a significant jump in pendings from 490 to 570 (237 of which are short sales). The $300K-500K range lost a bit of ground, bumping up to 15 months of inventory from 12. The $500K-1 million category experienced an uptick in average price along with fewer days on the market, but still favors the buyer with well over two years of inventory. The $1-2 million perked up with a higher average price and a decrease in inventory to 22 months, while the $2 million plus range had no activity at all (except for four pendings). Full report.
Data courtesy of NNRMLS, May 2008. Report includes Stick-Built Single Family, Condo/Townhomes, and Real Property Manufactured Housing in Reno-Sparks (Area 100).
Reno Ignoramus
Interesting numbers on the pendings. 67% of all pendings are under $300K. 25% are between $300K and $500K. Only 8% of all pendings are over $500K. In other words, the low end of the market is where the action is. The upper end continues to wither on the vine. We are returning to a market where very few houses sell for more than $500K.
Diane, can you tell us how many pendings there are under $200K?
Thanks in advance.
Marla
With 2 out of 3 houses selling for less than $300K, and 9 out of 10 selling for less than $500K, what do you all think is the mindset of the thousands of sellers who have their houses listed at more than $500K?
How long can they hold on to the delusion, denial, and rationalization before they finally recognize just how toast they are?
Justin
Let me see if I have this straight. If I am a seller above $500K, I have an 8% of 8% chance of selling my house. (Only 8% of all listings sell, and of those only 8% sell for more than $500K). Or, I have a 0.64% chance of selling my house. And that’s if I am just a bit above $500K. As I go higher in asking price it gets worse. If I am trying to sell at say, $1 million, I have 2% of 8% chance of selling. That’s a 0.16% chance of selling my million dollar albatross. Ugly, very very ugly.
BanteringBear
Marla posted:
“With 2 out of 3 houses selling for less than $300K, and 9 out of 10 selling for less than $500K, what do you all think is the mindset of the thousands of sellers who have their houses listed at more than $500K?”
Perhaps Allen Murray can give some insight?
BanteringBear
Justin posted:
“If I am trying to sell at say, $1 million, I have 2% of 8% chance of selling. That’s a 0.16% chance of selling my million dollar albatross. Ugly, very very ugly.”
Yes, hideous Justin. If I were selling a million dollar home, or parading one around as such, I would hope it was located at Tahoe or, at the very least, Montreux.
Harmon
I believe we are undergoing a fundamental systemic shift in the nature of the housing market in Reno. An inevitable consequence of the bursting of the bubble will be a return to the pre-bubble days when prices bear a rational relationship to income. The purchase of a $500K house will return to being what it always was: a fairly rare, and exceptional thing reserved to the well-off professional class. The purchase of a million dollar house will be what it always was: an extraordinary event reserved to the truly wealthy 1 or 2% of the population.
The extraordinary perversion of sound financial principles engendered by the bubble, when unskilled workers making $8 an hour could lie their way into half a million dollar loans, had distorted thinking beyond sensibility. That distorted thinking is still present, as witnessed by the absurd number of houses listed for sale in Reno over $ 1 million. Most of those houses will NEVER sell at that price. NEVER.
BanteringBear
Excellent post, Harmon. I agree wholeheartedly with everything you say. Asking prices, and most sale prices, are still completely detached from fundamentals. Consider that GreenNV just listed a parcel on Mayberry for $275k, and it is the lowest price in the area. $275k should buy a nice sized lake view parcel at Tahoe. I believe it will again, someday.
smarten
Harmon “believe[s] we are undergoing a fundamental systemic shift in the nature of the housing market in Reno…[One where] the purchase of a $500K house will return to being what it always was: a fairly rare, and exceptional thing reserved to the well-off professional class.”
Sorry Harmon, I disagree. Do you think you’re ever going to see gasoline at $0.50/gallon again? How about wages at $3.50/hour? Just ain’t going to happen. There are hundreds [if not thousands] of Reno homes that would sell tomorrow at a price in excess of $500K [I know of at least 53 in Montreux alone] if they were priced appropriately. The problem is they’re currently listed at prices in excess of $800K and are simply out of whack compared to the inventory available $500K are delusional.
The upper end of the Reno SFR will adjust, just as the lower end has been adjusting. And when it’s finished, I predict you’ll see a very healthy segment >$500K. And when the price of gasoline is $10/gallon, that segment may very well be >$1M. Are we there now? No. But we can still buy gasoline [in Reno] at a little over $4/gallon.
Speaking of gasoline, how about the fuel surcharge on your local agent’s 6% sales commission? If it’s good enough for the rest of the marketplace, why not real estate agents?
BanteringBear
I have to wholeheartedly disagree with Smarten and his belief in a “new paradigm” for Reno real estate. The fundamental problem is the excessive overbuilding of the high end. Builders built the wrong product. Many of these vacant monstrosities won’t sell for years, and when they do, it will be at deep, deep discounts as there simply aren’t enough people earning the kind of money needed to qualify to purchase homes of $500k or more.
As the high end, optioned out, homes sell for much less than $100 per square foot, it drives down the lower priced homes even more. We will find, in due time, that there is not much of a market for >$500k homes in Reno, so most will again, as in the past, fall well below that threshold-regardless of the cost of construction. Supply and demand will enforce it’s will in a nasty fashion.
Sully
BB you’re absolutely correct. Smarten is trying to compare apples to rubber tires.
Allen Murray
Sully and BB…you guys need to put the doobies down, its not 1975 anymore.
Sully
Lets see …. in 1975 gas was soaring, inflation was roaring, gold was in the mist of a bull run; Nixon was about to take us off the gold standard so the money presses could start 24/7.
Hmmmm… may not be deja vue all over again, but might be a little bit of a parallel.
smarten
Sorry BB –
Everytime I hear the argument you’re making insofar as the average Reno/Spark’s wage earner’s ability to afford the average SFR, I think of: Paris, France; Manhattan, N.Y.; San Francisco, CA.; their equivalents.
It doesn’t matter what the average Paris wage earner can technically afford [based upon his/her wages]. The prices for Paris apartments are off the chart and yet there’s great worldwide demand; they continue selling; and, at higher and higher prices. The same with Manhattan real estate. And I think the percentage of San Francisco Bay Area families that based upon average household incomes can afford a median priced San Francisco Bay Area SFR, is now in the mid-teens. Notwithstanding, homes the masses can’t seem to afford continue selling.
Don’t misunderstand me BB. I’m not saying that Reno’s higher end SFR market doesn’t have to come down in price – and drastically. And I’m not saying that your observations re “excessive overbuilding of the high end” are wrong. But if anyone here seriously believes the future of Reno/Sparks SFRs is like LCD HDTVs [the days of multi-thousand dollar sets for the masses are history], with all due respect you’re dreaming.
Furthermore, many real estate markets [and I believe Reno/Sparks is one of them] are attractive to buyers OTHER THAN your typical local average wage earner [just look at the number of present/former California residents who frequent this site]! These people don’t necessarily fit the local average wage earner mold and for this reason may be able to afford and are willing to purchase higher priced/more upscale SFRs.
I’m not saying it’s prudent for delusional sellers to hold out for rich, stupid [we’re not all stupid], retired, Californians [or Parisians]; at least not in the short run. I am saying that as the real estate market rebounds across the country and the economy improves, you’re going to find non-resident SFR buyers who find value in Reno/Sparks and are willing to pay >$500K.
But I guess we should just check back in 5 or 7 or 9 years to see if Montreux/St. James Village/Arrowhead/Saddlehorn McMansions have dropped in price to less than $500K. If so and amongst other things, you’re going to find a whole lot less agents in business compared to today.
Tom
As old Judge Gold used to say, “the truth is somewhere in the middle.”
As to St James, Arrowcreek, Saddlehorn, Montreux and Montreux-adjacent in the Callahan Ranch area, I would tend to agree with Smarten. Those prospective buyers are likely not the folks dealing 21 at Harrah’s or working middle management jobs at some warehouse or distribution center in Reno.
They are probably out-of-area prospective buyers who may be interested in the above upscale areas, but who probably would pass on areas with McMansions on postage-stamp lots, as exist down in the Meadows. There are some pretty nice houses down there, at around $600k to $750k, but the density is unbearable, it seems to me. So the sister state expatriates with options, I suspect, will pass on the San Fernando Valley lifestyle offered by those homes in the meadows. Consequently, I think those houses will indeed fall in price to meet the local earners’ purchasing parameters.
Thus in the Meadows area, I think BanteringBear is right on target, the houses there will likely fall in price to where local working people can buy them. How many cardiologists and resort hotel general managers are there in Reno, and don’t most of them already live in Arrowcreek?
My bet is that next summer you could get a 4,000 sq ft house in the Meadows for significantly less than if you bought it today.
Fortunately for the developers, despite their Quick Delivery Homes, they don’t seem to have a large amount of finished product in inventory.
BanteringBear
Smarten posted:
“Everytime I hear the argument you’re making insofar as the average Reno/Spark’s wage earner’s ability to afford the average SFR, I think of: Paris, France; Manhattan, N.Y.; San Francisco, CA.; their equivalents.”
Sorry Smarten, but comparing Reno, NV and it’s real estate market to Manhattan, SF, or Paris is beyond foolish; it’s delusional. Reno is NOT a world class city. It is apples to oranges. Furthermore, the aforementioned markets are primed for a meltdown of their own. Did you forget that Japan lost 90% of it’s value, with such a finite amount of land to boot?
Smarten said:
“Furthermore, many real estate markets [and I believe Reno/Sparks is one of them] are attractive to buyers OTHER THAN your typical local average wage earner [just look at the number of present/former California residents who frequent this site]! These people don’t necessarily fit the local average wage earner mold and for this reason may be able to afford and are willing to purchase higher priced/more upscale SFRs.”
As has been discussed countless times before, these peoples cannot carry a market. They are the exception, not the rule as their numbers pale in comparison to inventory. Local wages dictate median home prices in Reno, NV. Prices are going right back to where they were before the banks started giving money to anything with a pulse and a signature.
GratefulD_420
Question for Guy or Diane on the data they post.
Diane’s latest data states May Closings at 96% of asking price for < $300k & 94% os asking price for $300 – $500k.
Guy’s June 4th post – Median Prices & Unit Sold, shows May Closings at 85% of May asking price?
Why such a disparity? Diane, do you know how your Closing to asking price is calculated? per indivdual sale then average the asking/closing? OR compute total Asking Prices for closed?
Guy.. or is your data showing Median asking for all listed houses (~5,000) and then giving Median Closing for the (~300) that actually closed?
— Gratefully – D
smarten
BB, we all understand Reno’s no Paris nor Manhattan. But some comparisons are not
“beyond foolish” nor “delusional.”
For instance, any area that’s growing and attracts immigrants from other areas, attracts people who don’t necessarily represent your average local wage earner. And in this regard, Reno/Sparks is no exception. All I’m saying is although the average local wage earner may not be able to afford a Reno/Sparks SFR, doesn’t mean there aren’t others out there who can and will.
And given Reno’s/Spark’s population exceeds 400K and is growing; and but 300 homes/condos/PUDS per month are selling; I do think those who are not local average wage earners can “carry a market.” I personally think there are many, right here on this board, that fall into this category. The difference though is that unlike those who jumped in blindly in mid-2005, today’s buyer is exhibiting some intelligence.
And insofar as the worldwide real estate meltdown you suggest [have you see prices in Dubai lately?], comparing what we have today, even in Reno/Sparks, to Japan in the late 80s/early 90s, is like comparing apples to oranges [do you really mean to suggest that even Reno/Sparks SFR prices are going to drop 90% from their mid-2005 highs (wouldn’t that put the median back to the mid $30K range)?].
My point was only that there will ALWAYS be a higher end SFR market in Reno where homes sell >$500K and those who buy there may not be your local average wage earner who doesn’t have the kind of income necessary to support that kind of lifestyle.
DERRICK
oh smarten oh smarten.. you just think you are the next best thing since sliced bread don’t you?
Shame on you for poking fun at me and my oil short.. I told you I shorted at 129 .. whats oil at right now? this is a medium term investment not a 3 week investment idiot.. so get off your high horse and forget about it..
keep to the subject,, btw you have the biggest head I have ever seen.. what size hat do you wear?
BanteringBear
I nominate Derrick’s latest post as the worst in the history of this blog. I defy anyone to find a more pathetic utterance. It appears as if there’s a dosage problem.
Phil
I look at my street and there are two houses for sale, both where bought by native Reno types originally.
I get along well with my neighbors and most are retiring people from California. I think most of the people including myself are thinking our next stop is the retirement home or the graveyard.
There is a market for more expensive homes as long as California exists, and people retire, this is still one nice place to live.
Problem is now people are delaying retirement and therefore demand for te >500K homes is down.
I was very lucky and transfered here with my Silicon Valley salary. 🙂 Then again job security is tenuous and new job prospects here are slim. So I do feel a bit uncomfortable from time to time.
BanteringBear
Smarten:
I find you quite enigmatic. I’ve read most of your posts to this blog and, on the one hand, you come across as well-educated and wise, but on the other hand, somewhat naive.
You post:
“All I’m saying is although the average local wage earner may not be able to afford a Reno/Sparks SFR, doesn’t mean there aren’t others out there who can and will…I do think those who are not local average wage earners can “carry a market.” I personally think there are many, right here on this board, that fall into this category.”
I find this absolutely outrageous. How is this possible? Are you suggesting that all of these wealthy people are going to buy up all of the starter and mid range homes, as well? Please elaborate as I cannot even fathom such an event.
You state:
“And insofar as the worldwide real estate meltdown you suggest [have you see prices in Dubai lately?], comparing what we have today, even in Reno/Sparks, to Japan in the late 80s/early 90s, is like comparing apples to oranges [do you really mean to suggest that even Reno/Sparks SFR prices are going to drop 90% from their mid-2005 highs (wouldn’t that put the median back to the mid $30K range)?].”
I do not recall suggesting a global real estate meltdown, nor would I suggest that Reno median prices will drop to $30k. Please show me where I did. When I was speaking of markets primed for a meltdown, I was specifically referring to SF and Manhattan as I know nothing of Paris.
While I do agree that prices in Dubai are in the stratosphere, it is clearly a speculative bubble. Skyrocketing real estate prices are not indicative of a healthy market, but rather the opposite. One only needs to consider what’s driving prices to conclude what the end result will be.
And lastly:
“My point was only that there will ALWAYS be a higher end SFR market in Reno where homes sell >$500K and those who buy there may not be your local average wage earner who doesn’t have the kind of income necessary to support that kind of lifestyle.”
I agree with this. But where I disagree with you, is the impact that these sales have on the overall median and market in general. These sales are the exception, not the rule. I would argue that a large portion of them, over the course of the past 5 or so years, were to people who could ill afford them. As Harmon so eloquently put it, “The purchase of a $500K house will return to being what it always was: a fairly rare, and exceptional thing reserved to the well-off professional class. The purchase of a million dollar house will be what it always was: an extraordinary event reserved to the truly wealthy 1 or 2% of the population.”
smarten
BB [I like you too], let’s just watch and learn.
Most of us seem to agree that the higher end of the Reno SFR market is grossly overpriced [which explains why it’s not moving (whether the reason be it’s out of reach for the average local wage owner, or otherwise)]. If prices don’t come down yet this segment of the market takes off [which I find unlikely], then I guess we’ll both wrong. If prices come down and as a result this segment of the market starts performing like the $225K+/- segment, then I guess you’ll be wrong. If prices come down and it doesn’t make any difference whatsoever, then I guess this segment of the market will become history just as you and Harmon suggest. But I don’t think that will be the case.
And insofar as the median sales price is concerned, as Lindy schooled me and given last month as an example, it doesn’t matter if there any sales over $500K for the median sales price to increase. If the median sales price is $255K, it goes up as long as 50% of all sales take place at $256K or higher. Stated differently, the median sales price is no more affected if there is one sale at $255K and another 114 at $500K or more, versus one sale at $500K and another 114 at $255K. So basically, you don’t need any sales >$500K for the Reno/Sparks median to rise above last month’s $255K.
Future Buyer
My husband and I looked at 15 houses in May priced between 1.2 and 1.7 million in Arrowcreek, Montreux, and St. James. The problem was not that we couldn’t qualify, but we are not your average buyers. The problem was when you look at houses priced this high you have certain expectations that not one of these houses fulfilled. We didn’t like one of them enough to make an offer (even a low ball offer), because we felt they were too expensive and should have had an 800k price tag! And the 2 million dollar homes should be closer to 1.5. These were just average homes asking outrageous prices. It will be a rare buyer AND a rare HOME on an exceptional piece of LAND that will revive the million dollar market. The problem is out of control inflation and if history repeats itself, everything does run in cycles…
Diane Cohn
RI, here’s the data on the under $200K world for May 2008: 267 new listings, 86 sold, 32.21% absorption of new listings, $159,572 average asking price, $153,005 average sold price which was on average 95.88% of asking, 108 average days on the market, 19.85% expiration rate with 1,023 currently listed.
Grateful ID: Good questions, I will have to confer with Guy. To get my numbers I use a statistical reporting feature of the MLS that compares last asking price to the actual sold price. Other higher, previous asking prices for the same property don’t factor into the equation. Maybe Guy is looking at original ask prices versus the final sale price? That might account for the difference, but again, I will have to check with him.
Diane Cohn
RI, whoops… you asked for pendings under $200K. Current is 242 total, 61 of which are short sales.
Reno Ignoramus
Thanks Diane.
Out of 847 current pendings, 242 of them, or 29% of them, are for a sales price under $200,000.
So we are now at the point where almost 1 out of every 3 houses that close escrow sells for under $200,000. 2 out of 3 sell for less than $300,000, and 9 out of 10 sell for less than $500,000.
This is an extraordinary turnabout from the summer of 2004 where there was no decent housing in Reno for under $300,000. Take away the Voodoo loans and see what happens.
My purpose in starting off this thread was simply to point out how much prices in Reno have returned, and continue to return, to historical norms. I will leave the prognosticating about the future of the upper end of the market to the nostrdamus’ on this blog. Right now, I find these numbers quite insightful.
NAS
Ditto Future Buyer.
Prices are skewed everywhere, but Reno seems to have the market cornered on outrageous-makes no sense-scratch your head- house pricing. Case in point: Two homes on Ridge Field in Somersett. Both houses are the exact model, exact sq. footage, and even the same side of the street. One is listed for 589K and the other 999K. Small lots. Tract homes. Is there a fool out there willing to pay 999K ? Maybe 3 years ago, but now?
Guy Johnson
GratefulD_420,
You asked, “Guy.. or is your data showing Median asking for all listed houses (~5,000) and then giving Median Closing for the (~300) that actually closed?”
Yes, that is correct.
Reno Ignoramus
Are the Cottages at Caughlin Ranch approaching inflation adjusted sensible pricing?
Look at MLS 80000028. 1055 Waverly in the Cottages. Originally sold for $249,000 in 11/97. If we attribute 5% annual inflation over the past 11 years, the house should be valued at about $390,000. Currently listed at $415,000. An offer at 94% of asking comes in right around $390,000.
It is silly to talk about house prices returning to 1997 levels in nominal dollars. But in inflation adjusted dollars, this house is close. Now, of course, if you accept the government’s spinjive that inflation has only averaged 2% a year, then it’s not so close. Interesting.
Perry
I’m not so sure I agree with the whole absorption rate theory and statistics. When a house is obviously over priced is it really in the market? Take for example the following:
MLS# 80000901 $459k
MLS# 80000857 $547k
MLS# 80008317 $550k
All three are exactly the same house. Maybe some have views or a little more bling but you can’t justify the price difference. Sure the first one is a foreclosure but it isn’t selling either so apparently it’s a little overpriced as well.
I think 10% of the market is really “the market”. The other 90% are just people smoken’ the crack pipe hoping a bigger fool will come along.
Skrap Guy
Perry: you are correct. Others here have made the same observation. Most “sellers” are just taking up space on the MLS. And most of them occupy the above $500K price points. As somebody above astutely pointed out, you would think that when a seller is in the “8% of 8%” category, they would get more realistic in their pricing. But no, the denial runs very very deep. We have talked about the “my house is special” or the “my situation is special” thinking that is so pervasive. The simple reality is that most of these “sellers” will never sell their house at the dream on price they are asking. Most will just continue to ride the market down, implementing silly 2 or 3% price reductions along the way. This is why housing market downturns take so long to play out. This is why they can last up to 6 or 7 years, or even longer.
RI: It appears you may have found a realistic seller in the sea of denial. I don’t think that house is quite yet back to 1997 inflation-adjusted pricing, but yes, it is in the ballpark. As Perry points out, not all sellers are delusional. Just most of them. That seller appears to be in the 10% of the “real” market that Perry refers to.
smarten
Speaking of delusional, look what I found on craigslist [ http://reno.craigslist.org/apa/713268478.html ]:
The “crown jewel” of Somersett is available on a lease [at $15K/month], lease/option [at a price I’m afraid to ask given it’s talk about excessive 9,291 square feet (really “only” 7,538 square feet because “ncluded in the square footage is 1,753 square feet of ready to finish space, a buyer could add an office, indoor sport courts, swimming pool, or in-law quarters”)] or [you’ll like this one] “other properties for down payment” [what about the remainder of the purchase price, and can we trade a number of other delusionally valued Sparks SFRs as part of the deal?]!
Guy, to me this is an example of a delusional agent [maybe he’d like to take his commission in the form of another delusionally valued Sparks SFR?]! One would think that a “Master Real Estate Professional” would know better.
And why would “the co-founder of Bon Appetit Magazine” so overbuild; in Reno no less; and then in Sommersett? I’m sure there’s a history to this property [and I invite any of you that knows it to share your knowledge], but I just can’t make the leap myself.
Me thinks we still have a ways to go.
relocating buyer
hi smarten, here on the east coast many agents are on the verge of bankrupcy. consequently, they will do anything, say anything, etc etc . perhaps agents in reno are in similar financial situations?
John Newell
RI:
I appreciate the knowledge you bring to this blog, and I have learned a great deal from you in the time I have been reading it, but the calculation you gave above for the inflation adjusted value is problematic. If we use a simple annual growth calculation to adjust for inflation, annual growth of 5% over 11 years on $249k would be $425,874.50, not $390k. The formula for annual growth is FV = P(1 + r)^Y, where ‘FV’ is the future value, ‘P’ is the principal, ‘r’ is the rate of growth, and ‘Y’ is the number of years. Merely multiplying the starting value by one plus the rate times the number of years — FV = P((1+(r*11)) — does not return the proper exponential growth. In the example you gave above, the property is currently priced under the inflation adjusted value (assuming 5% inflation per annum).
If inflation were 2% per annum, a property worth $249k in 1997 would be valued at $309,600.20 at 2% inflation per annum. However, if we use the official government consumer price index calculations ( http://data.bls.gov/cgi-bin/cpicalc.pl ), then $249k in 1997 has the same purchasing power as $333,276.80 today. So, as you say, if we take the government’s numbers, we are not even close to 1997 valuation as adjusted for inflation.
Reno Ignoramus
Thanks John for the precise calculation. Your calculation just makes my point all the more.
The official government CPI calcualtions are just fine for folks who don’t drive, don’t eat, and don’t need healthcare. Do you know anybody like that?
As you may know, the official CPI calculation has been changed twice in the past 25 years, once in the Reagan administration and once in the Clinton administration. Both times it was the result of bi-partisan decisionmaking that was mostly intended to dampen down the annual increases in major entitlement programs, primarily Social Security. It clearly worked. Just ask any Social Security recipient if their annual 2-3% increases have been keeping even with the increases in the cost of food, gas, and medicine over the past many years. There are some economists who keep track of the CPI using the formulas before the changes. I recently read an article that said that if we go back and use the formula as it existed before the change in the Reagan administration, annual inflation is around 9-10% now and if we use the formula after Reagan but before Clinton, it is around 6-7% today.
I just picked 5% as a number that seemed sensible as an annual average over the past 11 years. I think we can all agree that the official number of about 3% defies credulity today.
John Newell
We work with many Social Security recipients (mainly SSI and SSD), and I agree that the yearly increases have not kept up with cost of living. I believe that your 5% estimate is a likely a more reasonable number to use. I included the official calculation for the sake of comparison.
Now, if BB is right and the median area income over the last ten years is lower than the official numbers (or at least has not kept up with inflation), wouldn’t this lead one to believe that the market is still overvalued even if it is at our below prices of ten years ago as adjusted for inflation of 5% per annum?
Reno Ignoramus
You are asking me, John, Diane’s original housing bear, if I think the market is still overvalued??Absolutely I think the market is still overvalued. Especially in the higher price ranges where the pricing goes from the merely ridiculous to the delusionally absurd.
This particular house in the Caughlin Cottages is unusual (perhaps part of Perry’s non-delusional 10%)in that it appears to be at least somewhat sensibly priced. I don’t think the sellers will get their asking price, but at least the asking price is not in whacko land.
I agree with BB’s fundamental premise, which I have also articulated over the last 2 years here. Prices, in relation to income, are out of whack.
The rent v. buy equation is still out of whack. It ultimately comes down to affordability.
RoyalFlush
BB,
I appreciate your skeptical view and follow your posts – even though I don’t necessarily agree. I’m interested to know if you have you been able to refute the median income data that GreenNV et al posted? If I recall correctly your argument for valuations hinged on the relationship between median income to median home price and Green’s data appeared to place present values as “fair.”
John Newell
Not really asking, more commenting. I had no doubt about where you stood, RI. And I agree that affordability is the key. Anything is only worth what people are both willing and able to pay.
And I also agree that the own v. rent equation is “out of whack.” For example, my wife and I rent because by doing so we can afford a nicer home for our children and have more money to save and play with than if we tried to buy a comparable house, even with 20% down. This may change in the near future (like Smarten, we are starting to actively look at properties), but until we find a house that we want to live in for many years to come at a price I believe we can truly afford, we will continue to rent.
BanteringBear
Hi RoyalFlush,
Thank you. I know my opinions are not always popular, but I’m OK with that. The only thing I have been able to find thus far (with little effort I must admit), is the median household income for all of Nevada for 2006 which, according to the US Census, was $50,088. How Washoe County could come in so much higher is beyond me. But, then again, I have a hard time believing it does.
Future Buyer
Bantering Bear–you are popular among us renters waiting it out for a good deal. I can imagine if I bought a house at the peak of the market, and was watching my nest egg decline in value, I would not like your comments much…
MikeZ
Shame on you for poking fun at me and my oil short.. I told you I shorted at 129
You need to keep your story straight.
May 8: “I will give you 1 for free.. short oil at 125-130 down to 90. ok?”
Down to 90? How’s that working out?
Tom
BB, you raised this question:
“… median household income for all of Nevada for 2006 which, according to the US Census, was $50,088. How Washoe County could come in so much higher …[?]”
Since this is a mid-point sign-post and not a mathematical measurement, it could be skewed upward in the universe being measured by the presence in one enclave of that universe of a cluster of high-end earners. To illustrate, take a number of counties in any State, in which residents are comprised of almost entirely similar families, mostly middle-income or lower-range earners. These are families of homogenous economics, such as in Kern County, CA, for example. There is not much of a topside to raise the median figure in Kern County, as compared to large numbers of lower level earners throughout that county. Now take as an example, a county which includes a segment of high earners, and not a tremendously large middle and lower end, unlike Clark County, in which the Law of Big Numbers will tend to “correct” the snapshot given by a median, even if there are high earners in some enclaves of that county. In this second example, the enclave of higher earners could adjust the mean upward. If Washoe County as a universe would include as “units” to be counted in posting a median, residents with relatively higher incomes (those in Incline, Montreux, etc, Arrowcreek, compared to downtown, other Reno areas, Sparks, etc, the meadows), and if you then compared that median to the rest of the state, this might illustrate the difference. To me, this would only indicate that Washoe County may have a less homogenous economic constitutency than many other Nevada counties; I don’t think it means that the typical Washoe resident necessarily has that much more buying power. Make sense?
When we were studying the usefulness of various statistical averages with behavioral scientist Dr. Harry Scoble at UCLA when I was there, Professor Scoble typically would throw out the high and low ends of such charts. That is because he wanted to define a realistic center for whatever question or service was being measured. The guy was a genius of statistical measurement.
BanteringBear
Tom:
Good post. I do understand how the median is calculated, however I find it quite hard to believe that a county the size of Washoe, with all of it’s low wage earners, could be skewed higher by such a massive “enclave” of high wage earners. My guess is that the sampling is bad.
billddrummer
BanteringBear:
I see your point about the median income for the county vs. the state, but I think the sample is skewed by two significant but unrelated things:
1. The median income in Clark County is significantly lower than here, principally because of the number of lower wage service jobs compared to this area;
2. Median incomes in the cow counties consistently lag urban areas.
When you combine those two factors, it’s not surprising to find that the median for the state trails the median for Washoe County. Since proportionately fewer jobs here are in the lower-tier service industry, the median tends to be higher than in places like Las Vegas, where a large component of the workforce is employed in the hospitality industry, which has lower median salaries than others.
Now, as far as the affordability of housing here, it’s also not surprising that activity within the marketplace is concentrated in sub-$300,000 properties. The more exotic loan products are gone, which artificially propped up prices for all properties. Now, lenders want buyers who can qualify with verified income, assets, and credit. And if you match the median income in Washoe County with qualifying mortgage ratios, you find that the median family can afford a mortgage loan in the $225,000 range–the sweet spot for sales.
Look for $500,000+ properties to languish for a long, long time. And the CA feeder effect has slowed, as equity positions in that market have plummeted.
The short answer: If your home is priced below $300,000, it will probably sell quickly. If not, be prepared for a long wait.
DERRICK
mikez . why do you care so much about me? are you attracted to me? do you want to take me out to dinner and then home after? Sorry bud I don’t swing that way..
John Newell
BB,
With median income data I have seen in the past, Washoe County median income is usually higher than the Reno/Sparks metro area median income because Incline (mainly) skews the data. This is part of the reason that I agree with you that a measure of fair value based on area median income does not necessarily equate with affordability.
BanteringBear
Yes, I agree John. Considering that fact, one would need to include Incline home prices when determining overall affordability.
EdBear
Our quest continues…
We are working with Diane, but don’t let that deter you from commenting.
Sommerset appears to be one of the Death Valleys of Reno. Ryder has a cute Pinton Pointe (note the “e,” that used to be worth $100K) model one, website priced at $339K. Could it be had for $300K, and if so, would it be a good buy considering “Death Valley?”
Thanks
Diane Cohn
I received this spam today and immediately thought of Derrick and the rest of you that love to talk oil on this blog for whatever reason… maybe I’ve missed my true calling?
———————
Yes, Realtors in Oil!
Enhance your business skills in the oil/gas industry. Click here to apply.
New Information this Thursday 10:15am
New Mexico Helium Prospect available
Why not Preview or present your Deal at The Dallas Petroleum Club…At No Cost
Hudson Drilling for sale, Rigs
Jim Ketchum who is the listing agent and is also a realtor that is fast expanding into the oil/gas industry through Global Tradedays. For additional details call Jim 817-797-5097
Don’t forget our Houston meetings breakfast and lunch on Tuesdays 7 am at Marriott Westchase and 10:45 am at Courtyard on St. James Place.
10:15am 8500 acre Oil/Helium prospect review also 11:00am 90,000 acres of Devonian leases plus production review for several states.
RSVP for Triple E on Thursdays in The Tyler Room on the 39th floor at The Dallas Petroleum Club!