Well…at least June’s median sold price drop was not as dramatic as May’s, but we’re still looking at a new low… $254,000. On the plus side, units sold for June was way up. With 387 residential properties sold in June, that’s an increase of nearly 13% over May’s number of solds. In fact, it’s even higher than June 2007’s 378 units sold. [Extra credit: When was the last month that year-over-year numbers were beat?]
What’s driving sales? Short sales and REO’s (bank owned properties). For June, 11% of the sales were short sales, and 35% of the sales were bank-owned properties. This is something we’re going to see much more of.
For Sale Inventory fell slightly for June — a 1.4% decrease from May’s inventory.
| Month and Year | # Houses For Sale | Median Asking $ | # Houses Sold | Median Sold $ |
|---|---|---|---|---|
|
June 2008 |
4,670 | $299,900 | 387 | $254,000 |
| May 2008 | 4,734 | $293,900 | 343 | $255,000 |
| Apr 2008 | 4,516 | $292,500 | 336 | $269,000 |
|
Mar 2008 |
4,197 | $298,950 | 244 | $260,000 |
| Feb 2008 | 4,056 | $299,000 | 221 | $271,632 |
|
Jan 2008 |
4,123 | $300,000 | 191 | $268,000 |
|
Dec 2007 |
4,163 | $310,000 | 249 | $275,000 |
|
Nov 2007 |
4,527 | $315,000 | 231 | $286,000 |
| Oct 2007 | 4,892 | $319,738 | 267 | $287,000 |
| Sept 2007 | 5,033 | $324,000 | 270 | $285,000 |
| Aug 2007 | 5,483 |
$328,900 |
349 | $295,000 |
| July 2007 | 5,428 | $334,500 | 351 | $295,995 |
| June 2007 | 5,387 | $339,000 | 378 | $300,000 |
| May 2007 | 5,192 | $339,900 | 427 | $296,000 |
| April 2007 | 4,944 | $342,000 | 393 | $295,000 |
| Mar 2007 | 4,687 | $341,500 | 391 | $297,000 |
| Feb 2007 | 4,429 | $340,000 | 334 | $285,000 |
| Jan 2007 | 4,710 | $342,888 | 336 | $279,950 |
| Dec 2006 | 4,568 | $345,000 | 347 | $293,995 |
| Nov 2006 | 5,201 | $349,000 | 330 | $300,000 |
| Oct 2006 | 5,656 | $349,900 | 422 | $300,000 |
| Sept 2006 | 5,968 | $352,000 | 396 | $301,000 |
| Aug 2006 | 6,256 | $355,250 | 393 | $310,000 |
| July 2006 | 6,125 | $360,000 | 416 | $324,750 |
| June 2006 | 5,949 | $364,000 | 473 | $329,000 |
| May 2006 | 5,407 | $369,900 | 432 | $318,750 |
| April 2006 | 4,626 | $369,000 | 415 | $317,000 |
| Mar 2006 | 4,295 | $369,900 | 437 | $329,000 |
| Feb 2006 | 3,899 | $374,900 | 326 | $315,250 |
| Jan 2006 | 4,245 | $370,000 | 325 | $325,000 |
| Dec 2005 | 4,040 | $375,000 | 385 | $319,900 |
| Nov 2005 | 4,432 | $376,448 | 443 | $331,000 |
| Oct 2005 | 4,694 | $376,700 | 559 | $335,000 |
| Sept 2005 | 4,567 | $380,000 | 603 | $336,500 |
| Aug 2005 | 4,370 | $385,700 | 695 | $334,950 |
| July 2005 | 3,860 | $387,000 | 677 | $345,000 |
| June 2005 | 3,411 | $384,500 | 607 | $335,000 |
| May 2005 | 3,113 | $375,000 | 717 | $326,000 |
| April 2005 | 2,808 | $365,000 | 650 | $315,000 |
| Mar 2005 | 2,611 | $350,000 | 660 | $309,000 |
| Feb 2005 | 2,198 | $348,250 | 411 | $301,000 |
| Jan 2005 | 2,078 | $349,000 | 381 | $295,000 |
Note: The median table above is updated on a monthly basis. The median home price data reported covers the cities of Reno, NV and Sparks, NV. Residential data includes Site/Stick Built and Condo/Townhouse. Data excludes Manufactured/Modular and Shared Ownership properties. Data courtesy of the Northern Nevada Regional MLS – July 2008.
smarten
Are you listening Derrick [and BTW, thanks for continuing to chomp at the bit]?
Guy states “REOs and short sales [dominating the market]…is something we’re going to see much more of” in the future. This means that in the short term, the median sales price will continue to drop [especially when unit sales start dropping in September (as they historically do every September)]. As some of us suggested in May, April’s median sales price spike was nothing more than an anomaly…something you’re seeing being played out. Now we’re only $4K above your magical $240K strata and down 5% since January.
It’s going to be a very interesting October!
Future Buyer
Looks like we are slowly creeping up on Bantering Bears median sale price predictions!!
Doug B. Cooper
Riddle me this…
How do those number compare to these?
http://www.housingtracker.net/askingprices/Nevada/Reno-Sparks/
Who, what, where is the credibility? :{o
Diane Cohn
Doug B, HousingTracker tracks asking prices. Guy and I track sold prices, which I think explains the difference in median. Not sure how they came up with 300 more active listings… perhaps they included some outlying areas that we typically don’t?
GratefulD_420
Diane & Doug B., the Housing tracker uses more outlying areas than the ones Guy and you track. To be precise they state:
The Reno-Sparks Metropolitan Statistical Area approximation has 6,219 total listings of which 4,918 are either Single Family or Condo homes (browse Reno homes). The area includes the major cities of Crystal Bay, Incline Village, Nixon, Reno, Sparks, Sun Valley, Verdi, Virginia City, Wadsworth, Washoe Valley and many others.
GrayGeekNV
Hello Guy,
Many thanks for the June data. I noticed that in Diane’s monthly report she says that the increase was 2% and your’s says 13%.
Can you explain the difference?
DonC
smarten – I think tracking the median price is an OK thing to do but the best barometer of prices.
One reason I say this is the important role played by financing. If interest rates shoot up you will definitely see the median price sink below $250,000. Houses are like cars — people want to know what the montly payment is. As interest rates go up, and as lending requirements go up, the amount you can finance goes down, so prices have to follow. On the other hand if interest rates stay low (can’t see them dropping any further) or if lending requirements are relaxed, you may not see the median price fall below $250,000.
A second factor relates to where the “delusional sellers” are. This factor would seem to be captured by the inventory numbers and the rent/buy ratio.
Right now the rent\buy ratio for the more affluent areas of Reno shows that buyers are still willing to pay a premium to buy. The inventory numbers for those areas show there aren’t a lot of those buyers. The less affluent areas show a rent/buy ratio that favors renting and less inventory.
My point here is that if the sellers in the more affluent areas become more “realistic”, there would be more sales at the higher end, and the median price would rise.
That would be a healthier market in many respects. It would not, howerver, indicate that prices were rising. It would simply reflect the fact that more of the higher priced inventory was moving.
smarten
DonC –
Appreciate the input but median pricing, by definition, means that “more of the higher priced inventory [whatever that means i]s moving.” After all, the median sales price is the point where half the sales are lower and half are higher than the median.
The reason the median sales price is dropping [and the reason why IMO it’s a good indicator (along with unit) sales of the market] is specifically because of the increase in unit sales at the lower end of the market. More sales at the lower end and less at the mid and higher end translates into a median that gravitates towards the lower end. We need to see an increase in unit sales at the lower end of the market before we will see pressure on median sales pricing [pressure to bring it down].
As RI points out, when the tide goes out all boats drop equally [BTW, I don’t necessarily agree with the principle however I like the analogy]. So in a vacuum, as sales activity picks up at the lower end of the market, we expect the higher end will follow suit. But if it doesn’t, it ends up stagnating. And that’s exactly what has been happening. The higher end of the Reno/Sparks residential market refuses to follow suit [because most sellers are delusional] and as a consequence, it is stagnating.
Many of us are waiting for this to change. Eventually it will and when it does, the median sales price will start to increase. Although I think you already know this, it doesn’t matter what the prices are above $254K [using today’s number as an example] for the median to increase, as long as half the properties that sell are selling above $254K [using today’s number]. So an increase in unit sales in the mid-range of the market, even though the high end is rotting, can and will increase the median sales price.
If interest rates increase, will that cause the median sales price to drop for the reasons you state? Maybe. But not necessarily. Although buyers at the lower end of the market may not be able to afford higher mortgage payments because of interest rate increases, those at the mid or high end of the market may be less affected. Therefore although overall unit sales may drop, you may find the percentage of those above $254K [again using today’s number as an example] actually increasing [which would then increase the median sales price].
Nevertheless and as we’ve recounted many times on this blog, the first sign of a real estate recovery [and not the bottom as Derrick asserts] is an increase in unit sales [in Reno/Sparks this took place in late January of this year]. The first segment of the market to rebound is generally the lower priced one [and Diane has confirmed for some number of months that this is exactly what has been happening]. As more and more lower priced homes sell, the median gets dragged downwards [which is happening as we speak]. According to Guy’s historical data, it generally takes about 9-12 months for the median sales price to level off [stop dropping] after unit sales have increased at the lower end of a market. That’s why some of us have predicted that the Reno/Sparks residential market will bottom out [pricewise] somewhere between October of this year and January of next.
For the median sales price to drop below $200K as BB predicts, the market above $240K or so [according to Derrick], $235K or so [according to GreenNV] or $220K or so [according to others on this blog] will essentially have to dry up altogether. I personally can’t see this happening, but I guess we’ll soon find out.
Now when the market bottoms, it may very well stay there for some extended period of time leading some on this blog to conclude that the market hasn’t turned [even though technically it will have]. Or the market may start steadily improving. But those kinds of predictions are simply beyond the pay scales for most of us. I personally am watching unit sales and median pricing to confirm where we are heading, and project when it may be a good time for me to become a buyer [in the segment of the market I personally am interested in].
I don’t know where you get your data concerning the rent\buy ratio in various areas of Reno/Sparks. But I disagree with you that it’s a direct factor in median sales prices. People who can afford to buy yet rent [and I’m one of them], do so because it doesn’t make financial sense to own. When that changes, these renters will become buyers. I personally feel that especially at the higher end of the market, it makes no sense to be a buyer now because: the cost to rent versus own can be as low as 25%-30%; and, prices aren’t appreciating.
Now at the lower end of the market, prices still aren’t appreciating. But as the median sales price continues to drop, you will see the cost to rent versus own increase. When it gets to 65% or so [the premium you refer to], IMO it begins to make sense to become a buyer and that’s exactly what you will see envelope.
I could very well be wrong on all of this but as each month’s unit sales and median prices are reported, I think we’re going to see a much clearer picture. Cheers!
billddrummer
Regarding the median sale price:
If I’m not mistaken, the current median sales price tracks almost exactly at what the median income household can afford.
To me, that means a few things.
One, that affordability is apparent in the market that’s showing activity–homes below $300,000.
Two, that unrealistic sellers are causing an inventory overhang in the $300,000+ segment. The overhang is even more pronounced as you move past $500,000 (see a previous thread on inventory levels at $500,000).
Three, that as long as short sales and REOs dominate the market, comps will continue to get punished.
Great research, keep up the good work!
Guy Johnson
Doug B. Cooper,
GratefulD_420 has already provided the answer to your question, but to reiterate, HousingTracker.net “includes the major cities of Crystal Bay, Incline Village, Nixon, Reno, Sparks, Sun Valley, Verdi, Virginia City, Wadsworth, Washoe Valley and many others” for their definition of Reno, Nevada.
GrayGeekNV,
Diane’s reported 2% increase in units sold was for year on year, YoY, (June 2008 compared to June 2007). My reported 13% increase in units sold was for month on month, MoM, (June 2008 compared to May 2008).
DonC
smarten — I’d like to disagree with because that often leads to some interesting insights but I’m afraid that, with one exception and a quibble, I can’t. And with respect to the exception I think it’s because I wasn’t clear enough in what I was saying.
The exception is the rent/buy ratio. (FYI I’m pulling this from the hotpads.com web site Dianne mentioned here — very cool). Right now we can see that the houses in the higher end areas have built into their prices a premium for owning. The houses in other areas less so. My point is that if the rent/buy ratio became more favorable to buying — which would happen if sellers dropped their prices — then we’d expect to see more activity at the higher end, resulting in an increase in the median price. (I think this is what you’re saying actually, giving yourself as an example.)
Now, given that the rent/buy ratio is a marker for how competitively priced upper, middle, or lower end homes are relative to each other, I assume that if all sectors are priced appropriately we’d expect to see the same ratio in all areas. But we don’t see this. The ratios in the lower end areas tilt in favor of buying; the ratios in the upper end areas tilt in favor of renting. Given this starting point, if ratios do become more equal, then the median price will move upwards without regard to whether the high end moves towards the lower or the lower moves towards the higher.
The quibble is with interest rates. I think historically you expect to see a $5000 drop for every 25 basis points. So a big change in interest rates would drive the median sales price here below $250,000 — it’s not that far off now.
Doug B. Cooper
Thanks Guy, Diane, GratefulID_420, and the rest…
There are so many resources out there with different numbers, it can be confusing for many people… I enjoy reading your blog and look forward to more.
Sully
Guy, it looks like Jan/07 beat out Jan/06 for the last time this happened. But, who knows, every month the numbers change. I have been keeping track of the numbers every month, and every month I have to go back and change them. It makes very little (over all) difference on a chart – but does get annoying.
I can understand a last minute change for the nearest months, but I have to go back six months and change the numbers – gave up on anything over six months.
Sully
BTW, May had 490 pendings – which would have expected to close in June. So net new sales for June were probably closer to zero.
July and August sales will probably bear this out, as the stock market is continuing its downhill slide and I doubt many will want to get in the way of this runaway freight train.
October/November may show some real interesting action.
Guy Johnson
Sully, thank you for answering the extra credit question.
And yes the constantly changing numbers do get annoying for those of us who track them. Each month I pull the data I have go back and tweak practically every line on my table. Believe me; it would be much easier to simply add one new row to the table each month.
DERRICK
not 4k, but rather 14k above my 240k number smarten.. Big difference.
smarten
Your prediction of any drop in the median sales price Derrick [and you’ll recall you really weren’t anticipating any drop at all], was really $245K. You then modified your prediction stating no lower than $240K for sure.
Well another $4K drop and we’ll be in the $240Ks [what I referred to as “your magical $240K STRATA”].
Regardless, one more month of a falling median sales price and we should be within a stone’s throw of your $245K prediction at the seasonal height of the market. I trust you’d then agreem not so big a difference. But let’s just wait and see.
DERRICK
smarten you obviously have WAY too much time on your hands.. perhaps you should get out a little more? I enjoyed a great weekend in South Lake Tahoe.. I couldn’t help but look at some artwork at wylans gallery, Ofcourse I ended up buying a few Godard artist proofs, and a few up and coming artist’s originals..
Don’t tell me you seriously have enough time to be posting on here EVERYDAY? Ahh well to each his own!