Below is the Reno Area Market Condition Report for August presented by First Centennial Title. What does this month’s report show? Demand is decreasing; Failed escrows up sharply (+22% M-o-M); Inventory is increasing; Prices continue to fall (-3% M-o-M).
One of the stats I monitor from this report is the “Percent Selling” number; or the percentage of successfully closed escrows. Last month this percentage was holding steady at around 50%. This month it dropped to 39%! That means that 61% of escrows failed to close for whatever reason (financing falls through; buyers get tired of waiting for the bank to approve a short sale offer; etc.) Four years ago this ratio was as high as 86% (see Percent Selling Market Efficiency graph in the report below).
This kind of failure rate really redefines the status of “Pending” in our MLS.
Reno Ignoramus
“Demand is decreasing; failed escrows are up sharply; inventory is increasing, and prices continue to fall.”
Other than that, everything is fine.
smarten
Thanks Guy –
Well your observations continue to support my conclusions.
IMO, failed escrows are increasing for two big reasons. First, many buyers can’t get purchase money financing for the reasons I’ve previously outlined. Thus sales contingent upon financing are falling apart.
Second, most pending short sales are failing because they’re conditioned upon one or more lenders agreeing to absorb a loss. Thus sales contingent upon lenders agreeing to cut their losses are falling apart.
I disagree demand is decreasing as long as your barometer is closed escrows. Obviously if lenders were agreeing to short sales and making loans to credit worthy borrowers, there’d be more sales and you wouldn’t be concluding demand is decreasing.
And since they aren’t, we’re seeing inventories grow.
Although it’s a bit strange for me, I guess I’m seeing the glass half full.
Anonymoose
Get ready for the recession in Reno, three large companies in the area are downsizing in the next 3 months including IGT – cutting 500 employees.
Zen
“Get ready for the recession in Reno”
We are already deep into it. Ask anyone in the housing industry, Architects, lenders, material suppliers, or guy’s swinging nail guns. Locally restaurant and retail numbers are down, the casinos are singing the blues and all of the municipalities are broke. Whether or not this all adds up to a “technical” recession, I say if it quacks like a duck, it probably is.
billddrummer
The recession in Reno began last summer when the mortgage origination market crashed. It’s become more pervasive than people expected it to be as home values fell, unemployment rose, and the construction industry and related businesses saw their sales fall off a cliff.
I’m dismayed that IGT is downsizing. My fiancee just moved here to look for work. She couldn’t find a job in NJ after six months of searching, even though she has a BA in Project Management and an MBA in Marketing.
Oh well. Perhaps she can find work as a temp.
Kevin Kearney
While this is a sad time for a lot of people those in position to act will have tremendous opportunities in the next 3-6 months. Things look bleak right now and the fed is having to take extrordinary measures to pump liquidity into the market. The banks need capital and will soon be willing to take 70 cents on the dollar from short sales or the refinance program offered in the Forclosure Prevention Act. As they begin accepting these transactions the foreclosure rate will ebb. To kick start growth the fed will lower rates and banks will have more money to lend. Money and property will be cheap.
With all of the very deep negative sentiment my instincts are telling me to be ready to act.
BanteringBear
One of the things I admire most about this blog, more specifically Diane and Guy, is the straight forward approach to delivering the market facts, without espousing “it’s a great time to buy” ad nauseum. After reading Kevin’s post, I’m reminded that there’s never been a bad time to buy in the minds of most realtors. What that really means, of course, is: “it’s always a great time to collect a fat commission, regardless of the consequences for the parties involved.”
Kevin Kearney
Bear,
Like you, I’m speaking as an idividual here and expressing my honest opinion. I beleive the time is right so I’m planning on buying a new house for myself and my new family to hold for the long term. I’m not sure what you don’t like about that but I’m certainly not asking anyone else to do anything and I recognize that some people just aren’t right for real estate at all. I’m not fishing on this site for buyers since that’s not what I do for a living. While you may call for my head, as you have done so with others, to be hanging from the gallows or lined up on the guillotine I wish nothing but the best for you. I’m not sure what happened to you in the past but I hope that all will be right with you in the future. Life is simply too short to get caught up in such negativity, but good luck to you anyway.
As far as your comments on Guy and Dianne go I know and respect them both and whole heartedly agree. I have had several transactions with Guy. Having probably dealt with thousands of real estate agents in my duties I can tell anyone reading this blog that Guy and/or Diane will do an excellent job for you.
cash buyer
hi mr bear, you are correct…………most realtors just can not help themselves. and since there is no accountability, the “this one won’t last” jargon is still used despite the hundred of dead lawns. recently read the august 7, 2008 posting on the reno number one expert blog site. he advises us all to buy now, as it is clearly a better option than renting.
diane and guy walk on water in my book, as they have proven they are brutally honest and can be trusted. and you too mr. bear. we appreciate your commentary.
smarten
Well Kevin, like you, I am not an agent and I stand to reap no financial reward [whether via a sales commission or otherwise] if anyone who reads this blog chooses to make a purchase. And I agree with your reasoning so please don’t be put off by BB [or anyone else for that matter].
As for BB, I can’t remember him having a positive comment to make about anyone other than Lindie, some previous poster whose name I can’t recall, RI [all of whom have shared his view that Reno/Sparks real estate is going down the tube], our hosts Diane/Guy and that stray dog. In fact, he has admitted he owns no Reno/Sparks real estate; has no intention of purchasing any for years to come [if ever]; and, he doesn’t even live in this geographical area. Thus I and others have asked him what’s his interest in our little community, and he’s refused to answer. So…
There have been a number of contributors to this blog who’ve commented that we won’t know we’ve reached bottom until some months after the fact. So if you, I and some other brave souls choose to act on our instincts in the coming months, BB won’t realize we just may have been right until April – June of next year. In the meantime we’re not stupid people; we don’t have an inherent conflict of interest; we’re entitled to our opinions; and if we choose to act on them, more power to us for putting our money where our mouths are!
Anopnymoose
Regarding IGT, 500 layoffs.
Yahoo Business reports that up to 1,000 will be laid off.
MKchick
Remember, it is the internet and you shouldn’t base expensive decisions on strangers. There is some excellent research here provided if you are looking to buy at some point.
And I’m happy to report the Assessor’s office is starting to show the sales that happened a few weeks ago. 🙂
BanteringBear
Kevin-
I’m not calling for your head, and I’m not sure why you would draw such a conclusion, other than perhaps your own guilty conscience. Maybe you’re not a realtor, but one click on the link that you’re “not fishing on this site for buyers” with, reveals a rather cozy relationship with said realtors, and the industry in general. If it quacks like a duck…
Smarten-
I’m starting to wonder if you’re either a chronic marijuana user, or a victim of head trauma. I’ve shared with the blog the fact that I grew up in Reno, have many friends and family in the area, and thus have an overall interest in the market and the health of the city. I find it quite amusing, if not offensive, the fact that some snooty, narcissistic Bay Area transplant such as yourself is calling into question my motivation for frequenting this blog.
You sound just like the kind of guy I used to like to tell to piss off when snowboarding at Squaw Valley. I hear East Palo Alto calling!
PS- When there are POSITIVE signs in this market, you will get POSITIVE posts from me. Not a day sooner. Got it? Good boy!
MikeZ
Like you, I’m speaking as an idividual here
Hi Kevin, following your link, it appears that you sell luxury Tahoe condos. Yes?
I ask because, while you may THINK you’re unbiased …
Ask a bond trader where to put money today and the answer is likely: “bonds.” Ask a fund manager, and it’s “managed funds.” Ask an insurance salesman, and … well, you get the idea.
Do you think you may be biased?
MikeZ
RE: “I’m starting to wonder if you’re either a chronic marijuana user, or a victim of head trauma.”
Way over the line, Bear. Way over the line.