Reno’s median sold price took another big hit in December dropping 4.3% from November’s number. December’s median sold price now sits at $208,000 and is extremely close to falling below the $200,000 level. [In fact, if we see another 4.3% price decline this month, the new median will be $199,056.]
As has been the case with sales observed over the past few months, units sold remain higher as compared year-over-year. December 2008’s 297 properties sold represents 19% increase over December 2007’s 249 properties sold. So the sales activity is definitely out there, but it’s concentrated at the low end of the price spectrum. Consider the follow breakdown of last month’s sales:
• 49% sold for less than $200,000
• 69% sold for less than $250,000
• 82% sold for less than $300,000
Today’s sales are dominated by [price-wise] distressed properties. Consequently an immense downward price pressure is placed upon the median sales price each month. Take December’s sales for example:
• 58% were bank-owned
• 15% were short sales
In other words, three out of four sales last month were distressed properties. And with nearly half of the ~4,000 active listings made up of short sales and bank-owned properties, there’s plenty of distressed inventory to sell through.
| Month and Year | # Houses For Sale | Median Asking $ | # Houses Sold | Median Sold $ |
|---|---|---|---|---|
|
Dec 2008 |
4,340 | $245,000 | 297 |
$208,000 |
| Nov 2008 | 4,573 | $249,900 | 282 |
$217,400 |
| Oct 2008 | 4,730 | $255,900 | 389 |
$222,000 |
| Sept 2008 | 4,795 | $263,000 | 364 |
$236,500 |
| Aug 2008 | 4,811 | $270,000 | 352 |
$240,000 |
| Jul 2008 | 4,906 | $275,000 | 418 |
$247,000 |
|
Jun 2008 |
4,800 | $280,892 | 394 |
$255,000 |
| May 2008 | 4,763 | $280,000 | 344 |
$255,000 |
| Apr 2008 | 4,538 | $284,000 | 337 |
$269,000 |
|
Mar 2008 |
4,218 | $289,900 | 246 |
$261,000 |
| Feb 2008 | 4,070 | $294,700 | 221 |
$271,632 |
|
Jan 2008 |
4,124 | $299,900 | 191 |
$268,000 |
|
Dec 2007 |
4,157 | $308,000 | 249 |
$275,000 |
|
Nov 2007 |
4,520 | $310,000 | 231 |
$286,000 |
| Oct 2007 | 4,882 | $317,000 | 268 |
$288,000 |
| Sept 2007 | 5,024 | $320,000 | 271 |
$285,000 |
| Aug 2007 | 5,470 |
$325,000 |
348 |
$295,000 |
| Jul 2007 | 5,415 | $330,000 | 351 |
$295,995 |
| Jun 2007 | 5,370 | $337,495 | 378 |
$300,000 |
| May 2007 | 5,176 | $339,900 | 427 |
$296,000 |
| April 2007 | 4,927 | $340,000 | 393 |
$295,000 |
| Mar 2007 | 4,669 | $340,000 | 391 |
$297,000 |
| Feb 2007 | 4,410 | $340,000 | 334 |
$285,000 |
| Jan 2007 | 4,690 | $342,000 | 336 |
$279,950 |
| Dec 2006 | 4,548 | $344,950 | 347 |
$293,995 |
| Nov 2006 | 5,182 | $349,000 | 330 |
$300,000 |
| Oct 2006 | 5,640 | $349,900 | 422 |
$300,000 |
| Sept 2006 | 5,960 | $352,000 | 396 |
$301,000 |
| Aug 2006 | 6,252 | $355,000 | 393 |
$310,000 |
| Jul 2006 | 6,123 | $360,000 | 416 |
$324,750 |
| Jun 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 |
| Jul 2005 | 3,860 | $387,000 | 677 |
$345,000 |
| Jun 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, Nevada and Sparks, Nevada. Residential data includes Site/Stick Built and Condo/Townhouse properties. Data excludes Manufactured/Modular and Shared Ownership properties. Data courtesy of the Northern Nevada Regional MLS – January 2009.
BanteringBear
Only a measly $8k and change to go to eclipse the $200k barrier, and I don’t see a whole lot of support there. Where are all those people that screamed I was crazy for suggesting the median would fall so low? C’mon now, don’t be shy. How does $175k sound? Or $150k? Silly? Really? Why?
BanteringBear
Guy posted:
“December 2008’s 297 properties sold represents 19% increase over December 2007’s 249 properties sold. So the sales activity is definitely out there, but it’s concentrated at the low end of the price spectrum.”
This statement is somewhat misleading in the fact that this is not necessarily the “low end of the price spectrum”. As many of us have stated, Reno is not a million dollar market. I’d actually argue that a lot of people continue to overpay for these “lower end” houses. Many of the homes parading themselves around at $750k and more, are really $300k homes. This will become obvious in the next few years. Many homes selling for $200k right now, will be your $100k and below homes. It’s turtles all the way to the bottom.
Marla
So I guess that Smarten’s prediction of the bottom being this coming Sunday, January 11, 2009, was wrong?
Reno Ignoramus
The estimated median household income for Washoe County as of July, 2007, (the most recent date I could find) was $54,343. I doubt it has gone up much since then. Until the bubble began to inflate in 2001/02, the median price of a house in Reno was essentially equal to 3 x median household income. That would put the median today at about $164K at the traditonal measure of affordability.
Ever since I began posting on this blog, almost 3 years ago now, I have said that Reno has an affordability problem. I said that when we take away the Voodoo money, the median price in Reno was an absurdity. It is less of an absurdity today than it used to be. But it is still bubbled up. It has taken us almost 3.5 years to get to this point; it may take us another 3.5 years to get back to the traditional measure of affordability. But get there we will.
And please, don’t tell me that it’s different here. Don’t tell me that Reno is special and people will pay more to live here because everybody wants to live here. Don’t tell me they are not making any more land. Don’t tell me about Rich Californians. Don’t tell me about Palo Alto and what happened there, and don’t tell me about Incline Village, because Reno is not Palo Alto or Incline Village. Don’t give me any of the phonied up realtorspeak that fueled the bubble.
Take away the bubble and the Voodoo money and the realtor nonsense and the frenzied greed and this market will return to the traditonal measures of affordability. Just because it has taken 3.5 years so far, does not mean the bottom is near. Observing housing markets decline is like watching paint dry.
Martin
So 75% of all sales now are REO or short sales, and 50% of all closing are for less than $200K and 75% are for less than $250K. Why, I fully expect a story in the RGJ quoting somebody from the realtors assoc. (ol’whatshisname) telling us that prices will be heading up any day now.
The 75% of all closings being REO or short sales has been holding for several months. However, it used to be that 75% of all closings were under $300K. Now it’s 75% of all closings being under $250K. The over $300K segment has dwindled to only 18% of all closings. I suspect sales over $500K are very scarce these days. I agree with BB and RI that we are on an inevitable journey of return to affordability. That would probably have happened anyway. Now factor in the biggest and deepest recession since Roosevelt and look out below.
CommercialLender
Wow, Guy, great data. What you are basically describing is a sad trend – downward velocity. Not just bad data, not just staying stable, but going down and picking up steam in more than 1 way (‘velocity’) including rate of decline and # of sales below $250K and % of distressed sales.
****
Also, and I hope this is ok to post a link, but someone kicked me this link from the Federal Reserve Bank of NY that is an inter-active USA map of where the stress is occuring, where it already has occurred (90+ days late, foreclosure, etc.) and where it might be expected to occur in the coming months/year (# of ARMs resetting, % of Sub-Primes with resets, etc.) Note you can choose about 12 metrics as well as toggle between sub-prime and alt-A. Very scary, frankly. The data-heads on this blog will love it:
http://www.newyorkfed.org/mortgagemaps/
Sully
Ditto all of the above. One thing that jumped out when I posted the numbers to my chart – was the spread between asking and selling. It hasn’t been this wide since Jun/07.
Also, thanks for the nyfed post CL. You’re right it is scary.
smarten
And what exactly was your prediction a year ago Marla?
Even though no one back then could have possibly predicted the credit crunch we’re currently experiencing, I think when the dust finally settles, we’re going to see that January 11, 2009 really wasn’t that far off.
But we’ll see. Hey, I may change my venue choice to the Crystal Bay Club. Can you believe Pauly Shore will be performing Saturday?
SmartMoney
Let’s not foget, at the end of a bubble collapse, prices always fall well-below fair value, and that marks the end of the bubble. If historical fair value is $164K (per Reno Ignoramus)based on median income, then we can look forward to the average median price falling below the $160k range when all is said and done. So a ways to go, no doubt.
DonC
Smarten – Wow. You’ve taken quite a bit of flak about your prediction. As we all know, unless you have a crystal ball, it’s impossible to predict a bottom or a top, and it takes quite a long time after the fact to confirm what it was. And if you had a crystal ball you might as well use it for sports betting where you can make a lot of money quickly. So many games, so many spreads …
I’ve always kinda thought your guess for the bottom date was a bit tongue in cheek, it being your birthday and all.
FWIW I thought your prediction for the date was about right. I’d probably revise it after the complete financial tanking we’ve seen during the last quarter, but hindsight is always better than foresight. Even pessimists like Shiller didn’t see such carnage in housing. Sometimes stuff just happens.
BanteringBear
It’s definitely difficult to predict when the housing market will bottom in price, but not so much the price itself. All one needs to do is look at what is supported by local incomes. That’s what I have based my predictions upon all along.
I was derided for suggesting years ago, that prices would fall below $200k. As far as how low they go, that is entirely dependent upon the employment picture. If we’re talking the “Greatest Depression” scenario, the median could fall below $100k. Seriously. That’d be a little more than 70% off the peak. Didn’t Japanese real estate fall 90%? Just sayin’.
Phil
Afordability has got to be the number one reason for the fall.
With jobless rates increasing, being in a deep recession, and voodoo loans still reseting for another year or two, there are too many obstacles to overcome to see this turning around soon.
Intrest rates are at increcridible lows, and is the only thing I see that would increase demand. Only problem here is that people actually need to qualify for loans now.
My guess we should see mostly decreasing values for the next 18 months, with a flat market for another 2-4 years.
The only thing I see which could change this direction is some large corporation setting up shop here.
We are seeing the result of construction jobs not being sustainable.
DonC
“Until the bubble began to inflate in 2001/02, the median price of a house in Reno was essentially equal to 3 x median household income. That would put the median today at about $164K at the traditonal measure of affordability.”
I thought the traditional figure was 4X to 6X. In any event with interest rates so low the traditional measure would be at the high end of the range.
Obviously there are extenuating circumstances but, given the median Reno income and the low interest rates, the median home seems fairly priced.
Interestingly enough, looking at the multiple does raise a question I’ve never been able to answer: namely, whether the average person is better off buying when interest rates are low or when they are high. Seems like low would be better, since you can lock in a low monthly payment. But low interest rates suggest little or no inflation, which will be most of the gain on the house, and at least some economic distress. Plus when interest rates go up the house price tends to go down.
On the other hand, if you buy when interest rates are high you end up paying more for the house on a monthly basis since prices are sticky downward. You can of course refi but that is always expensive (no matter what the mortgage broker says).
Waldo
6X income? Only in California, where the sun always shines, where EVERYBODY wants to live, where all the women are beautiful and all the children are brilliant.
And then, only during the bubblicious years, now long gone.
MikeZ
Until the bubble began to inflate in 2001/02, the median price of a house in Reno was essentially equal to 3 x median household income.
Median household? Or median *family*?
And do you have a citation for that?
MikeZ
I thought the traditional figure was 4X to 6X.
Ditto.
As I recall, first-time buyers were close to 3X income, while the movin’-on-uppers, who had equity to trade on, were closer to 4X-5X income.
I await RI’s citation for 3X income …
billddrummer
I too said months ago that affordability would be the metric that stabilizes the housing market, not only here in Reno, but nationwide.
SF housing prices dropped 31% last year, but the affordability ratio is still below 20%.
And the affordability now depends on a continued supply of low-cost mortgage money. If mortgage rates rise, then prices will have to fall further.
I believe the $200K level will be the bottom, or within 10% of it, so $180K (spot on, BB!) represents the stabilization level.
The problem is, there’s still waaaay too much inventory priced higher than $350k, with a cornice of inventory at $500K+.
That stuff may never sell.
As far as RI’s statistic on household income, it includes all income streams (salaries, rents, interest) from all household members. As far as the 3X income number goes, it’s been a staple in ‘conventional’ mortgage lending for years.
Trouble is, there hasn’t been ‘conventional’ mortgage lending until recently. Move up buyers saw their bubble equity as the income bump they needed to move up. Now that that’s gone, there are precious few move up buyers that qualify on an income basis for bigger mortgages. And most of them don’t have cash to put down.
So that cornice of high-value houses is going to stay frozen.
Sully
Chart of case/shiller house price div by family income: 2.7x is the median.
http://comstockfunds.com/files/NLPP00000/356.pdf
MikeZ
Thanks, Sully.
DonC
Since the multiplier which relates the median income to the median home price is wholly based on interest rates, the number today (an in the recent past) would be 4X or 6X. Certainly not 3X or 2.7X.
You can see this how this works if you crunch a few numbers. For example, if the median Reno home price is $208,000 then at the current interest rate of 5.4% for a fixed 30 year mortgage, payments on a mortgage for that property (assuming 20% down) would be $943.37. That’s 20% of monthly gross, well within the underwriting standard of 28%, though it makes the median house about 4X the median income.
To get to 28% you’d have to be carrying a $230,000 mortgage, which suggests a $275K house. That’s 5X. If you wanted to do something like a 5/1 or 7/1 ARM you could shave a point off the interest rate and buy something closer to 6X.
While this shows that the median sales price is more than adequately supported by the median income, the median sales price is not the median house price. To determine whether Reno is affordable you’d have to know that number. Anyone know what it is?
What’s also interesting about the Shiller graph is how well it illustrates that the run up in housing was created by the Fed’s low interest rates along with the popularity of ARMs with low teaser rates.
MikeZ
Very interesting. Both Stiglitz and Shiller think that speculators are driving sales these days and that once the market turns back up, they’ll begin dumping, extending the housing recession.
No Recovery for Real Estate as Speculators Dominate Sales
Sully
Interesting timing on that article Mike, as I have been noticing the same scenario in this market. At least a half dozen houses I had moderate to high interest in were bought by a [name] LLC.
Some of the deals made sense but others didn’t, as they would have to rent them out for higher rent then this area could expect to pay. Maybe these investors are expecting a spike in the spring market.
I doubt it will happen. If the unemployment rate continues its climb, I know it won’t happen.
All this talk about more stimulus, is nothing more than our money going toward bailing out the “money barrons” whom are proving to be more incompetent by the day.
So, another vicious cycle will appear as these flippers try to unload these “specs” – sort of like spitting in the wind.
Personally, I would rather speculate on the price of oil going back up then the price of houses going up in the near future.
BanteringBear
I read that article yesterday. It just goes to show that there really is no healthy inventory absorption. Until houses are purchased by end users, NOT speculators, the inventory problem will persist (as these houses show up on the market again), and the decline will continue. I see no price bottom in the near future for Reno area housing. Personally, I think the stock market will bottom years before housing, and I don’t believe we’ve seen the lows of the DOW.
CommercialLender
I don’t understand why more people than just myself look to demographic indicators here. Sure, we know all about exotic mortgages and low rates that caused the run-up, but I say look to the bigger picture, too.
Namely, in the late 90’s and early 2000’s, the baby boomers had disposable cash to use for speculation, for 2nd homes and for trade-up McMansions. Now, with equity losses and real estate losses and the prospect of retirement a few years away, the demographic shift of baby boomers out of the housing market, or downsizing, will cause continued pressure for, what, the next 10 years? The only demographic large enough to offset this is the echo boom, which are kids (20’s) who are spoiled, new-BMW-driving, Coach-bag-buying, never-seen-a-downturn kids with lower income than their baby boomer counterparts, and with little to no financial training to boot. (not even a subject in any school in the land today). They won’t be able to buy homes valued anywhere near where the baby boomers will want to sell. Oh, and taxes will go up and inflation will soon hit, both causing fewer dollars to go to housing. Therein lies, in my opinion, a 10-ish year cycle of stagnation in home transactions and naturally a depression of home values. (Depression in the sense an external factor is holding down values).
This is 1 of many variables, mind you, but one no one seems to talk about. Am I off?
Sully
Well CL, you’re to far ahead of the curve. People still have to get the message that 900+ billion in credit card debt is too much.
Once that message gets across, the scenario you decribe will have room to settle in. BTW, I agree with you and have been saying something similar for several years now (not on blog), but was getting met with blank stares like I was nuts!
One of the reasons I think the $1mil+ houses that are in the 4500 sq ft range will not do very well here.
Most retirees do not want a McMansion to take care of, and there just aren’t enough yuppies or dinks here take up the slack.