Thank you to our friends at Ticor Title for following recordings stats for December.
December units were up over November’s across the board (re-sales, new home sales, and re-fi’s), with re-fi’s showing the largest gain. No doubt spurred on by the further drop in interest rates. Total recordings in Washoe County for December (931) represented a nearly 18% increase over November’s 792 recordings.
[Click on the charts below to enlarge.]
The treat this month from Ticor was the inclusion of a three-year trend line. Looking at this chart really shows just how overheated the market was during the bubble’s peak in 2005. At its peak (August 2005) total monthly recordings summed to 4,779. That’s over 5X the number we see today.
NOD’s (Notices of Default) took another huge jump in December. I’ve asked my sources at Ticor to fill me in on the cause of the spike. I’ll let you know what I find out.
Walter
“NOD’s(Notices of Default)took another huge jump in December”.
And some say the bottom is near? Yea, right. Sure it is.
Marla
Actually, except for Smarten, who says we may be nearing the bottom, I find very few people now who are saying the bottom is close. I think people finally are getting it that we are in deep doo doo. Even the Chamber of Commerce types and the Realtor@ types, and the building industry types are acknowledging that they don’t have a clue as to where the bottom is. Yesterday the RGJ ran a story about the building industry annual meeting in Reno. Why even the shill “economist” was sounding like Reno Ignoramus and Bantering Bear over the past 2 years.
DownButNotOut
Right now it would take a tremendous amount of guts to say we are at or near the bottom. No one would be able to say that with certainty, and would be derided here and anywhere else Real Estate discussion exists. It’s easier in these times of uncertainty to ride the consensus wave.
That being said I see money loosening up and housing beginning to stabilize come spring based off these accounts: A new President, a bailout program, low interest rates, an economy that people are tired of (call it the American attitude) and spring (yes as in spring is eternal).
Am I calling it a bottom? There won’t be a bottom in the convention V sense. First the least expensive homes will stabilize and this will work its way up through the price ranges. To some degree we are seeing that now in the fact under $200K sales are up. Don’t hold your breath on Arrow Creek or Montreux ever working out, but once the average person can begin to buy on his current income (hear that BB? I’m agreeing)and the lower end stabilizes, people can buy both for investment and to for moving up as there family/wealth grows.
I’m sure to be ridiculed for the above but, what the hey, it’s what I believe, and I am putting my money where my ..er..keyboard is.
I full
DonC
Marla says “Actually, except for Smarten, who says we may be nearing the bottom.”
Since you can only tell a bottom well after the fact, who is to say he’s wrong? Maybe we are at a bottom. We won’t know that for another six or twelve months or so.
One thing which is empirically true is that widely held opinions about market tops and bottoms are invariably contra indicators. If everyone really does think the worst is yet to come then there is a good chance we’re at a bottom.
The other thing which is empirically true is that if you keep saying the same thing long enough you will eventually be proved correct. Hence you have Peter Schiff who has correctly predicted 37 of the last 2 recessions on the one hand and Larry Kudlow who has correctly predicted 37 of the last 4 expansions. Both are related to Nostradamus. 😉
NVMojo
We still have a ways to go. Remember all those resets coming up. There is a ripple effect after those happen that seems to stretch on for months after.
Move to Reno
DBNO, I tend to agree with your analysis of hope except for the wild card of rising unemployment and its impact on buyer psychology. Until the lay-offs stop and the private sector starts hiring again, I think that a lot of folks will sit on the sidelines and either (1) remain in their current house or (2) continue to rent.
The other factor I’m concerned with is the demographics of the baby-boomers like myself who plan on down-sizing and who may own vacation houses that they plan on selling to help finance their retirement. How can the housing market shift gears when there is a large potential inventory overhang that doesn’t go away. Remember, housing is all about supply and demand.
Plus there’s that optionARM and ALT-A mortgage situation. How many of those folks who CAN afforded the increased payments decide that they are not going to make payments on a house that may not get back to their purchase price until 2024? In other words, they take the loss and the credit score knock-down and “the keys are in the mail”?
ThomasV
I’m with Walter here. I may not be the great real estate analyst and genius that some here claim to be, but how can the housing market bottom until the foreclosures stop? When there are more REOs than there are QUALIFIED buyers, how can prices not continue to drop? I mean, geez, we used to talk about the situation being that there are more regular houses than qualified buyers, now we are talking about there are more REOs than qualified buyers.
I also read that article that Marla refers to. All I can say is that when ALL the usual market cheerleaders say 2009 is in the toilet and maybe most of 2010 also, things are not good. When the cheerleaders pack up and go home in the first quarter, you know the game is over (at least for this year).
Rocky
It wasn’t just the cheerleaders who packed it up and went home. It was the marching band, the pep squad, and the mascot as well. I have never read a more dire article in the RGJ about the condition of the local housing market and economy. Usually there at least a couple of quotes from the typical realtor types about how the worst is behind us and things are starting to look up. Not this time.
DownButNotOut
M2R – all good points, but what wasn’t said was no new inventory is coming on the market now from construction. The Alt A problem will just add inventory. Remember I’m talking about middle income and investment housing not higher end. The facts are we have come down on our backlog of these houses, the sales of them are up, and yes prices are down but that’s the definition of bottom.Alt A will continue to feed this inventory similar to how new construction used to but at a much more affordable price point.
To address your two other points – despite layoffs a much higher percentage of people still have jobs or money to invest and are willing to buy. Many want to move up if they could sell. With interest so low, time moving on (arguably most many people really want to rent)the loosening of the credit industry (bailout)we should see continued sales in the lower end housing sector. This in turn will begin to drive the next level of pricing.
As for baby boomers – If the increase on population is anything like it is projected, we will have a lot of new bottom end buyers entering the market on a regular basis. The key was to make the bottom end affordable -which I’m contending it is now – so the ripple affect can begin to happen.
Pie in the sky? Wishful thinking? Maybe so. But I’m hanging it out there for everyone to see.
Thanks for being civil in your response – I expected to get slammed by everyone. Maybe I still will.
Reno Ignoramus
“we should see continued sales in the lower end housing sector. This in turn will begin to drive the next level of pricing”.
This is a highly problematic conclusion in today’s housing market. Many of the sales in the lower end right now are by banks. Banks don’t “move up” into the next level. 50% of all closings today are sales by a bank. So 50% of all closings today result in NO move up seller, who goes on to become a move up buyer at the next level.
Another 15%-20% of all closings today are short sales. Short sale sellers are not “moving up” either, becoming buyers of more expensive homes at the next level. They are taking nothing out of the short sale, and thus have nothing to put down on a move up purchase.
Then there are the sellers who are not banks, but real people, who are not short sellers, but they are barely taking any money out of the sale. These are the folks who are barely breaking even, maybe netting a few thousand dollars, at most, out of the sale. These sellers are not the kind of sellers who go on to become move-up buyers at the next more expensive level.
So we are left with the 20% or so of sellers who are taking enough cash out of their sale to go on to move up to the next level. There are simply not enough of them to move the market beyond the bottom end. That is the reality of the market today, and a big reason why we are seeing so much activity at the low end with no corresponding activity at the higher levels. This is another reason why we will see no improvement in the housing market until the foreclosures abate.
Standish
RI’s comment is absolutely right. Hell, 75% or more of sales today result in NO seller who can then go on to become a “move up” buyer. Hell, in 50% of sales today the seller isn’t even a human being. It’s a corporation with a familiar name, such as WaMu, Countrywide, Wells Fargo, etc.
The notion that all the low end sellers are taking their profits and moving up into a nicer more expensive homes might have been true in the past. But today, it’s a whole different game. Welcome to the post bubble bizzaro world of real estate.
People have got to stop applying the concepts of real estate that used to be true in the past. This bubble and the craziness and fraud and greediness that went with it have changed the landscape in profound ways. What used to be true isn’t true any more.
DownButNotOut
RI- so I think you agree there is activity at the lower level, and without putting words in your mouth, banks will continue to feed this market sector until they have depleted their inventory. Then what? When fewer banks feed the inventory and wouldn’t more than 20% of the homes being sold be homeowners trying to move up? We’re already seeing a reduced backlog and increase in sales in this bottom end. We are also seeing banks that took forever to realize they had bad loans now being quicker to pull the trigger on sales. Banks were caught unaware and have had months now to put their plans in place for how they are offing the delinquent properties.
We shall see what we shall see. I wasn’t spouting that their isn’t more adjustments to come, but I was relaying I for one (the only one I think) don’t feel it’ll be all doom and gloom come spring.And if that’s true, between now and spring is a good time to make deals.
Standish
Down, I’m not here to speak for RI, who is well able to speak for himself. But if you think the foreclosure tsunami is going to be over by this Spring, all I can say is step away from the bong man. Guy points out that NODs are up last month. That’s UP not down. It takes months for a NOD to turn into a REO.
Have you seen the predicted Alt-A foreclosure graph? You think it’s different in Reno? Even the new head of the Reno realtors assoc. says foreclosures are going to continue well into 2009.
Even the UNR small business center says no recovery until 2010 because of the still flowing NODs. And they only exist to spew out the real estate industry’s propaganda.
Are you a realtor, or do you have a pecuniary interest in the rapid recovery of the market?
Ralston
Move, I understand your suggestion that eventually, someday, the amount of REO houses on the market will be insufficient to meet the demand of qualified buyers. And no doubt, eventually, someday, that will happen.
But nothing, anywhere, suggests that such will be the case by this Spring. That is a suggestion that flies in the face of every piece of objective information about the state of the market.
Move to Reno
I was hoping to buy a little place in Nevada this Spring but I think that I will hold off until the Fall or later. Even if the NODs stop, a lot of the REOs have been bought by speculators who will probably get tired of holding, especially if this recession drags on and on and on like the energizer bunny.
I took a look at the IV house smarten made an offer on. It’s a nice house but I bet it costs a lot to heat in the winter.
Guy Johnson
My Ticor contact’s explanation of the spike in NODs was: “In our initial evaluation of the recorded Notices of Default, there was a larger than normal number of Notices of Default filed on delinquent Homeowner Associations and a significant increase on deeds of trust defaults compared to November.”
DonC
Keep in mind that people have to live somewhere. Also — and this is directed at Ralston’s point — keep in mind that thanks to low interest rates a family in Reno with the median income can now easily buy the median house (by recent sales price). That’s a lot of cushion.
DownButNotOu
Standish – go back and read what I wrote. I’m not suggesting REO’s will diminish by spring. But keep listening to the status quo. I’m sure they told you before the meltdown it’d be this bad. And they’ll be sure to let you know once the bottom has been hit and Real Estate is on the rise.
And no, I’m not a Realtor.
smarten
RI states, “we are left with [ONLY] the 20% or so of sellers who are taking enough cash out of their sale[s] to go on to move up to the next level.”
So my question is how much lower does the number need to get before you think we’ve hit “bottom?” 15%? 10%? 5%?
I asked this question about a year ago when monthly sales dropped to 191 and it turned out to be “the bottom.”
I’m not saying we’ve necessarily hit bottom nor if we have it’s all up from here. But realistically, how much lower do you expect the percentage of “real” sellers to get?
What I’m seeing is that by-and-large virtually no non-distress sales are occurring. Part of the reason is because of the number of REOs, short sales, mortgage resets, the stock market, the economy, etc., etc.
But a very large part is because potential buyers just can’t secure reasonably priced purchase money financing. Until buyers can secure that financing, there won’t be any recovery; period.
Finally, please remember we need to define exactly what we mean by “bottom.” Here I think we’re talking about the percentage of “real” sellers.
Reno Ignoramus
The purpose of my comment was simply to point out that increasing sales at the bottom segment of the market is not going to translate into increasing sales in higher price segments until the low end sales stop being bank sales and short sales. In one sense Standish is correct: we are in unusual times now. It used to be true that low end sellers cashed out some equity that enabled them to “move up” to the middle segment. That enabled the middle segment sellers to “move up” to the higher segments. That’s just not the case now.
So if we eliminate the “move up” sellers from the market, the only source of potential life for the higher price segments of the market are the buyers who don’t have to sell to move up. There are darn few of them. And, as Smarten correctly points out, the few of them there are can’t get financing. Hence the vapor lock in the market.
BanteringBear
When most people talk of a “bottom” being reached, they’re referring to price. I see absolutely nothing to indicate we’re even close to such an event. The job losses are absolutely staggering. Though we’ve been in a recession for more than a year, it seems as though the worst might be ahead of us in terms of pain. Until there is some sort of rebound in jobs and incomes, there can be no recovery in housing. You can have all of the speculators in the world propping up the market (which is by and large what’s happening right now), but they cannot carry it long term.
As many have accurately pointed out, the majority of sales are not producing move up buyers but, in many cases, future sellers. This is not a balanced, healthy market. This is a speculators market where a well funded group are snapping up what they believe are bargains, but I think they will end up sorely disappointed. Sure, there are some great buys, as compared to 2005 prices, but are they such great buys when compared to 1990’s prices? I don’t think so.
SmartMoney
I have mentioned this before on here, but let me say it again. At the end of a bubble, prices will be well-below fair value. With some Reno homes, we are currently approaching fair value, in which case it starts to make sense to buy rather than rent. But at the bottom, prices will be much lower than fair value. That’s just the nature of a bubble, they all end that way. So hold on to your horses, there will be better values in the future.
Tom
Smarten, may I ask why you selected upon Incline as your target area? I agree it is nice to be up at the lake, but there is a reason it is so green and pretty up there. I would rather be lower, down near the treeline– less snow, closer to the airport, and I could still keep a small boat up at the lake and be just twenty minutes away from it. Maybe just preference? Any comments? We are still looking along the Mt. Rose corridor, from Fawn way up through Callahan Ranch area, Montreux and St. James Village.
DonC
Smarten — I’d be interested in your thinking on this one as well.
SmartMoney – How do you define “fair value”? I’d define it with reference to the median family income and the payments on a conventional 30 year loan. By that standard we’re well below fair value.
Smarten – You’re right that banks aren’t lending, but the reason they’re not lending is that the economy is so squishy that they’re concerned any loans they make will turn out to be bad ones. At this point I’d say the important piece is some type of economic recovery in the economy.
smarten
Why Incline Tom? Everyone has his/her particular reasons [remember, we’re retired so we’re not shackled to a job]. Here are ours [I hope we don’t bore anyone].
1. My wife and I are skiers. That means the North Shore of Lake Tahoe, and Incline Village is the only Nevada neighborhood on the North Shore of Lake Tahoe.
2. Taxes [including death].
3. Did I mention the Lake? The views are world class.
4. A small permanent population. But for holidays, this place can turn into a ghost town [which means we have it all to ourselves].
5. The people who live here, by and large, are some of the most interesting [and in their own right] successful people you’ll ever meet.
6. A season resident [we get a discount] ski pass for only $153/person and we’re about 5 minutes away from Diamond Peak [on a powder morning few can get into town and we have the mountain to ourselves]. Or we can ski for a couple of hours and still have time to come home and blog.
7. Beautiful golf courses. The Mountain course runs us [as residents] $35/round, and the Championship course runs us $56/round.
8. A world class recreation center.
9. World class private sandy beaches and boating.
10. $10 Christmas trees, and you get to go into the forest with your dog and fell your own tree!
11. We’re less than an hour away from major [Reno] shopping.
12. We’re less than an hour away from an international airport.
13. We’re less than an hour away [take your pick – South Shore or Reno] from world class entertainment [hey, don’t forget Pauly Shore at the Crystal Bay Club this evening].
14. We have our own supermarket [Raley’s], and we’re about 10 minutes away from a nice, newly remodeled Safeway.
15. Shakespeare at the Lake [at Sand Harbor].
16. A number of very nice restaurants, many of which offer 2 for 1 pricing for most of the year; a wide selection of reasonably priced Happy Hours; and no need for reservations.
17. No proposition 13 nor Mello-Roos “special taxes,” nor stupid bond measures where the people who vote for them are by and large NOT the ones who end up paying.
18. My wife isn’t keen on living in Reno. She affectionately calls it “barren hills.” The only places she’d consider living are Galena Forest, St. James Village or Montreux [although she thinks this place is too snooty]. So we checked out Galena in the summer – very, very hot [like a desert] and dry. On the other hand, the temperature in Incline Village [during the fall, spring and summer is very mild and pleasant].
19. Reasonably priced rental housing [if you can find something nice enough to rent long term] – as you know, we’re renters.
20. We get to live in the forest which means bears, coyotes, no smog and wonderful hiking trails.
We don’t mind the snow – in fact, we long for it.
We don’t mind the cold and besides, it’s generally only about 20 degrees colder [in the morning] here than in Reno. And the high temperatures in the late afternoon are generally only about 10 degrees lower than Reno.
I don’t know the elevation of Reno proper, but we’re at a comfortable 6,300 feet.
So assuming one doesn’t need to work in Reno; and one doesn’t have family there [because one is relocating]; why would one ever relocate to that side of Mt. Rose Highway?
So have I answered your question?
DownButNotOut
Excellent points. Makes me want to move there, seriously. I grew up in Tahoma, and miss that life.
BanteringBear
I think Smarten has done a good job of listing many of the merits of Lake Tahoe. I often wonder why someone would choose to sink a boatload of money into a Montreux house when they could afford to buy in Tahoe. IMO, Montreux is like the bastard stepchild of Incline. Comparing the two is like comparing a nice house in a gated community of Sacramento to an ocean view home in Marin County. There is no comparison.
Reno Ignoramus
I have a soft spot in my heart for Tahoma. There is little left of “old Tahoe” now, but if there is any place left at Lake Tahoe that still resembles “old Tahoe” it is Tahoma. I was a homeowner at Tahoe for many years and my favorite stretch is still between Homewood and Tahoma. If only it wasn’t in California.
Tom
Thanks, Smarten, good reasoning. My reasons to be a bit lower down the hill are based on the fact that we don’t ski, and I prefer not to shovel much snow, plus my ongoing need to get back to L.A. frequently. I have timed the drive from the RNO Airport Hertz barn to the intersection of Mt. Rose Hwy and Callahan Ranch Road…20-25 minutes. Another 25-30 minutes to get up to Incline and into the residential areas there makes a difference in the total commute, and that last leg is the deeper snow driving part. But if I were totally retired to where I weren’t expected to be attending meetings and hearings, etc, that extra distance factor wouldn’t be in the mix.
smarten
Hey Tom –
Since you love Montreux, why don’t you check out this craislist listing [ http://reno.craigslist.org/apa/993180020.html ]? It’s priced way over fair market [“FMR”] and allegedly, the “owners are motivated.” Delusional sellers of properties like this one [4,663 square feet on 1.1 acres] in Montreux are asking upwards of $2.7M. At $3,500 or so per month [which I suspect is closer to FMR], you’d be spending many times your rent to be an owner in a declining market.
All the perks with a fraction of the cost. And only 25 minutes to the RNO Airport Hertz barn! Good luck.
Tom
Funny line. However, I never said I loved Montreux, and there are other options in that general area: Galena Forest, St. James Village, and the Callahan Ranch area between the Estates at Mount Rose and Montreux. We will find the right place; there is nothing forcing us to relocate immediately.
DownButNotOut
Why does this thread always have to degenerate to talking smack? I never read into what Tom said above to say anything but his point of view, which is why we read a blog.Insinuating he is a delusional buyer is an ignorant assumption.
Outsiders beware! You’re idiots until proven otherwise.
rockies
Yep, that ol’ real estate/economy horse has been verbally beaten to a pulp. And, most
of the exchanges boil down to “my club is bigger than yours.” Same old bloggers and
SOS. Time to move on.
Marla
Talking smack? Down, I don’t find Smarten’s response to Tom in any way inappropriate, and I doubt Tom does either. I think Smarten was simply suggesting to Tom that he could rent a certain house in Montreux for far less than the price to own. What’s wrong with that?
And rockies, so your first post is to say you will not be posting any more? Well, thanks for all your input.
DownButNotOut
Maria – ‘All the perks with a fraction of the cost. And only 25 minutes to the RNO Airport Hertz barn! Good luck.’
Smack? Your right, maybe I misunderstood. Assuming? – well look at T’s response. What’s your take?
Marla
Nah, I don’t see it Down.
Smarten said he wanted to buy in Incline.
Tom asked him why he liked Incline.
Smarten responded with a long list of reasons.
Tom said thanks for the reasons, but he wasn’t interested in being that far up the hill.
Smarten then said, well look at this Montreux rental for far less than the cost to own.
Tom said he’s not commited to Montreux.
I don’t see any smack in this exchange at all.
DownButNotOut
I stand corrected. I read more in the overtone then was written.
CHRIS
I have a question that in your knowledge is 101 real estate but I am confused. Who sets the price of these homes? I understand “comps” but I have an example. House on Dominus, mls 80017386 is pending sale for 165900. It was listed for 165 too, there was a real estate agent interested in it, I made an offer which was not for 165 but I was unsure and so the other offer beat me. Then there is mls 80018829 same plan, but this does not have the upgrades the dominus house had, so why is 80018829 listed at 194900? My agent does not think they will accept the same for this house. This seems insane as looking at the inventory that is/will be out there why the difference? Am I wrong in expecting the same price?
Thanks
Chris
Sully
Chris, offer 145K. If your agent doesn’t like it – get a new one.
BanteringBear
Chris-
If there’s one thing you can expect in this market, it’s irrational pricing. Listings are all over the map. We’ve got a combination of REO’s, short sales, and dreamers, as well as a few motivated types. The best thing you can do, is to continue to do your own research, ask lots of questions, offer LESS than your hunch tells you, and by gawd get RID of that realtor!
SmartMoney
“SmartMoney – How do you define “fair value”? I’d define it with reference to the median family income and the payments on a conventional 30 year loan. By that standard we’re well below fair value.”
Hi DonC,
We discussed fair value in this thread https://renorealtyblog.wpengine.com/2009/01/december-medians-and-units-sold.html#comments
Phil
BB – If you are retired Montreux vs. Incline is an easy choice. But not everyone is retired. Commuting from IV to Reno woud be a nightmare.
I actually prefer the desert and stayed away from the trees even here in Reno. Something about wildfires scare the heck out of me (my borther in law actually was a firefighter who lost his life in one). I actually was considering moving to Sierra Vista (near Tuscon) in Arizona. And yes deserts can burn as well.
Chris – your agents seem not to want to work. It seems so trivial (to me at least) to go with what ever offer for my client wants to make. Making predictions if the offer would be accepted or not is fine, but to not make the offer seems lazy.
Bottom has been reached ? probably not, still too many voodoo loans out there. But decision on if to buy or not your home is different than buying real estate for just investment purposes. Consider also loan rates are near historic lows (if you can qualify).