The graph above shows the proportion of monthly sales made up of bank-owned properties over the past few months. [Note: I would have pulled data farther back, except the fields denoting bank-owned and short sale had only been recently introduced and not uniformly utilized prior to March of last year.] The meteoric rise in bank-owned sales is pretty phenomenal. A year ago bank-owned properties accounted for about ten percent of monthly sales. Today, they represent two-thirds of monthly sales. Add to that another 13% of sales consisting of short sales, and you’re left with only one in five sales being a traditional, non-distressed sale. [see table below]
These numbers are more striking when compared to the make-up of our current listed inventory: 22% are bank-owned; 33% are short sales; and 41% have no special condition of the sale.
Clearly the bank-owned properties are what are moving. If I’m doing my math right a bank-owned house is more than six times likely to sell than a non-distressed house.
On a telling note, one of my clients recently asked me if we could list his home as a bank-owned property, even though his home is neither bank-owned, nor a short sale. Though I liked his creativity, unfortunately I had to inform him that doing so was not allowed in our MLS.
Percentage of Monthly Sales
| month | bank-owned | short sale | non-distressed |
| Jan-09 | 65.1% | 12.9% | 19.4% |
| Dec-08 | 56.9% | 15.3% | 25.8% |
| Nov-08 | 51.7% | 19.7% | 25.7% |
| Oct-08 | 46.6% | 12.7% | 38.4% |
| Sep-08 | 36.6% | 13.4% | 46.1% |
| Aug-08 | 34.6% | 12.5% | 49.8% |
| Jul-08 | 38.0% | 8.6% | 51.1% |
| Jun-08 | 35.2% | 11.7% | 49.3% |
| May-08 | 29.9% | 7.3% | 55.7% |
| Apr-08 | 23.2% | 5.7% | 54.5% |
| Mar-08 | 11.8% | 3.4% | 63.9% |
| current inventory | 21.6% | 32.6% | 41.2% |
Note: The data reported above covers MLS Area 100 (Reno and Sparks, Nevada). The data includes Site/Stick Built properties only. Data excludes Condo/Townhouse, Manufactured/Modular and Shared Ownership properties. Data courtesy of the Northern Nevada Regional MLS – February 2009.
Reno Ignoramus
Thanks Guy for the data. This kind of info is what makes this blog the finest source of info on the Reno-Sparks housing market around.
So it appears the percentage of sales that are either REOs or short sales is creeping up. We are at almost 80%. This fact continues to have enormous impact on the health of the housing market. As I have posted a couple of times previously, there are now very few “move-up” buyers anymore. When 80% of all sales are bank-owned and short sales, that means 80% of the sales produce no buyer looking to move up into a higher price range. This is in no small part why the upper end of the housing market is dying on the vine. According to Diane’s most recent post, 265 houses sold last month. If 80% of those sales were REOs and short sales, then only 53 sellers were left to possibly buy up into a more expensive house. No doubt some of those 53 took basically nothing out of the deal, and were just happy to get out of their mortgage on their rapidly depreciating asset.
So a question: if the market is now producing only about 40-50 or so move-up buyers a month, where, exactly, are the buyers going to come from to buy the approximately 4,300 houses for sale?
Are there 4,000 cash drenched renters out there just waiting for the bottom to arrive?
Somehow, I just don’t think so.
Raymond
RI, I think there are some renters out there who are buying now. I would not describe them a cash drenched though. That’s why they are buying below $200K, and now even below $150K, and that’s why we are seeing the median sink lower into the sunset with each passing month.
You are right….the upper end of the market is absolutely moribund, and I see darn few renters who are able to buy anything at all over about $300K. Our own Smarten may be the one exception I know about, but I don’t think there are nearly enough Smarten’s to breathe any semblance of life into the upper end. It is not just dying on the vine. It is dead. I look at all those houses listed at $600K, $700K, $800K and laugh.
Martin
The upper end is dead? Well then, what about AmazingArrowcreekMontreauxSplendorGolfCoursGrandeurSaddlehornBest, offered at an average price of about $1.595 million?
MikeZ
On a telling note, one of my clients recently asked me if we could list his home as a bank-owned property, even though his home is neither bank-owned, nor a short sale. Though I liked his creativity, unfortunately I had to inform him that doing so was not allowed in our MLS.
Not so fast … he could legally change his last name to “Bank” then you could list it as Bank-owned.
MikeZ
Are there 4,000 cash drenched renters out there just waiting for the bottom to arrive?
[Raises hand]
Renter here, with 750+ FICO and a 20% deposit, just waiting for the right time, the right house and for the Reno-area job market to stabilize so that I know I have a future income stream here.
john
If the high end is so dead why are there 2 pending sales in Montreux over 1.5 and 2 more under 1.5? The two above 1.5 both had recent and large price reductions of 400k, and offers soon after. So it goes to show, at some price, the high end will move, especially in Montreux, which has been very stingy with deals until now. If you can buy a very nice house in Montruex on ¾ to 1 acre for less than $300 per sq foot I think you are getting a great deal, one that won’t seem stupid in a year or two and will seem very smart in 5 years. And don’t forget, Reno is different, it is a hidden gem, there is no income tax here. Many of these buyers in Montreux are getting a deeply discounted first or second home thanks to the state of NV. This is even more true now with CA income tax increasing to almost 10.5% for those making 1 mil and up.
Note also the below recent update from the Montreux sales office. Apparently additional homes are pending. Oh and by the way Smarten, that house in Galena that you thought was worth around 700k at best is also sale pending at 1 mil. MLS# 80015770 The bank may not get 1 mil, but I would guess they are getting close.
So all you premature predictors of the demise of the Reno high end market, especially in Montreux, should do your homework. Homes are selling. They are not selling at bubble prices, and they may be selling at replacement cost or even below, but they are selling. And if you have the resources to buy in the 1.3 and up range for under $300 per sq foot at less than todays replacement cost, this is a great time to buy a house that you could only dream of for the same price in a decent location in tax happy California.
Sales Update February 2009
In the February 9th issue of Portfolio magazine, Economist John Cassidy writes … “There’s a risk we may again overshoot the mark: As the economy goes down, we could be overemphasizing the negative just as we exaggerated the positive on the way up. By the end of this year, if all goes well, there could be tentative signs of an upturn.”
Real estate sales in Montrêux have definitely picked up during the first 60 days 0f 2009. Currently there are 5 pending sales in Montreux: 2 Renaissance homes, 1 Custom home, 1 Chalet, and 1 Custom Lot. This is a significant increase in sales activity from the previous quarter
RenoBruin
1st time poster, long time reader. I tend to agree with John. The high-end is starting to move – specifically in Arrowcreek there are a number of pendings in the 700-1M range. One needs to look at the potential buyer in this market – some of the homes are going for WELL below replacement costs, and many have the luxury and desire to live in a nice custom home.
I do agree with many of the “statistical prognosticators” over the past year or two, but keep in mind there is also a psychological and emotional connection that drives a buyer to a home, which can drive demand for many of the high-quality, market priced high-end customs.
Lastly, although i’m not saying we’re at the bottom, but I will predict a big uptick in volume over the next 12 months, with values bottoming out sometime this year. We were one of the first markets to crater, and will be one of the first to stabilize (note a market like Seattle that was relatively healthy through ’08, and is now feeling the pain).
My first 2 cents…
billddrummer
To john and Martin,
That’s good news. Now how about the other 195 homes in that price band?
True, there are people with money looking to buy in the upper price bands. But if medians continue to drop each month, what’s the chance that the current pendings will fall away, as potential purchasers realize that their offer made in good faith 60 days ago is now 10% underwater?
I’ll be interested to see how many of those pendings actually result in closings over the next few months.
Guy Johnson
RI, thank you for the compliment regarding the blog. It is appreciated.
MikeZ, I’ll mention the name change tactic to my client. Also, when you feel the time is right, I’m here if you need me. 🙂
RenoBruin, Always good to hear from a first-time poster. Thank you for your comment, and thanks for reading the blog.
Phil
How do realators get piad when you buy bank owned properties?
Guy Johnson
Phil,
With bank-owned properties that are listed on the MLS the brokers on both sides (listing side and sell side) of the transaction are paid commissions by the bank (Seller) in the same manner as brokers are paid with non-bank-owned sales. That being said, often the commission amounts are less than what is typically seen in non-distressed sales.
Martin
The high end is doing fine? Oh please.
85% of all sales are under $300K.
95% of all sales are under $500K.
Last month, ONE house sold over $1 million. Yes, that’s One. As in UNO. ONE out of 198 on the MLS.
There is 16 YEARS of inventory in the over $1 million segment.
But, you don’t have to allow the facts to get in the way of your opinion.
Future Buyer
You got to love John’s optimism, BUT who is Obama raising taxes on? Earners over 250k. Who do you think buys the over 1 million dollar homes? Same answer. Who is Obama lowering mortgage deductibles on? Same answer. Where is the incentive to spend a lot of money on homes when you are paying all the taxes, lost your but on the stock market, and can’t deduct as much interest on your home to even try and save on some taxes? Maybe another time and another President the over million dollar market might have had a chance to come back, but I can hear the nails being pounded into the coffin.
3 out of the 4 pending homes in Montreux I believe are short sales or REO’s–to bring the conversation back around! Montreux also offered a free golf membership (worth 100k)to the first buyer of a lot. I would like to think the current short sale and foreclosure prices are the bottom and they may be for the lower bracket, but I’m afraid the over 1 million has a long way to go. Who would even consider buying a home that is not heavily discounted as a short-sale or REO? Of course they are all the rage–it’s your only prayer to not lose your life savings within the year.
My advice to Guy for your client is advertise his home at “Bank owned/ short-sale prices without the hassle!”
Raymond
“Pendings Schmendings’. I believe that was the title of one of Guy’s threads when he explained that less than 25% of all pendings on short sales ever go on to close.
75% of pendings on short sales fall through. Citing pendings on short sales is meaningless.
There are listings in the over $500k range that have been showing as pending for months on end. It’s a very poor indicator of anything these days.
265 houses sold last month and 249 of them were under $400K. A whopping 6% of sales managed to get over $400K. Out of the 265 sales, 1 was for over $1 million. That’s a staggering 3/10 of 1% of actual sales being over $1 million. That is hardly a sign of life. It is a market segment that is in deep freeze.
billddrummer
I have to agree with Raymond on this one. It’s particularly interesting to me (not being a Realtor) that there are still so many homes listed above $1 million, yet as the figures say, there has been one closing.
Makes you wonder why there’s so much advertising dough being shoved at these listings, doesn’t it?
Why not just leave them be, and concentrate your efforts into the price bands that are selling–the sub $200K market?
True, you have to deal with people who aren’t financially sophisticated, but you could see some commission checks, instead of higher and higher Mastercard bills for advertising.
BanteringBear
John posted:
“If the high end is so dead why are there 2 pending sales in Montreux over 1.5 and 2 more under 1.5?”
Pending sales are not closed sales. Furthermore, you have no idea what dollar amount they are pending for; it’s not public information. 11 pending sales out of 198 listings, many of which will not close, is so minute it’s pathetic.
Real estate sales NEVER stop completely. Nobody has ever suggested they do. You need sales to drive prices lower. That’s exactly what’s happening in the higher end areas, albeit slowly. These sales are going to hammer values. But the high end market is, figuratively, DEAD.
“If you can buy a very nice house in Montruex on ¾ to 1 acre for less than $300 per sq foot I think you are getting a great deal, one that won’t seem stupid in a year or two and will seem very smart in 5 years.”
Just curious- where did you come up with this $300 psf figure? Furthermore, how on earth do you imagine real estate prices going up in the next 5 years? What do you base it on? Hope?
“And don’t forget, Reno is different, it is a hidden gem, there is no income tax here. Many of these buyers in Montreux are getting a deeply discounted first or second home thanks to the state of NV. This is even more true now with CA income tax increasing to almost 10.5% for those making 1 mil and up.”
Sure, Reno is a “hidden gem”. And so is Tahoe, and Sausalito, and Big Sur, and Carmel, and Malibu, and Newport, and Telluride, and Vail, and Aspen, and The Hampton’s, and West Palm, and Bainbridge, and Mercer, and Medina, and Seaside, and Bend, and Jackson Hole, and Whitefish, and Taos, and Santa Fe, and Sun Valley, and Park City, and, and, and… wait a minute. Something doesn’t fit on this list. Oh yeah, it’s Reno. Reno AIN’T special. Don’t give me that garbage- especially when it pertains to real estate prices.
“So all you premature predictors of the demise of the Reno high end market, especially in Montreux, should do your homework. Homes are selling.”
Don’t make me gag. There’s only one premature cheerleader here, and it’s you. You don’t have a clue. My guess is you’re just another out of towner who’s all of a sudden an expert on the local market. If you want to know where things are headed, talk to a local. If you are one, you’ve been asleep.
Miranda
Well . . . having lived in Park City, Jackson Hole and Bend I want to let you know that just because you are “special” and a “hidden gem” doesn’t mean that your hidden enclave is immune to the market. We just sold a home in one of those very special areas and the prices are dropping – not like here but enough that it hurts if you bought recently.
These areas relied on the “Rich Californian’s” to come retire, buy outrageously priced houses, ski, fish, and spend money. It was great while it lasted. When that money dried up things aren’t looking quite so rosy. These “special” areas often have no real jobs as the biggest employers are builders and developers with the service industry a poor second. So when the home buyers stop coming the local economy rolls over and floats belly up.
DonC
The low end of the market is seeing decent volume at greatly lowered prices. The high end is seeing no volume at fairly modestly lowered prices.
Basically prices at the higher end haven’t fallen to market clearing prices. Prices which are sticky downward is actually more the norm than what we are seeing at the low end. Either prices stay high and volume will be very low (until prices recover some time in the future), or prices will drop and volume will pick up. Which happens will depend on how many distress sales there are. So far there doesn’t seem to have been that many.
Future Buyer — Just as a FYI: The proposed tax hikes in Obama’s budget won’t have much of an impact on many earners in the $250K – $400K bracket. This is because these folks are already subject to the Alternative Minimum Tax, and that rate is above the proposed rate. Likewise the phase out on the deduction of interest on home mortgages is likewise limited because of the AMT.
john
I wrote a few weeks ago about the high end starting to move at realistic prices per sq foot and was slammed by the usual suspects/bears who say the same things over and over. Here is an update. 239 East Jeffrey Pine in Galena and Bank Owned, SOLD recently for $971,000. This house had an offer two years ago for 1.6 that was turned down by the owner/idiot builder. You may recall this was the house I suggested was a fair deal at 1mil, while Smarten said the bank would be lucky to get 700k since it was in Galena, and Galena is hot and dry. Also, 16820 DELACROIX, in Montreux, SOLD recently for $740,000. Both these prices are below replacement cost given the quality of construction, not counting the land. Again, the high end will move at the right prices, and these are two prime examples. You get a house for less than it would cost to build it, and the land comes free, which it should because land is worthless in Reno right now. Two more over 1.5 are currently pending in Montreux. I will update you once these sell.
billddrummer
To John,
Glad those two listings sold.
Neither one was over $1 million.
SkrapGuy
Let me get this straight.
There are 343 houses listed over $700K in the MLS.
2 of them just sold.
So the fact that 7/10 of 1% of all the listings over $700K just sold is evidence that the upper end of the market is alive and well?
That’s .7% of that price range.
John must either be a realtor or the owner of one of those upper end alligators.
Carleton
Neither sale was over a million. Oh. So I guess there is still 16 years of inventory in the over $1 million price range.
BanteringBear
I echo both SkrapGuy and Carleton’s sentiments in that I fail to see any correlation between the two sales John points out, and a healthy “high end” market in the Reno-Sparks area.
billddrummer
“Healthy” appears to me to be a feeble pulse, kept alive by a heart-lung machine.
The other thing about those two ‘sold’ properties is that they were both REOs.
How many more REOs are out there in that price bracket? And how many more are coming? (I think many people bought their ‘dream home’ with Option ARMs that are now beginning to reset at much higher payments. When those become distressed, look out for waaay more listings.)