Zillow has just released its fourth quarter (2008) market numbers. For those of you who use Zillow, but have never really gotten past their concept of a Zestimate®, Zillow Real Estate Market Reports track 161 metropolitan statistical areas (MSAs) throughout the U.S., identifying market trends including, but not limited to: five and 10-year annualized change, homes selling for a loss, negative equity, short sales and foreclosure transactions.
Reno, Nevada is one of the MSA’a tracked by Zillow. You can find all the reports for the Reno market here. I’ve also included a couple of the charts and tables that you’ll find off Zillow’s site below. (click to enlarge)
If you are interested in investigating one of the other 160 MSA’s click here.
BanteringBear
Zillow is a useful site with regards to past sold prices, and historical values. But, their Zestimates are always lagging the market, and are not indicative of current values, IMO.
smarten
Hate to change subjects on you Guy, but did you catch Robin Coons’ latest ChaseNation blog [ http://www.chasenation.com/profiles/blog/show?id=2000642%3ABlogPost%3A14880 ]? In it she tells us she has listings for two new construction Luxury Homes she claims can be purchased as short sales for 50% of the original asking price. The first was originally priced at $3.2M [it’s 8400 sf on over an acre] and can probably be purchased for $1.5M; over 1/2 price reduced [www.tourfactory.com/460355].
The other one [is 5500 sf with a 600 sf wine cellar on over an acre backing up to Brown’s Creek] was orginally $2.8M and can now be secured for $1.4M [www.tourfactory.com/364645].
Now Robin has a number of Montreux listings. For those of you out there waiting for prices to drop in Montreux, maybe you want to contact Robin [ http://www.robincoons.com ] and ask her if the same strategies would work on some of her Montreux listings? Or how about this one: would you call implementation of these strategies examples of looking at the glass half full or half empty?
DonC
It does catch up eventually. I just checked and the one house in our neighborhood which sold last month showed up. The current Zillow estimate was a few thousand below what it sold for, but it also showed a 30 day correction of a negative $150K, which we can assume was the difference between the last estimate and the sales price.
Overall being off by $150K is probably a decent estimate. The house was in exceptionally bad shape, which I can’t imagine Zillow can pick up. So of the $150K decline I’d attribute about 2/3 of that to the house itself. That leaves $50K which is about 5%. Not bad really.
The reasonableness of the Zillow estimate was more or less confirmed by the Office of Federal Housing Enterprise Oversight numbers. When I put our house into the OFHEC calculator, the resulting estimate was quite a bit higher than the Zillow estimate. Part of that can be explained by the fact that the OFHEC calculation is only based on 3rd quarter 2008 numbers, but the Zillow estimate is still lower even if you adjust the OFHEC numbers downward by 5% to account for three more months of declining prices.
Given that houses are never priced like a commodity, the Zillow estimate seems like a decent starting point.
Sully
Guy, is there a new law regarding disclosure on offers, if you have another offer outstanding? I was wondering if this is mandatory.
buttafuoco's
I guess it’s time to start buying houses by the dozens !
Reno Ignoramus
So according to Zillow, the market is down 37% from the peak in Q3 of ’05. That’s pretty much in the ballpark with most reputable sources, including the humble sponsors of the RRB, Diane and Guy.
Perhaps it is time that we all pause and give humble thanks and credit to those posters here who have advocated over the past 3 years NOT buying a house, but rather saving one’s money.
Consider this:
If the market has dropped 37% from the peak, now 63 dollars will buy as much real estate as 100 dollars used to at the market peak.
63 x increase= 100
so increase = 100//63 =
1.587
Thus, the increase in the purchasing power of a dollar to buy real estate is 58% since the market peak.
Yes, that’s FIFTY EIGHT PERCENT !
Yes indeed, it’s been a good to be sitting on cash over the last 3.5 years.
With all due respect to the ChaseNation crowd, you could not have been more wrong.
DonC
RI
1. If you bought earlier than the peak you would still have gains and if you bought later your losses would be smaller.
2. Everything is down 30%. Stocks. Bonds. REITs. And if you had a bunch of money in Indy Mac you lost 50%. There isn’t anything exceptional about losses in residential real estate.
3. Are you buying now? Or are you diverting those funds to all the other great deals out there? Basically we come to the problem with timing markets: you have to pick both the peak and the trough.
Casa de Dolor
Don C. said:
“Timing the market.”
Homes are not stock, bonds or commodities, notwithstanding that they were treated at such during the bubble. When this market turns it will do so with all the speed and nimbleness of a Giant Tortoise and “timing the market” won’t be an issue.
Casa
SkrapGuy
No, Don C, not “everything is down 30%”.
The Vanguard long term treasury fund was UP 9.25% last year.
The Vanguard intermediate treasury fund was UP 7.25% last year.
The vanguard GNMA fund was UP 5.65% last year.
Even the Vanguard prime money fund returned 2.55% last year.
These broad brush statements make for good blogsite hyperbole, too bad they just are not accurate.
RI’s point has nothing to do with market timing. It simply points out, quite correctly, that cash is king with respect to depreciating assets.
smarten
Hey Don, my hard money deeds of trust STILL paid 11.5%-12% last year.
And the interest rate on my ARM mortgage tied to the 11th District Cost of Funds just dropped another 1/2% last month [that’s extra money in my pocket].
And the new mortgage I want to get that I can’t seem to qualify for would cost me over 1% less than it did a year ago if credit loosens up [which would be extra money in my pocket].
And now there’s a glut of high [and ultra] end SFR rentals so if I choose to remain a renter I can drastically upgrade my housing for pennies on the dollar.
And now the Republicans are floating a home tax credit that will give me back 10% of the cost of a new home purchase.
I think I’ve been drinking ChaseNation for too long – the glass is starting to look half full!
Guy Johnson
Sully, I am unaware of a *new* law regarding disclosures of offers. The existing rules can be found here: http://www.red.state.nv.us/Forms/525.pdf
This is the State of Nevada’s DUTIES OWED BY A NEVADA REAL ESTATE LICENSEE disclosure.
When you check out the form you’ll see that it has two sections: 1) Licensee’s Duties Owed to All Parties, and 2) Licensee’s Duties Owed to the Client. It is in the second section where offers are addressed (specifically Item #4).
As a licensed real estate agent I have the duty to “Present all offers made to, or by the client as soon as practicable…”
However, if I am interpreting you question correctly, you want to know if, as a [listing] agent, I have a duty to disclose all offers received to all *other* interested parties. I would say no, unless my client [the Seller] instructed me to disclose the other offers.
As an agent my fuduciary duty is to my client. Does this help?
tom
“the Republicans are floating a home tax credit that will give me back 10% of the cost of a new home purchase.”
Smarten, have you read any details on this? Is it a true credit without a recapture over time? Is it going to be limited to first-time buyers as the Democrats’ proposal sought to do? If it is a true credit, without being need-based or limited in some way, it will be very useful to all of us. I heard on one of the cable news channels, though, that the Repubs’ proposal would have a dollar limitation and might be recouped over future tax years. I guess we stay-tuned.
tom
For all interested, I was able to find a nutshell-type summary of the Repub tax credit add-on to the stimulus bill. It appears to be limited to the lesser of 10% ofa 2009 purchase price or a $15,000 credit, and is apparently recoupable over succeeding tax years. It is not limited to first-time buyers, which the Demo version was;
So actually it is more like an interest-free loan than a true credit. Still, the ability to defer $15k of taxes for free for several years does have value.
smarten
Don’t know details tom other than:
1. It’s NOT limited to first time homebuyers;
2. Which leads me to believe it’s IN ADDITION to the $7,500 first time homebuyers’ tax credit [you don’t need to be a first time homebuyer; just one who hasn’t lived in your owner-occupied home within the last three years] that was enacted last year [could one double dip?];
3. From what I heard briefly on the news the other day, the credit is a minimum of $15K or 10% of your purchase price, whichever is greater. But in doing a quick internet search, I am finding unofficial reports that it’s 10% of your purchase price up to a maximum of $15K [which makes little sense to me given it’s tough finding housing around here selling for less than $15K];
4. I’ve also read from these same unofficial reports that this tax credit will have to be repaid like the first time homebuyers’ tax credit must be repaid [at $500/year for 15 years]. But this makes no sense to me given the current stimulus package proposes last year’s first time homebuyers’ tax credit repayment requirement be REPEALED.
So to answer your question tom, this is definitely something to keep our eyes on.
Oh on another issue – remember the $4,500/month Montreux McMansion rental on Alpes Way I pointed you to a couple of weeks ago? Well now it’s down to $3,995/month and since the owners are supposedly “motivated,” I’m certain it can be bagged for $3,500/month or maybe even less? This home is currently listed for sale at $2.55M.
IMO, EVEN WITH TAX CREDITS, it makes little sense to buy if you can lock in a long term rental of one of these more upscale homes at rental amounts like these. In fact, I’m currently working on one of these for myself – the home is listed at $5M and if I told you what it can be secured for as a rental, you’d be flabberghasted.
Sully
Guy, I wasn’t very clear. If, I (buyer) make an offer on property A and on same day make an offer on property B (short sale). Does the fact I’m making the other offer have to be disclosed?
CommercialLender
Smarten,
how are you getting comfortable with the landlord risk, namely they’d default on the mortgage and the lender would evict you? Do you ask them for a mortgage statement or duplicate NOD or credit check…?
DonC
CL — Good point. It’s hard to understand why an owner would lock in a long term rental at a fire sale price. I could see a short term deal but not a long term one.
And the default could occur later. I do know some landlords who are doing 18 month leases in order to have the lease expire in the summer of 2010 because they think that time frame has the best chances for seeing a rental market recovery. But I’d be skeptical of a multi-year deal at a too good to be true price.
SkrapGuy – There is a line between being overly literal and being intentionally obtuse.
Since you managed to miss the forest for the trees, I’ll make my point more directly: If you hold cash and the markets go down you’re a champ. If you hold cash and the markets go up you’re a chump. Since the markets go up more than they go down, the only way to avoid being a Chump with a capital “C” is to be invested at least some of the time when the markets go up. Stated alternatively, you have to time the markets.
My question to RI was designed to get him and others to think about this. It’s fine to congratulate yourself on being a master of the universe in holding cash during a downturn. Now what? When do you get back in? Or don’t you? In my experience people who are consumed with timing don’t do well over the longer term. The bottom comes and then goes, and they get so preoccupied with having “lost out” by missing the bottom that they psychologically can’t pull the trigger and get back in. To add to the problem, real estate is a clumpy investment, so you can’t ease into it.
Sully
From the Senate stimulus version:
To accomplish these goals, The American Recovery and Reinvestment Act provides $888 billion in investments and tax cuts. Of this total, $694 billion will enter the economy by the end of Fiscal year 2010, meaning that 78 percent of the monies allocated will reach the American people by September 30, 2010, providing an immediate boost to the overall economy and creating an estimated four million jobs.
One would have to be in a coma to not see a bottom in this time frame, as real estate does not move like the stock market. Additonally, in the Reno area (according to very long time residents), if housing follows its historical norm, I suspect there will be about 1 year of flat pricing in order to determine “now is the time to buy”
Perhaps BB or RI can back this up?
smarten
CL and DonC –
There are no guarantees in life.
If you’re really concerned that your landlord may default, you can record a request for notice of default as you’re an interested person in the property [a subject we’ve addressed before on this blog]. That way if a lender records a NOD, you must be given notice. If given notice, you will have a minimum of 90 days and realistically more to make sure your tenant deposits are applied to your rent obligations.
And if it were me and I received notice from my landlord’s lender that he/she had defaulted, I’d stop paying rent. In fact carrying this thought further, why not include a clause in your rental agreement that recites the landlord warrants and covenants he/she will keep all mortgages and taxes against the rented property current and in good stead? Then if he/she defaults, you’re relieved of your obligations [i.e., paying rent] under the rental agreement.
You can also run a check on the assessor’s site for outstanding mortgages against any property. From that search you should be able to determine whether there’s equity in the property. If so, it’s unlikely your landlord will be defaulting.
And I don’t know about Nevada but in California it’s unlawful for an owner of residential property to rent it out and then not use the rental proceeds to satisfy mortgages he/she/it may have against the rented property.
Sure as a tenant you may ultimately have a battle against your landlord’s lender. But it’s unlikely you’re going to be out-of-pocket anything. And more likely than not, any buyer of the property at a trustee’s sale who is not willing to continue your tenancy will probably pay you to voluntarily move.
Many frustrated sellers are turning to the rental market just to generate whatever cash flow they can. But when rents are depressed, you can only secure the level of rent the market will bear and most of the time, that means negative cash flow to the landlord.
Guy Johnson
Sully, regarding your offer question, I don’t think you *have* to disclose that you are making multiple offers, but you would want to make sure that you had language in your multiple purchase offers that protected you in the event that both offers were accepted. (Unless, of course, you really wanted to purchase both properties in the first place.)
When I am representing clients (buyers) who want to make multiple simultaneous offers I always include verbiage in the contract that not only discloses that fact to the seller, but also states that an acceptance by the seller is not binding until the offer and acceptance is reaffirmed by the buyer.
DonC
Sully – In order to really give the economy a jolt the stimulus has to make up for the decline in consumer spending AND business investment. I don’t think even a trillion dollar package will do this over a two year time frame.
That’s not to say it isn’t a good idea, just that the drop in spending has been huge and I don’t see the Obama Administration as willing to try and sell a larger package.
Housing will recover when jobs come back. That seems like it’s more than a year out, don’t you think? Plus there has to have been overbuilding — I’m thinking Arrowcreek and downtown condos — and that excess inventory will have to be absorbed before you see upward price pressure.
On the other hand, recoveries are U shaped. If you plan on living in a house it matters little if you buy on the way down or on the way up, especially as you approach the bottom. You end up at the same place.
Sully
Don, for the most part I agree with you. The only thing about this area versus say Silicon Valley is the overbuilt state.
The counties in Silicon Valley all have building moratoriums, whereas Washoe doesn’t. When I came here in 1997 to look at houses, Wingfield Springs was just about the northern boundary of Sparks. Now its about the middle.
Silicon Valley has every known HiTech/Electronics firm in the world represented there and the 100K+ salaries to go along with it, here it appears the gaming boom has subsided and will take a lot longer than 2 years to recover. Thus, my guess at a year of flat pricing.
So, most areas will recover in a U fashion, whereas Reno/Sparks most likely will not.
DonC
Sully – As Smarten says, there are no guarantees. Houston and New Orleans housing prices peaked in the 80s. They never came back. Even during the last bubble.
You bring up a good point though. Overbuilding is usually a good indicator of how fast prices will come back. I look at the Reno downtown condo market and wonder whether that will take ten years to sort out. (The WSJ had an article about Corus bank yesterday and how it seems doomed).
Another interesting point is the demographics. For the last twenty years the demand has been for larger houses in the suburbs. But that has changed and most people looking for housing are now more likely than not to be looking more urban and smaller.