Condo median sold price, units, DOM, and $/sq.ft.

15 comments

1. 

   April 7, 2009 at 11:02 AM

   billddrummer

   It doesn’t look like lots of Montage condos were included in the March number, does it?

2. 

   April 7, 2009 at 11:54 AM

   Otto

   So if you bought a condo back in January of 1998, it would now be worth…the same as in January 1998.
   What am I missing?
   I thought that real estate only goes up.

3. 

   April 7, 2009 at 12:50 PM

   3niner

   Interesting, the condo pattern isn’t quite as regular as the SFR pattern, but we still see DOM minimum, followed by volume peak, then pps peak, and selling price peak.

   The peak (and predictors) are streched out over a longer period of time, but it’s still useful information.

   Also, it’s interesting that condos took longer to peak, but have corrected more rapidly once the bubble burst.

4. 

   April 7, 2009 at 6:45 PM

   bondstevenbond

   3niner (or others),

   Interest observation that you made, 3niner.

   Does the series of events; DOM minimum, followed by volume peak, followed by pps peak, followed by price peak at the top imply the opposite series of events at the bottom? i.e., DOM max, then volume min, then pps min, then price bottom?

   If so, what is the rationale? Is it a reliable series of events?

   Thanks very much

5. 

   April 8, 2009 at 4:53 AM

   KingBud

   Condo market is more volatile for sure in terms of pricing.

   For example, a couple years ago I looked at the condos at Tanamera in South Meadows. Nice units in terms of amenties, but were asking 250K for units that were about 900 sq ft in size.

   Looked up an article in RGJ this morning, there’s an article from 2/2009 profiling a unit about 1100 sq ft, asking 259K. Link is here: http://www.rgj.com/article/20090221/HOMESCAPE0304/902210340/1208

   Hard to imagine any condo in Reno is worth over 200/sq ft in this market, so this pricing strikes me as curious.

   Anyone with any thoughts ?? Wishful thinking on Tanamera’s part or are they making sales at these price points ??

6. 

   April 8, 2009 at 6:20 AM

   DonC

   Guy, thanks for taking the time to provide all this information. You don’t get too many kudos for it but it is appreciated.

   Condos are usually more volatile because one larger project can really add to the inventory, and usually you see several larger projects coming on line at once.

   I’m thinking that with all the Montage still overhanging the market there may be some real carnage in the downtown market.

   KingBud, I’m really not familiar with Reno in general or South Meadows in particular, but from the other properties I’ve seen the listing seems unrealistically high.

7. 

   April 8, 2009 at 8:35 AM

   billddrummer

   Great data, Guy.

   You must be a master at time management, since your real estate business is still working (and you’re working it).

   As far as the medians for condos, I think a reasonable price in this environment is around $115-$120/sf, depending on amenities and the HOA burden. Lots of people forget that those assessments can be huge, especially if you buy into a project that’s poorly absorbed. Unless there’s some type of assessment protection in place, prudence rules.

8. 

   April 8, 2009 at 10:27 AM

   3niner

   bondstevenbond said:

   “Does the series of events; DOM minimum, followed by volume peak, followed by pps peak, followed by price peak at the top imply the opposite series of events at the bottom? i.e., DOM max, then volume min, then pps min, then price bottom?”

   If you change “volume min” to “volume peak”, then I would say there’s a qualified “yes” to that question.

   The DOM minimum indicates a strong sellers’ market. This would be a time when prices are rising very rapidly, as sellers find that they can charge more and more for houses. Conversely, the DOM maximum indicates a strong buyers’ market, and prices should be falling rapidly at that point in time. We should expect these events to come well before the peak and bottom, respectively.

   The volume peak indicates maximum price agreement between buyers and sellers. During the bubble, it indicated that many buyers were excited about the prospects of getting rich, by speculating in real estate, while many sellers were excited about being able to cash in, and were getting cautious about the prospects of future price increases. After the volume peak, more buyers were starting to become nervous about high prices.

   We would expect to see a similar volume peak as prices continue to fall. I would expect both the DOM extreme and volume extreme to precede the price extreme in either direction, but I’m less certain that the DOM extreme would come before the volume extreme.

   As for the price per SqFt peak and purchase price peak, it seems to me that these are simply two different ways of looking at the same thing. I know of no reason that one would necessarily occur before the other, and suspect that differences in timing are simply an aspect of statistical noise.

   The useful thing to learn here, is that there are two indicators (DOM min and volume peak) that anticipated the price peak. These occurred early enough, and the price peak lasted long enough, for them to be a useful guide in making decisions. Keep in mind that it takes a few months to be certain you’ve actually seen a peak or bottom in one of these numbers.

   Conversely, I would expect DOM max and volume peak to anticipate the price bottom. If we have a “U” shaped bottom (as some are predicting), there will be plenty of time to recognize the bottom as it occurs.

   Keep in mind that what really matters to a buyer or seller is their individual deal. The broad market indicators merely suggest the prospects of getting the desired deal.

   I hope this helps. Hopefully others will weigh in with their own thoughts on this.

9. 

   April 8, 2009 at 10:41 AM

   billddrummer

   To 3niner,

   Well-reasoned analysis. And it points to the market dynamics which dictate buyer psychology, not the other way around.

   So what we should look for is a peak in volume, coupled with a decrease in DOM. That would signal the beginning of a recovery.

   Now how does the inventory supply factor into this picture? Would it be reasonable to assume that as inventory drops while DOM falls, that ‘recovery’ then resumes?

   I think days’ supply is a key component (not setting aside your trend analysis, which was excellent). I think all the levers need to be moving–DOM falling, volume peaking, and days’ supply falling as well–then, you might presume that the hole we’ve found ourselves in is finally beginning to reverse.

   Well don!

10. 

    April 8, 2009 at 12:47 PM

    3niner

    To billddrummer,

    Looking to Japan’s bubble cycle, and noting that our’s has tracked their’s (adjusted for inflation), I expect that our price drops will continue for some time, as they slow down. I also expect that prices may stay near the bottom for a few years, after we get there.

    This is all talking national averages, however, and Reno’s market seems to be moving through the cycle faster than the average. Also, the condo portion of the market seems to be moving even faster.

    I have trouble using “inventory” as an indicator, because various factors cause properties to move in or out of the MLS. Right now, regardless of what the numbers might say, inventory must be extraordinarily high, because foreclosures are happening almost as fast as houses are selling.

    “Inventory” is like asking price, in that both are incomplete statistics. There is an important part of the story that isn’t reflected in the number. For example, the asking price is only good information if you also know the offering price. In equity (stock) investing this is known as the bid-ask spread. When the spread is high, the volume will be low.

    In reality, every house in the area is part of our inventory. My house has not been on the market for many years, but I would sell it in a heartbeat for $1,000,000 (it’s worth about 1/3 of that).

    Kind of rambling here. I hope this makes sense.

11. 

    April 8, 2009 at 2:08 PM

    billddrummer

    Good point. And the inventory number leaves out the ‘shadow inventory’ that never makes it into the MLS–FSBOs, REOs that haven’t been listed, etc., so I see your point about the nebulous nature of the inventory figure.

    Guy mentioned in another thread that more than twice as many homes are entering the NOD/NOS category than are being sold, which begs the question: What happens when they come on the market?

    I don’t see sales momentum rising much from this level, because of stricter underwriting criteria that is shutting out buyers who used to qualify with no problem. (The best rates, the ones advertised, presume 20% down and 750+ credit scores. How many people have both, and are shopping for homes?)

    A trader, commentator and expert on markets, John Mauldin, has referred to the recovery as a “Muddle Through Economy.” Things will get better, but they’ll feel bad for a long time, and growth will be in imperceptible increments, not like the V shaped recessions familiar to most Americans. A U with a looong bottom is probably what’s in the cards.

12. 

    April 8, 2009 at 3:18 PM

    3niner

    To billddrummer,

    Falling prices always bring new buyers into markets. I know some young people, with good credit, who simply wouldn’t buy when they thought houses were overpriced. At some point in the next year or two, I expect them to do so.

    People of limited means have discovered that buying a house can be very risky, and many will be renters for a number of years to come. People of greater means will see opportunity in becoming landlords. They will take on the ownership risk with the expectation of making a profit.

    Markets work, if they are allowed to do so.

13. 

    April 8, 2009 at 6:00 PM

    Guy Johnson

    DonC, billdrummer, et al, thank you for the words of appreciation.

14. 

    April 8, 2009 at 6:48 PM

    bondstevenbond

    Diane, Guy, Niner, Bill, BanterBear, Ignoramous, and many, many others; thanks so much for making this such a educational and informational blog!

    Niner, your analysis makes a lot of sense to me. Thanks again.

15. 

    April 9, 2009 at 10:04 AM

    3niner

    To bonstevenbond,

    You’re welcome. I would have to say that I have only become knowledgable about this subject in the last year or so, and that much of what I’ve learned was a direct or indirect result of things said by those already involved with this blog.

    Back around the market peak, I had a gut feeling that prices had gone up too much, and suggested to my wife that we sell our house and become renters. She hated the idea, and I didn’t try very hard, because I lacked knowledge. If I had been reading this blog then, we might have done it, and been $200,000 – $300,000 ahead of where we are now.

    As we approach the market bottom, there will be other opportunities. The actual bottom may be years away, but it looks like there might already be individual bargains, priced below likely market bottom prices. Of course, this looks like it’s mostly just condos right now, and not much to choose from there, but the bargain opportunities seem to be expanding, and should continue to do so for some time.

    🙂