The link below will take you to the first installment of a new monthly Market Report created by the Reno/Sparks Association of REALTORS, Inc. The report is sent to member agents and brokers, and agents are encouraged to use this information in their own analysis of the market and in counseling clients and customers.
Now before anyone starts suggesting "spin" or “kool-aid", take a look at the report. You’ll find it to be an accurate analysis of the market reflecting the same numbers we report here on the RRB. I think they’ve done a nice job with the report. Let me know your thoughts.
Click here for the March Market Report and the accompanying chart.
Some highlights from the RSAR March Market Report:
- March’s Median sales price has settled back to the January level of $200,000 for now – down 1.5% from last month – a 27% decrease from March of 2008.
- “As of March, we had only 9.1 months of inventory based on the rate of sales for March. This compares very favorably to 14.1 months supply of inventory as of March 2008. We have to go back to March of 2006 to find better inventory absorption numbers.”
- Month’s supply of inventory in the $1 Million+ category is 50.86 months.
- Distressed properties accounted for:
- 72% of properties sold in March
- 78% of what’s pending
- 63% of new listings
- “The increased demand we see is still at the lower end, with plenty of inventory. Multiple offers on 150K Bank/Owned’s doesn’t do much to drive up prices.”
Sully
I agree that this is a fairly accurate report, not much spin. As the first sentence says – the next two to three months will tell a lot.
We had a 3 month moratorium on foreclosures, and only this month starting back up. When these hit the market, then we will be able to see if the median is close to a bottom or still working its way down.
Actually, I like this report better than the ones coming out of NAR, as those are always rose colored, “now is the best time to buy”, etc. regardless of location.
I’m beginning to think that the realtors in this
area actually think their clients have a brain and intend to use it, contrary to the NAR which thinks we are all a bunch of lemmings willing to follow the leader off a cliff! 🙂
Martin
“Multiple offers on $150K bank owned’s doesn’t do much to drive up the prices.”
That’s one of the most honest statements to ever come out the realtors. Maybe they are finally trying to emulate this blog. As has been said before here, it is just hype and spin to say that the increased number of sales YoY is a sign the market is recovering. Not when 75% of those sales are distressed and are just driving values and comps lower. Just as a business that loses money on every sale cannot make it up in volume, a market that loses value with every sale is not in a healthy condition.
Reno Ignoramus
Remember when people used to care about whether the Congress would grant BK judges the so-called cramdown power on residential mortgages? If anybody still cares, the bill went down in flames in the Senate today. Not even close to the 60 votes needed.
So Smarten you are safe……:)
Sean
speaking of the backlog of foreclosures there were 50 Notice of Sales filed just TODAY!! Over 500 for the month of April.
65 woo
I think this must be a sure sign of the implosion of the Reno market. 75% distressed sale is a mind numbing number.
Can it get any worse?
Worried Guy
I am looking at some properties in South Reno and I am really wondering how in the world these properties are going to sale. A lot of them are priced well above $150 per square foot and I see no buyers. Specifically, in the Arrowcreek and Galena area. The properties will just sit on the market and the price will grind lower over time until the sellers capitulate already. I like how the RE agents are trying to protect their comps in on of the worst RE markets since at least the 1970’s, if not the early 1930’s. This is like holding a finger in the crack of a damn..Good Luck.
smarten
Thanks for the heads up RI! I haven’t been following the issue but think it was a stupid, stupid, stupid idea [and not just because I invest in residential deeds of trust]!
Now here’s a couple of other stupid housing related subjects the Obama administration isn’t yet should be pushing:
1. Why don’t FNMA and Freddie Mac open up the current loan modification program to EVERY FNMA/Freddie Mac borrower who’s property has a LTV of less than 105%? Right now if you can’t demonstrate adequate “hardship,” you don’t qualify for modification. Wouldn’t allowing modifications for every FNMA/Freddie Mac borrower reduce their mortgage payments which would put more money in their pockets to pay for other expenditures that would stimulate the economy…like real property taxes?
2. Here’s another stupid recommendation: why not raise the conforming loan limit throughout the country to the $729.5K maximum which applies in just a select few “high cost” areas? As long as the same FNMA guidelines are used as for current conforming loans, what’s the problem? If your income doesn’t come from “earnings” and you’re looking for a mortgage in excess of $417K, it’s essentially impossible to secure at a reasonable cost. If it weren’t impossible, maybe people would start purchasing those homes for sale in excess of $500K which might help revive the housing market?
The way things are now, this housing stimilus recovery program is really a joke which tells me the Obama administration really doesn’t care about reviving housing; it’s more interested in spreading the wealth!
Wish Barack read this blog!
john
Happy to report another sale in Montreux folks. 5695 Lausanne Dr. just sold for 2.2 mil. At 5695 sq ft that comes out to $386 per sq ft. There is currently another pending short sale at 1.550. If this sells soon that will be 3 sales in the 1.5 and up price range this year in Montreux. This echoes Smarten’s experience in Incline. The well priced high quality properties in the most desirable locations (Incline, Montreux) are moving. There is obviously a lot of money sitting on the sidelines waiting for a unique once in a generation opportunity to buy these super premium homes at or below replacement cost. Smarten, come on down to Montreux and take a look around. You get a lot more for your money here and golf club memberships are ½ price until June.
Moreno
John:
Who cares?
smarten
Thanks John –
A question and a comment.
The question: why is it you’re “happy to report another sale in Montreux?” My interest is in your comment is your “happiness.”
The comment: I’m reluctant to share this w/the group and I’m not going to go into any details at the moment, but my wife and I found something we want to buy in Incline Village and we’re currently in escrow [so we won’t be “coming down to Montreux”]. The purchase-money financing aspect of the transaction is going to be a real challenge [as I have suggested to the group before], but we’re giving it our best shot and I guess if it’s meant to be, it will come to pass.
IMO, the only “more” one gets for his/her money in Montreux [compared to somewhere like Incline Village] is square footage and monthly HOA dues. One doesn’t have to pay any up front membership fee [other than the deed to his/her Incline Village property] nor HOA dues in order to secure preferred access at preferred pricing to Incline Village’s two golf courses [a resident 10-pack at the Mountain Course costs $31/round including use of a cart], Diamond Peak Ski Area [$17/day] and three [no charge] beaches. Try securing these amenities at Montreux!
john
Smarten – only happy because the last time I wrote about pending sales Montreux several people bagged on me saying “pending schmeding” etc., as in who cares about pending sales, only closed sales, and the high end is dead etc. and Montreux is doomed etc. YTD sales show otherwise and it’s nice to be right. It’s easy to say the high end is doomed as most people do on this blog, and much harder to take the opposite posiition and then prove yourself right.
BanteringBear
I don’t remember anyone ever saying sales would completely stop. Furthermore, just because a property sells does NOT mean it was a great value. Some people here need to familiarize themselves with the term “knifecatcher”. Many of the folks buying today will be sorely disappointed in several years time. Whoever just purchased Lausanne is an IDIOT. They paid peak bubble pricing for a house in a market that is down nearly 50%. Stupid is as stupid does.
BanteringBear
Does anyone here believe that 5695 Lausanne appreciated more than 30% in the last month, at the same time the local market continued it’s price decline? The sale price was more than 30% higher than Zillow’s Zestimate, and anyone familiar with Zillow knows that they are almost always on the high side. Something really reeks about this deal. Without even looking into the details, I have a sneaking suspicion it wasn’t an “arms length” transaction. The 5695 Lausanne sale doesn’t even remotely pass the sniff test.
Lodi
The high end is dead. There are 179 houses listed for over $1 million. Just because 3 houses in Montreux sell means very little. Only a Shill can take what amounts to 0.017% of all $1 million houses listed on the MLS actually selling and suggest that the market is alive and robust.
That’s like saying you did you hear that somebody bought a $500,000 Ferrari last week? Oh yes, this proves that the auto industry is alive and robust and absolutely smokin’ now.
GratefulD_420
Zillow is a good program and can do a good job at evaluating base pricing, especially in track built to “semi-custom” neighborhoods.
to elaborate on BB’s comment that Zillow is high, I would say that Zillow is slow OR lagging the current value. It was low during the bubble, always lagging, and is high during the fall.
Especially troubling for zillow is they do not allow for non-standard sales. I imagine upon designing the calculation program this was a good assumption. Unfortunately, now with 72% of the housing being sold in our community as distressed and non-standard, this assumptions is extremely bad and causing zillow great offsets (on the high side) from current value.
Until Zillow starts to capture the distressed sales as comps and use them in their current valuation calculation use should consider the values extremely old and high.
inclinejj
Happy to report another sale in Montreux folks. 5695 Lausanne Dr. just sold for 2.2 mil. At 5695 sq ft that comes out to $386 per sq ft
Does anyone know the terms of the sale..Financing details? cash down? lender/bank who funded the loan..
smarten
Happy to report [not really “happy;” just following our John’s lead] two Incline Village SFR sales which I believe are indicative of the market.
The first is 823 Ophir Peak. Some of you will recall this home was the subject of a Mike Blog. Described by many as a tear down in a nice lower elevation neighborhood; and after being marketed for sale by its former delusional underwater owner at $1.4M; it reverted to the lender [IndyMac] at trustee’s sale for $835K. It was then listed at the lowball price of $619K and in less than a week, engendered 16 offers [mine included]. Well it closed escrow Friday for $701K. This now sets the price bar for low elevation, nicer IV neighborhood tear downs.
The second is 346 Winding Way. 3,500 square feet of high end, attractive Tahoe mountain style construction in 2006 that for quite a bit of time was delusionally marketed for sale by a local [former?] mortgage broker at $1.7M. Well last Wednesday it closed escrow as a WAMU short sale [about $1.5M was owed on a first plus HELOC] for the mind boggling price of $925K [$261/square foot]. If the home didn’t overlook Highway 28, InclineJJ and me would have been all over this one! IMO this sale now sets the standard for the plethora of last summer’s $1.5M listings – if your price this summer isn’t under $1M [and the number of listings is noticeably on the rise], forget about it!
Now both of these sales prices are high compared to Reno/Sparks pricing, but IMO they represent the same kind of market forces. I feel Arrowcreek, St. James Village and Montreux need to sit up and pay attention because they’re prone to the same type of market conditions and they need to priced comparatively. Stated differently, I find it hard to believe ANY Reno SFR represents value at $2.2M!
BanteringBear
Smarten posted:
“Happy to report [not really “happy;” just following our John’s lead] two Incline Village SFR sales which I believe are indicative of the market. It was then listed at the lowball price of $619K and in less than a week, engendered 16 offers [mine included]. Well it closed escrow Friday for $701K.This now sets the price bar for low elevation, nicer IV neighborhood tear downs.”
Uh, I don’t think so, Smarten. One sale does not a market make. Like I said before, you might want to familiarize yourself with the term “knifecatcher”. You know, you really ought to lay off the real estate Kool-Aid, it’s beginning to distort your perception. You’ve been calling bottom now for nearly six months, and the market keeps going lower. How long until you’re totally full of it, and have zero credibility? This is not an attack, I’m being serious. Let’s revisit Incline Village prices in a few years time, so we can laugh at the Ophir Peak sales price.
GreenNV
Sales history on 5695 Lausanne:
4/14/2009 – $2,200,000.
4/30/2007 – $2,400,000.
7/15/2005 – $2,350,000.
2/21/2001 – $2,200,000.
The new purchaser used a $1,540,000 first mortgage from WFB at 5.0% interest-only for 10 years. On the same day, they sold 551 Silvertip in IV for $3,650,000 (that one is another story with a bunch of trusts and LLCs and may not have been a break even price). 10 days later, they took out a $97,875 hard money second loan (from a very interesting source!).
The 8 years with ZERO appreciation sticks out to me. My guess is that the second loan is to pay for some quick redecorating. I smell a flip / flop.
Reno Ignoramus
Perhaps one of our IV experts can help explain how this house mananged to be the only house in America that had essentailly no appreciation during the Greatest Bubble in History. Between 7/15/05 and 4/30/07 it appreciates $50K??
Between 7/15/05 and 4/30/07 claptrap 600 sq.ft. condos in Stead appreciated more than $50K.
This is strange indeed.
Smarten? InclineJJ?
marcus
I picked a bad day to stop sniffing glue.
BanteringBear
The Lausanne sale proves there are, still, some greater fools out there. Every million dollar listing is hoping to land one of these suckers. The odds are, however, stacked heavily against them.
smarten
Settle down BB. No one’s calling a “bottom,” whatever that may be. And no one has said these two sales have “made a market.” All I said was that the sales of Ophir Peak and Winding Way have set new benchmarks [for the reasons stated] for the rest of the IV SFR market. Maybe it turns out to be a temporary benchmark, maybe not, but I believe it’s a benchmark nonetheless.
You want to keep score; go ahead. Return to the Lakeview or Mill Creek subdivisions in IV a year from now and see what 1,700 square foot SFR ranchers are selling for. Right now there are a good number of similar homes for sale in these neighborhoods and they’re priced considerably higher than $700K.
Same exercise w/Winding Way. Very nice upscale construction that ended up selling for the very reasonable price [at least by IV standards] of $261/square foot [in the last seven months NOTHING has sold in IV at less than $218/square foot, and that was an old, POS, distressed offering up in the IV bleachers (i.e., geographically undesireable). Winding Way was very nice, nearly new, upscale construction at low elevation].
So let’s see where comparables are a year from now [I can tell you where comparable listings are right now and they’re considerably higher priced]; you keep score.
BTW, you keep stating “the [IV] market keeps going lower.” Since you’re a man of data, precisely what data are you relying upon which supports your conclusion? Now I’m NOT preaching that our market has gone higher, but if you look at the median sales price in a vacuum, YTD IV SFRs are UP 42%. Also for what it’s worth, sales volume is now identical to 2008 YTD as of the end of the first four months of the year.
So if you’re going to challenge my credibility and serve me Kool-Aid BB, would you mind putting a shot of the Captain in it?
BanteringBear
Smarten-
What’s happening in Incline Village, IMO, is that mostly higher end properties are selling (but at significant discounts) as the bottom has fallen out of the market. You state that the median price is up 42% YOY. That may be true, but can the same be said for PPSF? I’m thinking not! Median price can be very elusive- especially when the lower end is much weaker. That’s why the PPSF is important. I could honestly care less if the median in Incline Village went up 200% over the course of the next year. Prices WILL collapse, it’s just a matter of time. ALL asset classes are affected by what’s happening, and Incline Village is not “special.” Prices will crater just as they will in The Hamptons, Aspen, Holmby Hills, etc. No area will be left unscathed. It’s just taking a little while. I’m patient.
smarten
BB, I don’t disagree w/much of what you’re saying. It’s just that traditionally many have measured ups and downs in the real estate market based upon things such as median sales price, sales absorption, DOMs, etc. What you’re now suggesting [and BTW a measurement I suggested about a year ago that is more accurate in this market] is that price/square foot may be more important.
In the past I’ve said on this board that although the median sales price may not have gone down in IV, what one can purchase for that median sales price is heads and shoulders above what could have been purchased several years ago.
Will average SFR prices/square foot continue to drop in the near term future? I think so. But for quality construction like Winding Way, will it drop much below $261? I DON’T think so. But again, you keep tabs and we’ll take a look back in a year or so.
BTW, I’m very familiar w/that 551 Silvertip sale Mike pointed us to. That property was owned by a contractor who did a major remodel on the home and then attempted to sell it for at least two years. Originally he was asking in excess of $5M and only recently, did it sell for $3.65M. BTW, Silvertip was reported sold to the MLS as of 4/14 which at first blush led me to believe the purchase of Lusanne was part of a 1031 exchange [which may help explain the reported sales price of $2.2M].
Turns out my suspicions were correct. The seller of Lusanne and the purchaser of Silvertip was “The Ormiston [Albert and Rita Malconada] Family Trust.” The seller of Silvertip and the purchaser of Lusanne was John Ligon and Guila D. Turville as trustees of “The Guila D. Turville Residence Trust.” Although the transfer tax paid which appears on the face of the Lusanne deed equates to a $2.2M sale, given the nature of the transaction, I have grave doubts.
Let me opine differently, Neither the Ormistons nor Turvilles could sell their properties conventionally. So they were disposed of via what appears to be a 1031 Exchange.
Martin
But what’s up with Lusanne? It sells today for exactly for what it sold for in 2001? Surely we are not saying that IV values have dropped back to 2001 are we? I’m with RI, in that I find it very strange that this house showed essentially zero appreciation during all of the bubble years. Many houses at Lake Tahoe went way up in that time frame, and this house does……nothing?
What’s the story here?
BanteringBear
“What you’re now suggesting [and BTW a measurement I suggested about a year ago that is more accurate in this market] is that price/square foot may be more important.”
I’m certainly not suggesting this. I’m merely illustrating that there are times when it’s important to dig a little deeper to find out what’s really going on. The median is typically a good barometer. Only when we have extraordinary circumstances, like those of today, can it prove misleading.
marcus
Right, so you are suggesting that PPSQ is more important for comparative reasons than median price.
BB your an IDIOT!
geopower
sorry to interrupt a good argument with a question about the original post.
The part of the report I found most interesting is that median price seems to have dropped below what they show as the historic trend line for median ssb price from 1990-2002. But their graph only shows actual data back to 2000. Anyone know a good place to look to check of the price trend from the 90s really fits 2000-2002? I’ve only been in Reno 3 years, so I don’t know what was going on here in the 90s.
thanks
Sully
geo: Guy posted these numbers a while back, I added the percent increase over previous year, this might give you a rough idea of how stable the market was prior to 2001.
Year Median Sold Price
1998 $136,000 –
1999 $141,500 4.0%
2000 $148,000 4.9%
2001 $155,500 5.1%
2002 $169,000 8.7%
2003 $195,000 15.4%
2004 $258,000 32.3%
2005 $318,000 23.3%
2006 $305,000 (4.1%)
2007 $285,000 (6.6%)
Sully
Also, 136,000 in 1998 is roughly 177,500 in todays dollar.
geopower
Thanks Sully
Waldo
“136,000 in 1998 is roughly 177,500 in todays dollar.”
Yea, sure. Only if you use the US Gov’t official CPI Index. You know, that’s the totally cooked number they come up with. Show me anybody who has experienced only 28% inflation in the cost of food, gas, medical care, college education, over the past 11 years.
Oh wait, those are all the things they exclude in their calculation. I forgot.
Sully
Waldo, I did say “roughly”. If you really want to get into it, the number would be much higher, but then who knows what the basket of goods consist of anymore, as it changes whenever an item gets too expensive. 🙂
Worried Guy
Well the today’s $’s doesn’t seem to be doing much for inflating real estate anymore…A lot of inflationistas forget that fact…The downward spiral will effectively reduce pricing power in all the basic essentials over time also as the $177,000 today becomes $148,000 in future $’s….Get ready for endless rants from inflationistas to say it could never happen.
Worried Guy
Check that…$148,000 in today’s $’s becomes $177,000 in future $’s…
smarten
BB,
IMO our [blog] job, so to speak, is not to “care” about what happens in the local real estate market but rather, to interpret it. So when you state you “could honestly care less if the median in Incline Village [goes] up 200% over the course of the next year,” you’re no longer listening to the market; you’re becoming a cheerleader [“it’s just taking a little while. I’m patient”] – BTW, no personal offense intended. Stated differently, on one hand you say: “let’s revisit Incline Village prices in a few years time, so we can laugh at the Ophir Peak sales price.” Yet on the other you say you: “could honestly care less if the median in Incline Village [goes] up 200% over the course of the next year.”
I believe we’re seeing market forces that I personally can’t recall seeing before; median pricing in IV [sorry, can’t tell you about The Hamptons, Aspen or Holmby Hills] going UP while REAL “prices” are [to use your words] “cratering.” What this is telling me is that the median sales price may no longer be an accurate barometer of the market [and BTW, it may no longer be an accurate barometer of the Reno/Sparks either (thus so much for your belief that the median sales price in Reno/Sparks may drop to $149K)].
Pricing in IV has already cratered [the Ophir Peak and Winding Way examples I shared are evidence of this observation (and I could provide others)]. It’s just that the casual observer can’t tell by looking at YTD sales nor the median sales price in a vacuum.
I guess what I’m asking BB, is how far down in price does an average property wherever have to drop before you feel it has reached bottom? According to Guy, there were actually some sales in the Renaissance subdivision of Montreux a couple of years ago for as high as $1.25M-$1.4M. So if something in this [higher end] subdivision closes within the next two weeks [that Delacroix property I commented upon several weeks ago in particular (which is now in escrow)] at let’s say $575K [a 55%-60% drop in value], in your opinion is that enough and if not, as a friend of mine used to ask, “what’s the par on this hole?”
john
Smarten, you wrote, “IMO, the only “more” one gets for his/her money in Montreux [compared to somewhere like Incline Village] is square footage and monthly HOA dues”
This is completely wrong. If you buy right in Montruex for say around $300 per sq foot, you can get super premium construction that blows away the “Tahoe mountain style construction” you refer to for $261 per sq foot. (a “mind boggling” low per sq ft price, as you called it.)
$300 in Montreux buys you 16 inch cement core, stone covered walls with an R49 insulation rating, extensive mature landscaping, built in outdoor BBQ, fridge, fire pit etc., 3-4 car 1500 sq ft garage, premium Italian sold bronze fixtures, top of the line Bosch appliances, smart wiring throughout the house with integrated security, stereo, lighting etc. I could go on and on. IV houses in this price range don’t even come close in quality. But you wouldn’t know because you never “come on down to Montreux.”
With regards to BB’s ongoing blanket assertion that anyone buying today in the Reno super premium market is buying at bubble prices, BB, I ask you this. If you are buying at or below today’s replacement cost, and keep in mind that it’s a lot cheaper to build a house now than 2-3 years ago the peak of the bubble, how are you in any way buying at a bubble influenced price? BB, you seem to automatically conclude, without even reviewing sales history, as in the case of Lausanne, that anyone paying 1 mil and up in today’s market is a fool buying into the bubble, getting ripped off solely because they are buying a million plus house in Reno. What if they are buying below cost? How can that not be a good deal? Sure, maybe the deals will get a little better than cost, but not much, as we have seen with YTD sales in both IV and Montreux. There are people with money, waiting in the wings to buy at these levels. At or below cost, the high end in these two markets moves, and rightly so. BB, your same old unsubstantiated Bantering BS is getting old.
john
To clarify, I should have added that my definition “cost” does not include the cost of the land. That comes with my version of a “good deal” for free. So buying below replacement cost means the land comes with the house at no charge.
DonC
Good report. There is a little cheer leading but by and large it’s very limited and tangential to the data. The only part I’d disagree with is that while the Reno market may have behaved somewhat differently than the national market — but not really — it’s consistent with the western market, which is of course mostly California. What this report shows is what we’ve seen in the west in general. It’s not idiosyncratic.
As for what happens next, I’ve said before there are two types of people looking at markets: those who know they don’t know what the market will do next; and those who don’t know they don’t know what the market will do next. Markets are not strictly rational and you can go broke or miss opportunities being rational and right. Predicting markets has nothing to do with fundamentals and everything about anticipating today what other people will think tomorrow. Essentially it’s just guessing.
At the top of the bubble the market was roughly overpriced by 30% relative to income and interest rates. Now it’s fairly priced or slightly under priced, depending on how you view it. Does this mean prices will bounce back? Probably not. People have memories and they tend to overemphasize what has happened in the very recent past. Plus there is still a lot of inventory, and doubtless foreclosures are not at an end.
On the other hand the data doesn’t lend much support to a “falling knife” interpretation. I’d also question the notion that the next two or three months will tell the tale. We could see another big drop. You can only see a bottom when it’s in your rear view mirror, and that will require employment to recover.
Smarten — I’d wonder how the stock market affects the IV real estate market. The market has had a very good run lately and that may be shoring up IV real estate prices. Having your portfolio go up a significant amount can do wonders for your purchasing bravery (aka the wealth effect). Also, and most importantly, good luck with your purchase. Hope it works out for you.
smarten
Thanks DonC –
I personally don’t think the recent run up in the stock market has had much if any effect on IV SFR resales. However [and like other places], I think the crash of the last 6 months has!
Coincidentally I was speaking to an agent last week who had represented a client who last November had an accepted offer on an IV property that was very fairly priced for what it was. The stock market had just taken its first real hit; she was torn as to whether/not to pull her money out of the market go forward w/her purchase; and her stock broker was pushing her to stay in the market. Well the client listened to her stock broker and when the market didn’t rebound and a good amount of her wealth evaporated, she got cold feet and bailed on her home purchase.
The home came back on the market [at a lower price], quickly went into escrow [again] and on December 29 of last year closed. The agent lamented to me that if her client had only listened to her instead of the stock broker…
BanteringBear
Smarten-
First off, I don’t have a “job” here, and I answer to nobody. You can try to nitpick, and twist and distort things I say, but you can’t put words in my mouth no matter how hard you try. When I said I “could care less”, perhaps I meant I “couldn’t care less”. BOTH are acceptable in the English language, and I gather that most readers understood what I meant. If nitpicking makes you happy, by all means carry on. Calling me a “cheerleader” is quite desperate on your part, IMO, but I’m not going to get into another pissing match with you. We’ve had our share of those, and I’m not going there anymore.
I think you need to re-read my posts, because we’re in agreement insofar as the IV median’s inability to accurately depict the weakness of the market. I DO NOT agree with you that the median is not indicative of the current malaise of the Reno/Sparks market. Quite the contrary. A sub $200k median speaks volumes about what’s happening- especially as it pertains to median incomes. I would never suggest that the median is the be-all-end-all, as there are many criteria to consider and digest for anyone interested in purchasing a house, or researching a particular market.
You ask: “I guess what I’m asking BB, is how far down in price does an average property wherever have to drop before you feel it has reached bottom?” Well, in my OPINION (got it DonC?), that varies from market to market. As everyone knows, certain markets have huge inventory problems (it’s NOT one size fits all DonC), and IMO they’ll fall well below what local wages afford. Reno/Sparks happens to be one of these.
Other, smaller markets are not so reliant on local wages but other factors. I’ve always maintained that Incline Village is a different animal. I still believe that. But, I don’t believe in the current pricing structure. It’s all conjecture, but I’d look for early to mid 90’s prices NOMINALLY for an answer to wherein the bottom lies for the greater Tahoe area. Aggressive? You bet. But I don’t believe in this economy, and deflation, wage, and wealth destruction are going to turn second home markets on their collective ears to put it politely.
As far as the Renaissance home goes, I have never even seen those, but 60% off sounds like a good start to me. That’s more than in line with what the Reno/Sparks market has depreciated as a whole.
John- I agree with a few of your points regarding PPSF. But, after reading your last sentence, rather than post a lengthy response, I’d just suggest you gloss over my posts. The feeling is mutual, and, unlike Smarten, you haven’t gained an ounce of my respect.
DownButNot Out
Smarten – I would venture to say the agents client ‘guessed wrong’, which given the facts at the time didn’t seem to be too poor of a decision. But as an example it’s a great one for Don C’s point, which is she held off buying when her stocks went down, therefore the inverse could be true, that others might buy when their stocks are up – even more so in a volatile market they may not be comfortable in.
On another subject – we should all care in IV goes up 200% in the next year, as this would obviously signify something much larger than what has been thought of here. Hopefully that comment was meant in the context that the percentage IV might go up wasn’t germane to the point being made.
Worried Guy
Yeah Real Estate and Stocks are declining in Tandem (Guess she would have lost in both ways)…Has the client ever heard of the power of Cash?…I guess that is foreign to Real Estate agents these days….
Back2Basics
I think the data from Sully/Guy is interesting. Since the market is doing a major post-bubble correction, I thought it would be interesting to estimate where prices would have been without a bubble. Given a stable market based on pre-2001 data, it looks like Reno real estate was gaining 4-5% annually. So in a normal world this is what prices might have looked like:
5% gains after 2001:
(most generous scenario)
2001 $155,500 —
2002 $163,300 5.0%
2003 $171,400 5.0%
2004 $180,000 5.0%
2005 $189,000 5.0%
2006 $198,500 5.0%
2007 $208,400 5.0%
2008 $218,800 5.0%
4% gains after 2001:
(more realistic scenario)
2001 $155,500 —
2002 $161,700 4.0%
2003 $168,200 4.0%
2004 $174,900 4.0%
2005 $181,900 4.0%
2006 $189,200 4.0%
2007 $196,800 4.0%
2008 $205,600 4.0%
3% gains after 2001:
(most conservative scenario)
2001 $155,500 —
2002 $160,200 3.0%
2003 $164,900 3.0%
2004 $169,900 3.0%
2005 $175,000 3.0%
2006 $180,300 3.0%
2007 $185,700 3.0%
2008 $191,200 3.0%
Hopefully this nosedive correction is taking us back to normalcy? True bottom may not be until the median of regular sales hover just above 200K (not just short sales/REO’s)
Interpret how you’d like.
CommercialLender
Absolutely amazing how much has been said here over so very little: a few homes in the ultra high end being sold. Everyone go outside and enjoy the spring why don’t you! 🙂
Speaking of which, doesn’t “the spring” bring the market somewhat back to life each and every year, which might serve to explain these few home sales as much as any of your collective analyses?
No offense intended to any of you, but this topic has gotten long and not that helpful from a big picture perspective.
****
If anyone cares, commercial real estate continues to suck a whole lot of wind right now. We feel the turning point was not until say Dec or Jan and has been steadily going downward ever since. This industry clearly lagged the single family industry’s troubles. So, while I might be too close to it to be perfectly objective, I think there is an unfortunate ton of bad news and press that will continue to negatively effect this industry and with it the overall health of the economy… just for what it is worth.
inclinejj
The new purchaser used a $1,540,000 first mortgage from WFB at 5.0% interest-only for 10 years. On the same day, they sold 551 Silvertip in IV for $3,650,000 (that one is another story with a bunch of trusts and LLCs and may not have been a break even price). 10 days later, they took out a $97,875 hard money second loan (from a very interesting source!).
Thanks GreenNV!!!!
Why are we comparing Montraux in Reno vs Incline Village??
billddrummer
It is interesting to see that the non-bubble median would be about what is now the median. The only problem with that is that 80% of the sales are distressed, and as a consequence the median will more than likely overcorrect to the down side before it resumes rising based on nondistressed transfers.
In the meantime, rent.
And to CL,
That’s a singularly disturbing trend we’re seeing as well. Well-secured loans just a year ago are now impaired, forcing collateral calls, major principal paydowns or worse. And vacant buildings, particularly in the industrial/commercial area, are popping up seemingly everywhere. No longer can you support a 5% vacancy/credit loss factor locally–not with the South Meadows submarket at a 33% vacancy rate.
I saw a report from one of the commercial brokers here that said no spec commercial building would come on line in 2009. That’s remarkable. But there’s no lending appetite for spec commercial construction, even if the borrower is stronger than a 10-yard row of ripe garlic.
Commercial may get far worse than residential ever did…
And did anyone notice the $27 million NOD filed on the Caviata project at Kiley Ranch? I guess leaseup has been slow.
Otto
John,
No offense, but anyone using the term “replacement cost” doesn’t understand markets.
Or put another way, when trying to put a “value” on a piece of real estate, use zero as your replacement cost. That way you won’t get burnt.
I haven’t been to Reno or Montreux, but from what I’ve read on this blog, and I know I am going out on a limb here, I would put the replacement cost of a house in Montreaux at about 120K.
DownButNot Out
Otto- I have to disagree with you. I believe if you can buy property – I don’t mean indiscriminately – that is less than the cost of the bricks and mortar, you have a good long term investment. Therefore the term replacement value is a valid term. I’m not suggesting all houses that cost less than what they cost to build are good investments, but new houses are constructed in the future, and they will be, then the similar house you buy under construction cost will be a good value, IMO. Especially if the land and improvements are included in that equation.
And yes construction costs and labor rates are falling, but permits and mitigating fees are rising equally, if not faster.