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

28 comments

1. 

   July 4, 2009 at 10:37 AM

   BanteringBear

   Here we go again. A small increase in the median, a market loaded with speculators, Smarten “snapping up” a house, and the bottom calling gets louder. Pay no attention to the MASSIVE numbers of foreclosures in the pipeline, the continuing deterioration in the job market, falling incomes, or any other news which foreshadows what’s to come. By all means, carry on with the shilling. It’s entertaining.

2. 

   July 4, 2009 at 1:07 PM

   Reno Ignoramus

   If the median household income in Reno-Sparks is about $55K, and if you apply the 3.5 times household income standard, then we are now at the point where the median household can afford the median priced house.

   But before we all start falling over ourselves proclaiming the bottom has arrived just because the median went up from May to June, I suggest a more measured stance. Guy advises us that last month there were 511 sales, and 47% of them were REOs. So, 240 REOs sold last month. Not bad. However, last month there 358 TDs recorded. At least 95% of those TDs went to the bank. So, there were about 100 more houses that became REO than REO houses that sold last month. In other words, bank REO inventory increased last month, it did not decline.

   Now I believe we are seeing somewhat more expensive houses become REO. We are also seeing, at least a little bit, that after 3 years of denial, that some sellers in the middle to upper price ranges are lowering their asking prices. As these nicer and more expensive houses sell either as REOs or because sellers are getting some religion, we are going to see some increase in the median. The REO inventory is not just a bunch of houses in Stead and Cold Springs anymore. As these nicer and more valuable houses work their way into the sales data, the median is going to be impacted upward at some point. Now I seriously doubt that the guy who paid $800K for his Somersett house in 2005 and who sells it today for $450K is going to be much impressed with some uptick in the median.

3. 

   July 4, 2009 at 1:24 PM

   Raymond

   Yes I suppose that REO properties like the Melton house listed for more than $1 million will sell for more than the $180K median…..

4. 

   July 4, 2009 at 4:00 PM

   FutureRenoHomeBuyer

   I believe RI nails it. Increasing median is probably the result of the mid to high end finally coming down in price to levels where buyers will make offers. As those higher (delusional) prices come down, and the properties get sold, overall medians will increase. It still shocks me to see properties above the $500K level with list prices equivalent to 2004 or later pricing. Until they are at or below 2002/3 levels (beginning of the bubble), they’ll likely stay on the market. Human nature, though, to think that the $850K appraisal from 2006 still holds for “my” property. Really, $450K might be necessary to make it move.

   Mark Hanson at fieldcheckgroup.com provides a great rundown of what’s happening in California. I believe it’s not a stretch to apply the same logic to Nevada. In fact, I see these stats as confirming that Reno is pretty well tracking with California — meaning that reduction in the high end prices gives the appearance of increasing median sales prices. 2010 is the year of the mid to high end collapse.

5. 

   July 4, 2009 at 4:49 PM

   converter

   Coming to live taping of reality show with me and the d block fam june 6th 3pm – 9 at the juice bar 125th street between park and madison!!

6. 

   July 4, 2009 at 4:49 PM

   3niner

   RI makes an excellent point. The crude statistics we have available make it difficult to extract meaning from the data.

   What’s really needed is something that compares apples to apples, some measure that takes into account size, quality, features, location, etc., but ignores current prices levels. With that information, it would be possible to break houses into meaningful groups for comparison.

   Unfortunately, I know of no database that contains this information. Interestingly, appraisers must come up with some sort of score, of this sort, before applying current market conditions to get an appraisal price. It would be valuable information if all of these scores were pooled somewhere.

7. 

   July 5, 2009 at 7:06 AM

   smarten

   I too agree with RI. And we talked about it here on this blog two years ago. As demand went down, we expected that by and large, so would the median sales price [which made this traditional measurement pretty much irrelevant]. We expected there would come a point where demand would return and as the numbers began to increase, so would the median sales price [Guy, I and others extrapolated that based upon historical norms, it would be somewhere in the 9-12 month range]. So what we’re seeing now is not unexpected. And I also agree that sales at the high end of the market are completely unnecessary in order for the median sales price to start increasing. For June, a single sale at $183K would have moved the median sales price up AS MUCH as one at $1.5M!

   I also agree with BB that one month doesn’t signal a “bottom” [whatever that term may actually mean]. Remember, demand is greatest during this time of the year; prices are down; so are mortgage rates [as long as you’re not looking for more than a $417K loan and you’re a wage earner]; and, there’s still that first time homebuyers’ tax credit out there to sweeten the pot. Let’s see what happens over the next 3-4 months before we start jumping to conclusions.

   One more point I would like to address and it’s RI’s comparison of median income to median sales prices. For most of my life I lived in the San Francisco Bay Area. For as long as I can recall, less than 20% [and for many years, less than 15%]of median income wage earners were able to afford a median priced home. Yet that never stopped prices from increasing and sales from taking place. And I’m not talking about sales funded by the “easy [mortgage] money” that was available 4 or so years go. I’m going back 30 years or more.

   So who exactly were these “buyers” who could afford to keep pushing up prices in the Bay Area? I submit it was the “move-up” buyer. The guy [or gal] who purchased 30 or more years ago; saw his/her home increase in value; decided to pull his/her equity out of the home and roll it over into something more expensive; EVEN THOUGH his/her income had not kept pace with median sales prices. Traditionally this was viewed as a “healty” market.

   I believe this type of market will eventually return. And when it does, I don’t believe we will be comparing what the median sales price should be based upon the median wage earner’s income. I’m certain BB disagrees and that the “norm” will be lower prices for years to come. But I believe BB also thinks long term interest rates are going to remain low for years to come.

8. 

   July 5, 2009 at 10:29 AM

   billddrummer

   If I recall, I posted the same thing last month too.

   It’s good to see that the proportion of distressed sales is declining. But as Smarten said, since there are still more new TDs entering the pipeline than are being cleared, there’s still a massive overhang in inventory, despite the uptick in sales activity.

   And I agree with the group that the median is rising because of the higher value homes selling that weren’t selling a year ago. Whether it’s because sellers are lowering their prices, higher value REOs being liquidated, or a combination of the two, it’s a function of the mix of homes being sold, rather than an indication of a healing market.

   Although now the median family income can afford a median priced home. If you have 20% down and good credit.

   I wonder how many people still have 20% to put down?

9. 

   July 5, 2009 at 12:07 PM

   BanteringBear

   People believe what they want to believe. Smarten bought a house, and wants to believe that he got a great deal (that remains to be seen), and that real estate prices have bottomed, and will bounce back.

   I couldn’t disagree more. I think the prices we’ve seen over the past 30 years, as they pertain to incomes, are gone forever. This country has changed. The middle class, pretty much the bread and butter of the market, is steadily sinking into lower class. This systematic destruction is due to greedy, corrupt politicians and businessmen who further their own interests at the expense of the common man.

   30 years ago, a CEO of a large corporation could expect to earn roughly 20-30x the pay of their lowest paid employee. Due to a number of factors not limited to greed, fraud, corruption, poorly constructed trade agreements, poor immigration controls, and weak labor laws, those salaries ballooned to, in many instances, over 500x. At the same time, opportunities for financial advancement for the middle class dried up. In short, this was a great transfer of wealth from the middle class, to the upper class.

   This is a very, very abbreviated synopsis of the crisis we find ourselves in, but to understand why housing prices won’t be coming back, and to anticipate what is on the horizon, one must see the situation for what it is. This crisis isn’t something that can be easily fixed with some stimulus package, or home buyer credit. It’s about incomes, jobs. It seems the politicians are slowly waking up to this fact, but the current batch in control aren’t the ones who will lead us out, for they’re the ones who brought us here. It will take new, fresh faces and ideas, but god only knows how those voices will be heard.

   At any rate, and regardless of the speculative buying taking place right now, I see weaker and weaker housing demand as we move forward, and for the indefinite future. As many have pointed out, there is a consolidation in households which pressures not only sales, but rents. The jig is up.

10. 

    July 5, 2009 at 3:09 PM

    Sully

    BB, my cousin did a paper on the CEO salary thing. It was 1500x not 500x. I couldn’t believe it at the time, that was around 2006, but I do now. And – that number was the average, I wonder how much more the Goldman Sachs executives are getting….

11. 

    July 5, 2009 at 3:53 PM

    DonC

    RI’s point is a good one, and one I’ve tried to make before — the median sales price says more about what is selling than what any particular house might sell for. Just as the subprime foreclosures pulled the median down, so will the Alt-A and Option Arm foreclosures push the median price up. But in both cases the price of housing is still down.

    It’s difficult to understand how you get upward pressure on housing prices until the employment improves.

    Personally I think we’ve turned the corner and are putting in a bottom, but if everyone decides we can go back to business as usual we’ll be headed back down again. The banks are still in a world of trouble and foreclosures are a huge drag on the economy.

12. 

    July 5, 2009 at 4:01 PM

    FutureRenoHomeBuyer

    Just picked up on an article at the WSJ describing the problem of lousy construction during the boom.

    http://online.wsj.com/article/SB10001424052970203872404574258531574049434.html

    “The furious pace of home building from the late 1990s through the first half of the 2000s contributed to a surge in defects, experts say. It caused shortages of both skilled construction workers and quality materials. Many municipalities also fell behind inspecting and certifying new homes.”

    Buyer beware for any cookie cutter stucco palace built from the late 90’s to the present (and I wouldn’t exclude Montreux and the northwest). I always said I’d never buy one of those cardboard castles, and it seems my hunch was correct — over 17% with two or more major defects.

13. 

    July 5, 2009 at 5:28 PM

    smarten

    BB, just so we’re on the same page – I agree with you that my glasses may be colored. So I could very well be out to lunch. But at least it’s my lunch, and I walked into the diner with my eyes open.

    Had dinner with some folks last night I’d never met before. One fellow made what I thought was a very interesting point. Since our economy is by and large fueled by consumers rather than the “things” we make, there was nothing to support the stock market in 2000 when it crashed. Afterwards those seeking to prey on consumers had to find a new jig – and it became real estate. Now that real estate has crashed and this jig is up, it’s time for those seeking to prey on consumers to find a new vehicle. Not sure what it’s going to be but just like the stock market recovered in 2002 or so, so will real estate – until the next day of reckoning!

14. 

    July 5, 2009 at 8:58 PM

    B M

    “2010 is the year of the mid to high end collapse.”

    Yes. The data I found seem to tell me the same for Reno area.

15. 

    July 5, 2009 at 10:26 PM

    big baby

    “Not sure what it’s going to be but just like the stock market recovered in 2002 or so, so will real estate”

    actually the stock market didn’t “recover” untill 2003 almost 2004.
    ALSO the stock market crashed AGAIN! we are now BELOW 2002,2003,and 2004 levels..

    I don’t expect any big run up in real estate prices anytime soon.
    Smarten you bought too soon..

    OWNED!

16. 

    July 5, 2009 at 10:31 PM

    big baby

    in a meager 3 months from now smarten will realize he could of bought a home just as nice for 25-35k LESS !

    in 6 month he will be looking at -50k equity

    In 1 year it will be painfully clear that he over-paid by about 75-100k!!!

    While I’m sure he got an OK deal he didn’t get a GREAT deal..
    patience is a virtue, some just don’t have it!

    EPIC FAILURE!

17. 

    July 5, 2009 at 10:32 PM

    big baby

    I say “ok” deal to make you feel better smarten..

    sweet dreams 🙂

18. 

    July 6, 2009 at 5:12 AM

    inclinejj

    I believe this type of market will eventually return. And when it does, I don’t believe we will be comparing what the median sales price should be based upon the median wage earner’s income. I’m certain BB disagrees and that the “norm” will be lower prices for years to come. But I believe BB also thinks long term interest rates are going to remain low for years to come.

    Like I been saying, the markets will not come back except the first time buyer market and speculataors waiting to pick up stuff in the next year or so..The mid to upper markets will not come back till money starts flowing and the lenders start wanting to fund jumbo loans once again..

    Everything is full doc these days and the lenders are dotting the I’s and crossing the T’s once again..

    Wall Street and Banks and lenders are all greedy by nature and they need the profit to fuel the machine..

    Will money start to flow in the lending business once again..sure, will they remember the pain suffered by this crash. who knows..

    20 years in the business 4th major boom and bust cycle..

19. 

    July 6, 2009 at 8:18 AM

    john

    Sorry to be off topic, but several of you asked for updates on the pending Montreux sales that I wrote about a few weeks ago.

    6616 Jung closed on 6-30 for 1.9 mil which was asking. This house was builder owned and never occupied.

    16840 Delacroix closed on 6-30 for 744k. Asking was 799k. This house was also builder owned and never occupied.

    The larger high quality more expensive homes and the smaller lower quality and least expensive homes seem to be selling in Montreux, while those in the middle, size, quality and price wise seem to languish.

20. 

    July 6, 2009 at 8:40 AM

    Phil

    I just refied my house at 4.875%. It took almost 8 weeks to get the loan!

    The appraisal was for 408K on a house which I paid 680K and put in about 85K worth of improvements. Ouch!!!

    Anyway the lender had 7 more contracts to finish that day, with half being new loans.

    Now if only we can get more jobs here. With a 10% unemployment rate I have my doubts if this downturn is over.

21. 

    July 6, 2009 at 9:47 AM

    billddrummer

    To Phil,

    I saw a great analysis of unemployment numbers that suggests the real unemployment rate is closer to 15%:

    http://seekingalpha.com/article/147068-true-unemployment-numbers

    The author contends that because the average work week is falling relative to the past, and there are more part time workers who want full time work (or more part time hours), the stated unemployment rate should be adjusted by the number of hours worked in relation to the number of hours avaiable for work.

    And if you look at the sectors here that suffered the most (construction, FIRE) it’s not hard to make a case for a much higher unemployment rate than 10%.

    I’d guess it’s 30-35% in the construction industry, upwards of 15% in FIRE (finance, insurance and real estate), and rising past 15% in retail, despite the opening of Legends. There’s still been a net decrease in leased retail space, with Circuit City, CompUSA, Linens & Things, Mervyn’s, and a raft of smaller retailers closing over the past 18 months.

    Btw, wasn’t Legends supposed to be like Summit? What happened to the high end stores that were supposed to take spaces there? Looks like an outlet mall to me. Which was what was on that parcel when Helms owned it.

    It failed.

22. 

    July 6, 2009 at 9:56 AM

    billddrummer

    Another thing:

    The chart that shows the average listing price for Reno has finally started to reflect a bit of reality. The average has dropped below $360,000, which is 33% lower than a year ago.

    Perhaps rationality is beginning to return to the market.

    That’s not a bottom, but it’s encouraging to see that listing agents are starting to respond to the true market dynamics.

23. 

    July 6, 2009 at 10:33 AM

    big baby

    IMO the low end 200k < has bottomed out for the most part.

    You can also find some really nice deals in the 200-300k range, this segment is reaching stabilization as well.

    the 500k and over segment is still hurting, and I could see it staying like that for at least the next year.

    1,000,000 and up? in NO WAY is this segment bottomed or stabliizaed.. anyone who thinks it has is still drinking kool-aid..

    I will be in maui for the next 12 days, so take care..

24. 

    July 7, 2009 at 2:34 PM

    homepop

    I have been following on Zillow a house we sold about a year ago. We sold it for $530K last July. A month or two ago, Zillow had it valued at just about $430K. Then, suddenly, in the past few weeks Zillow says the value has gone UP $8K in the past 30 days.

    Can this be related to the increase in median price? I am very puzzled by it…

25. 

    July 8, 2009 at 8:18 AM

    billddrummer

    To homepop,

    I believe it is related to the rising median, but as we’ve discussed, it’s more a matter of higher value homes being added to the closing mix in a higher proportion than in the past.

    Don’t expect it to rise much more.

26. 

    July 9, 2009 at 8:44 AM

    homepop

    Thanks, Bill.

27. 

    July 9, 2009 at 10:19 AM

    Sean

    homepop, recent sales activity in the area can have a dramatic effect on your zillow estimated home value as well. If the home next door sell’s for $2 more per square foot and your home is 4000 sq/ft there is your $8000 addition. Now if next week the home 3 doors down sells for $10 less per sq/ft expect a very sharp drop. Zillow is a good starting point of values but no where near accurate in the custom/semi custom non cookie cutter subdivision areas.

28. 

    July 19, 2009 at 1:05 PM

    homepop

    Thanks, Sean. Sure enough, it has begun to fall again…