As Mike indicated in his last post, I was indeed in Iowa. Presently stuck at the Salt Lake City International Airport. Delayed Delta flight from Minneapolis caused me to miss my Delta connecting flight by five minutes…but that’s another story.
Now I’ve got four hours to kill at SLC International. The good news is the airport offers free wi-fi throughout the terminals. Woot!
Catching up on local news I came across this article in yesterday’s RGJ:
High-price homes struggling during economic downturn
…thought I’d forward it to the blog for discussion. I’ll try to get back to blogging later this week. Thank you for your patience.
big baby
Any comments smarten??
oh yea thats right you don’t care!! LOL
SkrapGuy
There is absolutely nothing in this article that has not been discussed, over and over, on this blog. This blog is anywhere from 6 months to a full year ahead of the MSM. I think it was RI or somebody who commented at least a year ago about the “vapor lock” in the market and the almost total lack of move-up buyers. Can anybody remember any time when the RGJ or the national media had something to say that had not already been talked about here?
Martin
I agree this is another RGJ “news flash” about the obvious. This blog has been talking about the moribund upper end of the market for well over a year. It’s nice to see the RGJ only a little more than a year behind the blog.
john
On topic, and because several of you have asked for updates on Montreux pending sales, 20525 LATOUR WAY closed 7-9 for $1.30mil. Asking was $1.65.
This house was builder owned and never occupied and very nice. I am not a builder but I don’t believe this could be built today for that price. When you compare this house to Smartens recent purchase the case is once again made that you get a whole lot more for your money in Montreux than you do in IV in terms of quality of construction, finishes, sq. footage, garage size etc. So if you don’t mind the lake being 25 minutes away, yet appreciate having an airport, Home Depot, Whole Foods, much better schools etc. 20 minutes away, then there are some great deals to be had in Montreux right now.
billddrummer
Back on topic,
That’s why blogs like this exist. The MSM seems almost as clueless as our ‘elected leaders’ about what’s really going on ‘in the trenches.’
What I don’t get is how they can charge 0.75 a copy for it.
billddrummer
And to john,
Suppose (like smarten), you’d prefer to live at IV than in Montreux?
While I agree with you that the properties in each region are similar in character, if someone makes a decision based on their desires, why not support it?
From smarten’s posts, I never got the impression he wanted to live anywhere BUT Incline, which makes comparing his transaction to yours a fruitless exercise.
In your opinion, Montreux is a “better buy” than IV. Unless you want to live at Incline. Then, no perceived amenities available at Montreux will counterbalance that desire.
As long as smarten is happy with his purchase, I extend my congratulations to his family.
DownButNot Out
BD said ‘That’s why blogs like this exist. The MSM seems almost as clueless as our ‘elected leaders’ about what’s really going on ‘in the trenches.’
MSM and our elected official are joined at the hip and aren’t speaking to the readers of this or other similar blogs, as we’re certainly not their target audience. Why, I can’t comprehend. It seems to me if ANY newspaper actually told it like it was rather than worry about tabloid journalism, they’d have a following far greater then they currently have.
billddrummer
To DBNO,
That’s something Corey Farley wrote about in his RNR column before the RGJ hired him back. If newspapers provided timely, accurate and entertaining content, they wouldn’t be struggling with lost readership, lost credibility and lost sales.
I only read the newspaper because my employer subscribes. In the belt-tightening area that is 2009, I expect that perk to go away shortly.
I get the coupons in the mail every Wednesday.
smarten
I’ll comment Derrick; and again, we’ve talked about this before on this blog.
What is the “high” end of the market? According to the article, it’s SFRs priced in excess of $1M. Well in IV, that’s barely the median.
As I’ve commented many times before, the “deals” in IV [as well as Reno I might add] have been at the extreme lower and upper ends of the SFR market. It’s essentially everything in the middle that has been sitting UNLESS aggressively priced. John’s example in Montreux and our home were both aggressively priced and for that reason, IMO, represent good values in a poor overall market.
I commented before that 90% of the SFRs in IV priced at under $2.5M represent something most would not want to live in based upon their current asking prices. Our home was the exception to this general statement so my views haven’t changed one iota!
Now commenting on John’s Montreux sale, I haven’t seen the interior of the Latour Way property. But I seriously doubt the quality of construction matches ours which I’ve commented is very, very high end. I presume the square footage is greater for the Latour Way property which makes the price/square foot lower than what we paid – but that’s okay for two reasons. First, a deal on something you don’t really need [here square footage] is really no deal at all. Second and with all due respect Senator, I know Monteux and it’s NO IV. As Billdrummer accurately states, my wife and I DIDN’T want to live in Reno; we wanted to live in IV. To us the skiing, views of the Lake, [discounted green fees at IV’s] golf courses and beaches mean a whole lot more to us than accessibility to a Home Depot [there’s a pretty nice Ace Hardware in town – good for most mundane tasks], Whole Foods [I abhor organic (and besides, we have a very nice Raley’s in town and a very nice Safeway in Kings Beach about 5 minutes away)], public schools [we have no minor children] and an airport [we rarely travel anymore because we already live somewhere we’d otherwise travel to for a vacation – and besides, being within 45 minutes of a major airport is just fine (when we lived in the Bay Area, we were 45 minutes away from SFO, so what’s the big deal?)!
So concluding, the only “high priced” IV homes that are struggling in this economy, are THE OVERPRICED ONES! So what’s new?
So the “greater value” Montreux offers is really in the eye of the beholder, and that’s just not us [sorry John].
big baby
good to know smarten..
personally I’m happy letting my 550k collect interest, because each month the deal only get getter..
cheers
john
Smarten – here is the tour. I’ll let you decide. This was the model house so it’s tricked out in every way possible.
http://tour.circlepix.com/tour.htm?id=475029&mls_tour=1
Based what I have seen of both houses this one is higher end. Keep in mind that it also has 12 inch cement core walls which adds quite a bit to the construction costs, and does wonders for energy efficiency.
I am aware that you have no desire to live in Montreux. My post was obviously not for you since you have already purchased a house, but for others considering between IV and Montreux. Many people move down the hill from IV to Montreux for the reasons I pointed out. An added bonus now is that Montreux prices are significantly lower than IV per sq foot for much higher quality homes.
smarten
John –
Now that I’ve seen the tour of the home in Montreux you mention, I can categorically state it’s not nearly as nice as ours [nor is it comparable to those $2M+ homes on the golf course (note the cheap plumbing fixtures, no sub-zero/its equivalent refrigerator in the kitchen, cheaper tile in the bathrooms, standard height interior doors notwithstanding higher ceilings, etc.]. This home is in the newer “The Chalets” subdivision of Montreux [a cut above Renaissance but markedly below the many custom homes constructed in Montreux]. And at $1.3M, I think the buyer OVERPAID! I don’t have the address but last weekend there was a Montreux home featured for sale in the RGJ for $1.27M that had been offered originally at over $2M. Those are the kinds of high end deals I am talking about. When homes in The Chalets subdivision begin selling below $1M, call me. But not now.
SmartMoney
I never understood why someone would want to live in Montreux. It’s no Lake Tahoe that’s for sure. I mean you get a view of a Golf Course and a bunch of trees, but you can have that at many places. Lake Tahoe is just so much more unique and beautiful. I can see why Montreux homes are selling for a lot less per square foot than IV. Makes sense.
GratefulD_420
Smarten…..uhghgh…… must you continue on about your “highest of high quality”? your schilling days are over.
Truly, you lost repect from almost all bloggers and readers when you posted that you choose an adjustable rate vS fixed rates. When fixed are at the absolute all time bottom???? Are you the only person in the world who think rates will get better when so much money has been printed, debt is at all time high?? Every man, woman & child predict inflation and soaring higher rates??? Please explain if you think otherwise.. OR have some angle that no one else can figure out?
Many let you pass on this incredibly questionable decision… and keep on schilling about IV. Wait a minute…. I just gave you a pass again….. it was a VERY STUPID decision! Unless you truly couldn’t afford to buy the house under fixed terms………… ????
… also I did ask some time ago… WHAT will you do about the taxes on a place like that? Are you not WAY overpaying? or is that your fair share?
anyways… it is good to know that you purchased for the “good feeling of home ownership” and not as an investment. If this is true… then it will help you digest the pain.
Couple other things…
you “abhor organic?”… yeah that makes sense. Organic stuff is gross. You love nature but can’t stand organic things?
The skiing in IV compared to Montreux/ ArrowCreek/Estates,etc? So does that mean “Ski slighlty inclined” is better than the Chutes at Mt.Rose? Whatever.
sorry, but you going on and on about your “so high end purchase,” has brought the worse out in me. I usually pass on the derogatory tirade… but you kept going on and on trying to convince everyone… including yourself. I do wish the best of luck to you on your purchase but please stop trying to validate how great of purchase it is and how everything is schilling better in IV!
smarten
Sorry GratefulD –
The decision for us was very difficult for a number of reasons which I’ve tried to explain. But let me just address the fixed/ARM mortgage decision you raise.
If you can’t get a reasonably priced fixed rate mortgage, what good does it do you? Do I believe interest rates on conforming mortgage loans will go much lower? No. Do I hope interest rates on jumbo mortgage loans will go lower? Yes [not that we can qualify for a mortgage through Penfed, but recently they have eliminated the rate surcharge between conforming/non-conforming mortgages]. Do I believe interest rates on all mortgage loans will go higher? Yes.
Someone [I think CL] made the observation that whenever one selects a mortgage, he/she should determine for him/herself a game plan and exit strategy. Sometimes that means not opting for a 30 year fixed rate mortgage [for instance, if you don’t intend to own the property for 30 years]. In the end we came up with a game plan that would result in retiring/replacing the mortgage within the next 5 years. In the meantime the difference in payments between a 5.375% and 6.5% fixed is not inconsequential.
You also raise the issue of property taxes. This too is another subject we considered. Not that it makes a whole lot of difference but it turns out property taxes actually decreased this year over last year’s due to the drop in county valuations across the board. And last Monday the Board of Equalization ruled that all 8,700 IV properties are entitled to have their A/Vs rolled back even more to 2002-03 levels. So really, it’s about the best property tax scenerio that could have been hoped for.
Sorry to have offended you insofar as the other subjects referenced in your post.
john
Smarten – wrong on all counts. This WAS a 2 mil plus house adjacent to the golf course at the peak of the market, just as high end as the homes you reference. It sold for what it’s worth. The fridge is sub zero. It’s covered in wood so you can’t see it. Most folks consider that an upgrade. The interior and exterior doors are all 8 ft solid alder, not standard height. The tile, or marble in the case of the master and elsewhere is top grade, as are the Rohl Italian fixtures. You keep going to great extents (exaggerations, skewing the facts, ignoring facts etc. ) to justify your purchase. As Grateful D points out, all this does is give us chance to see the real Smarten now that he has some “high end” skin in the game, looking down on us from his “high end” perch in IV, where everything is apparently superior, even pesticide laden food. You may have left the Bay Area a while ago but it seems the Bay Area never left you.
Martin
Smarten, I agree with Grateful that you ought to give up the cheerleading for your purchase. We get it. You bought a house. You believe you got a great deal. Cool. You spent a lot more money that most folks can afford. Again cool. But you don’t need to drive it into the ground, ok? And you don’t need to constantly tell us how your house is better than Montreux, and better than anything anybody else has bought in IV for the same money. You are sounding either 1) arrogant, or 2) not nearly as convinced of the killing you say you made since you need to constantly reinforce and explain your decision to buy.
CommercialLender
Smarten,
Can you explain without being too personal the debt angle you mentioned:
“we came up with a game plan that would result in retiring/replacing the mortgage within the next 5 years. In the meantime the difference in payments between a 5.375% and 6.5% fixed is not inconsequential”?
Do I read you to say you are going to pay off the loan in 5 yrs with cash? If so, why not now (maybe you need to make investment sales, retirement age triggers, vesting of stock, etc.?) If so, did you do the math and could you share on paying the cash now versus paying 5.375% on the variable rate loan, net of taxes, and net of the opportuntiy cost of the cash invested elsewhere? I.e., could you have come out ahead by not taking a 5.375% ARM or 6.5% fixed rate mortgage today, after subtracting the rate of return on your cash invested elsewhere, and after taxes (real estate, prop tax, and div/cap gains taxes)?
Just curious, as I think these thoughts for my future next buy (all cash vs. take a mortgage).
DonC
Smarten – FWIW I like your reports about your your buying decision. It’s always interesting to get a different perspective on how others evaluate property. As for shilling, you truly like IV for the reasons you’ve mentioned so it’s just an honest opinion.
CL – Having done it both ways, if you can seriously consider paying cash then the decision to take a mortgage is more about flexibility and liquidity than returns.
I think the biggest advantage of paying cash or planning on paying the mortgage off is that you bargain harder up front. People end up succumbing to all those zeros. The same people who will go to great lengths to save a thousand dollars on a car purchase will toss away $20K on a house purchase. Part of this is that the $20K may just be a smaller percentage of the price, but the other factor at work is that they don’t grasp how much $20K is — they just look at the monthly payments. It’s just play money.
smarten
CL –
I’m reluctant to share much more personal info because of the way I get blasted from the group. But let’s just say we DIDN’T have the cash to make a purchase without a mortgage so the alternative you suggest really wasn’t an alternative. In this market if you have equity in another property [or other non-liquid assets] and need to access them in order to make a purchase [i.e., a contingency], you’re in trouble [for the very reasons suggested by DonC]. Nor were we going to sell something a couple of years ago in the hope that maybe something someday would come along that we could purchase without a mortgage [to us, that would be putting the cart ahead of the horse].
So we decided to find the home first; hopefully qualify for the best mortgage we could at the time [and remember, it was nearly impossible given the jumbo market]; and then after the fact, try to liquidate some of our assets to pay down our mortgage [remember, no pre-payment penalty]. Basically, we have five years to do so or better yet, the secondary market for jumbo loans will loosen up over the next year or so and hopefully afford us the opportunity to refinance into a fixed rate mortgage at a more favorable interest rate/terms than were currently offered to us.
But it would be imprudent, IMO, to have passed up what we viewed as an opporutnity just because we couldn’t secure the type of mortgage we would opt for in a perfect world.
We had a game plan to position ourselves so we could purchase something if the opportunity presented itself; we had a game plan on how to find something and close on it; and we have a game plan as to how to pay it off. The plan may not pan out but at least we’ve given it thought and have some time to make it happen.
Hope this explanation helps.
FutureRenoHomebuyer
I really appreciate Smarten’s posts and hope that they continue. I think some of the rather personal attacks against him here were unwarranted. I’ll likely never be able to buy as nice a house as Smarten got at Incline, but still have learned a great deal through his detailed posts on the process.
People want you to speak up and say what you really think — until you do, and then they chop your head off. So easy to criticize, so difficult to lay your cards out the way Smarten has. Enough of the Smarten bashing — I think it inhibits discussion and detracts from the board in general. If you don’t like a post, don’t read it.
FWIW
Paul
Check out this gem from Don Kanare’s blog, posted yesterday:
“Buyers who procrastinate will find themselves missing out on their first and second choice properties. Most sellers have no need to reduce their prices down to firesale levels.”
Apparently, its 2005 all over again in Incline.
CommercialLender
Smarten,
I appreciate your whole story, so thanks for sharing through the weeks. Best wishes on your home!
big baby
Plain and simple…
smarten you bought too soon.. oh well.. you plan on living in your new home for a long time, so you should be fine..
Glad I’m still holding my cash and waiting though.. finding better deal STILL on a weekly basis.. btw incase you were wondering.. our price range is 300-350k, however we are paying cash.
CommercialLender
All this talk of market bottoms and sales activity makes me have to post this link:
http://www.businessinsider.com/henry-blodget-there-will-be-two-housing-market-bottoms-2009-7
Great data and 2 graphs on what it is that will bottom first and how long one might guess it will take for prices (not sales) to increase.
I don’t agree with all of it, namely their call of a distinct bottom in the early 90’s was in fact a long, drawn out ‘U’ shaped recovery, which I happen to feel is what we’ll see this time around. (Do also note the double-bottoms experienced in 1979/81, which might happen again if inflation picks up.)
Enjoy the brief read.
CommercialLender
Big Baby,
Care to share what communities you are considering? What type/size/age/amenity package? What your decision matrix is for a home purchase today? What you think represents the absolute best buy today for your all-cash $350K? Also, given you are all-cash already, why not take on top say a $100K mortgage for tax reasons, et.al. and buy a bit more of a house?
Curious
John Newell
Hey big baby,
I am curious about your general plan. Are you looking at a new primary residence or an investment property?
If it is a new primary residence, will you sell or rent your current residence? I can see risks and benefits to both approaches. Your past comments have shown that you are willing to take on a fair amount of risk, but your current plan seems downright conservative with respect to what you have told us before.
billddrummer
big baby,
I’m curious as well.
Reno Ignoramus
Paul:
Back in April of 2007, Diane linked to a comment by Don Kanare who said at that time that IV prices will never come down, because there are no subprime loans at Incline. Now, he says if you can get an IV property for 2004 pricing, you ought to go for it.
Keith
America is prosperous and resilient – we always have been, so this housing thing isn’t gonna drop us as bad as everyone thinks! Sure it sucks now but it did back in the 70’s – I think where everyone gets caught up is how all of a sudden we go from spending frivolously to needing to be attentive with our spending almost at a micromanagement level. Instead of remaining grateful for everything we have and giving back when we can – That’s the American way and Tahoe & Reno and even Vegas are all going to bounce back from this and it will seem like a bad dream. Thankfully my internet marketing firm here in Reno has been doing great through this, but I have also stayed positive. I work out of my home – which has lost considerable value but oh well – at least I still have it.
Bailout roast pig suckling
Keith,
We will eventually bounce back, but it will never be as before. Your complacency is a bit disconcerting. As the Federal Govt has given trillions to wall street and indebted our grandchildren, you seem to be saying you are living the dream. With no outrage, things will never change.
Yes, after the most massive twin bubbles in the history of civilization, it really is different this time. Read Ritholz’s book, “Bailout Nation” to learn the historic, criminal carnage that has occurred. Or read Fleckenstein’s “Greenspan’s Bubbles”. But, please, do not post pollyannish, blissfully ignorant blogs about how great you have it while 15% of Reno is unemployed, with no end in sight.
Remedies won’t be on tap until those in blissful denial wake up and smell the coffee.
ditz
Almost 2 years ago we looked at a home in NW foothills having just dropped in price to$620K. Recently saw the exact model, comparable yard, etc. REO listed for $335K (I predict it will sell through under $300).
I hear people saying “when the market comes back.” Come back to what? This is going to be more like a reset. The new normal.
Discussing this with my 15 year old, his analogy: “sort of like re-booting my computer
and having it come back at 50% power, huh?” Well, not precisely, but pretty close.
smarten
John –
I didn’t want to respond to your last comments before I had my facts and figures before me. With all due respect, it is you who is wrong insofar as “the Chalets” subdivision in Montreux is concerned. I have in front of me an advertisement that appeared in Tahoe Quarterly’s Mountain Home 2007 edition magazine. Quoting, “Chalet lot and home packages start[ing] at $1.5M,” and “custom home lots from $375K.” This subdivision was NEVER one of the $2M ones in Montreux, and these homes were NEVER the custom $2M+ ones I was referring to. So we’re back to what I initially stated: I don’t consider paying $1.3M for a once $1.5M [or souped up $1.65M] Montreux “Chalet” to be anywhere near the value [remember, I said VALUE] of paying $610K for a Renaissance at Montreux SFR that sold in 2007 for $1.3M-$1.5M! What I’d be looking for if I were looking to buy in Montreux would be one of those once $2.5M+/- mega mansions selling for the $1.27M I referenced in an earlier post. With all due respect Senator, you’ll never find this to be one of the SFRs in “the Chalets” subdivision, and I stand by my observation that one of these homes will have to be marketed at below $1M before it gets my attention.
DownButNot Out
Smarten, when you write in as much as you do, can’t you expect some comments? I for one have enjoyed your input, but you post;
‘I’m reluctant to share much more personal info because of the way I get blasted from the group’
seems a little over the top. Keep posting what you believe and let the commentators be just that. We’re all entitled to our opinion even if one of them is about your situation.
dumdedum
To be fair as far as those bashing the RGJ story, the paper has been reporting on the difficulties of the high-end market by virtue of covering CHASE International’s quarterly reports since last year.