Yikes. The report eventually tracks back to Q2 data from the US Treasury if you follow the links, and the data only covers 64% of all mortgages. For every current REO, there are 9 more in the foreclosure pipeline. The parts of the report I plowed through also cited the increase in work-outs, and depressing statistics on how work-outs have been working out. I haven’t tracked this report historically and have some questions about what the raw numbers really mean, but still sobering. Now for out next trick, Q3!
September and Q3 are over here in Washoe. What’s you gut on NOD/NOS/TD trends?
NODS declined to 930 from August’s 1068. NOSs declined to 659 from 757. TDs decline to 300 from 329. The Nihilist in me notes that September is a short month. The Homeowner in me is relieved by the overall downward trend on the loss of my equity. The Mathematician is having toss and turn nights adding up the NOSs that aren’t becoming TDs. The Machiavellian side is wishing that I was cashed up and could be like Page Ventures (check out their recent activity). The Dog Owner side of me just got emphatically told it is time to log off this post and do leg lifts around the neighborhood.
PS: RGJ article on Declining School Enrollment loosly correlated to foreclosure hotbeds. A bit of insight on the "where did they go" discussion?
Perry
I can’t imagine the bank letting it go for what they’re asking but this looks like a future foreclosure to me. The street is a little busy but it looks like a nice house.
MLS# 90010780
4351 Amberwood Avenue
billddrummer
Mike,
Thanks for the links, an awesome report.
(And we thought government was good for nothing!)
This points to the fact that loan performance is closely tied to the economic fortunes of a typical family. And it doesn’t appear that willful nonpayment is at the root of the problem (although there are probably some people doing that).
I submit that if you look behind the numbers, income interruption is the biggest reason for mortgage delinquency, whether from loss of a job, divorce, illness, or anything else that can happen. And since most people don’t have savings, when the income stops, there’s little they can do.
Worried Guy
Nice sized prop tax on that Amberwood property…$6,600 per year and rising. Remember, long-term overhead can be a killer.
Gary
The declining school enrollment issue you raise is interesting, Mike. I’ve been wondering lately if emigration from Nevada to find employment has been causing a net population loss, and how large. It improves our unemployment stats over what they would otherwise be, but its impact on the housing market is obvious. This is one of those times when a decennial census seems so inadequate. School enrollment might be the best indicator of this short-term population trend. Without these stats, we might only have the bare logic of “Duh, of course people are going to move to where they can find work!” Michigan lost an estimated 109,000 residents in 2008 due to their well-known employment woes.
Maybe the RSCVA’s new marketing campaign will be the magic love potion we need to make tourists once again flock to the biggest little city, helping break the fall of those WCSD enrollment figures. Or not.
bob c
un-scientific analysis:
the bank owned and short sale prices of
a few weeks will return as there is no
appetite for the mark-up of the last few
weeks due to the recent increased activity
hold tight–the deals will return
Downtownjunkie
Why your house is not worth more than your neighbors…
Remember the old days? When your house was worth more than the neighbors because you had upgraded to hardwood floors or stainless steel appliances. This is not the case anymore. In fact, your house can be assumed to be worth less than your neighbors if you decide to put it on the market.
I see tons of listings everyday from sellers that can’t come to grips with the market value of their homes. So here is your only shot to sell:
Ask your realtor or go onto the local assessors website and determine the most recent sales in your neighborhood. Calculate the average sales price into a price per square foot (PSF). Then minus 15%. Sounds kinda depressing right? If sellers had done this in the first place they would have an exponentially better chance of getting out. But they don’t do this. They just walk the market all the way down. Determined that their personal value of the house is correct.
I see a ton more banks willing to cut their losses. Case in point: A friend purchased a condo in the south for $330K. The bank has tentatively approved a sale of $129K. He will be out because when he wanted to sell he separated his value of the condo with the actual market comparison. And then he discounted it another 20%.
I especially see this trend in homes listed over $500K.
bob c
exactly, junkie
Grand Wazoo
Pretty much the ultimate in denial is one we’ve talked about before – 1025 Manor Drive. $549K for 1300 sq/ft. The seller maintains 2600 sq/ft which includes a finished basement. Even that footage figure puts it over $200 per, which just isn’t isn’t going to fly in the current market, even in Newlands Manor.
Just in case you want to ride along and stay up to date on this gem, there’s a twitter account for the house – of course, why not?!?
http://twitter.com/1025manordrive
FutureRenoHomebuyer
Wazoo,
Can’t resist commenting. As you know, I’d be interested in that one as well…if it were selling for 40% less, which is what I reckon to be a fair starting point (if a bit on the expensive side).
That twitter thread is depressing, even if you are looking to gut some seller-in-denial. Hope this idea proliferates, though, as I see it as no advantage at all for the seller. Hope they keep it going for the next few years, as that twitter thread will be a poignant nutshell of what it’s like to try to sell an overpriced house in this market. Their agent is doing them no service at all, allowing them to have false hopes with a price like that. FWIW.
Reno Ignoramus
That house on Manor is one of my Stairway to Heaven “and it makes me wonder” houses. That house more than doubled in price in just 10 months in ’03-’04. Even at the height of bubble’s greatest frenzy, houses did not double in price in 10 months. There was something curious about the price last paid for that house in ’04. I would love to see the appraisal that was prepared for the sale in ’04. Love to see the comps that justified an increase in ‘value’ from $271K to $596K in 10 months.
SkrapGuy
1025 Manor Drive not only stands as tribute to the delusion of the seller, it also stands as tribute to the sheer insanity of the bubble.
That house increased in value by $30K over a 3 year period from 1997 to 2000. Or about $800 a month.
Then it increases in so-called value by $325K in 10 months from 10/03 to 8/04. Or about $32,500 a month.
Multipy the absudity of this by a few 1000 houses.
I laugh when I hear people say the bottom is near.
billddrummer
Now all we need is a post from the realtor representing the seller on 1025 Manor, justifying the sale price.
If you recall, the last time we ‘featured’ this property, we got a post from the realtor along with a link to its website.
I’m waiting….
Martin
Not likely billd. Remember when the house belonging to Mark Fox came on the market at $780K and Mike mentioned it? The consensus on the blog was that it was overpriced, and we invited the realtor to come and explain the pricing rationale. All we got was a short puff piece from the realtor about what a great buy it was. Never heard from her again.
BTW, the price has been reduced about $110K since we suggested it was overpriced.
Realtor happy talk is all your’e ever going to get, billd.
And the house is still overpriced.
MikeZ
re: 1025 Manor
“Just reduced the price to $549,000.”
Delusional!
Credit where due: nice job on the web site.
billddrummer
Nice site, true. Did anyone mention the $475,200 1st DOT recorded in August 2004, and the 2nd DOT for $59,400 recorded the same day?
Could the sale price be dictated by the balance owed on these mortgages?
No, I sincerely doubt it. I’m sure the listing price was based on careful analysis of recent comparable sales activity within the immediate neighborhood, adjusted for time and amenities unique to this spectacular property.
I’m not a realtor, nor do I play one on TV.
smarten
A small tangent with the group’s permission.
I went to an Incline Village [“IV”] “moving sale” yesterday. Turns out it was a PUD [in IV, basically a detached condo] neither for sale nor for rent. Spoke to the owner and was told he/she didn’t even bother to list his/her home for sale because he/she realized that in this market, it wouldn’t generate sufficient funds to satisfy the existing financing thereagainst. Instead, he/she worked out a pre-foreclosure settlement with the lender. Bottom line, the equivalent of a deed to the lender in lieu of foreclosure before foreclosure.
Surprisingly, the owner told me he/she had negotiated a complete release of liability [for any deficiency] under the mortgage, and some cash [or its equivalent] for keys payment in consideration of his/her turning over the property in good condition.
I find this to be a very interesting and beneficial [at least to the owner] resolution to another under water situation. I can’t imagine this isn’t/couldn’t be going on in Reno/Sparks and it suggests to me a new option compared to your standard [and frustrating] short sale option. And apparently at least one lender has come to the conclusion that this type of work out makes more sense [to it] than your typical foreclsoure route.
Have any of you heard of this type of “sale” taking place? I don’t know how to track any of this through the public record but if it can be tracked, I find this to be another category of “sale” to be lumped in with short sales and traditional deeds in lieu of foreclosure.
SkrapGuy
billd, of course you are right about how this house is priced. This is just another example of “I need to get” pricing.
“I owe $XX and therefore I need to get $XX” out of it.”
This seller does not understand that the market could care less about what he “needs”. Just because he overpaid badly and is knee deep in doo doo debt does not mean a buyer has to come along and bail him out of his mistakes.
He’s just hoping there are still a few Fools around.
bob c
1025 manor
zestimate 362K and this website is generous
with valuations (a super upgraded
home can be taken out at
zestimate) also, lot is tiny.
in this market its how much under zestimate do
list for——-i got a laugh at 150% of zestimate,
truly absurd
better to take this 362K and look at todays new
bank owned prop ON the 12th fairway at arrowcreek
(this one seems priced for sale–built in 1999)
when i have my cash i’d get over and look at
listings like this (the arrowcreek one)–i’m
not trying to time market, just am glad i avoided
the bubble prices—not hoping to be a ‘robber
baron’ and the associated depression
549k list price is so far into left field it
actually made me feel good for some reason—thanks for the laugh
Worried Guy
Anybody have an opinion overall about Somersett? Any homes you would consider worth a venture? The HOA’s in some of the areas like Talon Pointe seem a bit on the high side like Montreux. Are the amenities worth the price tag?
bob c
i’ve heard sommersett without golf is 100/month
with golf i don’t know
bob c
smarten,
my sister lives in southwest reno and she knows
of several moderate homes that are empty and the
yards are being maintained (so there is no evidence of foreclosure) and they are not listed
anywhere, as anything thus the shadow inventory
is being maintained by someone
Downtownjunkie
“Have any of you heard of this type of “sale” taking place? I don’t know how to track any of this through the public record but if it can be tracked, I find this to be another category of “sale” to be lumped in with short sales and traditional deeds in lieu of foreclosure.”
Smarten,
This IS happening in Reno. I think in the end it is a much cheaper transaction for the bank.
willk
“i’ve heard sommersett without golf is 100/month
with golf i don’t know”
I’ve never heard that. I’ve been looking at Somersett because I like the wide open views. It’s frustrating that they have planted so many trees that they will probably ruin the view (like Caughlin Ranch).
Downtownjunkie
I am willing to bet the owner of 1025 manor put 6 figures into upgrading the house. He is now so caught up in his “sweat equity” that his judgment is forever blurred. This is what I am talking about on my previous post.
Hopefully he has the cash to keep paying the note for the long term. But then again, why would he be selling it.
It’s a nice website though..
CommercialLender
Couple of comments:
1) Somersett – when I owned there, it was $150/mo HOA flat for all amenities other than the private golf course and their clubhouse. Some communities had their own amentities, gated entries, pools, etc. and therefore another HOA on top of Somersetts and another monthly amount on top. The Village, for example, was an additional $90/mo on top of the $150 and includes pool, clubhouse and I think private road snow clearance, and maybe some insurance on the attached duets. I did not buy into the 18 holf golf course, but the 9 hole is included in the normal HOAs, except you pay a small amt to play. (BTW, a fun little course on a windy day – I once hit a ball with an 8 iron that went up, up, up, then landed travelling backwards, ending up rolling toward me only ~20 yrds away!) As for $100/mo, this is either a newbie price attracting new owners in this downturn, or a typo. Further, with so much distress and so many foreclosures, and built homes sitting in builder inventory paying only a small portion of the normal HOA fees, one must simply wonder when the $150/mo for those who do own there will skyrocket.
2) Guy, Mike, others. Why on earth would a Realtor bother taking a listing like Manor? Maybe in the first few months of the downturn you could stomach the denial thinking a return to normal was soon to come, but why now take or continue such an obviously overpriced listing? Are some Realtors as blind as some listings indicate they must be? Further, even if they don’t do open houses or much paid advertising, what is the economic cost or impact to them for taking a listing in today’s market?
3) Downtownjunkie, I hear you and agree … But for that a buyer looking at recent comps and seeing a competing house for 15% off in this crazy market will immediately ask “what’s wrong with that house?!” and proceed to offer a 10% discount off the 15% discount. Its a psychological quagmire: discount to sell from the seller’s perspective, but ‘must be distressed’ or ‘cheap goods’ from the buyer’s. So sellers don’t discount and therefore buyers don’t buy because its not priced to sell. Any suggestions on what it will take to change this loggerhead?
Worried Guy
CommercialLender,
What I am seeing is a near stalemate between buyers and sellers in the $350K and above area. Even more so heading over $400K. Right at the moment, there appears to be a real 10-15% no man’s land between the asking and the bid for a lot of these homes in the $350K and up category. Of course, there will always be one or two who will play the seller’s game and cover the spread, but I don’t see any point in that in a declining market.
bob c
right on the money worried guy
galena forest lowest listing is 499
they are going to have to match the 429 (or
close to it) for the comparable recent bank owned
sale to get any action (in my opinion) even though
they have reduced the property asking price twice
this gap exists in all markets i’m watching
tom
I also see this stalemate. The sellers won’t come down to reality and the buyers see no reason to pay unreal prices just to be locked into declining value. So those sellers who are not under duress, won’t change and will sit there indefinitely. I think this illustrates that about all that will be selling for the next several months will be homes under forced sale conditions–deaths, divorces, and foreclosures.
FutureRenoHomebuyer
Galena, Montreux, Old Southwest, Caughlin Ranch — all of these areas have shown remarkably “sticky” prices. Yes, we’ve seen 20+% declines in these areas, but it’s still difficult to find prices equivalent to 2004 or earlier, whereas the overall market is back to 2002, or earlier.
Why? Denial, equity for the longterm holders, a nice cash pile for the newcomers (that’s starting to run low perhaps)? Probably some combo of all.
But… life happens. People get divorced. People die. People lose their jobs. People decide to move.
So, the holdouts in the sticky areas will be overtaken by life at some point. As I’ve asserted before, for those interested in buying in these areas, patience will be handsomely rewarded. I’ll give it no more than one more year before a significant decline (in excess of any additional regional decline) inevitably asserts itself in these areas. FWIW.
Sully
The market can remain irrational longer than you can remain solvent.
This is usually reserved for the stock market, but it can apply to any market – real estate included.
Grand Wazoo
Swing your peepers to Vegas and see this spot of “good news” courtesy of today’s WSJ. Maybe the Montage gang should of purchased in LV? Not noted in this story is that condo prices in LV have taken something like a 45% haircut, so this 30% price reduction isn’t going to make it. But I bet Fernando could make these numbers pencil!
“MGM Mirage is cutting the price of the condos at its $8.5 billion City Center development by 30% due to the economic downturn, the company announced Monday.
In order to address a growing backlash from many of the people who signed contracts on condos in the 2,440-unit complex during the height of the Las Vegas real-estate boom. Many had said they would have trouble closing on those units now that financing has become harder to obtain and the market in Las Vegas for luxury condos has crashed. Investors and observers had anticipated a price cut from the company for some time.
“We believe that in this economic climate, this price reduction is an appropriate step to take on behalf of our buyers so as to provide them greater flexibility in closing on their residences,” City Center’s chief executive, Bobby Baldwin, said in a statement.
The multi-towered City Center project, which is situated on 67 acres on the Las Vegas Strip, is expected to open in December as a mixed-use complex with residential, retail and casino spaces.
In 2006 and 2007, when the market for luxury condominiums was at its height, MGM Mirage used more than $300 million in deposits for residential units to help fund the enormous complex. That was common practice among developers at the time.
MGM Mirage had hoped to sell its condos at top-of-the-market prices, which would have brought in $2.6 billion. However, it ended up getting deposits on only a portion of the inventory. If all of those deposits were to result in sales, it would mean $1.6 billion in revenue.
But the market for new residences in Las Vegas has dropped by roughly 40% and financing for luxury condos has withered. Indeed, many of the people who had put down deposits on City Center said they would not be able to raise the money needed to close on their units. That could have spelled trouble for City Center, which risked opening its doors with a raft of units still up for sale.
By offering up a 30% discount, MGM Mirage expects that many more of those who put down deposits will be able to finalize sales.”
Big baby
any thoughts on some of these fairly “Cheap” apartments for sale in reno?
I have been thinking about buying a few to rent out long term.. though I’m not quite sure how the resale value will be on these down the road…
Downtownjunkie
Commercial Lender: I sort of agree with you but…
Buyers today care about two things; If the house is sound (mechanically/structurally), and how much margin for error is built into the purchase price. As others have noted on this topic, there is a hugh gap between the actual value and owner’s assessed value. When I look to buy I assume the market is coming down at least another 15% from the MARKET value. This is sometimes 40-55% LESS than the OWNER’S assessed value.
FutureRenoHomebuyer
Sully,
I agree, and accept your position. I’ve used that same quote myself.
That said, I believe prices will be lower in one year, perhaps significantly lower. I also believe that anyone purchasing in the $400+k range over the next year should be prepared to hold for at least 5 years. This will not be a “V” shaped recovery.
Worried Guy
A real bottom in the real estate markets will be when reluctant sellers willingly accept buyer offers that are within 10-15% below recent comps. The gap will be filled and it will be time to buy.
Grand Wazoo
Ask yourself this:
Look around your office, your place of employment. How many of these people can afford to come up with a 10% or 20% downpayment on a $400K house and also service the debt – what would that be, almost $3K a month? After an $80K downpayment? How many of your coworkers could handle that? My guess is “not many”.
Reno is a pretty working class town. I work with a bunch of professional people who are well paid, and even they are singing the blues. Remember – no way to sell the current house in Reno and take the profit to use as a downpayment on the next mansion – those days are over for the forseeable future. So you’ve either got cash and pleny of income to support a $400K home purchase, or your don’t. No more voodoo loans, those days are (hopefully) over forever.
What I’m trying to say here is the market for even a $300K house is just about dead in this town. The locals by and large just don’t make that kind of money, nevermind the joint they bought in 2005 that is already bleeding them dry.
Reno Ignoramus
Wazoo,
The very first post I ever made on this here Diane’s blog about 3.5 years ago was that prices in Reno had risen to absurdo levels, way beyond the ability of the average Reno household to afford without resort to suicide loans.
What I got back was a bunch of hooey about how it didn’t matter what Reno citizens could afford because Rich Californians were coming over the Pass in stunning numbers and they would prop up the Reno market for years on end. Diane even was talking about the “new paradigm”, whatever the hell that meant, that we had entered into a new era of ever escalating real estate values. Then Diane said it was “asian money” flowing into Reno via the Bay Area. The spinjive just never stopped back then.
Now Diane is gone, her Somersett new paradigm example of the ever rising real estate values in Reno still a short sale short of completion.
Back before the bubble, a $400,000 house in Reno was WAY beyond the reach of the average citizen of this “working class town” as you so correctly put it. It still is. It always will be. As I first said about 3 years ago, there are simply not enough cardiologists in Reno to buy all the absurdo priced houses on the market. Never have been. Never will be.
Worried Guy
Another point to consider is that even if an individual has the $400,000 to plunk down on the home in Reno, then they would need major other income to cover the high overhead on these properties over the years. Many properties at this price point in Reno have unreasonable property taxes that will not be adjusted down anytime soon do to the screwy property tax system in Nevada. Moreover, there are unnecessary HOA fees to add to the mess. Then, the fact that investment income on savings has all but been eliminated thanks to very misguided monetary policy by an unfortunate entity that has control over such matters and is doing the country a lot of long-term harm.
Big baby
wrong worried guy
it’s the governments job to create stability.
if they had just sat around and did nothing like so many on this blog suggest they should of done, this country would be far worse off than it is now.
for the most part I think they did what they had to.
I’m an optimist and believe long term things will get better, they always do!
Worried Guy
No it’s the Government’s job to preserve justice, which they have flat out failed to do. They are too involved in an economic system that can not be supported. The country needs to be cleansed of failed monetary and tax policies that have promoted reckless debt/speculation over savings/production. Using the same failed policies that caused the problems in the first place is the definition of insanity. It’s time for a wake up call and I see the RBA tonite has just sent out the first salvo with a nice 25 basis point increase on their cash target rate. This will be the first of many rate increases around the World.
billddrummer
To Wazoo, RI and Worried Guy,
I submit that the bubble was propped up by the mortgage industry and its ‘innovative mortgage products’ that allowed people to buy their dream home even if they didn’t have dream home income. Interest only, Option ARM, Pay-Option ARM, and NINA stated income mortgages only served to create a phantom demand for housing that wasn’t supported by prevailing incomes. That, in turn, led to higher and higher prices for both new and existing housing, as it seemed that everyone could qualify for a mortgage on a $400,000 home.
Well, now, those people who weren’t supposed to own don’t, the financial community got gunshy when all those mortgages started to default, and now the only loans most people can get need iron-clad documentation to qualify.
It’s a refreshing change, but the downside is that there are still some sellers (and realtors) out there that think 2006 prices are still valid.
They’re wrong.
Downtownjunkie
All the bailout did was keep employment propped up. Big transfer of taxpayer money to the wealthy IMHO.
The bankers and execs sunk the ship, the over-extenders and liar loaners were given a raft, and the responsible taxpayers are bucketing the water back out. Whatever…
Downtownjunkie
is bucketing a word?
Worried Guy
Yeah but the lowering of the Federal Funds Rate to 1% by 2003 had a lot to do with that housing bubble. Also, the foreign interests in pushing down intermediate to longer term U.S. Treasury rates to keep consumption going of their poorly made goods.
Big baby
you all need to take some economics classes
half of all that drivel made ZERO sense
Worried Guy
Yes, the Fed manipulating interest rates had nothing to do with creating disastrous financial bubbles. C’mon Big Baby explain yourself.
FutureRenoHomebuyer
According to the Financial Times today, a Starwood-led consortium has won the bid for Corus properties. For those Corus/Montage watchers out there, it may not necessarily be great news, though.
“The assets include loans made to condominium projects, many of which are unfinished developments, and are valued at $2.5 billion, half of their face value…”
http://www.ft.com/cms/s/0/e4452246-b203-11de-a271-00144feab49a.html?nclick_check=1
Half of face value? Really? This from the smartest guys in the room at buying distressed properties? Considering some of the prices I’ve seen thrown about regarding face value of the Montage, I don’t believe I would touch it for a 50% discount off that price. (Wouldn’t face value put it at ~$650k per condo?) Come down 75% and maybe we can start talking.
“The buyers…will take 40 per cent of a newly created limited liability corporation that will buy the assets, while the FDIC will hold a 60 per cent stake.”
So, once again, the taxpayer is potentially on tap to bail out Starwood, once their 50% payment for Montage and similar properties turns out to be a bit rich.
Hope I’m just being to pessimistic, as I think all would agree that a full occupancy Montage would be a good start at getting downtown Reno back on its feet again. Interested in what the group, especially Mike, CL and the Dude might have to say.
Grand Wazoo
Right before Corus was seized they had the Montage loan on their books valued at $60M – they had already written it down. If Starwood got the Montage at 50% of that, that’s $30M. Divided by ~300 condos of varying sizes, that works out to be $100K per unit. Starwood will sell the Montage off to an interested party and make a profit, the interested party will try and sell the condos and make a profit – even if the Montage ends up being worth $60M again, that’s still just $200K per unit, average.
When it is all said and done I bet its less – way less.
billddrummer
Try $125K/unit, on average. The penthouse units will go for about $150/s.f. but the remainder will be in the $110K-$175K range.
Too late for Cavanaugh’s, but good bargains for people who want to live downtown.
Martin
Remember earlier this year when somebody bought a 1500 sq. ft. Riverwalk unit in a no-reserve auction for about $70K?
Let’s say the Montage is twice as nice as the Riverwalk. So twice that price? $140K for a 1500 sq. ft. unit at the Montage?
Seems as good a measure to me as anything else.