Much positive news from September’s Market Condition Report presented by First Centennial Title. Prices up, inventory steady, escrows up, failures down. Click on the report to enlarge.
…from the report:
OVERVIEW: Activity slows as market transitions into the fall-winter cycle. Prices appear to have bottomed in the short term at or near current levels.
SUPPLY (ON MARKET): Continues to hold very steady in the current range with little meaningful deviation (for the 8th month).
DEMAND (SOLD PER MONTH): Demand declined for both SFR and Condo. FAILURES (EXPIRE-WITHDRAW): The rate of failure for SFR was over estimated in September. The current result corrects that figure.
IN ESCROW (FUTURE CLOSINGS): Up slightly from September.
PERCENT SELLING: Due to the adjustment in failures, Percent Selling increased from 54% to the current 63% for SFR, and 54% to 48% for Condo. Expect the measure to remain at this level or gradually decline.
MONTHS SUPPLY: This key measure is on the increase implying and reinforcing the idea that the market has peaked in terms of closed transactions at or near the current level.
MARKET SPEED: Market Speed has slowed for both types. The pace of the Reno market (which was increasing) is now slowing. The best performing Reno submarket remains Fernley, returning a Market Speed of 38 (down from 50 last month). The slowest is Yerington at a very sluggish 7.
PRICES: Both SFR and Condo returned median price increases. Expect an up and down trend from month to month. Large changes in price should not be expected, while relatively small diminishing negative shifts are more likely. This trend is generally in line with other markets surveyed.
skeptical
This report isn’t very useful. It doesn’t give any stats at different price bands. It doesn’t give much historical data for comparison, outside the graphs (and that median sales price graph doesn’t impress). Still, I thank Guy for putting it out there, so I can see the mindless drivel that the seller’s agent is spewing. Denial ain’t just a river in Egypt, according to many of the whacky prices you can find throughout the MLS.
That said, Sep/Oct 09 will give everyone a false hope that things are shaping up in the Reno RE market. Volume and stats will be up at the low end because of the (theoretically) expiring tax credit and the end of the buying season. Heck, I’d even go so far as to say that we might be near bottom at the <$250k level. Congratulations! Woohoo!
But, OBTW, look at the market above $400k. Jobs are gone. Exotic financing for clerks at Home Depot is gone (no offense to the lurkers in orange bibs out there). Ergo, demand at/above that price point is decimated. No one is left to afford those houses, except the underwater homeowners that already have one. And they ain’t moving. Now, recall that at the top of the bubble, $400k was the MEDIAN.
So, for all the zombie RE Agents out there, please repeat after me: Lower prices aren’t the problem, they are the solution.
ursula
We should do a tally on how many people we know who are facing foreclosure right now. I know at least 10.
So we rent for a few more months to see what happens.
E.Edward
Wages just won’t support these prices period!..The selling season is coming to an end…When interest rates go up and they will? That will be all she wrote..This false/propped-up market is on borrowed time..
Just heard 32% of the FHA loans from 2008 are now in default?…
Only thing that does remain consistent is the landslide of coming inventory and job losses..
bob c
what if the USA does a Japan ?
0.25% interest rates and we swallow the worlds
inflation by lowering our standard of living
seems japan 1987 and usa now have a lot in common
real estate spends 20 years going nowhere, long
term rates go lower and we all kind of just fester
there is still a lot of wealth in the USA, but the
demographics say that we will be giving up our
stronghold on the top spot in the world
its not an armageddon…..just little new wealth
created for a long time
bob c
but YAY dow 10,000 !!!!!!!!!
(deja vu over a decade ago—10k by 2K was my internet screen name in the 1990’s)
smarten
Skeptical, I don’t want to rain on your parade but I think you’re reading too much into the stats when you conclude “DEMAND at/above that price point [$400K] is decimated.”
I think there’s quite a bit of demand for SFRs priced above $400K [especially those whose price/square foot is less than the cost to replace]. Two problems though. First, pricing in many instances is still delusional. Second, jumbo financing continues to be almost impossible to secure; especially if all your income doesn’t come from “earnings.”
With your permission, let me give some real world examples.
You might recall that about four or so months ago 1086 Tiller [in Incline Village] sold at trustee’s sale [to the consortium Mike has written before about] for about $900K. IJJ and I commented at the time that this was an absolute steal for a home of this size and quality. At the time I reported I knew of an agent who had a buyer for this property at $1.15M offering the prospect of a very, very quick $250K profit.
But somebody got greedy. The other day this property finally came on the market. The asking price – $1.33M. So here the problem ISN’T that demand for this home at a FMV price hasn’t been decimated. Rather, the seller is delusional.
Although I’ve been out of the loop for the last 1-1/2 or so months, before then I had a number of agents share with me that deals were falling apart left and right because when presumably qualified buyers submitted their offers [which were accepted], they didn’t realize they couldn’t qualify for jumbo financing.
If buyers can’t secure reasonably priced jumbo financing, it doesn’t matter whether the under $400K SFR market stabilizes – the money to purchase doesn’t exist.
To me there’s a simple solution. The FNMA/Freddie Mac conforming loan maximum amount for Washoe County [as well as everywhere else that isn’t characterized as “high cost”] needs to be increased. Once this happens, there will be an instant secondary market for jumbo financing as we know it and then…
But for now [and the forseeable future (since our President has no interest in addressing the real problem)], the over $400K SFR market will remain decimated. But not for lack of demand.
skeptical
Smarten,
Yeah, I guess we all would take a million dollar house, given the choice. Just look at the bubble, when millions who couldn’t afford it went out and got the exotic financing to secure that dream home…which turned into a nightmare.
So, what’s your point? You talk about deals falling apart left and right due to no financing, and then you kinda try to argue that there is demand? If that’s demand — wanting something that you can’t pay for — well, whatever.
I could give a rat’s butt about how many hapless yuppies would love a house in Lake Tahoe, or the more expensive parts of Reno. What matters, is how many can afford one. Perhaps my waxing philosophically was just a bit too poetic to be perfectly clear. No jobs, no credit, no financing = no home sales above $400K, the old MEDIAN. Just because many would like that expensive house, doesn’t mean it’s gonna sell.
Hell, I want a million dollar place at IV too! You wanna call that demand, go for it. As comprehensively laid out by you, though, there ain’t nobody left that can actually qualify to buy the place.
So, demand above $400k is decimated. Put it any way you want, bro.
Carleton
I think Skeptical is right. 70% (probably more) of all sales today do not produce a seller who then becomes a move up buyer. Banks don’t move up. Short sellers don’t move up. And of the 30% of sellers who are not distressed, half are selling for below $180K. In other words, there are darn few sellers now who are looking to move up into the higher priced houses. So who then is left? First time buyers? First time buyers are looking to buy over $400K? I don’t think so.
I think skeptical, and many others who have made the same point, are right. There is very little demand for houses over $400K.
50% of sellers today are not even human beings. Another 20% are human beings who are taking NO equity out of the sale. Of the remaining 30% of sellers, half are selling for less than $180K gross, and who knows what they net after paying off the mortgage and sales costs.
In other words, the overwhelming majority of sales today do not produce enough net money to the seller to even be enough to make a 20% down payment on a $400K house.
That is why the over $400K market segment is dying on the vine. And really, it is even lower than that. The $350K market is pretty ugly these days.
GratefulD_420
Smarten,,
excuse me? You think the real problem is the President… or Feds (common taxpayers) are not willing to support the well-off buyers of $400k or above?
I think the “well-off” should let the free market dictate the jumbo financing. I would be extremely depressed to think my tax dollars went to supporting the financing of those Million Dollar homes. Sounds fairly delusional in itself and very greedy.
Of course… if I pay the taxes to support your loan….. the rich man gets his Million Dollar home… banker gets his golden parachute… wall street keeps snorting all of the columbian…. then in the trickle down I will at least have a job to cut your grass. Where do I sign Sir?
In the end… this is not a “high cost” market. It is a severely over inflated market. There is absolutely no high paying industry to support a high costs market. Juicing the jumbo loans with taxpayer money is just more inflation of the market and making it harder for everyday family to buy a home.
Walter
I suppose we could say there is great demand for houses over $2 million too. All of the demand, though, is by people who can’t afford it.
When we say there is “demand” for a product, does not common sense usage imply that we are talking about demand from people who can afford to buy the product?
I would like to buy a Ferrari. But my financial circumstances are such that I can’t pay cash, and my banker won’t make me a loan. Would you say my desire constitutes demand? I trust that Ferrari’s business plan would likely say no.
Worried Guy
Jesus Mary! When in the world are people going to get it into their heads that a real market is demand and supply! It isn’t the government backing loans to create demand. That is why prices have to drop because it was a fraud folks. All inflationary bubbles are a fruad brought about by misguided monetary-tax policies and scrupulous lending practices that were condoned by regulators. Notice how AIG was continually bailed out? That was to save Goldman Sachs. GS would be Enron right now if not for you and me bailing them out. It is disgusting and the chicanery in the housing market must cease also before the market can and will reach bottom.
smarten
Folks –
You don’t seem to understand that the overwhelming majority of home sales are funded by purchase money financing. Without that financing, most buyers can’t afford anything – and so much for “demand.”
The “free” market by and large doesn’t dictate mortgage financing availability/cost – the government does. If your loan amount is less than $417K, banks have a ready, willing and eager buyer of the mortgages they originate – the Federal Government. And within parameters, the Government dictates the cost/terms of that financing. Which means we taxpayers all subsidize the cost.
The government has “recognized” that in a handful of counties/areas, residential housing units cost more [so they are labeled “high cost”]. For this reason, the government understands that a conforming loan amount limit of $417K isn’t enough of a mortgage to support a healthy residential real estate market. So rather than allowing the “free market” to dictate mortgage availability/cost in these areas, the government has determined that in these counties/areas only, it will buy mortgages banks originate which can be as high as $938,250 [Alaska, Hawaii, Guam, US Virgin Islands].
But Reno/Sparks [and Incline Village for that matter] aren’t so designated. So if you want to purchase a home in Reno; with the assistance of a purchase money mortgage that exceeds $417K; by definition that mortgage can’t be resold to the Federal Government. So what lender is going to originate such a mortgage knowing there are few if any investors out there willing to purchase it from them? And assuming there are one or more such lenders, at what cost? Therein, IMO, lies the problem.
Raising the maximum conforming loan limit amount has nothing directly to do with making loans to people who can’t afford them. It has nothing to do with people who dream of owning a $2M home yet neither have the down payment nor income to support its purchase. As long as the tough underwriting guidelines remain the same as currently in place for mortgages under $417K, there is no greater risk to the investor [or government or we taxpayers].
So my point was only that if we want to kick start the housing market; the government will purchase $729,750 mortgages in Silicon Valley; and because of this fact availability/cost is artificially low because it is dictated by the government rather than free market forces; it’s unfair to deny the same “benefit” to those originating similar mortgages in Washoe County [again assuming the same rigid loan guidelines are applied]. Now if no homebuyer in Washoe County can afford such a mortgage because of the lack of real income/wages, that’s a completely different story. But assuming he/she can, in my book that’s called “shadow” demand and it’s real.
There ARE qualified borrowers who would be purchasing Reno SFRs in excess of $500K in the current market if they could obtain a reasonably priced “jumbo” mortgage in excess of $417K. But since they can’t, they don’t. And if the government pulled the rug out from under those purchasers seeking mortgages of less than $417K, you’d quickly see “demand” for lower priced housing dry up as well because without the assistance of purchase money financing, they can’t afford to buy [and thus don’t represent “demand”] much of anything.
Until reasonably priced mortgage financing becomes available to Reno homebuyers seeking loans in excess of $417K, you will NEVER see a recovery in the over $500K segment of the market. And as some of you have observed, if this segment of the market crashes [assuming it hasn’t already], we’re in for big economic trouble.
But the root of the problem, IMO, is not “demand.”
Sully
Another issue with demand is retirees. Most retirees have seen these peaks and valleys and don’t have the time to wait for prices to come back to normal, therefore buying in areas that are priced right. The demand for high end will take quite a while to come back, most retirees wouldn’t expect to live that long!
BTW, very few retirees want/need a 3500 sq ft house. So the market for overpriced, over-sized (above 400K) housing will depend on younger people making the money to afford them. There is where the problem is, as the Reno area doesn’t have enough jobs with high enough income to support the higher end houses.
Its a catch 22 situation, the people that want/need the larger houses can’t afford them, the people that can afford them don’t need them.
🙂
BanteringBear
I find it humorous that it’s the government which draws Smarten’s ire, rather than the banks who have drastically reduced lending on houses. The FHA, and the GSE’s (Fannie and Freddie) were created to help low income families buy houses. The idea that they now should help wealthy people buy expensive homes is absolutely ludicrous.
Smarten wrote:
“As long as the tough underwriting guidelines remain the same as currently in place for mortgages under $417K, there is no greater risk to the investor [or government or we taxpayers].”
Wrong. The larger the loan amount, the larger the loss should it go bad. Are you insinuating that the default on a million dollar mortgage is no more painful for the taxpayer than a $100k mortgage? If so, wake up.
It’s not time for the government to increase their participation in the lending arena as far as guaranteeing mortgages through the FHA, and backstopping Fannie and Freddie, but rather decrease their role. That’s the plan, actually, as the current agreement with the Treasury caps the entire Fannie and Freddie portfolio at $900 Billion (!) through December 31st of this year, then it’s supposed to wind down by 10% per year until it gets down to $250 Billion.
It’s time for bailed out banks, who will pay record bonuses to execs this year, to step up to the plate and start lending.
Worried Guy
Smarten,
Will you ever figure out that the Government’s involvement in all price levels below $417K has made housing unaffordable over the years? What about the person who saved and wants to pay cash? So I guess they should pay the artificially inflated prices thanks to the markets getting stuffed with FHA loans? You say the problem is not demand, but the reality is the problem is false demand being promoted by bogus government intrusion into the market place. This type of crony capitalism is why the housing markets still have a long way to correct. Maybe two to five more years until we reach bottom, which will coincide with the U.S. Government calling it quits with their support for the housing markets.
SkrapGuy
Smarten,
A person seeking to buy a $500K house with a 20% down payment does not need a jumbo loan. Yet, the market for houses listed at $500K is dead. Dead.
The reason it is dead is not because buyers cannot get loans. It is because there is no demand. The number of people with $100K to put down, plus closing costs, and the ability to pay almost $2000 a month in P&I is very small now.
It appears you have very little understanding of the economic reality of Reno-Sparks. It ain’t Incline Village. $500K may be chump change in IV, but it is well beyond the ability of the great majority of people in Reno-Sparks. That was the case before the absurdity of the bubble when lenders just gave money away without any regard to creditworthiness. And it once again the case now.
smarten
BB –
Nice to have coaxed you out of hybernation.
My ire is not with the government. I feel the same way as you about banks, the lending industry, Wall Street, bail outs, etc.
All I am saying is that my experience [which I have attempted to share] tells me that there IS demand for SFRs priced in excess of $500K. Part of the problem is that jumbo financing to fund such purchases is either non-existent/unreasonably priced.
To answer your question about the “risk” of a jumbo loan going under compared to that of a conforming loan [going under], I see the two as being about equal. Would you say that the “risk” of a $417K 80% LTV loan going under is higher than that of a $100K 80% LTV loan going under simply because $417K is more than $100K? If so, then you’re right; the risk of a $1M loan going under is higher than that of a $417K loan going under [which then begs the question: where do we draw the line?].
But in the real world, the larger the jumbo loan, the lower the acceptable LTV which compensates for the “risk” of a larger loan amount. So although one may be able to get a 80% LTV $417K loan, one may only be able to get a 65% to 70% LTV $900K loan. Assuming the same rigid underwriting and appraisal guidelines are applied equally to both loans, I personally find the $900K loan with the lower LTV to be no more riskier than the $417K loan.
We’ve talked before how the government is trying to “stimulate” the housing market because of its adverse effect on our overall economy. All I was trying to point out is that the >$500K segment of the market is dying in Washoe County NOT simply because of a lack of demand but rather, because: listing prices are in many instances still too high; and, there’s little reasonably priced jumbo mortgage financing available. Although we can’t do much about the former, there IS something the government can do about the latter. I’d much rather see FNMA buying jumbo 70% LTV mortgages than making the bailouts we’ve witnessed.
If you don’t want the government to do anything, that’s fine; let’s let water seek its own level. And while we’re doing nothing, maybe the government should lower the maximum conforming loan amount in Reno/Sparks because the median sales price as dropped so much in the last several years? Or maybe FNMA/Freddie Mac should go out of business? That way there will be even fewer Reno/Sparks homes that sell because without a mortgage, your pool of buyers will evaporate. But that’s a good thing, don’t you think, because anyone that requires a purchase money mortgage to buy a home probably can’t afford the home anyway. Is that what you really think?
BanteringBear
Smarten posted:
“…because anyone that requires a purchase money mortgage to buy a home probably can’t afford the home anyway. Is that what you really think?”
At long last, I’ve grown tired of arguing with shills, and people who are unable to see the forest for the trees, and who use bogus straw man arguments to try to misrepresent others positions. Nowhere in my post did I suggest anything remotely close to what you concluded, Smarten. Carry on with the baseless assertions if you so desire, but they make you look the fool.
DonC
Smarten — As usual you bring up some interesting points. But I’d ask a question: Isn’t the fact that some buyers can’t qualify for larger loans just another way of saying that demand at higher price points has dropped? IOW if there are fewer buyers at a given price point, either because of tightening qualifications on the part of banks or lower income or higher interest rates or some other reason, at the end of the day what this means is that market clearing price has to drop. (Or it doesn’t drop and nothing sells).
As for the reason banks are not offering jumbos so easily, all you need do is look at the default rates on jumbos. They’re going up so banks are being more careful with these loans, and they want higher interest rates.
Moreover, I’m not sure regional and local banks have a lot of money to lend at the moment. These institutions are sitting on a lot of commercial and home loans, and that inventory is looking shaky. As a consequence, they’re beefing up their reserves, and the more that goes to reserves means that much less money available to loan out. Commercial Lender may have a good idea of how this is working out in the Reno area.
Carleton
35 new listings on the MLS today.
Number of listings below $350K?
34.
Number of listings above $350K?
1.
That’s where the demand is. Below $350K.
The notion that there is significant demand for $500K houses and above in Reno is nonsense. Smarten you come spend a Saturday at any one of the WalMarts here in Reno and we’ll see how much ‘demand’ there is for a $500K house. We could go to Macy’s except that it is empty.
It really has nothing to do with government guarantees and conforming loan limits. It has everything to do with affordability. And if you think a $500K house is within shouting distance of affordability for the average Reno-Sparks household, then you need to step back from the bong Smarten.
That rareified air in Incline Village has made your thinking quite fuzzy.
Martin
A $500K house is 9 X the median household income in Reno.
Unless we are going to bring back the NINJA loans, the suggestion that there is real “demand” for $500K houses in Reno (as opposed to wishes, or dreams, or desires, or fantasies) is absurd.
Jennifer
$500,000 is
one half of
a million dollars.
That is a feaking
lot of money, even for
people with good jobs.
Once the bubble mentality finally
goes away and
people again remember
just how much one half of
a million dollars is,
a one half of a million dollar house will be
what it always was….
a rare thing for the well off.
CommercialLender
Smarten, Smarten, Smarten,
You now advocate the Fed Govmt to create a market where no viable market exists? Do you not see that this in fact leads or will lead to a bubble, not corrects the bubble we just had? The Fed-controlled agencies of HUD, Fannie and Freddie have allowed banks to ignore the free markets (no one willing to buy the debt on the open market) and go straight to a new/false market (government willing to buy the debt absent any others). In fact, this articificial limit of $417/$729K is currently re-creating another bubble! Same with the 1st time homebuyer tax credit, not unlike cash for clunkers. Look at all the press in the last week of homes flying off the shelf in areas like SD, LA, etc. There is a mini-bubble being created in the low end of the market. What happens when and if these homes start defaulting: another bust? More taxpayer bailouts?
My point at the macro level is govt should be a regulator, legislator, judiciary, but not a buyer of mortgages that the free market is supposed to dictate! The govt and its policies crowded out the entire mortgage market over the years, which is why there are no appreciable buyers of non-govt debt today. The free market experienced a bubble, and now is trying to correct it as free markets do, but the govt is propping up at least the sub $417/729K strata. The problem is not a low govt mortgage debt ceiling, it is that the govt is a buyer of private contracts at all!
(Worried Guy, I agree with you fully, except for ‘crony capitalism’ I believe is misplaced in your sentance. This is a govt trumping free markets issue: ‘crony government’ but not necessarily capitalism en masse.)
It has been said many times before, made famous by Reagan: the government is not the solution, it is the problem!!
CommercialLender
My last post crossed a bunch of other posts – I should refresh before submitting!
DonC,
my above comments single out govt vs. the mortgage markets. Banks and others have serious issues and many were culpable in their own way in this past bubble. No arguments there, many to blame. But I’m attempting above to address the flawed reasoning that demand is somehow held back by artificial govt limits – and stating these limits in fact are detrimental by lowering risks by passing off to a nebulous 3rd party (the govt) and the resultant crowding out of the rest of the market.
I love the Ferrari analogy from Walter. Sure, we all would, but not all can. Some do, but shouldn’t. If you give me a loan backed by the Feds, sure I’d go buy a Ferrari or Lambo, what the hell! If not, I’ll just have to stick to my used Acura. Why then should the govt guarantee a housing loan I can’t afford in Reno, let alone a higher end luxury home in a vacation town like IV? And why should everyone else on the RRB pay taxes to help me buy one?!
Let the demand and pricing fall to where the free market will clear it, but that will not happen unless the govt gets out of the way.
Future Reno Home Buyer
Since there is no market for the $500k plus home in Reno, what will ultimately happen to all the $500k plus short sales and foreclosures. How far can these $500-900k homes fall? Will they become the future $300-350K homes??? Would love some insight into the future of these homes.
johnny
Is that before or after high inflation Jennifer? 😉
waiting in the wings
Future Reno Home Buyer: Will they become the future $300-350K homes???
MLS 90005452 that’s the way it’s shaping up…not sure about anyone else but I’m sensing the price drops in the 400k-550k area are about to accelerate.
Future Reno Home Buyer
We are retiring to Reno in early 2012. I am watching the MLS to see what our $300K – $350K budget will buy. This blog has been very helpful and interesting to me. I am just wondering what my budget will buy in 2012 and if these upper end homes in the $400-600k will fall into my price range by then. I would appreciate your opinions and insights.
Worried Guy
Commercial Lender,
Crony Capitalism: Crony capitalism is a pejorative term describing an allegedly capitalist economy in which success in business depends on close relationships between businesspeople and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, and so forth.
Crony capitalism is believed to arise when political cronyism spills over into the business world; self-serving friendships and family ties between businessmen and the government influence the economy and society to the extent that it corrupts public-serving economic and political ideals.
Worried Guy
If we are having a ‘hyperinflation’ problem, then why are these homes at $350K and above sitting on the market stranded in Reno? Now there might be the appearance of ‘inflation’ as a result of the Fed-Treasury-Banks pumping and pimping questionable monies into equity markets and commodities, thereby consequently getting ‘hot money’ USD carry trade HF’s into the game. However, this misguided Ponzi scheme is really not going to do a damn thing to improve the debt stranglehold that is on the U.S. economy. This latest effort to inflate equity and commodity markets to re-liquify insolvent banks out of their bad debts and the Fed’s debts now…Is straight on foolhardy and not going to end well.
FutureRenoHomebuyer
Future Reno Home Buyer,
What’s up? You took my name! What in the hell am I gonna do now?!
Seriously, maybe I should just start writing in as Smarten. Like they always say, if I can’t get positive attention, I’ll just try to get any attention. I don’t know why all you poor folks out there can’t afford a nice spread in IV like me, anyway. Must be the President’s fault 😉
Or, since he is suddenly so popular, maybe I should just be the the new Bantering Bear. I’ll see if I can put that other grump back into hibernation. God, I never knew that being an old sourpuss could be so endearing.
I could be Derrick/Big Baby/Johnny/etc…, too, but I don’t think my fragile ego could handle the vicious feedback to my nasty remarks. But, I’d prefer to just dish it out than have CL and company constantly calling me out.
Well, I guess I just pick a new moniker at a time and place of my choosing. Meanwhile, for all the FRHB critics out there, rest assured that the new guy ain’t me. FWIW…
2012 Reno Home Buyer
To Future Reno Home Buyer – The real one
Soo Sorry, I am new to this website and didn’t see your name in the current blog, didn’t realize it was taken. I will change mine to “2012 Reno Home Buyer” for the future. Again, I didn’t mean to step on anyones toes, just wanting information.
CommercialLender
WG, ‘duh’ to me, thanks for the clarity. your original post makes plenty o sense now.
2012, your journey will be very interesting with many variables to watch/consider. Good luck. I think there were many 2009 buyers back in 2008 who are now 2010 buyers and 2011 buyers or are just plain content-to-rent for now. My own experiment of voluntary renting is now in its 4th year. I might just join you in 2012.
BanteringBear
“Or, since he is suddenly so popular, maybe I should just be the the new Bantering Bear. I’ll see if I can put that other grump back into hibernation. God, I never knew that being an old sourpuss could be so endearing.”
You obviously haven’t been around this blog long. My posts have nothing to do with being a sourpuss, but rather straightforward honesty, something this country could use a lot more of these days. Are you just another thin-skinned, politically correct, jealous hater? Yawn…
waiting in the wings
2012 Reno Home Buyer:
How the market stabilization plays out in Reno and what it looks like in 2012 is going to be very interesting, there is such an array of factors within the melting pot.
My 2c:
First the low end should firm up and see some appreciation, with demand fed by those forced to downsize plus gov incentives and canny investors realizing it’s going to be the only cash flowing option for them.
The interesting part is how this demand and value appreciation percolates up the price range….really, really slowly. As many have pointed out it’s going to be a long time before households will be able to rebuild their wealth to facilitate any kind of move up market activity. The classic flow of first time buyers to young family to mature family back to retiree is going to be stalled at the young to mature stage but the retirees are still going to want to downsize and may be the only ones that can afford to absorb the equity loss. The big question will be how prepared households will be to suck it up and work thru the equity loss or throw in the towel and let the Banks do their thing, which leads us to employment, or lack thereof. The simple fact that there are no where near as many households in a financial positions to create demand in the 300-500k market coupled with the steady supply from the Banks, distressed and retirees should just keep forcing the prices lower and lower via comps that actually sell.
Then the funny stuff starts, as the higher market starts to collide with the appreciating lower market it essentially crushes the growth until the whole lot settles to an equilibrium the matches the areas income and wealth levels.
2012, I wish I could wait that long…
Interesting times….
Note: all the above should be qualified by the fact that I have no real estate experience, I do however have a horse in the race, we are looking to settle in the area and reading this blog rocks…
2012 Reno Home Buyer
Jan 2012 is when we are retiring and we will be buying in the Reno/Sparks area. We are from California and will be looking for a single story (no stairs, because this is our last home, hard to make stairs in your later years), 3000 sq ft newer home hopefully in the $300k-$350K range. Sounds like it might be possible in our price range by 2012. Even though I got off to a rocky start by using someone else’s moniker, I just want to say this is a great blog, very informative and I enjoy reading everyone’s insight into the Reno Real Estate market.
FutureRenoHomebuyer
2012,
Glad to hear your comments. No worries at all about the outstanding initial name you chose. You must be pretty brilliant. Ironically, it sounds like your are looking for the same place as me, but possibly a bit cheaper and a few years down the road. FWIW, I fear raising interest rates now more than imploding prices, which may influence me to buy next year at a good price, rather than three years from now at a great price.
BB,
Thanks, you made my day.
All,
Replacement cost is frequently raised as a valuation tool, especially on distressed properties. How does one come up with a good estimate for the cost of a new home? Do you just use a flat guestimate of ~100/sq. ft. for instance, adjusting upward for enahncements like upgraded floors, kitchens, and bathrooms?
Any info/opinion on this greatly appreciated, as it will definitely be an aspect of any offer I eventually make.
Sully
2012 – you may have your sights set a little high. Although I’m not sure what you mean by “newer” the cost to build here is about 134/sq ft. Thats for an average house, not high end custom.
To get 3000 ft, expect to pay over 400K. This mortgage meltdown will not change the cost to build one iota; builders will just quit building.
If you’re looking for a foreclosure, thats a different ball game. But, then again, who knows what it is going to look like two years from now. If you go back two years ago, a lot of people didn’t believe the market could fall as much as it has now.
BanteringBear
“To get 3000 ft, expect to pay over 400K. This mortgage meltdown will not change the cost to build one iota; builders will just quit building.”
That’s kind of a silly statement, Sully. With deflation, the cost to build is falling, and builders are also discounting their rates.
Sully
BB; is that another one of your hats. How long have you been in the construction business?
With all due respects, selling prices are related to building costs, but not limited by them. The recent frenzy in home building, allowed the builders to sell for far more than their costs to build.
I been in this phase of the industry for a long time, I know how it works. Go back to your nap, you woke too soon!
willk
Wow. I’m in the same position (planning on retiring to the Reno area in 2012). Don’t worry, I won’t take your screen names. We live in the Sacramento area and like to go up and look around on the weekends. We’ve been tempted a few times to buy now and use as a second home or rental. We will definately do this once we are certain the market bottom has been reached or we find a really great deal. We have looked predominately around Somersett but have recently looked around Arrowcreek too.
2012 Reno Home Buyer
Sully,
I was in Reno in March 2009 looking at brand new homes built by different builders. Each time we were asked to fill out a survey card which included our contact information. We have received two calls from builders with “special pricing” incentives trying to get us to buy. Prices were over $100k less than what they were selling for in March. Wish we could buy now, but I have to console myself with the thought that prices may be lower when we are able to buy in 2012. The same quality/size house where we live(Huntington Bch, CA) would be 1.3M. For us Reno is a great place to retire and get the home of our dreams for an affordable price. By newer I mean 2001-2009 and I will definitely be looking at foreclosures to maximize our budget. Love the Reno area and no state income tax. What more could a future retiree want. Can’t wait to be a new Reno resident.
BanteringBear
As a matter of fact, Sully, I DO know about building. In fact, I have several friends who are contractors, both residential and commercial, and I work in a closely related industry. They’ve been lowering their bids over the course of the past several years. Are you a builder, Sully? I’d bet you’re not, because you haven’t a clue what you’re talking about.
FutureRenoHomebuyer
I have seen an avalanche of price reductions hit the market since 13 Oct. Is this the beginning of the long, dark winter season? Is this the final leg down of a devastating market?
Admittedly, my search tool is relatively unsophisticated. I use Trulia. Shoot me, but I like the interface. My typical search is focused on the whole of Reno, listing order by date of latest price reduction. After the 170th listed reduction dated 14 Oct, I finally gave up. Is it a glitch in the system, or is something up?
For all you MLS connoisseurs out there, I’d like to hear your take. I must say that I am seeing some tremendous values right now — especially considering current interest rates. Although I will not buy before the spring of 2010, the wait will be difficult.
Sully, I like your estimate of $134/sq ft and will use that as a baseline going forward.
As for the deflation devotees out there, I just don’t see it, not while Helicopter Ben has the controls of the money supply, FWIW…
Sully
BB, I am a contractor and have been in the industry for 45 years.
BanteringBear
I’m calling BS, Sully. You said:
“This mortgage meltdown will not change the cost to build one iota; builders will just quit building.”
Either this is just a stubborn statement from someone angry about the current state of affairs, or you’re not a contractor. I know what my friends are going through right now. They’re building for less than they ever have. As residential dried up, a lot of guys moved into commercial, and that really drove prices down. It’s a buyers market if you want something built. Bids have dropped like a rock.
Sully
Oh well, if my three responses finally show up you’ll be able to see my temperament lowering with each comment. 🙂
Sully
I’ll try it one more time, color this one flushed after the others ones that were various shades of red.
Bids have dropped like a rock because the contractors are trying to stay competitive, it’s a normal cycle in the construction industry. Residential dries up, everyone moves to commercial. But the cost to build are influenced by material and labor costs, not the end user mortgage market.
If no one is buying, then no houses are built. Does that mean the cost to build has gone down?
Competition from foreclosures have hurt builders more than anything else, but the actual costs have not fallen off a cliff, just the excessive profits. That’s not to say that material costs haven’t come down because of the recession. But, to say your friends are building for less than they ever have – just tells me they haven’t been building for very long.
Here is a link to current building costs, see if you can figure it out:
http://www.building-cost.net/CornersType.asp
FutureRenoHomebuyer
I count over 110 price reductions for properties in Ward 1, Ward 2, and area codes 89509, 89511, and 89521. These are mostly SFR in some of the nicest parts of Reno, with most properties listed over $250k.
Having used this search over the last year, I’ve never seen so many reductions on one day.
If anyone has any confirmation/denial/additional info, I’d be quite grateful to hear about it.
Downtownjunkie
“This mortgage meltdown will not change the cost to build one iota; builders will just quit building.”
The builders sealed their fate long ago paying extraordinarily high prices for dirt. THAT is what’s putting builders in a stalemate for now-until the banks take their losses. Labor and materials have come down quite a bit so you would be surprised what TODAY’s replacement cost is as compared to 2004-2006.