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.
Raging Bull
Unfortunately, you are all lost little lambs of Bantering (Bent) Bear and Reno Ignoramus (Is Bliss).
The turnaround is now — real time.
1) Record low interest rates
2) Record high government incentives
3) Record low new construction
4) Record high bearish sentiment
5) A growing majority of homes priced at above replacement cost.
6) The govt printing money like it is going out of style (more $$ = inflation and higher real asset prices, and real estate lags the stock market, just like the nasdaq bubble)
Look at all the new posters planning to retire to Reno. We all know that, if the conditions were right, people would be flocking here to Reno. I don’t care about unemployment. Those poor folks got foreclosed upon and they ain’t comin’ back soon.
Who is? California disenchanted. Oregon non-liberals. Folks who just like to have a good time. If Reno sucked so bad, none of you would pay attention to this blog. All of you must like Reno, or you truly are morons.
Bottom line: buy it now while you can. ‘Cuz next year you’ll pay a heck of a lot more in interest and principal.
Bears, your moronic mantra has grown tiring. Don’t fall victim to not being nimble enough to change your attitude with a changing environment. I call the bottom. And it is NOW.
Downtownjunkie
Maybe I was being “shilled”. But why would she say prices are going to fall off. I think she is legit so I am going to wait and find out:)
Worried Guy
Well if we are at the bottom then:
A. The U.S. Federal Gvt. no longer needs to extend the $8K tax credit after November 30th.
B. The U.S. Federal Gvt. no longer needs to back Fannie Mae, Freddie Mae, FHA loans and GS-JPM-BAC-WFC-C..etc..etc…
C. All shadow inventory can be brought to the market right now and swallowed with new buyers.
D. The Unfederal Reserve can normalize the Federal Funds Rate back to 5-6%. This has been an absolute crime perpetrated on people who saved for years to then be handed zero rates to support a bunch of greedy baseless whores is beyond reproach. The market should dictate interest rates for cash, not an arbitrary Politburo in New York and Washington.
The list goes on-you get the point. None of these are going to happen right now and until they do, we are not even remotely close to a bottom..It is a shame that more people will get wiped out in real estate from all the schemers inthe coming months and years..But look at the Federal Reserve, Gvt. and Banks…These are the biggest schemers of all time and it is dismantling the country.
E.Edward
I just have to jump in here on the above misconception of inflation/hyperinflation,Every global county {to date} that experienced inflation Home prices decreased,While necessity items increased.{Eating seems to be more important than home ownership}
Further: Low interest rates will not out-last the coming windfall of inventory thus destroying any attempt at a propped up/artificial housing recovery
Re-cap: Medium wages at that point simply will not support current medium home prices
Agreed: Record low new construction { Rumor has it Washoe county leads the county in the most % of unemployed construction personal} This also will be a major contributer
Final: The measly 8K tax credit whether extended or not is peanuts compared to the future equity loss. “Housing is on life support and can’t stand on its own, feds running out of bullets”…
Patients is the winner here…
bob c
and the 15K credit proposed for all buyers is
essentially the government decreasing the down
payment by 15K, because the 15K will be added
onto the selling ask price if passed
(make loans easier, for those who don’t have the down payment….isn’t that what got us here?)
japan has had 0% intrest since 1987 (22 years);
they have had to eat the worlds inflation and
people with savings have had to play the currency
exchange to get any ROI as far as interest rate
or get next to 0 investing at home
so if japan is eating 2.5%/year in relation to the
rest of the worlds economies…their waelth is
now 22 years x 2.5% less than it was
they call it deflation….i call it absorbing
the inflation (they deflated in relation to
rest of world)…thats the path we are headed on
….that 2.5 % adds up after 22 years
to get ROI they can buy foriegn bonds, but
then they need their currency to comply and
it has weakened over the 22 year period (although
recently it has staged a rally as have their
long term rates which are 1.5% or so)
btw the nekkei peaked in 1987 at 38,000 + or –
and is what 10,000 or so today
in 1987 60 minutes featured the japanese as the
worlds leaders and they were….they dominated the usa in autos , electronics and manufacturing
india, asian tigers and china will overtake
usa in computer technology so the last frontier
the usa leads in is biotech…we are an aging
society and the young bucks are zooming up on us
willk
bob c said ” …india, asian tigers and china will overtake
usa in computer technology so the last frontier
the usa leads in is biotech…we are an aging
society and the young bucks are zooming up on us
”
Healthcare reform will kill off our lead in biotech.
Move to Reno
Whether one buys now or later depends on several factors. Very low interest rates is one factor. price per sq. ft given construction quality is another. To me, the deciding factor is the location of the house, its siting, and its layout and whether the previous owner put a lot of bucks into the place in additions and upgrades.
It’s very hard to buy at the absolute bottom but if one is within 10% of it then the buyer has done well.
I’m looking to buy in Las Vegas and houses offered near the median price are selling like hot cakes. Houses $250k and higher stay on the market for some time unless they are compelling buys.
Raging Bull
Here’s some blueberries and salmon for all the bears out there:
1) It’s pretty much cheaper to buy right now than to rent. I can get me a nice $420,000 place in Arrowcreek right now, with 3% down, and pay ~$2200/month for P&I. Then I get to deduct mortgage interest. Too easy.
2) As has been discussed ad nauseam in this blog, a growing majority of places in Reno are selling for less than replacement cost.
It’s always darkest before the dawn. Real easy for all the Cassandra’s out there to be calling for the end of the world as we know it right now. I wonder where they were in 2006? (BB and those of his ilk excluded from that remark, as they’ve got a chronic case of grumpiness. Yeah, they were right on the downturn, but they also missed the upturn, as they will next time around. Even a broken clock is right twice a day.)
BanteringBear
“Real easy for all the Cassandra’s out there to be calling for the end of the world as we know it right now. I wonder where they were in 2006? (BB and those of his ilk excluded from that remark, as they’ve got a chronic case of grumpiness. Yeah, they were right on the downturn, but they also missed the upturn, as they will next time around. Even a broken clock is right twice a day.)”
Upturn? BWAHAHAHAHAHAHAHAHAAAA! What upturn? Let’s see- record foreclosures, mammoth shadow inventory, escalating unemployment, stagnant to declining prices- you call that an upturn? Your diarrhea of the mouth makes you look awful foolish. Best to know what you are talking about before you utter such garbage. Get back to us late this winter so we can laugh at you even more than we are now.
Oh yeah- hit up the archives from 2006 before “wondering” where we were. We were right here, on top of things. Where were you? Misunderstanding the situation then much the same as now, I surmise.
smarten
Hang in there Bull. Although the choir is walking in lockstep w/BB and RI, NOT everyone is [as demonstrated by what I find to be an extraordinary number of commentors to this blog who’ve admitted they’re either buying or actively presenting offers to buy Reno/Sparks real estate].
When we talk about a “bottom,” I’ve attempted on a number of occasions to get a consensus of exactly what it is we mean by use of the term. The reason being that the “bears” are ignoring much of the data historically used to measure the state of the market [as recognized by Guy in his post].
As the market turns [and by no means am I saying it has (although it very well may have)], the number of quality properties in a location you’re particularly interested in which exhibit the features you’re particularly interested in and at a price you believe represents the “bottom” are going to dwindle. At that point you’ll have to either settle for second [or third] best; or, at a price higher than you want to pay; or, you may actually decide to continue renting because you missed the bottom and you’re waiting for a return engagement.
IMO there are deals out there in every price range and if you can find something you want now at below replacement cost and at a price which to you is the lowest you’ve seen in the last 18 months, I see no reason to wait just because someone on this blog who really knows nothing more than you about the market makes the generic statement that “the bottom still has sometime to go” because of…[fill in the blank].
It’s easy to sit on the sidelines and criticize. It takes mettle to act at a time you feel is right and everyone else is predicting doom and gloom.
I’m sure CL as well as I are interested in what if anything you find to purchase and the methodology you use given the current state of the market.
Raging Bull
Bantering Bear is like all critics. When you cannot do, you criticize those who do.
So, in the interest of full disclosure, tell us Bear. Do you own any property? If so, why? You should have sold in 2005 if you believe your own posts.
If not, will you ever buy? This is key. Perhaps BB just won’t ever have the money to buy, which is why he is so grumpy.
I think all reasonable folk would agree that buying one’s own home can be one of the best investments ever made, as long as it’s for the long haul.
Even in this historic crash, prices have only reverted back to 2002 levels, at worst, with a few insignificant exceptions like condos in less-desirable parts of town.
I’ll freely admit that the fed govt. has long subsidized homeowners with the mortgage interest tax deduction. Like it or not, that is not going to end anytime soon. So, as long as you think you can buy a place near replacement cost, and can hold it for 5-10 years, why wouldn’t you avail yourself of that incredible financial incentive?
If BB and his acolytes think it is not a good time to buy, and it never will be, then why do they even follow this blog? If there are conditions under which they would buy a property, then they should clearly define what those conditions might be.
Otherwise, they are just blabber-mouthed bears that do no one any good.
BanteringBear
“Bantering Bear is like all critics. When you cannot do, you criticize those who do.”
Yet another stupid, baseless assertion. Never once have I criticized anyone for purchasing a house. If they can afford it, I think that’s great for them. I defy you to back your comment up with fact. You can’t, because you’re a phony.
As far as my situation, go back into the archives, newbie, and figure it out. You know zero about me, yet you make assumptions about my financial position. You are an absolute fool of the highest order.
That said, it matters not if one owns property, does not, has plans to buy, or wants to rent for life. People discuss the current housing market and economic situation because it is affecting their lives, and those of EVERY US citizen, and it interests them. I’ve gone round and round with you bird-brained shills, and you’re a dime a dozen. You’d know a thing or two about blabber-mouthing, that’s for damn sure. Sounds to me like Downer changed his name.
Raging Bull
1)Homes are selling for less than replacement cost.
2) It’s cheaper to buy than rent.
Please, can anyone try to refute this?
I reckon it matters a hell of alot whether one “one owns property, does not, has plans to buy, or wants to rent for life…” It goes to the root of this very blog. If you cannot back your daily assertions up with actions, past or present, or at least with future plans, then you are just a blabbermouth. Actions tell the rest of us where you actually stand, not just where you say you stand. Smarten, for example, has fully disclosed his opinions in quite personal detail and his specific actions as a result of those opinions. This gives him solid credibility in my mind, and his posts have been invaluable.
If you want to hide behind personal attacks and non-sequitors, no one needs to refute your arguments, as you obviously have none.
BanteringBear
Like I said, newbie, it’s all in the archives. Looks like you’ve got your reading cut out for you. You don’t blow onto a blog and start demanding information already shared from people who have been contributing for better than three years, and get your wishes. Quite the contrary. “Hide behind personal attacks?” LOL, love that hypocrisy, Raging Bullsh!tter.
DownButNotOut
BB- Thanks for the complement, and I’ll take it as such, but I’m happy to watch this one shake out. I happen to agree with RB on a lot of what is being said.
BTW- if you really had some skin in the game you’d let us in on it – the ‘As far as my situation, go back into the archives, newbie, and figure it out’ BS is ridiculous, as nobody has the time to read through 2006 just to figure out what you did back then.
Besides, it doesn’t tell us what your doing now. Blabbermouth seems to fit IMO.
BanteringBear
No matter how hard you guys try, you can’t talk the market up, and it just burns you to no end, doesn’t it? I LOVE IT!! Don’t hate the player, hate the game. 🙂
DownButNotOut
No blogs for RE in WA?
PursuitAce
BB believes in the depression scenario. End of story. No use arguing about it. He is not changing his mind. You can’t even talk to him about his own scenario. I have been hoping to see some good dialogue on here regarding current and future events. It just hasn’t happened. So, moving on…
BanteringBear
I don’t think you’ll be missed, PA. I can’t ever recall you offering anything even remotely insightful. You might try Active Rain, or another of the shill sites. I’m sure you’d fit right in. They’re big on happy talk, saying things to make each other feel good, putting the blinders on, you know- sheeple food.
johnny
leave BB alone he is just a grumpy old man!
hmm lets see here… inflation is right around the corner like it or not folks. i ask you who benefits in conditions of high inflation?
Debtors, that’s who!
cheaper to buy than rent? hmm sounds like an obvious choice to me!
Homes selling for less than replacement costs? hmm another no brainer! especially with that inflation thingy I already mentioned.
if you think putting your money in the bank and waiting 2-3 years to buy a house is a “Smart” decision you are only kidding yourself. I will gladly take that mortgage for 5% when inflation will most likely be HIGHER in the years to come..
not to mention the cost of commodities is already beginning to spike.. just getting warmed up folks
Sane Economist
One issue the would be bulls are missing, is the fact that Reno has just experienced a classic real estate BUBBLE. Now, bubbles come and go, but all Bubbles share 2 common traits.
1. The outrageous prices NEVER return(nominally).
2. Before median price is restored prices ALWAYS OVERCORRECT.
Now I believe, 180K is about par for Reno, and come 2013, this is more or less where the median will be. However, between now and then you have to allow for said overcorrection, so median is definitely going to drop further. What’s really frightening though is this will occur in the face of upper end compression.
Houses that sold for 600-700K in Somersett, will sometime in the next 5 years years exchange hands at least once, for about 300K.
I also find it amazing that anyone seriously thinks there is inflation in our near future. If only we could be so lucky..
johnny
BB slap some stone over that door in your APT and call it the CAVE!
John Rusin
It looks like we’ve acquired some desperate agents trying to drum up some buying buzz, along with some recent unfortunate homebuyers who are trying to justify their decisions.
Briefly, the prices don’t match the wages here. Sorry, that’s the simple truth. There is good news: our economy is diversifying away from low-paying, low-education casino jobs. Bad news- its being replaced by low-paying, low-education retail jobs. Local governments, by givng STAR bonds to (duh) stores, and the state stripping away Millenium Scholorship and other education money will keep Nevada a “low-pay-can’t-afford-a- $300,000-house” state.
Second, low interest rates have not worked up to now to create a buying binge. Third, replacement costs are irrelevant…too much inventory trumps that and will cause further price drops. And buying is not the bargain over renting it was anymore. Rental rates are falling, and Washoe property taxes, at least where I live are much too high.
I tell everyone I know…wait 2 years to buy, at least. You’ll save $$$.
FutureRenoHomebuyer
Seems to me good points have been made on both sides of the ledger. Replacement cost and the buy v. rent calculations are relavent, and at least ensure a prospective buyer that they are not getting ripped off.
On the other hand, I happen to believe prices will go lower, at least in the near term, especially at the high end.
Below $300k seems a pretty safe buy right now. Above that, price compression will likely provide better deals near the end of winter and beyond.
What do you say, Guy? Feels like this thread is just about used up… Would love to see some specific properties discussed. 1080 Mt. Rose St. in the old southwest is a REO that has my eye. Would love to see it go for peanuts, so I can pick up a neighboring place for cheap with the lower comp. Currently listed at $99/sq. ft. and bound to go lower. If I had $800k, I’d be looking at it. Looks like a mansion from the website. FWIW.
johnny
“Briefly, the prices don’t match the wages here. Sorry, that’s the simple truth.”
What prices are you exactly talking about? if you are talking about the 250k> segment then you are partly right.
if you are talking about the 200k< segment then you are flat wrong. It’s pretty obviouse that the 200k< market HAS bottomed
johnny
maybe you are talking about the median pricing? 185k?
actually, the Reno area wages DO support a median of 185k.
again be more specific!
johnny
“I tell everyone I know…wait 2 years to buy, at least. You’ll save $$$”
and how much do you plan on “Saving” when interest rates on a traditional 30 year fixed rate mortgage are at 7.5%?
and with the banks holding many foreclosures off the market, inventory levels getting VERY low, what kind a house do you expect to buy?
oh yea, what about when inflation increases considerably in the next 2-3 years? do you have an answer on that too? will that make houses cheaper? lol
johnny
“I also find it amazing that anyone seriously thinks there is inflation in our near future. If only we could be so lucky..”
apparently you don’t follow the consumer price index (cpi) do you?
Last I checked it just registered a larger than expected increase in consumer prices..
oops inflation already!
Worried Guy
Realize this…If commodities and equities start rolling over in a pivot point continuation of the collapse in 2008, the Federal Reserve and U.S. Treasury have nearly used up all of their ammunition to stem the tide. This is quite a scenario building here for the deflationary outcome. The next move could be the wipe out acceptance phase. We are already at zero rates and the Kill The USD trade is not a never ending answer. Just right now, the overvalued currencies vs the USD are sending economies into a slowdown as a result due to a reduction in exports. It is an echo bubble redoubt that is set to burst. This will have dramatic results for real estate valuations going forward once again as has already been witnessed.
johnny
Tell me on NOVEMBER 18th when they gov’t announces the CPI numbers that we aren’t already starting to experience inflation!!
MMMk? I will be here waiting on the 18th for your response.
see ya then!
Retiring to Reno
J Rusin said ‘I tell everyone I know…wait 2 years to buy, at least. You’ll save $$$’.
Someone before on this thread hit the nail on the head (Future Reno Buyer?)and that is buying that special one of a kind place MAY NOT BE AVAILABLE in two years.
Put another way – most everyone talks about house buying like your buying a Chevy – maybe you all buy Chevy’s- I’d like to buy a DeLorean. Therefore the difference 8k in first buyer incentives, or 1/2% in financing becomes meaningless compared to getting what I want. (maybe it was Smarten that pointed this out?)
Are there really that many sheep buying?
Sane Economist
Johnny,
I’m not saying don’t buy. Just don’t overpay.
Personally, housing has never appealled to me as an asset class, although others obviously feel different.
But if I were to buy, I would not exceed 50$/sft. I just don’t get it where you think this demand is going to come from to drive prices up. I must be missing something.
Also you are quite wrong about your price/rent equation. Rents are dropping so precipitously that the Feds are literally battling to keep up. As you know rent equivalent makes up 40% of CPI, and the latest equation showed that number to be negative. First time thats happened since 1992. It’s also the main reason why granma’s social security checks are staying at par next year. That has happened since 1931 if memory serves.
I would be very happy if I saw inflation on the horizon, cause we sure as heck need it. But from my perch, I don’t see nuttin’
You mention CPI. You are correct in your statement that it increased last month. In fact it doubled going from 0.1% to 0.2%. However M2 velocity has almost stalled for the last 3 months which tells me we are entering a very dangerous deflationary period. I guess we shall see.
Worried Guy
The CPI number is being run on energy related components. The entire point of bringing the USD down since March is to massage CPI numbers with those energy components to fear the money into asset inflation and feed the beast. Zero interest rates are the primary culprit. Either way, when reading the CPI you have to ask how many Gvt. sponsored banks (GS-JPM) in conjunction with spec HF’s ran Oil up to juice CPI numbers? All is not as it appears. These guys are pulling every trick in the book to avoid deflation print numbers. They are going to happen nonetheless as GDP in the U.S. goes negative in 2010. BTW..the change in M2 has fallen to a slim 1% growth rate in the last six months. This isn’t what you would normally see in a true inflationary/hyperinflationary environment. The Federal Reserve has increased the monetary base by 1000% since the last 3 months of 2008, but it has been flat since that time. Normally that would result in those deposits being multiplied nine times through the fractional reserve banking system, but it is not happening. Why? The fact remains that banks remain unsound at this time and want to collect on loans rather than lend. This is credit being destroyed in the system as loan volumes are collapsing along with consumer asset prices. The money multiplier has gone to zero along with money velocity. This is decisively deflationary as the Fed is just flat out losing the battle.
DownButNotOut
Can’t we get back to beating up on Bantering Bear? At least that had some truth to it.
On a serious note, we’re dominated here by 1st time buyers, let’s at least give them the benefit of our wisdom.
Here goes mine:
Buy under replacement costs
Look at different neighborhoods – specifically school’s if your young
Safer, more established neighborhoods if your older
Value – how old is your house? How energy efficient? Are the streets wide or narrow? Parking?
Where are the community trends leaning when it comes to city blocks and your area.
Property taxes – what’s it mean compared in relation to other areas.
Future growth. Are you at the edge, or inline?
I agree w/ RTR – no two houses are alike. When it’s talked about here that houses cost this or that, it reminds me of the picture I still have on my desk from when my youngest son was born – 27 of the most beutiful newborns stuffed on our couch – and no one could tell who’s was who’s.
And that was viewing our kids.
If that’s how you see your house (no difference) you may want to wait.
If not – go for it. It may not get better, despite what you read here.
MikeZ
RE: “2) It’s cheaper to buy than rent.”
Well, prices can’t go up until local incomes support the mortgage qualification requirements, so, if that rent/own imbalance remains, rents will fall.
BanteringBear
Sane Economist and Worried Guy make excellent observations regarding the current state of the economy. Inflation isn’t the real threat, it’s the deflation we’re battling. This has been discussed time and again on this blog, but it seems the shills are oblivious to real world economics. It just doesn’t jive with their “hurry up and buy now because hyperinflation and high interest rates are on the horizon” blather.
BanteringBear
“Can’t we get back to beating up on Bantering Bear? At least that had some truth to it.”
If that’s beating me up, you’re about as weak as they come.
Reno Ignoramus
Future,
1080 Mt. Rose is Rollan Melton’s old house. I was in that house a few times, although not very recently. It is a wonderful house, but take into account its age. It was initially built in the early 50’s, then updated probably in the 80s. So even the ‘updates’ are about 25 years old now. I suspect it would take a few bucks to bring it up to date again.
I believe that this house originally came on the market as an REO at about $1.1 million. Then went to about $900K. Now at about $800K, which puts it about $100. sq. ft.
Way too much work, inside and out, for a guy like me. But for the right owner, it could be a grand old house.
Downtownjunkie
Reno Ig,
I want that house but it is too rich for my blood. Would be complete suicide unless held onto for 10+ years.
There was a bank owned that came up today in Old South. Looked pretty interesting. Called the realtor and it looks to sell for 170/sf. This is a common case of “hurry before the tax credit runs out”. Pretty smart of the Bank IMHO. Pretty dumb on the buyers part though…
Reno Ignoramus
Down, I have a friend who is a realtor with whom I went to lunch a couple of days ago. He outright acknowledges that realtors in his office are using the “better hurry up and buy before the tax credit expires” gambit. He even said they had a sales meeting about it. So I suppose potential buyers, and maybe not even very potential buyers, will be hearing a lot of that the next few weeks.
Move to Reno
These realtor shills can’t lay a glove on Bantering Bear because he has all the critical facts on his side. High levels of unemployment, independent appraisals now required, 20% down payment, fully documented mortgages, strict limitations of amount of mortgage given available income, consumer confidence is zip, etc. Yeah, houses are selling below replacement cost but the cost of new homes has fallen as well. The fact that bank on letting some folks stay in their houses even after they stop paying the mortgage means there is a back log of foreclosures in the pipeline in the boom areas.
As for comparing USA to Japan, there are a lot of differences between the two countries and I doubt that the USA will repeat what happened to Japan. Our population is growing for one thing.
Now is not a bad time to buy if you find that extra-ordinary house that is priced like an ordinary house. AS the realtors love to say, your “dream” house..
Martin
“Now is not a bad time to buy if you find that extra-ordinary house that is priced like an ordinary house.”
I agree. This seems to be the sole point of every comment that Smarten makes now that he has bought. I find this a rather unremarkable point. Of course, in every market, there will be a few good, maybe even great buys. If you are astute enough to find one, then by all means pull the trigger.
But the fact that an astute buyer can with diligence find the occasional good bargain even in a bad market does NOT mean the market is recovering.
How come everybody who suggests that the bottom has arrived absolutely ignores the thousands and thousands of houses in the foreclosure process?
How come?
CommercialLender
I never thought I’d see the day where I got something out of Johny C/Derrick’s posts while BB’s were flat and unsubstantiated name-calling. Johnny at least offered his rationale for buying and cost/rent metrics for his business plan, thank you.
****
Many of you are spirited debaters in bottom calling. I submit you all may, for the most part, be correct if you correctly identify the strata of home in your analyses. Those calling ‘bottom’ appear to be doing so in the sub-$200K strata while those calling ‘bs’ appear to be focused upon the mid and upper end.
Bear with me a moment here. Most posters here are familiar with the concept of a ‘yield curve’, or a graph of the current market yield of the 2, 5, 10, 30 yr UST bonds/bills. Quickly, a normal YC slopes upward to the right as typically 30 yr rates are higher than 2 year rates to compensate investors for future inflationary risks. At times the curve is steep where the longer the maturity, the more the rate needs to be to attract investors. At times this is flatter where investors demand not as much increased yield to hold the bonds for a longer duration. Also, the entire curve can stay sloped the same, but shift higher or lower en masse.
Stick with me. Now think in terms not of interest rate yields but of housing prices. What we went thru in this past bubble was, I submit, both a shifting upward and a steepening of this supposed curve. All houses went up in value (shifted upward), but particularly in the high end homes (sloped more steeply). Now, in this bust the entire curve has shifted downward for sure, but particularly so in the low end. We now have a fairly steep ‘housing’ curve with the low end having dropped so fast due to reasons such as subprime lending and the relatively lesser cash flow abilities of lower end home buyers faced with job losses. The lower end of the curve has dropped to such a degree where ‘affordability’ has crept back in to that end of the housing market, compounded by $8K tax credit, FHA loans, and foreclosure pricing. Simultaneously, the high end is down certainly, but it is not down enough to create the demand we are seeing in the lower end. Additionally, prime and Option loans are just hitting the fan, job losses have reached middle and upper middle classes, and financing for jumbo loans is difficult at best. Thus, the $500K end is effectively on life support while a tremendous amount of resales are occurring in the short end.
Thus, Johnny C and others can buy in the low end assets that cash flow and/or they are OK to take the risk of further declines as they perceive most stress in this end is behind them. However, many others are not OK to take the risk of further declines in high end strata, because that end of the housing curve is perceived to still be too high with too much risk of the curve flattening out.
Now that everyone has that picture in mind, anyone want to venture a guess what shape and level the housing curve will take this winter? 2010?
BanteringBear
“I never thought I’d see the day where I got something out of Johny C/Derrick’s posts while BB’s were flat and unsubstantiated name-calling.”
Oh, please CommercialLender. “Unsubstantiated name-calling”? Go back and read Raging Bull’s, Downer’s, and Derrick’s posts and rethink your selective, myopic assessments. You single me out because you and I have gone round and round in the past, and that still clouds your judgment. I would have thought better of you, but you’re just one more in a long list of my haters, now. Being in the industry, as you are, it’s no surprise you share such hate and vitriol, really.
Regarding properties cash flowing on the lower end- wages are declining, and rents are falling. People are grossly underestimating the effects of mass unemployment on the local market. Today’s cash flow positive properties may be tomorrow’s albatrosses. What’s happening in the low end of the market is, IMO, a speculative frenzy not unlike that of the peak, albeit at lower prices. More foreclosures in the making there as prices continue to drop. Until people are forced to have more skin in the game, the shenanigans continue.
PursuitAce
Thanks Sane Economist and Worried Guy…good stuff the think about…
FutureRenoHomebuyer
CL,
Another classic post. Thank you.
CommercialLender
BB,
You made … my point.
FRH,
Thanks for the compliment.
BanteringBear
No, CL, I called you on the carpet for your hypocrisy, and you have no defense.
CommercialLender
BB,
First you call me a hater, now hypocrite?! Huh? Where on earth do you get this from? You make a blanket statement “Being in the industry, as you are, it’s no surprise you share such hate and vitriol”. This logic is ill suited for a thinking person of your heretofore evidenced caliber: are you saying the commercial mortgage market is inherently hateful and vitriolic, or are you attempting to tell me, whom you’ve never met and clearly misunderstand, that I carry extreme adverse social and personal traits?
FWIW, there’s exactly no one on earth that I hate. Find one. Given how you adamantly defended yourself when people incorrectly attributed words to you in the past, how would you suggest I now act? Please substantiate that I am hateful, vitriolic and hypocritical, or otherwise retract your slanderous assertions.
Re-read my comment above in which I observed Johnny/Derrick gave us rationale and reason, with numbers to boot, so we could all glean something we obviously care about: Reno area real estate. I contrasted his posts to those of your own that gave us childish name-calling: “Downer”, “Raging Bullsh!tter”, “you’re a phony”, “newbie”, need I go on?
I’ll write the same thing I wrote the last time you and I got into a written scuffle, namely I often derive a good bit of data from your posts and enjoy your point of view except when you devolve into personal attacks. I find they cheapen one’s argument where facts and logical debate would otherwise strengthen it. Thus, I actually derived good input from Johnny / Derrick instead of you, an observation which I mused was something unexpected.
****
Finally, others today have challenged you to share a bit with us on your own personal situation so we know the backdrop to your comments and so we can glean some constructive information on the Reno real estate industry. You quipped they should go back and read posts from 3 years ago. Others commented they don’t have the time to do so. Consider saving us all the time and the necessarily improper assumptions that your thoughts and situation in the past 3 years has remained entirely static, and pray tell what your skin in the game is in Reno real estate? [Smarten, its coming…] We’d all like to learn from your experience and observations.
I’m not sure why, but I welcome your responses.
BanteringBear
CommercialLender-
You asserted that I had engaged in unsubstantiated name-calling. You’re wrong. Again, I would suggest you re-read all the posts by Raging Bull (sh!tter, yes he is full of sh!t), Downer (my pet nickname for him because I know he loves it so), and Derrick, Diablo, Marcus, Johnny, Big Baby, or whoever the hell he’s posting as lately, in order to see that what I post is very much substantiated. The reason that I called you another hater is because you conveniently chose to ignore all of the hatred directed at me by the aforementioned posters, and singled me out just as they have. It’s clear as day. As far as the remark about your industry- there is much bitterness amongst those employed in your field as the well of easy money has run dry, yet the anger lives on. Enough said.