Somersett Development Company Ltd (SDC) is the master developer of the Somersett project. They took the project through the entitlements and approvals process, constructed the infrastructure and site improvements, then sold off major portions of the finished lots to outside developers for their projects. SDC maintained ownership of the entitled commercial properties, many of the custom home sites, and a few pockets of land that they could develop or sell off in the future. It has been a rough couple of months for SDC.
There are two large commercial sites totalling over 16 acres located on the west end of Somersett Parkway, where it meets the traffic circle in Verdi. After literally years on the market and with no anchor tenants stepping up, these sites sold in August for $914,000 to Witt Family LLC. If you saw the amount of work that went into site preparation, you would understand the bone crushing loss SDC took on these commercial sites. On the other hand, the Goddard School site on the far east end of Somersett Parkway sold in October 2009. The purchase price for this slightly less the one acre parcel was $725,000.
On 14 September 2009, SDC deeded back 24 lots on Woodcrest and Gypsy Hill to Nevada Security Bank in a Deed in Lieu of Foreclosure (DIL). These lots are the western portion of the Ledges development (the Ledges also went back to the bank, but was not a SDC project). The $5,000,000 loan had an outstanding balance of $4,8,02,345.50 plus interest and penalties from 5 February 2009. The bank and SDC determined that the fair market value of the properties was $1,575,000, a third of what was loaned less any equity SDC brought to the deal.
On 28 December 2009, SDC deeded another 34 lots back to Nevada Security Bank in a DIL. These were custom home lots located on Eagle Bend and Eagle Chase. The amount owing on the loan was $6,421,500, and the fair market value was determined to be $3,125,000, though the recorded transfer value was $2,906,205. This deal had a lot of parts, and might be interesting for you die hards to follow.
17 more lots went DIL to 1st Independent Bank of Nevada on 31 December 2009. Again, custom home lots. The balance of the $2,150,000 loan was $1,959,759, the fair market value was determined to be $1,000,000 and the recorded transaction value was $1,140,303.
On 19 January 2010, a NOD was filed on the Town Center retail and office complex. As of 4 August 2009 when payments stopped, the balance on the $8,775,000 loan was $8,670,428.52, and there is now an additional $192,702.81 in interest and penalties due.
Why the DILs instead of a foreclosure on these recourse loans? It says to me that Somersett Developmet Company Ltd has no other assets for the banks to go after. They still own another pocket of finished lots, but those could be the next DIL. The relationships between developers and the smaller commercial banks is also much more gentlemanly than if BofA or the like were involved. Still, I hate that MY bank ate a million dollars in one of these transactions.
Somersett is less than half built out at this point. The vacant lots are not generating the anticipated property tax revenue and fire impact fees, a major factor in the potential closing or "browning out" of the new Somersett Fire Station. The vacant lots are also not generating the HOA dues projected to maintain and improve the project, and my guestimate is that about 25% of the improved lot owners are delinquent on their HOA dues.
It looks like death by a thousands cuts for SDC. I wish them the best.
skeptical
The quicker developments and properties like these get unloaded and clear the market, the better off everyone will be. Situation doesn’t look bright for Somersett right now, but someone is going to get these properties for pennies on the dollar.
It’s been said before, falling prices aren’t the problem, they are the solution.
On a more negative note, with falling population numbers and falling employment, where will the demand for the McMansions come from?
I used to see a turnaround ca. 2010/11. Now I see a slow drip decline for at least the next few years.
I used to be nervous about the expiration of the tax credit (as I am eligible), now I see that expiration as a point of opportunity. For the properties that are affected by the credit, I predict a quick $8k price drop as soon as the credit is expired.
Lastly, rising interest rates used to be a concern for me, now I look forward to significantly higher rates to create pricing opportunities in the properties that I am interested in.
No, there will be no “V” shaped recovery in the Reno housing market (or IV, for that matter — second homes are extravagances that have gone the way of easy credit and vacation rentals/hotel rooms are cheaper than vacation homes in a falling/stagnant market).
Patience, as in 10yrs worth of it, won’t be penalized, IMHO. For now, cash is king in the Reno RE market.
GrandWazoo
How occupied is the Town Center? Retail? Commercial office space?
BanteringBear
Somersett, as Reno Ignoramus has pointed out so many times, was built entirely on the bubble. That’s why this is not surprising in the least. The prices NEVER made sense. Not even for a moment. These developers were blinded by greed.
When this nonsense starting sprouting up in the early 2000’s, I questioned who all of the rich people were who would afford all of these overpriced sh!tboxes. Nobody had any real answers, just vague responses like “they’re out there.” No, they’re not. They never were. This was a poorly conceived development insofar as prices are concerned. The market is now taking care of that, as is evidenced by th
BanteringBear
“…evidenced by this thread.”
Need edit button.
GrandWazoo
I imagine the Town Center was ground zero for offices to house the builders and realtors back in the salad days of the development during the bubble.
That place must be a ghost town now.
BanteringBear
Admittedly, I’ve never been shopping at the Town Center, or done anything besides drive through Somersett, but the place just oozes “cheap and fake.” I just wasn’t getting the vibe of a warm and quaint little market and town, or anything like that from my brief encounter. In fact, Somersett felt like one big sham. Perhaps I knew too much.
GrandWazoo
“Cheap and fake” pretty much describes the whole Reno tract house bubble.
“Insane and out of your fricken minds” pretty much describes the current Reno Newland Manor neighborhood homes for sale.
I guess no one ever gets a clue … it is not like the Newland Manor houses are moving.
FutureRenoHomebuyer
Wazoo,
I share your frustration regarding Newlands Manor. I can only guess that, as one of Reno’s oldest and most established neighborhoods, there must be a much higher percentage of positive equity/less desperation there. People don’t want to sell into this market if they can avoid it. I can’t say I blame them, but they’ll never get the $250/sq.ft. for the 50yr old houses.
I’m going to guess that what is for sale is likely divorce, death, pink slip related. The rest seem content to try to wait this one out.
As an aside, I’ve noticed something similar in San Diego. The oldest, most established neighborhoods have been more resilient during this collapse. Try to find something inhabitable for less than $1M in Pt. Loma, La Jolla, or Coronado. Just isn’t happening.
Morale to the story? Cooking cutter, chinese drywall, stucco, $hitboxes zoomed during the boom and have since gotten crushed. Older money has been more stable and resilient. FWIW…
Looking forward to picking up a nice place in the old SW ca. 2013 or later….
MikeZ
Future, those more resilient, monied neighborhoods can crash, too, and when they do, it’s generally violent.
Have you seen Manhattan apartment prices lately? PPSF down almost 20%, YoY. And that’s in money central, with record bonuses being reported for most investment bankers this year.
Yeah, they can afford to wait. For years. But at some time, if the economy hasn’t turned, patience runs out and that can mean a mad rush for the door.
Sane Economist
Good point Mike.
Obama’s announcement this morning spells the final deathblow for the Manhattan/Marin county/IV type markets. Leveraging is dead.
Stand back and watch the upper echelon devastation.
Guy Johnson
GrandWazoo, Inre tenants at Town Square: check this link…
http://www.mysomersett.com/Default.aspx?p=DynamicModule&pageid=266208&ssid=133052&vnf=1
Raymond
Uh oh, Sane…..
I can feel Smarten whipping up his rebuttal right now…..
stand by….
Reno Ignoramus
Yep, this was about as hard to see coming as the pandhandlers on Virginia Street.
One of the very first comments I made here about 4 years ago was that Somersett could never have happened if it wasn’t for Voodoo money from top to bottom. Voodoo money to the developers at the top and Voodoo money to the individual debtowners at the bottom. I posted the other day about how entire streets in Somersett are selling for 50% off or more. This entire development was built on a false promise that never could have been kept…….that real estate prices can go up 15% a year forever. Nowhwere in all of Reno was the Greater Fool theory more in operation than at Somersett.
skeptical
RI,
Arrowcreek and Montreux right up there with Somersett…IMHO…
Reno Ignoramus
skeptical, you are correct that Arrow Creek and Montreux had their share of Greater Fools. But I have always singled out Somersett as being the only development that was built ENTIRELY on the bubble. (Except for the Montage, which is a different conversation). The first houses were being built in Somersett as the bubble was inflating. Unlike Arrow Creek and Montreux, which had development that predated the bubble, there is NOTHING in Somersett that was not built with Voodoo money. There was simply no way that Somersett was ever going to work, short of values there going up 15% a year forever, which is basically what the developer and realtor happy talk was from 2003-2006.
skeptical
RI,
Understood and accepted. That said, to be fair many early purchasers in Arrowcreek and Montreux went for the easy money bubble refi’s, which lumped them in the same grouping as the panic buyers of 05/06.
I defy anyone to explain to me how the >$500k market in Reno will not lose >20% over the next two years.
smarten
SE,
996 Third Green closed late last week at $1.25M.
532 Silvertip Dr. closed about 10 days ago at $3.75M [my wife and I (in anticipation of a friend going in with us on the purchase) offered $3.25M a little less than a year ago].
591 Tyner closed yesterday at $1.075M [my wife and I offered $888,888 a year ago].
615 Country Club Dr. came on the market today at $1.389M [we were the first to see this home a bit more than a year ago when it came on the market as a REO priced at $1.1M (it ended up selling for about $1.05M as I recall)].
smarten
P.S. –
996 Wedge Ct. [what I think is the best value currently on the market in an upscale SFR], priced at $1.9M, went into escrow two days ago.
BanteringBear
But, it’s not over Smarten, not by a long shot. Furthermore, just naming addresses and prices means nothing. What’s the PPSF? What’s the previous sales price? Materials used? Location? There’s a lot more to consider.
skeptical
Smarten,
-Third Green looks like it went back to the bank for $1,372,800 in Aug 09. You say it sold for $1.25M.
-591 Tyner listed at $1,388,000. You say it sold for $1.075M.
-Can’t find anything on Silvertip.
-Last property is just a listing. I guess I can list my mother’s-in-law property in Vegas for a million, too. Would you accept that as evidence that Vegas is back?
These are not compelling data leading me to believe IV is on the upswing. Quite the contrary, actually. Though I will concede that any activity at/over $1M these days is noteworthy.
Perhaps more noteworthy, though, is the Zillow quoted IV median sales price/sq.ft. as of 3 Jan 10 of $287/sq.ft. This is your favorite metric, right? That datum closed the year at a low point. Hasn’t been this low since early 2004. A technician might surmise that there is support in the $230/sq.ft. range, but that would be another 20% discount from current sales prices. Days on market has recently skyrocketed over 180 days as well.
Nope, not convinced it’s a good time to buy in IV, Smarten. But thanks, anyway.
smarten
Skeptical –
I never said nor meant to imply that the IV residential real estate market is on the “upswing.” Nor that the worst is “over” BB. Nor that we’re primed for a “V” or even “W” recovery.
I only meant to demonstrate that notwithstanding SE’s predictions, at least one of the geographical areas he mentioned hasn’t gotten the message [I guess we’re all stupid] – sales are continuing to chug along, and well in excess of $1M [the issues are NOT whether these prices represent big drops from their bubble highs, nor PPSF, nor materials, nor location, etc. Rather, the issue is that people are continuing to pay in excess of $1M for what you all are assuming are second/vacation homes (not the case insofar as I was concerned)].
PPSF is definitely down in IV. Stated differently, although prices may not have gone down that much more in the last year [I think the SFR median is down close to 20%], what it is one can purchase for those prices has improved markedly. But we discussed this phenomena here more than a year ago, so what’s new?
What we’re seeing here in IV, IMO, is that slowly but steadily, the nicer stuff [at least SFR wise] is getting picked off [and at the worst time of the selling “season” if you’re a seller] and NOT being replaced by something comparable. Now I’m not talking about POS SFRs and condos – I’m talking about the stuff that most people would be proud owning [assuming price were not a factor].
It has now been close to 1-1/2 years and there has been nothing I would rather have purchased [in my price range] other than 1086 Tiller [the Page Ventures trustee’s sales purchase we’ve discussed for close to $900K that it flipped in a couple of months for $1.33M] ASSUMING I could have purchased it at $900K rather than $1.33M [which I couldn’t because I didn’t have all cash to pay at the courthouse steps]. And based upon everything currently for sale and in default, there continues to be nothing. So although it may not be a good time to buy in IV, if I were still a buyer, I have been and would be waiting for a long, long, long time.
IV is a lot different than Reno/Sparks for a number of reasons. But what is happening here is not an aberration. Something similar has been going on in Tahoe City and Truckee. Maybe we’re all getting “sucked in” before the REAL real estate collapse? But you know, maybe we’re not.
3niner
The first post on this thread (by skeptical) says a lots of things that make sense.
Reno Ignoramus
Hey skeptical, I agree with you entirely about the over $500K market having substantial downside yet to come. Substantial. I would even say the over $400K segment has substantial downside yet to come. The only thing that causes me pause is the 2 year timeframe. I have said many times on this blog that watching this market deflate is going to be like watching paint dry. We are now almost 5 years past the bubble high, and look how many sellers still don’t get it. The denial and delusion of sellers in that price range is powerful. Weeks turn into months and months turn into years.
billddrummer
The property on Silvertip was 531 Silvertip, closed in an all cash deal 1/5/10.
The previous owner pocketed around $2 million after paying off the first.
smarten
Billddrummer, the previous ownder of 531 Silvertip purchased the property for $5M. He had a $1M mortgage and the property pretty much sat vacant for 5 years. Carry for 5 years including property taxes at $20K+/annually and a household of new upscale furniture/furnishings [in anticipation of short term vacation rentals], and I wouldn’t characterize the $3.75M resale [after costs of sale] as “pocketing” anything!
billddrummer
To Smarten,
Good point, and it runs back to what others are saying about whether the IV market has healed yet.
You’ve hit upon why it’s so difficult to see whether the high end sales are an indicator of market revival or not.
I was only counting the sale against the mortgage, rather than the original price of $5 million in 2005 (the peak year???).
I suppose the new price paid was 25% below the original purchase price, but also, as you so rightly point out, the value of carrying oosts apart from interest and taxes for 5 years.
No wonder he wanted out.
CommercialLender
As a former owner, albeit briefly, in the ‘Sett, I say its kinda sad as there were a good number of people who wanted the whole thing to work out as a great community filled with fun people and fun things to do. But, I saw from a mile away the HOA disaster that would eventually happen. Those owners were told that they’d be paying $150/mo based upon a) eventually selling all the 3,600 or so homes in a reasonably fast timeframe, and b) dubious math generated by the sellers’ interests. Their models assumed sales would be steady, thus the lots once sold to a builder were $37.50/mo, once permitted $75/mo, once sold to a sucker $150. Problem now is the HOA has many fewer owners than their proforma and of these many are either not paying via defaulted homeowners or builders, or many lots not coming online. To own there for the foreseeable future is to face high risk of HOA fees going way up or services going way down, or both. All sad and, as RI states, a true picture of the bubble mentality.
CommercialLender
BTW, Mike mentions the developers allowed Deeds-in-Lieu instead of forcing foreclosures or filing BK (yet). This is quite common in the commercial RE business for various reasons but mainly commercial developers wish to ensure they can borrow again at some point, so they willingly hand back assets rather than fight in court or frustrate the lender’s actions. This is perceived a much better outcome than fighting a lender, and is ‘honorable’ enough to obtain financing at a much sooner point in the future.
The developer’s loan documents may have stated recourse or non-recourse obligations. Generally they’d be recourse to payment and completion, though in the bubble crazy things happened such as non-recourse construction lending. However, almost always in a non-recourse loan the filing of BK particularly triggers recourse obligations immediately.
What this might mean to our CRE mess is a faster process of loans and assets reverting back to lenders than anything we’ve seen in the SFRE business. And, the government won’t bother propping up CRE borrowers like they are desparately attempting to do in the single family world. As a result, CRE will correct faster than will SFRE, and possibly at a concurrent time.
bob_c
And the somersett country club has at most 25%
of its memberships sold with no club house building (not a part of the hoa, but relective on the ambiance there). That course could be sold and made public. The canyon nine golf (the epitomy
of frivolous waste is a total cash drain)
and the 9 million dollar rec center could even
be sold thus reducing hoa fees, but creating an
assessment for the ‘loss’ on the sale.
24 hour fitness is $12/month with a 2 year costco membership…….the hoa cannot compete—-its more like a ‘tax’ than an asset.
billddrummer
To CL,
Great points, and illustrate the higher sophistication of commercial borrowers (and lenders) vs. residential borrowers (and lenders). I would venture that if an underwater homeowner suggested a DIL to the loss mitigation ‘specialist’ at his mortgage lender, he’d be met with a long pause and “…what’s a DIL?”
Justice
I understand that the developers have been supporting the Somersett golf course to the tune of $800,00 per year. Assuming the developers will no longer provide that support, what will happen to the golf course? A sale is of course possible, but the golf course is losing money as a golf course. Isn’t it more likely the excess water rights would be stripped off the golf course for immediate cash, and acreage converted to lot sales as feasible?
CommercialLender
BDD,
I’d love to hear a thread on this blog on the deed-in-lieu issue. Namely, I’d love to hear from those who are in or have been in short sale positions attempting for months to arrange these often-failed short sales, if they had already offered a DIL but was rejected.
CommercialLender
BTW, the DIL portion of Diane’s post last year appears below, to save anyone interested the look-up:
“We formally requested a Deed in Lieu of Foreclosure in writing from the bank but never heard anything back, so I guess they weren’t interested in that option either.”
Anyone else been in this situation?
billddrummer
To CL,
I was one of those borrowers, but the bank wasn’t interested in a DIL, preferring to take the property all the way to foreclosure. My negotiations took place in mid-2007, well before the market crash. Perhaps they figured that there would be more value to them at foreclosure than if they accepted the DIL.
Complicating matters was a hard-money 2nd mortgagee who wasn’t interested in curing the first and renting the house back to me–although he could have.
Overall, it was a messy situation that wouldn’t have been easily solved.
Now I rent, and that’s totally OK.
smarten
I’ll chime in on the deed-in-lieu or “in lieu” issue [actually, never heard of it referred to as a “DIL”] CL. First, a deed-in-lieu doesn’t wipe out junior mortgagees/encumbrancers. So what’s in it for me if I’m a senior mortgagee [I want clear title free of juniors]? Don’t tell me I could be collecting rent because if the property is currently a rental, I already can under the mortgage’s assignment of rents provision.
Second, I’m not sure how a deed-in-lieu affects the subject of a deficiency [sorry, I’m no longer close to a law library so I can’t do any research]. Stated differently, does a deed-in-lieu, as a matter of course, fully extinguish the obligation[s] it secures? If so and my security is worth less than I am owed, why would I want to give away my right to a deficiency?
If not, how do I recover my deficiency [and more importantly, how do I calculate the deficiency {remember, it’s the difference between what I am owed and the security’s FMV (have the mortgagor and mortgagee agreed upon the security’s FMV or the RPTT on the deed-in-lieu)}]? I certainly can’t file a traditional mortgage deficiency action within 6 months of a trustee’s sale, because there has not been such a sale. Pretty sticky situation I would think for the lender [or as Billddrummer recounts, “a messy situation that wouldn’t have been easily solved”].
I know you’ve speculated CL that at the height of the bubble commercial borrowers may have been negotiation NON-recourse mortgages, but I would be very, very, very surprised. Thus why are deeds-in-lieu so common in the commercial world?
CommercialLender
1) First Mike then BDD both referred to “DIL”. I had not heard this term either but used it to shorten. Should it be DILF? I like the ‘F’ on the end…!
2) Yes, the 2nd lien situation muddies the water, but is not always the case. If there is no 2nd, then a DILF (!) might be best for the lender and borrower because the borrower will continue to fall behind while trying to sell, the bank has a high probability of taking back the asset anyway so why not take it sooner rather than later, the bank would save money and hassle rather than trying to fight or foreclose, the borrower is being ‘honorable’ by walking away quickly to allow the bank access to try to recover their interests. A long, drawn out death is worse than a quick death, so to speak. If there is a 2nd, well, why bother with a short sale at all? The borrower is pretty much screwed no matter what, then, so continue to default and let it foreclose. (That is unless you could find the lucky buyer or get the 2nd lien holder to wake up to reality, saying nothing of your morals or cash in the bank.)
3) Deficiency? This blog has informed readers a number of times that there’s been effectively zero deficiency filings in the area for some time. Its already not a practice for the banks, though it remains legally their option. Again, seems to me, the bank should rather have the asset back asap rather than a long drawn out process in a declining market.
4) Finally, all I do is non-recourse financing, for years and years. Banks traditionally asked for recourse, but in the boom years went away from this. Elsewhere in the CRE world there are life companies and Wall Street investment banks who provided financing on a non-recourse (excepting ‘bad boy’ acts of fraud, etc.) Many of the Wall Street lenders are dead or sidelined, but the life companies are lending. It is common also that a CRE borrower who voluntarily files BK to frustrate a lender or sues or otherwise dodges a lender is in essence black-listed for future loans while those who promptly do DILFs (love this new acronym) to allow the lender to quickly recover the asset and try to recover value are looked upon in a much more favorable light. My opinion is that we’ll see more of this, like today’s Stuy-Town Peter Cooper Village Manahattan give-back of the largest apartment community in NYC. (See a good write up from a CRE perspective here http://www.squarefeetblog.com/commercial-real-estate-blog/2010/01/25/tishman-walks-on-stuy-town/ )
Final note, CA is a ‘single action’ state, making the CRE lenders’ more favored action the possession of the asset rather than the recovery from a borrower. So my comments above about non-recourse lending applies to the whole of the country, but all the moreso in CA.
smarten
Hey CL, it’s not DILF; it’s MILF!
billddrummer
To smarten,
Good one!
To CL,
Thanks for the expanded explanation. And am I delusional, or did the Stuy-town deal get valued at $409,000 a door? ($4.4 billion/11,000 units=$409,000/unit).
Math aside, I thought CL in particular would benefit from this link. It talks about the coming carnage in CRE:
http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2010/01/25/an-insider-s-view-of-the-real-estate-train-wreck2.aspx
Sobering reading, and unfortunately, I think he’s got some valid points.
One thing to consider is that if lenders don’t pursue deficiency judgments (which they haven’t been), the underlying loans are effectively non-recourse, despite whatever laws are in effect. In other words, by not exercising the right to a deficiency judgment makes the loan transaction a de facto non-recourse deal, even if the lender is granted the right by statute.
Futurebuyer
I used to be future buyer, but we bought a short sale about 6 months ago–as a home, not as an investment so I really don’t care if we lose value. Does anyone not see a positive in the economy train wreck?–we are losing jobs, but also losing population. With lost population we avoid traffic, pollution and added crime. I fail to see the problem in these things–I don’t think that growth is always for the better. You guys need to cheer up and focus on the positive. Lower real estate taxes, less hassles! Everyone can move to Texas as far as I am concerned!
Tom
FutureBuyer commented, “With lost population we avoid traffic, pollution and added crime.”
Maybe so, but I believe the economic result of a decreasing population probably depends more upon the composition of the net population loss, rather than the net change in the bare numbers.
For example, in California, a substantial share of the people currently departing are taking assets with them: savings, income flow from pensions, employment income, small family businesses, and the job skills and education of those who leave. Compared to this, the majority of the people currently arriving are coming in largely with little more than the clothes they are wearing, plus they are bringing with them needs for schools, hospitals, and public benefits. They largely do not have the personal resources to pay for the costs of meeting those needs, either, so the State tries to do it and sinks further into the hole financially.
Hopefully in Nevada, you will experience a reverse effect, but I haven’t yet seen any demographics or economic data on the composition of the new arrivals and the recently departed in Nevada. It would be interesting reading to have such data.
Futurebuyer
In response to Tom–It is hard to compare Nevada and California-Nevada is really geared to the service industry (casinos) and construction. I have no statistics to go on, only observation and having lived here in Reno my entire life. Those jobs that we lost are not coming back anytime soon–10 years plus? So I am glad that the builders are going to have to cut back on the uncontrolled, not well planned growth and less people does mean less traffic anyway. There was never enough people to fill the houses that have already been built so why continue to build?
longerwalk
The problem with population decrease is that pockets of cities start becoming vacant, which increases crime. That’s if lower-income population leaves. If higher-income population leaves, the municipality loses tax revenue (all the way from sales tax to property tax). The bursting of the bubble also will mean a decrease in the remaining population’s taxes. Sounds like a deal, until you realize that the homeless down at Record Street will command the limited tax dollars, and not the rebuilding of the sorry pools, say, or maintenance of flat fields for soccer. City streets will start going down, too. Stable population is pretty good, slow growth, too, but loss . . . rarely good.
billddrummer
I have to agree with longerwalk. A drop in population usually results in a shrinking tax base and a simultaneous rise in demand for services.
Just the kind of thing you don’t want if you desire a vibrant community.
There’s an old saying, “If a company (community isn’t growing, it’s exhibiting the first signs of death.”
Just look at Detroit. Jobless rate above 20%, a tax base shrunken by 40%, and population down 50% since the mid-1950s.
What’s worse is that its decline has accelerated since the beginning of the last decade. It’s almost as if the decline looks like a snowball rolling downhill–slow at first, then picking up speed and intensity as it travels downslope.
Let’s hope Reno doesn’t follow the same path as Detroit.
GrandWazoo
Billd – I’ve been saying the exact same thing for a while now. Having been born in Detroit, and having spent my entire life in the midwest until we moved to Reno a few years ago, things are starting to become strangely familiar out here. Downtown Reno is starting to look like downtown Flint, where I spent some years in the late 70s and early 80s. Remember Jim Rodgers recent quote (which I am badly paraphrasing):
“Historically the Nevada economy has been a Ponzi scheme built on the idea that the Nevada population (and thus its economy) will forever expand. Government services for the current residences are built on the sales and real estate taxes paid by the incoming residents”.
Or something like that, you get the idea.
Heard the latest state budget news? A billion dollar shortfall on a five billion dollar budget, or a gap of 20%. Nevada currently makes Michigan and California look like fairly successful operations.
skeptical
Reno is suffering from the aftermath of an historic bubble. This is the devastation that bubbles cause. This is the cataclysm that was wrought by Greenspan and Bernanke, and all the legislation (or lack thereof) written by the whores in Congress who served the Banksters. This is why bubbles must be avoided at all cost. This is why Reno will be hurting for many years to come. Bubbles usually collapse down to levels well below mean averages preceding the bubble. i.e. look for mid-90’s prices on Reno RE before you panic buy anything.
However, Reno is not Detroit. Reno will be on the path towards health as soon as property values sink to the level that the market will bear. Foreclosure inventory will then get depleted, houses will become occupied, and the economy can get back on the path towards health. Lower prices are the tough, but primary, medicine that is needed. Pretty straightforward when you think about it. It’s why I’m so against all this government manipulation in the housing market.
Now, Detroit on the other hand. Well, let’s just say that the heyday of American industrial prowess is behind us, and even $10k houses in Detroit are sitting idle and considered overpriced.
Can Reno ever get to that level? I think not. Then again, I never thought it’d be profitable to farm lettuce on abandoned lots in downtown Detroit….
Gary
One other factor doesn’t bode well for Nevada’s recovery, and that’s education. Education Week recently released its annual rankings by state. Nevada was at the very bottom of all states in the overall rankings, with only Washington D.C. scoring lower, and Nevada ranked #51 in the students’ “chance for success” subcategory.
As bad as this seems on its face, the worse news is that few of the effects of Nevada’s deepening recession and the accompanying cutbacks in educational spending are likely to have shown up yet in the underlying statistics, even for this bottom ranking. The disparity between Nevada and less-hard-hit states is likely to only grow without some sort of intervention.
But there is good news… I doubt that we’ll slip much lower in ranking.
skeptical
Gary,
Do you have a link to those rankings and/or the report?
Gary
Skeptical,
Here’s the handy little interactive map/chart I found:
http://www.edweek.org/ew/qc/2010/17src.h29.html?intc=ml
billddrummer
Mike,
A bit off topic (or the thread drifted, I’m not sure which), but which parcel in Somersett sold for the Goddard School?
I’ve been looking but can’t figure out where it is.
billddrummer
Mike,
Is it the parcel just west of the Sharlands Ave. intersection, on the south side of Somersett Parkway? Records show a transfer for $725,000 in October 2009, but none of the business entities show an obvious connection to Goddard School.