Yesterday I posted the monthly median numbers and noted that January’s median sold price plunged more than five percent from December’s median sold price. After seven months of relatively flat monthly median sold prices, one has to wonder if January’s drop was a seasonal blip? Or does it portend the beginning of a “double dip”?
Where prices go from here only time will tell; however that doesn’t stop the topic from being discussed throughout the day. After reading yesterday’s post a colleague asked me what I thought was the cause of January’s price drop. At the risk of stating the obvious I replied, “more houses being sold for prices below the previous month’s median”. “But where are these lower-priced sales occurring?”, she asked. A good question; and one that doesn’t get answered when looking at the median sales price for Reno and Sparks as a whole.
So, I broke out January’s 334 sales by MLS area. The sales occurred across 35 MLS areas. However, as seen in the table below, some areas contained a much higher proportion of sales than others. In fact, from a distribution standpoint, just seven areas accounted for nearly half the month’s sales.
The table below shows January’s sales by MLS area. For the ten areas with the most sales I have also calculated January’s median sales price.
UPDATE February 10, 2010 – I’ve filled out the remaining median prices in the table below and also added a column for median sold price per square foot. Decide for yourselve where the data is too thin to be meaningful.
| MLS area | Jan. sales | median $ (sold) |
median $/sf (sold) |
| Reno-Stead | 35 | $105,000 | $75.43 |
| Spanish Springs-South | 26 | $219,500 | $80.70 |
| Reno-South Meadows | 24 | $240,500 | $125.14 |
| Sparks | 21 | $106,000 | $88.11 |
| Sparks-East | 20 | $141,000 | $95.66 |
| Sparks-Suburban | 19 | $193,250 | $101.43 |
| Reno-Cold Springs | 18 | $130,500 | $80.22 |
| Reno-Northwest Suburban | 17 | $225,000 | $113.35 |
| Reno-Northwest Foothills | 16 | $240,820 | $100.58 |
| Reno-South Suburban | 15 | $429,000 | $158.75 |
| Spanish Springs-West | 14 | $168,925 | $105.96 |
| Reno-North | 13 | $145,000 | $87.42 |
| Sun Valley | 12 | $130,000 | $90.17 |
| Reno-Lemon Valley | 10 | $155,000 | |
| Reno-Old Northwest | 10 | $145,000 | |
| Reno-Donner Springs | 9 | $155,000 | |
| Reno-Old Southwest | 8 | $310,250 | |
| Reno-Southeast | 8 | $62,500 | |
| Reno-Southwest | 8 | $337,500 | |
| Reno-West Southwest | 7 | $397,000 | |
| Spanish Springs-East | 4 | $308,750 | |
| Virgina City Highlands | 3 | $200,000 | |
| Palomino Valley | 2 | $257,500 | |
| Reno-Foothills | 2 | $182,500 | |
| Reno-Old South Suburban | 2 | $187,500 | |
| Reno-Rancho Haven | 2 | $174,500 | |
| Reno-Southwest Suburban | 3 | $385,000 | |
| East Truckee River | 1 | $90,000 | |
| Reno-Golden Valley | 1 | $193,000 | |
| Reno-Hidden Valley | 1 | $380,000 | |
| Reno-North Valley | 1 | $190,000 | |
| Reno-Red Rock | 1 | $250,000 | |
| Reno-Silver Knolls | 1 | $124,500 | |
| Sparks-Foothills | 1 | $279,000 | |
| Verdi | 1 | $930,000 | |
| Reno-Sparks | 336 | $167,500 | $97.28 |
As seen above Stead holds the top spot for highest number of January sales – more than ten percent of sales for the month. This is consistent with 2009 overall numbers. See related post: 2009 sales by MLS area
For the Reno-Sparks MLS Area Map, click here.
Note: The data in the table above includes Site/Stick Built properties only. Data excludes Condo/Townhouse, Manufactured/Modular and Shared Ownership properties. Data courtesy of the Northern Nevada Regional MLS – February 2010.
billddrummer
Great stats, Guy.
When you break the sales by MLS area, the price differences are stark.
Is the Stead area the new Montello district?
skeptical
Guy,
Great data, but post seemed to end a bit abruptly. Do I correctly infer that you believe the Jan 2010 is consistent with last year’s data and, therefore, does not represent outlier data?
One month does not make a trend, but this can’t be good news for potential sellers out there. Those on the verge of buying might want to wait a bit longer.
OBTW, not sure how one can call it a “double dip”, when there was never an uptick. Perhaps you meant “next leg down”?
Downtownjunkie
Sparks=Ouch
Reno Ignoramus
Well, gee, it looks like most people who are buying houses are buying the lowest priced houses. And thus the median keeps dropping. What a keen insight.
The MOST important stat Guy posted about January sales was that REOs and short sales continue to make up 75% of all sales. Or, stated another way, 75% of all sales still produce no move-up buyer. (It is higher than that when we consider how many “equity sales” really involve no equity). All that is alive out there is the first time entry market, and the overwhelming majority, I suspect, of those January buyers are first time buyers. At this point in the game, all that is left of the first time buyer market are the barely lit and the dimly glowing. What percentage you think of these January buyers got in on the 3.5% down, $8,000 first time money back skin of their teeth? What percentage of these January sales are November’s NODs?
This market is a long, long way from healthy.
Waldo
The current ediion of the Reno News and Review has a cover story about the Reno housing market. The piece starts off with the line “your house is worth shit” and goes on to explain why it makes no sense for people to continue to pay the mortgage on their upside down house. Even quotes Brian Kaiser from UNR as basically saying people ought to walk away and default.
Reno Ignoramus
I’ve been saying on this blog for over a year now that sooner or later, when those 60% of Reno “homeowners” with a mortgage who are upside down figure out what the only financially sensible thing is to do, it’s going to be look out below.
I was not aware that Mr. Kaiser at UNR was suggesting people consider walking away. That’s quite interesting.
skeptical
New Zillow data as posted just today. I think the data is only tracked through 30 Dec, though. Still, confirmation of continuing decline:
http://www.zillow.com/local-info/NV-Reno-home-value/r_13478/#metric=mt%3D36%26dt%3D1%26tp%3D5%26rt%3D8%26r%3D13478%2C276579%2C274801%2C276311
John Newell
A former mortgage broker who I know has suggested to me that buyers should use as little of their own money as possible by using the $8k credit and obtaining 3.5% down financing (even if they could put 20% down). His reasoning is that rent is currently higher than mortgage payments even with only 3.5% down and property taxes included, and with almost no money down buyers will not lose much of their own money if they have to walk away. I wonder how many of the 3.5% down loans are actually buyers doing this type of thing.
Norton
I think RI’s point is that we are scraping the bottom of the bucket to drum up buyers with artificially cheap money and artificially cheap down payments and tax policy all rigged to keep this gasping market alive at all cost.
And prices will continue to fall as the bottom of the bucket buyers get fewer and fewer and even with all the prop-ups will be “able” to afford less and less. So yes, John, I think that’s what’s going on.
Carney
I just read the Reno News and Review story online. Yes, it seems Mr. Kaiser has seen the light that it makes no financial sense to feed the alligator.
BanteringBear
I continue to maintain that people are STILL paying far too much for the bottom of the barrel housing. Places like Stead, Sun Valley, etc. should have a median much less than $100k.
Pre-bubble, one could buy a 3 bedroom house in Sun Valley for ~$50k. People are paying over $100k for places in bad neighborhoods. This is still WAAAAY too much money, and they will find themselves upside down by tens of thousands in no time whatsoever.
$200k should buy a very nice house in a nice neighborhood in Reno, and that’s just not happening right now. This thing’s got a long way to go. When the median is around where it is today, but represents a healthy cross section of ALL areas, not weighted towards the low end, the we’ll be near a “bottom”.
PS- Brian Kaiser has ZERO credibility. I went at it with that shill on the RGJ site years ago, and he was in complete denial about what was coming, even when presented with the cold, hard facts. Nobody should listen to a word that guy says. Dig some of his comments from years ago and see for yourself.
Guy Johnson
Skeptical, yes I did end the post rather abruptly. Sorry about that; I was on my way to meet a client and didn’t have time to wrap it up, but wanted to get the breakout posted anyway.
I don’t think there was anything exceptional about January’s data. The lower end properties are driving the market. First-time homebuyers are out in full force. 75% of monthly sales are distressed properties.
One number I found surprising was the median for South Meadows. I would not have guessed that it was as high as it was – $240,500.
A question for the readers: what other types of analysis would you find insightful? …price per square foot by MLS Area? …median asking prices?
Let me know. Thanks.
smarten
Last month under the this December’s median sales price prediction blog I stated that, “for the last ELEVEN YEARS, the total number of unit sales in…January have averaged 264.8…in the following February, have averaged 288.9;” and based upon the foregoing, I predicted that the number of unit sales in January of [this] year should total 352.” Since the actual number, according to Guy, turned out to be 334, historically unit sales continue to be up and the drop seems to be pretty much in line with January’s seasonal lows. I also predicted that based upon this elevent years of data, January should mark the monthly low point in unit sales for this year. So with this in mind, it should be interesting to see how February [with less days] turns out.
To be fair I also predicted that based upon the same historical data when compared to December 2009’s median sales price, that price would drop in January of this year to $172K. So the fact there’s been a drop, at least to me, is no surprise. The fact the drop has been an additional $5K from my prediction is.
Also, I stated that “we’ve been pretty much skating along the ‘bottom’ of the median sales price range [$170K-$180K] for the last seven months.” A $167K median sales price for January seems to have broken below the $170K floor [even though it’s only by $3K].
Skeptical is correct – one month does not make a trend. But based upon the foregoing data, the months of February and March should be telling. I expect the number of unit sales to increase. But if the median sales price doesn’t follow suit back into the $170K-$180K range, I think something more is going on. So we’ll see.
CommercialLender
Expect to see in the coming months the headlines at least nationally “New and Existing Home Sales Fall Drammatically in Feb, Due to Blizzards”. The press will then hit the drum, further scaring home buyers while the NAR and NAHB will whistle past the graveyard by blaming the snow. All the while the higher end homedebtors will begin to capitulate. I just don’t see how at least the first half of 2010 is going to be pretty.
KingBud
Guy,
I wish I could short South Suburban real estate like a common stock. I would go short South Suburban and long Northwest based on those numbers(pair trade). That spread in prices needs to narrow, and I doubt it will narrow by Northwest prices going up.
You might have answered your own question in your post, guy. Breaking down the MLS areas by average sales price per sq foot would be very useful. That way you would be adjusting the median sales price in different regions for home size. Part of the sales price difference likely reflects differences in average home size in the different areas.
Sully
Guy, I agree with the square foot method. Especially in Stead, as there are many older, smaller houses and newer developments with over 2000 sq ft houses.
PriceItRight
Guy,
Looking at the historical SFR data for the top 10 MLS area (Stead to South Suburban) will be very insightful. To reduce the statistical noise related to small numbers, the data can be grouped for each quarter rather than each month. In addition to the regular parameters (numbers sold, median sold, median price per sq. foot) one can also look at the total dollar volume to compare mean to median (so as to get a feeling of the skewness of the distribution). One can throw in other filters (pre 2000 construction vs post 2000 construction; more than 2000 sq. ft vs less than 2000 sq. ft) to understand the market better. Compiling something like this can however be very time consuming.
smarten
The recent observations/suggestions by KingBud, Sully and PriceItRight make a point I’ve raised before.
If you’re looking to purchase a particular type of SFR in a specific area, relying upon changes in an all inclusive median sales price, at least insofar as you’re concerned, can be meaningless/deceptive. What relevance does the sales price of a 35 year old 1,000 square foot Stead fixer-upper have to you, if the market you’re interested in purchasing is a new 4,000 square foot McMansion in Montreux? Obviously there are going to be many more sales of the former and each one is going to have the effect of bringing down the all inclusive median sales price – which again, may be but marginally relevant to you.
The point here is that one should not paint too broad a brush when it comes to median sales prices nor the PPSF upon which they’re based in a vacuum.
skeptical
Smarten,
Your point is well taken. Location, location, etc…. However, a rising tide lifts all boats, and an ebbing tide can ground them.
No one would be foolish enough to expect Stead pricing on a Montreux McMansion. That said, Montreux will feel some considerable pain this year. Prices will contract there at a much more dramatic pace than in Stead.
Were I to make an offer on such a place (Montreux, Arrowcreek, etc….), I would go for the jugular, and demand a much larger discount than a sub-$200k modest home elsewhere in Reno.
Declining median in Reno would embolden me to make a more aggressive offer on an overpriced home in a prestige location, and therefore would effect that property’s prospective value. Don’t know how it could be otherwise. PPSF and median sales in Reno overall (and trends thereof) must be at least a consideration for any prospective buyer in the greater area.
smarten
Skeptical, I agree with much of your observations. I guess the point I was trying to make is that IN ADDITION to Guy’s figures, if I were looking to buy in Montreux [or Arrowcreek or wherever], I would be closely following median sales prices and PPSFs in those neighborhoods proper. If they had not dropped commensurately with the rest of Reno/Sparks, then I too would be low balling the hell out of an over/delusionally priced offering.
I think it’s wrong to jump to the conclusion that SFRs priced well above the median sales price don’t sell. Even in this market, the attractively priced ones [in comparison to true comparable properties] do. The delusionally priced ones don’t.
skeptical
Smarten, we agree.
nvmojo
We are renting a house out at Damonte Ranch that was purchased in 2007 for $530,000. Homes just like it that have foreclosed or are being short-saled are listed for about $300,000. I am shocked they are still this high too.
nvmojo
Forgot to add that our lease was up at the end of January and the owner (lives in Sacramento) asked us if we would be interested in buying it for $400,000. He thinks it’s worth that much because there is a pool table in a game room and a hot tub. Yeah, right.
billddrummer
To nvmojo,
So offer him $300,000 and see what he does. Chances are, he’s underwater already (or close), and your rent payments don’t begin to cover all of his expenses. You could point out that distressed homes are selling for $300,000 with hot tubs, and the pool table isn’t worth $100,000.
If in fact you want the place. Otherwise, just renew the lease.
nvmojo
Good advice, Bill!
You are correct, we pay him about $1850 a month for this place and it does not cover what he is paying a month.
We only moved in here to help out another family member so it will behoove us to downsize, whether we rent or buy. After reading all the info on this blog, I think we will continue to rent. Spouse is a teacher so we may not have the same income once the Legislator and Gube Gibbons are done with us this month.
Thanks!
Sully
nvmojo; Don’t blame Gibbons for the spending spree the legislators went on. Doesn’t matter who sits in the Governors office – the problem is still there.
Too much out go, not enough income. Always a sign of trouble. California style spending sprees, should stay in California where they belong. 🙂
skeptical
nvmojo,
You make some good points. But, if your house is really worth $300k, why not just find a similar one and buy it for that price? All the mortgage calculators I’ve used give you less than $1850 for a monthly payment (a 30yr fixed FHA with 5% down will require $1565/mnth). That’s not including the tax credit, tax benefits, etc…
At the very least I’d ask for a rent reduction. That owner is not in a very good place to deny you that.
Despite all my bearish comments, I actually believe $300k and below in Reno is probably pretty safe. It’s all the inventory above that which I believe is extremely risky and due for much more pain in 2010 and beyond.
smarten
nvmojo –
I’m SHOCKED you’re paying $1,850/month in rent for a home in Damonte Ranch. Just for fun I went to craigslist and used “Damonte” as my keyword. I came up with 79 offerings [meaning there is a glut of inventory]. Now we don’t know your particular rental’s characteristics but out of the 79 offerings, only TWO were being offered at more rent than you’re paying. One is a 4,100 square foot 3/4 home on Strathmore Ct delusionally priced [because it’s more than Montreux rentals are going for] at $3,600/month [ http://reno.craigslist.org/apa/1560660164.html ], and the other is a 5/3 3,100 square foot home on Heather Field Ln offered at $1,995/month [ http://reno.craigslist.org/apa/1588296217.html ]. Most quality offerings appear to be available at around $1,450/month. I say renegotiate your rent or move across the street!
As an alternative, talk to Guy about the Toll Bros. REO for sale he/I talked about. My recollection is it sold new in 2007 for close to either $600K. I was going to offer $287.1K [there was a recent price drop to a little over $300K] which is what the home reverted back to the lender for.
Good luck!
CommercialLender
NVMojo,
Before signing any lease, be careful. Your landlord may be at imminent risk of default and if he does and it goes to foreclosure you can pretty much expect to lose your security deposit and be in a forced-move situation. Certainly don’t pay any prepaid rent.
billddrummer
To CL,
A wise bit of advice. I spoke to a customer of mine who’s girlfriend was forced to move after her landlord defaulted on his mortgage.
For all you data miners out there, what’s the easiest way to do that research? I typically start with the property address on the Assessor’s website, then search the owner of record’s recordings on the Recorder’s webpage.
Any other suggestions?
GreenNV
BillDD, that’s how I would do it, but I would also search the owner’s name on the Assessor’s site to see what other properties they own.
Also, record a “Request Notice of Default” so that you would be notified if the landlord receives a Notice of Default. It is cheap insurance.
billddrummer
To GreenNV,
Great advice. We wouldn’t want to rent from someone who’s trying to service 5 or 6 mortgages, would we?
billddrummer
And further–
If your prospective landlord owns multiple properties, it might be worthwhile to file Requests for Notice on all of them. Owners of multiple properties will sometimes use one financial institution for financing several parcels, and the loans will have cross-default clauses–if one loan goes into default, the bank has the right to place all of them in default. But if you only asked for a notice on the one you are renting, there’s a chance you wouldn’t be notified of problems with other properties.
Just a thought… Great advice though.
skeptical
This thread’s a keeper, and is mandatory reading for anyone renting, or considering to rent in this market.
smarten
Billddrummer –
Although Mike’s advice regarding the recording of a request for notice of default is sound, I don’t think you can record the request against every property your landlord owns. You need to have some direct interest in the property the subject of a request for notice of default. So unless you’re renting multiple properties, stick to the single property. And just to be triple cautious, I would get my landlord’s signature as well as your own on the request; and, I would have the signatures notarized [the last time I read the statute, my impression was that it would be quite a stretch for a tenant to assert sufficient standing to unilaterally record a request for notice of default].
To expand upon Mike’s advice, I would include a clause in any lease whereby the landlord covenanted he/she would make all payments on existing or future mortgages as well as secured real property taxes, as they come due; that he/she had an affirmative obligation to notify you in writing if he/she did not; and, consenting to the joint filing of a request for notice of default. This way if your landlord failed to affirmatively notify you of his/her default, not only would it be a breach of your lease [which relieves you of the obligation to perform (i.e., pay rent)]; but it would represent constructive fraud [fraud without intent] on his/her behalf.
Good luck!
skeptical
Smarten,
Para 2 in your above makes absolute sense and is great advice.
Para 1, however, is pretty wack. I would have no compunction whatsoever in “unilaterally” requesting a NOD on my landlord’s properties. What’s the landlord going to do, sue? Yeah, I’d like to see him present his case in this environment. Meanwhile, his house is vacant because I just moved because he’s suing me. And as the last box leaves his house, I’ll wish him good luck in getting that last month’s rent.
Get a notarized signature? Are you serious? There’s no way a landlord in this environment is going to make trouble with a trouble free, punctually paying tenant, just because that tenant wants to be advised of any potential NODs arising in the landlord’s portfolio.
It’s obvious that you were a lawyer. Step back from your surgical deconstruction of “how you read the statute” and consider the devastation in the market right now. The landlord ain’t gonna risk losing a solid tenant.
smarten
Skeptical –
Now there you go making me do WORK!
I think the statute is NRS 107.090. It permits a “person with an interest” in real property the subject of a mortgage to record a request for notice of default under that mortgage. A person with an interest in real property is defined as any person who has or claims any right, title or interest in, or lien or charge upon, the real property described in the deed of trust, as evidenced by any document or instrument recorded in the office of the county recorder of the county in which any part of the real property is situated. Thus if the tenant has no standing to record a request for notices of default under other mortgages [of his/her landlord] in which the tenant claims no interest.
Now notice that the tenant’s interest in real property must be evidenced by a document recorded in the office of the recorder. That means either the lease or a notice of its existence must be recorded in order to gain standing to record a request for notice of default. That’s why I said the vehicle is “iffy” for the tenant. I don’t know if the recorder would let a tenant record such a document that did not relate to a specific recorded document which evidenced the tenant’s interest in the property but even if he/she would, as you can see it would be without authority? Can the landlord sue for slander of title? You bet!
The reason I recommended that the landlord’s signature be acknowledged is because once acknowledged, the lease can be recorded. Then the tenant will have an interest in property evidenced by a document recorded with the office of recorder which allows him/her to record a request for notice of default. Understand?
I’m a landlord Skeptical and I can tell you that if my tenant asked me to execute a document which allowed him/her to record a request for notice of default under my mortgages against the property, I would have no problem. If I were a tenant; requested this of a perspective landlord; and the landlord balked; I’d find another landlord. Besides, at least in CA., it’s unlawful for a property owner to default on a mortgage and pocket the rental proceeds.
skeptical
Smarten,
I appreciate your knowledge and good attitude.
That said, I’d file the request for NOD without hesitation. If the county recorder pushed back and demanded documentation as you cite above, I’d go through the ropes and get it.
Still, I don’t think the half asleep bureaucrat at the county recorder’s office worrying about the upcoming workforce reductions would know anything about what you write above. I’ll bet you a diet coke that the request goes through like bugs through a goose.
CommercialLender
On this topic, my wife and I rent homes in Tahoe 4-5x or so per year (cheaper, easier than owning, at least for now). Usually go to repeat places but from time to time rent new places. Since its only a few days or week at a time, I don’t go thru much hassle but I do pull a title prelim to see if in fact the person on the rental agreement actually holds title. I ballpark the debt level, too, to see if its unreasonably high. If anything sounds fishy, I’ll either dig further or move on to the next place. Assessor’s office is a great idea that I had not used before.
There are those who slap a photo and description on a craigslist listing, collect the upfront sec dep and rent but don’t actually own the place. Do be careful, all.
smarten
I’m up for the Diet Coke!
Here’s the problem. The request for notice of default the tenant presents for recordation may have to recite his interest in the property as evidenced by a recorded document. If that isn’t recited in the document, it may be rejected for recordation.
I think the easiest solution for the tenant is to add some language in the lease as we’ve previously discussed, and then have the landlord sign [along with the tenant] a document captioned notice of existence of lease agreement – be advised that landlord and tenant entered into a lease agreement affecting the below described property as of a certain date. Have both signatures notarized and then it can be recorded. At that point the tenant can file a request for notice of default referring back to the instrument number of the recorded notice of existence of lease agreement.
You’re right it’s a lot of extra work but if you’re a tenant and truly concerned about your landlord defaulting on his/her mortgage…
smarten
CL –
A few years ago when it was a landlord’s market, I recall people in San Jose putting rental ads up on craigslist [even for vacant properties they didn’t own]; meeting perspective tenants; agreeing to rent the units and receiving big up front deposits; and then never appearing again – all several times over to several different perspective renters. People were so excited to find anything to rent, they gladly turned over thousands of dollars in deposits to complete strangers. So I agree with you that one should be careful.
Hey next time you’re in town, you should give me a call and we can go take a look at a couple of those “higher end” IV SFRs priced at about $250K!
billddrummer
To CL & smarten,
Thanks for the wisdom and excellent advice. I appreciate the level of knowledge available on this blog, and hope I can continue to contribute in my small, silent way.
Reno Realty Blog: Reno Real Estate, Market & Trends, Nevada » The Class of ‘05
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