Guy’s February sales report showed "equity sales" representing 26% of all sales. An equity sale is defined as basically not a short sale or REO. It includes sellers who actually have equity in their properties, or those who bring cash to the table at closing (CTT on the spreadsheet). I was able to track 85 of the 87 equity sales Guy reported:
– 7 were builder sales, just listed on the MLS.
– 15 were properties being resold after a Trustee’s Deeds to private parties (NRES, Wood is Good).
– 2 were flips after REO sales.
So at least a quarter of the "equity sales" are either tainted or are MLS aberrations. You can run your own percentages, but true organic sales are far less that 26%, and correspondingly distressed sales are higher than 74%.
Median sales price for this group was $220,000. I thought that the true organic sales might be higher.
Here’s the chart. I’m guessing on some of the equity sales as I haven’t thoroughly vetted all the loans involved, but it gets us into the ballpark.
But what really stunned me was in the "terms" column. 25 of the 85 sales were for cash (plus 28 conventional, 25 FHA, and 7 VA). CASH buyers in our distressed market. Are they lemmings or lions?
Guy and I joke about the inverse relationship between the time we put into researching a post and the number of comments received.
This one was a huge slog for me, and i hope you find it interesting enough to comment on.
Reno Ignoramus
Thanks very much Mike for this work. This is not at all insignificant. What this means is that at least 80% of all sales today produce no move-up buyer. The banks selling REOs are not moving up. Short sellers who are happy to get out are not moving up. Flippers who bought on the courthouse steps are not moving up. And no doubt some sellers in a so-called “equity sale” have no equity. They either are bringing money to the table or are no more than breaking even. I do not see how a market wherein at least 80% of all sales produce no move-up buyers can be considered healthy, or even normal. The normal market dynamic where the seller of the $200K house becomes the buyer of the $350K house, and the seller of the $350K house becomes the buyer of the $500K house, etc., is simply missing today.
Waldo
So let me see if I understand:
The median priced house is $170K.
About 85% of all sales produce no move up buyer.
The median sales price of the so-called “equity sale” is $220K.
Let me ask a question of the bottom -callers:
Where, oh where, are the buyers going to come from for all those hundreds and hundreds of properties listed over $250K??
I can agree that the bottom has probably been reached for Smithridge condos.
Polly
So last month how many people sold their house, then took the equity and bought another house?
Hardly any.
I wonder if there are any escrow people who might comment on how frequent concurrent closings are today. When the seller in one escrow is the buyer in another escrow that close at the same time.
skeptical
Mike, because of data like this, I would pay for this site. Thank you.
There’s an environmental commercial that used to air on TV. It’s a scene of tall sea grass with a few fish swimming around. Looks pretty nice.
Then it switches to a scene of what the same waterspace looked like before environmental change: seals, sea otters, big fish, small fish, coral, etc…..
The point of the commercial is that we have suffered from changing baselines. We believe the current scene is peaceful and nice. However, we are not aware of the carnage and destruction of the formerly complex ecosystem.
The Reno RE market is a perfect analogy to the ocean scene in that commercial. Sanguine bottom callers and recent homebuyers purvey a housing market that seems to look ok, and gives reason for cheer. They disregard the carnage that has occurred.
80+% DISTRESSED SALES MATTERS
The market above $300k will be dead for years. No move-up buyer, no high-salaried professionals, dim prospects for the state’s fiscal condition spell nothing but pain going forward at the mid to high end.
The burden of proof to counter this argument rests with the pollyannas, not the realists who simply comment on the world as it is, not as it once was.
Martin
I don’t think there are hundreds of properties listed over $250K. I think there are thousands.
And thousands more properties in some stage of foreclosure. And not just a couple thousand, but 7-8 thousand.
Just because the median may have leveled around $170K suggests absolutely nothing as to how thousands of houses priced 2,3, 4 or 5 times the median are going to sell. Especially when 85% of all sales produce nobody who has the money, or the interest, in buying another house. There is nothing less than carnage coming to the mid to upper end of the market in Reno/Sparks.
smarten
For some time I have been asking posters exactly what are their definition[s] of a “bottom?” By and large, I haven’t really gotten a cognant answer [but for skeptical]. Well now I think I have the answer. Rather than measuring sales volume or sales prices, it’s when the percentage of sales that produce someone who purchases another/move up house exceeds 15%. Now we know!
EdBear
First of all, thanks Mike. Although I rarely comment on postings I’m an avid reader. You might remember that I’m a Californian who has flirted with the Reno/Sparks market for years.
That being said, I did a quick eyeball comparing the current sold prices with the previous sold prices. Without doing a complete analysis, it appears that a significant majority of the current sales are for more (and sometimes a LOT more) than the previous sales. Someone is making money in this market. I wonder who they are and what their strategy is. Anyone have any thoughts?
Mike McGonagle
Thanks for the kind words – I appreciate it.
I’ve updated the chart to include previous sale dates. Many of these equity sales are really LONG holds.
Sane Economist
Thank you for the data Mike.
On a certain level the implications are almost surreal.
Thats why I think calling some sort of bottom is truely assinine.
Sully
Mike, your question about cash buyers strikes an interest in me also. I did a little research on some of them. Sawbucks (highest cash purchase) was purchased by an investment securities firm out of Bellevue, Wash. at 204/ft. Makes you wonder if they are buying it to flip or have made so much money in the last year, they wanted a vacation home. 🙂
Dman
http://finance.yahoo.com/tech-ticker/despite-obama's-best-efforts-housing-prices-have-further-to-fall-says-glenn-tongue-440185.html;_ylt=AgYELQDs0V840.91bjw7Pse7YWsA;_ylu=X3oDMTE2NDFwbG10BHBvcwMxMQRzZWMDdG9wU3RvcmllcwRzbGsDZGVzcGl0ZW9iYW1h?tickers=xhb,brk-b,xlf,rexi,spy,dia,%5Edji&sec=topStories&pos=9&asset=&ccode=
sorry for the link from hell .. but its worth a look.
CommercialLender
Smarten asked about a definition of a bottom. Unscientific I know, but I’ve observed in both the dot.com and housing bubbles the same pattern:
When pundits on TV/media/journalists seem roughly 50/50% divided on if the market is going up or down, that is the inflection point.
Kid you not. I saw this exactly in early 2001’s dot.com crash where about half on CNBC wondered if the market was really all that strong and not too overheated while the other half dismissed those concerns (I got out of some, lost my shirt in others). Market peaked in March that year. I saw this again in late 2007 that the bulls and bears were equally divided with respect to housing and housing’s impact on the economy (I got out of some investments in both, and lost my shirt in others). I saw this again last year in the first quarter with everyone running for the exits in many markets in Jan and Feb, then around half of the pundits started saying it was a good time to buy/invest. The stock and corp bond markets bottomed in March ’09 (I bought some stocks, but left in retrospect way too much in cash). To be frank, I’ve seen this again 4Q 2009 again where half suggest we are heading out of recovery and half into a long haul or double dip. My guess is the economic mess bottomed in 4Q. Now, I get the flavor around half of what I hear now suggests housing has bottomed while half laugh that off.
Now, I’m not naked: you know I’m in the latter camp primarily b/c my CRE part of the industry is last to fall and last to rise, so I’m somewhat jaded with that perspective. But now, given my very unscientific observations noted over several inflection points, I’m inclined to think we may be currently at a bottom of indeterminate lenght (though in no way possible a ‘v’ shaped bottom).
billddrummer
To Mike,
Great stats, and thanks for digging them up. I don’t see how either of you can keep up with the stuff you must do, let alone providing us data junkies pro bono statistics to chew on.
And to CL, I too agree with you that we have reached a bottom of sorts. The problem you’ve identified (and that I subscribe to) is that I fear we are destined to drag along the bottom for a long, long, long time–perhaps several years.
And will things get better, or just not get worse?
Who knows. The CRE piece of it is just starting to melt down. And this time, it will take no prisoners.
Sully
I got this in the mail today, for some reason it seems more appropriate for these times then any other time in the past decades:
“The difference between death and taxes is death doesn’t get worse every time Congress meets.” – Will Rogers
DonC
The great contributions of Adam Smith and Leon Walrus were to explain that it didn’t matter who was selling or why they were selling and it didn’t matter who was buying or why they were buying — the only thing that mattered was the transaction price. That was two hundred years ago.
Having said that, if pushed, I’d say that fewer move up buyers suggests a bottom and more move up buyers suggests a top. In essence, move up buyers are great contra indicators. I’ve always marveled at how most people approach the question of when to move up. If you have a $100,000 house and want the $200,000 house around the corner, the rational thing would be to move up when the market is down. But with one exception I’ve never known anyone who has had the nerve to actually do this. They’ve all waited until appreciation has set in. At this point “their” house is worth $150,000 and they’re now ready to take the plunge because in their minds they’ve now “made” %50,000 which will serve as free money to finance the move.
That’s fine but now the $200,000 move up house is worth $300,000, and the move that would have cost $100,000 before now costs them $150,000. So in my experience move up buyers are neither rational nor smart, and they pile into the market heavily near tops and disappear near bottoms.
skeptical
CL,
Respectfully disagree. Bottoms occur when people are bleeding out of their eyeballs. Bottoms occur when people have lost hope. It’s that last shred of hope that forces people to maintain their denial, thereby fostering greater losses. Panic selling precipitates bottoms, not a 50/50 sentiment split between bears and bulls.
The weak hands need to be flushed out before any stable foundation can be built for a healthy, appreciating market. And 10,000 homes in shadow inventory will provide plenty of inventory to work against any increase in prices.
It’s all academic, though, isn’t it? If you really need a home in Reno, just low ball the bejesus out of the desperate seller and buy within earshot of the median to maximize your chance of selling on the other end with your skin in tact.
OBTW, not sure which version of Bubblevision (CNBC) you watch, but they’ve been bullish since Greenspan had a clue, which is too long ago to remember. It’s no secret that their ratings are directly correlated to stock market performance, which naturally affects their commentary. Google it.
Chucklehead
DonC,
You are killing me. Absolute numbers of move up buyers are a contrary indicator. That’s a good one!
Man, if I didn’t know you were joking… That’s awesome. We are so lucky to be availed of that kind of brilliant insight.
Seriously, move up buyers presuppose existing equity and therefore an ability to put a substantial amount of money down. Lack thereof, assumes the opposite. So, we’re better off without qualified buyers! Awesome.
EdBear
Mike,
I just eyeballed the 09’s and found that fo the 17 listed, 15 sold at a very significant increase in price, 1 at a modest increase and 1 at a breakeven. What am I missing here? Am I looking at the data wrong, or are some 09 purchasers making a bundle in a short time in a “down” market?
I’d sure like your opinion. Is there money to be made by the savvy investor, and if so, how might you and I do it?
Feel free to email me at my private email that I guess you can get from the webmaster.
MikeZ
RE: “I’m inclined to think we may be currently at a bottom of indeterminate length…”
I tend to agree that we are at or very close to (SFR median price within 5%) a bottom in Reno, not for the reasons you cited, but because the last 8-10 mos have seen DOM and price declines approx. flat.
SkrapGuy
EdBear, it seems you have missed a series of threads that Mike has put up about investment groups buying foreclosures and turning them around for tidy profits in very short order. Sometimes just a few weeks. For very signficant gains. There have been at least 3 threads about this with probably a couple of hundred comments. Perhaps Mike can refer you to them.
Raymond
A lack of move-up buyers signals an improving market. That’s absolutely fabulous. Reminds me of some the great bubble logic….
Debt is wealth.
A mortgage is an investment.
Borrow more to increase your gains.
billddrummer
To Raymond,
Debt is wealth if someone owes it to you.
A mortgage is an investment if you get the payments.
Borrow at low rates to invest at high rates, but don’t be surprised if you lose at both.
billddrummer
Further,
The cash buyers in the stats that Mike dug up are in the best position. They are immune from the vagaries of the ‘market,’ because they don’t have to worry that the property value will be exceeded by their mortgage balance.
Whether the investments they made were ill-timed isn’t material. The important thing to remember is that they have established values for each property they purchased. And I’m guessing none of them will sell until the values rise beyond their purchase prices.
SkrapGuy
I’m sorry, but the statement that a lack of move-up buyers heralds a strengthening market has to be one of the most foolish things ever said on this blog.
Not quite as stupid as when Angie the loan officer said that a buyer ought to be wary of paying too little, but close.
Free Falling
I chuckle at the “surprise” that there are so few “true” equity sellers in the current market. It is no surprise to me that the sales satisfying skeptical’s def’n are folks who have owned for ten years or longer. With a tax code encouraging mortgages on principal residences, there are plenty of folks with negative equity and buckets of cash sitting on the sidelines.
Some of these are stepping up to the plate and are buying today. Others are waiting for a 10% increase in median price to believe bottom has actually been reached before stepping in as move up buyers. It is far easier to buy a stock (or a home) when the graphs are showing upward rather than downward trends. I think that far more people would rather buy after the market has rebounded 10% than risk buying when the market still has another 10% to fall. Others are the “buy and bail” folks who will purchase a new home (larger or smaller) and then walk on their existing mortgage. (Previous posts have documented a few of these.)
The over $250 k market, as always, will be impacted by the SF Bay market, which is up 10% in the past year. There are plenty of folks in the Bay who have lost a bunch of RE equity in the bubble burst and need somewhere more affordable to retire. The NV tax advantage is likely to remain long after CA and NV take the necessary steps to address their huge budget shortfalls.
There is also the longstanding “affordability” factor in favor of NV. My firm selected Reno for an office a few years back because of the huge after tax cost of living difference between here and Southern California. We relocated a bunch of people to this city. Once the CA economy starts creating rather than destroying jobs, we will see more businesses choosing Northern Nevada for the same reason. There are significant tax and labor savings for a firm that can operate from Reno rather than the Bay area.
The Economist (and plenty of other pubs, plus posters to this blog) called the upcoming bust back in 2004 with a cover story. The mainstream press continued to tout the RE boom well into 2007 when it was rather obvious to most that the show was over by the end of 2005. The popular press remains focussed on the futile efforts of Washington to “save” a handful of homeowners from foreclosure. Adam Smith’s invisible hand has corrected the imbalances of the RE market here in Reno (as evidenced by price stabilization, and month’s supply of inventory) largely without the help of worthless HARP/HAMP/Flavor of the Week save your house programs. Low interest rates and an end to Armageddon thinking (still present with a few posters here) by most are the real reason for the stabilization. Today the press is still focussed on the foreclosure story, but prices will quietly start to crawl back from their current depths with little fanfare.
The fascinating thing about the creative destruction of capitalism is the unanticipated benefits. The railroad bubble drastically improved the transportation infrastructure creating long term economic benefit for the country at the expense of the railroad shareholders who financed the rapid rail expansion. The dot com/tech bubble drastically improved the communication infrastructure creating long term economic benefit for the country at the expense of the tech investors/speculators. The real estate bubble drastically improved the housing stock of the country, cleaning up many areas of urban blight and driving down prices for those folks smart enough, dumb enough, or young enough not to get caught in the mess. It makes little sense to build today, so the oversupply will gradually be absorbed. By that time most of the folks who were earning their livings framing houses will have found alternate career paths, so construction costs will start to climb again.
The folks buying today and locking in for 30 years will be laughing in 2020 when prices and interest rates are both significantly up. EVEN IF THEY MISS THE BOTTOM BY TEN OR FIFTEEN PERCENT. How many of you bears have actually bought a stock within 15% of it’s bottom price?
Chucklehead
“The great contributions of Adam Smith and Leon Walrus were to explain that it didn’t matter….”
“…I’d say that fewer move up buyers suggests a bottom and more move up buyers suggests a top…”
DonC YOU ARE AN IDIOT.
In fact, you’re worse than an idiot. You’re an idiot who cloaks his idiocy with the quotations of famous people. You’re an idiot who actually thinks he’s smart.
I’ll say it one more time because it feels so good.
YOU ARE AN IDIOT. Now, be gone.
Downtownjunkie
We are close to bottom unless we are at the brink of armageddon. At least we all share the same opinion in that the bottom will be here for a long time.
You can bash me all you want as it is just my opinion. Good post Mike.
EdBear
The compaison of the prices between the 2009 sales and the current sales proves that a LOT of money can be made in flipping the “right” properties. Take a look at the numbers.
Is anyone here interested in getting a group together, tossing $10 or $20K each into a kitty and taking a plunge? I’ve got the money, but we need astute knowledge of the Reno/Sparks RE market to make wise investments.
If anyone is game for investigating such a group, let me know and I’ll bet Guy or Mike could pull it together.
Sully
Not so sure about all the ranting regarding a bottom. It’s the tops we should be worrying about:
At or near the top of unemployment lists
At or near the top of foreclosure lists
At or near the top of personal bankruptcy lists
Need to get off the top of these lists before we can begin to think about being at a bottom of anything.
DonC
Sully — you do realize that all your “tops” would in fact define the bottom? IOW the top of unemployment, the top of foreclosures, and the top of bankruptcies would occur at the bottom.
More to your point about jobs, which is a good one since without jobs the housing market doesn’t exist, is the linked chart. This fun little chart shows how jobs follow corporate profits with about a one year lag. (This is sort of a “Duh” relationship: businesses obviously want to wait to confirm that profits are sustainable before hiring). During the last year corporate profits have risen sharply. As is the usual case, employment is following. My guess, unless you have some reasons for thinking that Reno is like Detroit, is that Reno will follow the national trend.
http://www.businessinsider.com/chart-of-the-day-real-corporate-profits-yy-vs-1-year-difference-in-unemployment-rate-reverse-scale-2010-2
More jobs –> more demand for houses –> higher house prices.
Sane Economist
Free Falling said “the folks buying today and locking in for 30 years will be laughing in 2020 when prices and interest rates are significantly up”.
Could you please provide your reference for this claim.
I ask, because my models tell me that in 2020, nominal values of houses in Reno will be about 20% lower than where they currently are.
Sully
Don, I’m quite aware of the contrarian nature of tops, but I would like to see Nevada move down on these lists a little before even thinking about a housing bottom or even a scrapping bottom. Also, DC never ceases to amaze me with all their help (read intervention) to artificially make things move up. Heck, I could make a mountain move with a few trillion dollars to spend.
smarten
Chucklehead said to DonC “YOU ARE AN IDIOT. Now, be gone.”
No DonC you’re not an idiot. And even if you were, you should not be gone.
Were it not for the fact that our friend Derrick recently purchased a new Spanish Springs stucco condo, I would have guessed Chucklehead to be another one of his monikers.
But regardless, why do some on this board need to be so disparaging when someone takes a different position and then backs it up with fact (whether/not cognant)? We can disagree with one another all we want, but why does it have to degenerate into insult?
I’m amazed by the number of posters who have expressed their belief that we’re either at or within 5%-10% of a Reno/Sparks SFR bottom [I’m not surprised at all by the number who feel the opposite]. It makes me think that CL’s unscientific observations aren’t that far off. All I know is that when the consensus of residential real estate opinion is bullish, it’s a good time to sell. And when it’s the opposite, it’s a good time to buy. IMO those who have the guts to buck the trend will ultimately be rewarded. But of course, if you don’t play you can’t win.
bob_c
And for a bear, once they miss a bottom, fear
will increase and they will never enter the game,
forever have regrets and root against others good
fortune.
DonC
Sully said “Also, DC never ceases to amaze me with all their help (read intervention) to artificially make things move up.”
Actually they have a new tact, which makes more sense to me that what they’ve been trying to do.
Rather than spending money to reform the mortgages of people who are underwater and aren’t likely to be able to stay in their houses even after the reformation, they’re spending the money to facilitate short sales in order to speed up the inevitable.
Deleveraging is an ugly process and no amount of lipstick is going to change that.
DonC
smarten – thanks for the kind words. The truth is that when I read the comment it gave me a good “chuckle”.
That said, like you I am puzzled by the emotion of some of the responses. It’s almost as if we were fighting over some obscure religious doctrine! LOL
Sane Economist
One reason I would be reluctant to call for a bottom right now is lack of transparency and hence lack of price discovery. Government intervention in the housing market has completely distorted the true market value, unless you believe the intervention will remain indefinite, something I highly doubt.
It seems prudent therefore to wait until government exits from the market before calling for a bottom. Supposedly this process is going to start in May.
FWIW, I think there is going to be a another serious downtrend in prices – particulary with higher end of the market. Which is why I think Reno’s overall median price will be higher in Dec 10 then Dec 09.
billddrummer
I stand by my prediction of a $187,000 median in December 2010. I believe, like Sane Economist, that higher end properties will begin to sell at lower price points, thereby pushing up the year end median.
But I still believe that forecasting a bottom is impossible until you’ve identified an increase in something other than volume. A 3-4 month trend in rising median $psf would convince me.
That hasn’t happened yet.
BanteringBear
DonC, no doubt, makes some statements which are quite confounding, but what really leaves me scratching my head is how he talks about “deleveraging”, and “deflation”, yet also talks about house prices increasing. I mean, huh? Purchasing a house in a deflationary environment is not wise. Your debt gets more expensive by the day as houses continue to fall in price.
smarten
First SE, for my entire adult life the Feds have intervened in the residential real estate market. The Feds make the mortgage market [and even what they don’t purchase/insure ends up being priced at some premium over what they do purchase] and there’s little doubt this is going to continue [in other words, the Government is not exiting from this aspect of the market].
Second, I find it interesting you’re down on the residential real estate market yet are predicting a higher median sales price and by osmosis, increased unit sales [how else can the median increase short of the low end of the market collapsing?]. So a month or more ago when skeptical laid out his benchmarks for a residential real estate recovery; and relied upon increased unit sales and an increased median sales price; he was mistaken; correct?
So there’s a residential real estate recovery according to skeptical and his group when unit sales and median sales prices increase, and there’s the second leg of the downturn according to you when unit sales and median sales prices increase; and according to Mr. BB when unit sales and median sales prices decrease.
Then there’s Waldo and his group who believe that without move-up [what about empty nester move-down?] buyers there can be no recovery, and DonC and his group who believe the lack of move-up buyers is a great contra indicator.
Talk about being all over the map…
PriceItRight
I am a longtime reader of this blog (not an avid poster though) and have to say that smarten distinguishes himself by clear, comprehensive and courteous comments.
Sane Economist
Smarten,
The extent to which the govt. has involved itself in the current housing market is unprecedented. Never before has the govt. involved itself in altering existing mortgage contracts.
You can argue that the tax write off on interest payments is govt. involvement, but even that is different, as the house price reflects that condition at the point of sale. Essentially this is the first time govt. has entered the housing market after the point of sale. Purists regard this as an assault on private enterprise, but that is another matter.
I’m not quite sure what you’re getting at with your comments above. But for clarity let me say this.
If a house sold for $1million at some time in the past, and now sells for $500K, my definition of that transaction is called a price drop. Also median price has nothing to do with unit sales, bottoms falling out or any of the other things you listed.
For me the bottom will be the price that reflects the new lending standards ie. mortgages requiring 20% down payment coupled with ability to pay the monthly amount. I think that is going to start towards the end of this year.
skeptical
Smarten,
Just to set the record straight, I believe there will be more to a bottom than higher volume and higher median sales prices. Here are what I believe will characterize the bottom when it finally occurs (in 1, 5, 10, or 20 yrs?).
1) People will be totally disgusted with real estate.
The shear number of bottom callers on this blog gives me apprehensions that we are no where near bottom.
2) Underlying economic factors will need to turn.
Read: unemployment down to a healthy level; population decrease in Reno must turn around and become positive again; and there must be growth in the local economy. I don’t see any new strip malls being built lately.
3) Rising volume and medians good, but additionally a rising PPSF completes the trifecta, and gives me confidence that the worst may be behind us.
Qualitatively, someone made a great point recently (Sully?, Skrapguy?, Grateful?), when they stated that their money buys a much nicer house now than it did 1,3,5 yrs ago. And that trend continues. As long as that is the case, we have not hit bottom.
OBTW, so that I am perfectly clear, I believe we are in a bifurcated market right now. I believe it’s safe to buy a house at or under the median. However, I believe anyone buying significantly above the median is taking on significant risk. I can see price compression above $350k for years to come. FWIW.
smarten
SE,if I understand you correctly what you’re saying is that the ONLY residential real estate sales that can be considered when viewing the then state of the market, are conventional ones made possible with 80% LTV purchase money financing. Am I reading this right?
If so, I don’t think this has ever been the traditional measure – in part because it excludes probate sales; all cash sales; FHA/VA sales with 3% down; 80/10 [where the seller carries back 10% of the purchase price] sales; etc.
Traditionally we have looked at raw data such as average/median sales prices; DOM; unit sales; and to a lesser extent, PPSF. It’s almost as if now because of what the market is going through, we are invent new kinds of litmus tests [like the percentage of move-up buyers]. Is that what you’ve done?
BTW and on a completely different subject, since you’re an economist with an interest in conventional financing, I’m curious as to your predictions for long term mortgage rates for the rest of the year.
I’ve somewhat been following the mortgage market for the last couple of months and it seems to me that mortgage rates have again dropped. Still higher than they were 9-12 months ago but not warranted by the cost of money [the Federal cost of funds rate has certainly gone no lower (in fact if anything, it’s higher)].
And let me throw something else out there related to the availability of mortgages. I met with my hard money mortgage lender the other day and he told me he’s seeing all sorts of great borrowers seeking great [from the lender’s perspective] loans who simply CAN’T secure them from major institutional lenders. Professional people earning in excess of $200K annually; seeking 15% LTV first mortgages; with FICO scores in the very high 700 range; being forced to come to him for 5 year loans at 10%-11% interest/year and 5%-8% in loan origination fees. Can the inability to secure a mortgage actually be worse now than it was a year ago?
smarten
BTW PIR, thank you. I’m trying.
Sane Economist
http://www.housingwire.com/2010/03/11/is-this-the-lull-before-the-storm-for-us-mortgages/
Smarten,
What the long term interest rates will be is obviously the 64K question. I’m in the deflation camp so I think they will be low for years to come. Which of course makes me a bear as far as the housing market is concerned.
I believe this is the single most important aspect about buying today, because at the end of the day it’s all about oppurtunity costs rather than costs per se.
skeptical
Nevada unemployment back up to 13%. NV is second only to West Virginia in recording the largest jobless rate increases since Jan 2009:
http://globaleconomicanalysis.blogspot.com/2010/03/regional-employment-report-unemployment.html
Must be near bottom….
Sully
My guess, unless you have some reasons for thinking that Reno is like Detroit, is that Reno will follow the national trend.
Don, I’m thinking the chart will look like the 83 – 86 period over the next 2 – 21/2 years. And do I have any reason to think this? No, not any NEW reasons, the old ones will suffice.
skeptical
Sully,
Are you saying the market will be flat for the next 2 1/2 yrs?
BanteringBear
On the subject of jobs in Reno, or the lack thereof, there is no historical precedent for what is unfolding, economically speaking. This is yet another reason why even historical pricing may be a tad too optimistic at this point. Why are Detroit houses so cheap? Lack of demand due to a lack of jobs. Barring some miracle turnaround in the Reno economy, it looks like real estate prices will continue to erode for the foreseeable future.