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.
BanteringBear
Smarten posted:
“Well how about the fact that the bears, specifically Mr. BB, are singing the tunes they’re singing specifically because they DON’T own real estate? So what’s the difference.”
Another completely false statement. I have an (apparently unusual) ability to see the truth regardless of whether or not it is in my best financial interests. It’s called objectivity.
“Even when they’re forced to admit there’s been a market reversal, they still won’t act because they will have missed the boat. What we’ll likely hear is that the second [or third, or fourth] leg of the downturn is just around the corner.”
Now you’re a clairvoyant, able to predict the future actions and sentiments of a large segment of the US population? No, you’re not, this is just more of of the same nonsensical blather you’ve grown accustomed to typing.
“Assuming our oracle from the garden has any money to buy real estate, I’d be interested in hearing what he’s doing with it [medicinal marijuana?]. How about shorting residential housing futures?”
For your information, I do not drink alcohol, smoke cigarettes, or use marijuana. My interest is ornamental horticulture, and my work has never been about the money, it’s about waking up every day and doing what I love. While it’s obvious to me, and probably anyone who’s been reading this blog, that you earn more money than I likely ever will ($900k mortgage anyone?), you are no more of a person because of it. You epitomize hubris and poor character, and are the poster child for everything that is wrong with this country, basing the value of individuals on their flashy titles and net worth’s instead of their good virtues. I do a lot of work for people with money, and some I call my friends, while others never get a return call from me. I think it’s obvious which group you’d fit into.
SkrapGuy
The suggestion by Smarten that people bearish on real estate don’t own property is wrong. Very wrong. I have been about as bearish as anybody on this blog for longer than most people have been aware of this blog (RI and BB have been here longer). I continue to be bearish.
I own a house in Reno. In fact, I own two.
Martin
I also own a house in Reno. Count me as a bear.
Walter
I have no problem with anybody’s opinion on the current direction of the market. Bull or Bear. Fine. It is, however, a bit silly to suggest that the only people who are bearish on the market are non-owners foolishly sitting on the sidelines afraid to take the leap to ownership. As I survey the current housing market in Reno, I can see no objective reason to be anything other than bearish. I’m not here to try and talk anybody into seeing it my way. I am here, however, to tell you that I am a homeowner. The notion that the only people who see a lot of headwind for the market in the months/years to come, and therfore reach the bearish conclusion, are fradey cat sidleiners, is, quite frankly, a bit insulting. Some of us are capable of reaching a conclusion on the state of the market that may not be the most favorable for our individual circumstances. It is called objectivity.
PursuitAce
Even by the end of 2012, 40-50% of home sales in the Truckee Meadows are predicated to be foreclosures.
DonC
skeptical — Well you’re half right but 100% wrong in where you’re going. I don’t live in Reno. But I’m thinking about buying. As for buying in the last two years you’re way off. While I’ve bought more houses than most people, I was lucky enough to buy long before the run up and to go into the last downturn totally deleveraged.
Obviously what you’re suggesting is that my views reflect my personal situation. In your mind someone who bought recently is motivated psychologically by a need to justify the purchase by having prices go up. You’re completely and impossibly wrong here — I’m a buyer not a seller — so it would be to my advantage to have prices continue to drop. They may, but given the data it seems that over the longer run there is more upside than downside.
My guess is that you’ve never heard of the term “projection”. Essentially projection means that you attribute to others those motivations which most animate you. My guess is that this is what is happening here.
billddrummer
To Carlton re/Belsera:
The Belsera project crashed because the developer went belly up 40% into the subdivision. That’s why the roofers didn’t get paid, and the costs to complete–cleaning up the liens, repairing damage wrought by three winters, etc., make the project unsustainable now.
Maybe another year of falling prices will make it worthwhile for someone to go in and finish it. But for now, it’s just not worth it.
MikeZ
[Bear]: “My money says MikeZ bought a house. He was on this blog long ago, with bearish sentiment, and now he’s singing the bulls tune. Same as Smarten. These guys buy a house, and all of a sudden the bottom is in. Blinders.”
Nope, wrong again. I already explained why think the bottom is here (or very close): because of the last 6-9 mos of data.
Stick to discussing the data, Bear, and forget trying to read minds.
MikeZ
[Skrap Guy] “The suggestion by Smarten that people bearish on real estate don’t own property is wrong. Very wrong.”
Skrap, go back and reread … it was Bear and skeptical who started the “cognitive bias” theme.
smarten
My statement on this subject was as follows: “the bears, specifically Mr. BB, are singing the tunes they’re singing specifically because they DON’T own real estate. So what’s the difference?”
Does the oracle gardner own real estate? Does skeptical own real estate? If they do, aren’t they pretty stupid for having seen the writing on the wall years ago and done NOTHING in mitigation [as our friend Derrick did]? Or is it a case of “do as I say, not as I do?”
If they don’t own real estate, am I the only one who sees a connection between those who tout further declines in the residential real estate market AS A WHOLE [as opposed to just one strata], and those who aren’t players?
DownButNotOut
So if a lot of these buyers documented via Public Records are buying and then re-selling at a profit, doesn’t this make it a buyers market for the astute businessman?
SkrapGuy
MikeZ, I don’t care who started the “cognitive bias” theme. My point was very simple:
It was a stupid thing to say that the only people who are bearish on the market are sitting on the sidelines afraid to make a move, and hoping for the worst.
Seems there are some others readers as well as myself who are bearish AND are property owners. Thanks Martin and Walter for helping to make it clear that not all bears have no skin in the game.
BanteringBear
“Does the oracle gardner own real estate? Does skeptical own real estate? If they do, aren’t they pretty stupid for having seen the writing on the wall years ago and done NOTHING in mitigation [as our friend Derrick did]? Or is it a case of “do as I say, not as I do?””
How do you know we’ve done nothing, or not? You don’t, you’re just running your loud mouth again. What you fail to realize is that most people on this blog are not shallow narcissists like you and Derrick, and aren’t starved for attention, sharing the personal details of their lives with the world. Last time I checked, this blog was about Reno real estate, and not the personal holdings of the contributors thereof. You’ve got stupid covered, that’s for sure.
skeptical
As long as the government keeps throwing money at this problem, with no forethought, analysis, or expertise, we are in for trouble:
http://www.huffingtonpost.com/2010/03/15/hardest-hit-states-given-_n_499390.html
“The five states hardest hit by the foreclosure crisis have been given only weeks to plan how to spend $1.5 billion in federal funding announced by the Obama administration last month.
Guidelines issued under the U.S. Treasury Department’s Fund for Hardest Hit Housing Markets on March 5 gave housing finance agencies in California, Arizona, Florida, Nevada and Michigan just six weeks to come up with plans on how to spend their share of the money.”
With this kind of unlimited intervention in the markets, we really don’t have American capitalism anymore.
Perhaps the bulls are right. A few billion here and a few billion there and after a while you could buy the whole state. Trouble is, our grandkids will be paying for it.
We argue to each other as if it really matters. This problem that we have with spending into oblivion puts the survival of our way of life in jeopardy.
Full disclosure: I do not currently own property, although I have the financial means to do so. I am just not convinced this thing is over, and believe that waiting a few years has no downside. I will buy a home when I believe the time is right. When I perceive a turn, as defined by previous posts of mine, I will pull the trigger, gut the seller, and have no mercy.
BanteringBear
I’ll take you at your word, MikeZ. I’ve got no reason to doubt you. We used to agree way back when, but you’ve a completely different viewpoint on the market now. Time will tell who’s reading the tea leaves correctly. Not sure why you haven’t bought a house if you think the bottom is in. You expressed long ago your interest in buying.
BanteringBear
Edit button, sil vous plait.
MikeZ
[Skrap Guy] “It was a stupid thing to say that the only people who are bearish on the market are sitting on the sidelines afraid to make a move, and hoping for the worst.”
Skrap, the cognitive bias argument /was/ stupid. smarten pointed that out by turning it around on Bear and skeptical. Do you get that?
DownButNotOut
‘When I perceive a turn, as defined by previous posts of mine, I will pull the trigger, gut the seller, and have no mercy’
Funny how we criticize the buyers and developers when in the end, it’s all about whether we make money on our deal. Human nature I guess. Sit on the sidelines and be an expert, or enter the game and take criticism.
Those wanting to stay safe will always be on the sidelines commenting on others.
MikeZ
[Bear] “We used to agree way back when, but you’ve a completely different viewpoint on the market now.”
We still agree on most points, Bear: I bet we agree that Reno RE isn’t going to appreciate anytime soon, especially not until job and income growth returns.
Thinking we’re at or near the bottom does not make me “bullish.”
This is a very different market today than 3 years ago, ~50% down from peak, and with data that shows at least some short-term price stability now, so yes, my viewpoint has changed.
I take that as the sign of an open mind, not cognitive bias.
Reno Ignoramus
Hey mike….
119 Comments!
while this thread has had the usual drift away from the original topic, nice to see you got rewarded for your efforts.
Now if only it wasn’t the case that every thread ends up being yet another discussion on whether the market has hit bottom. Yes its interesting. But how many times do people need to say over and over and over that yes the market has bottomed, no it hasn’t, yes it has, no it hasn’t, yes it has, no it hasn’t………
DownButNotOut
‘Now if only it wasn’t the case that every thread ends up being yet another discussion on whether the market has hit bottom. ‘
Seriously? Every thread has always ended up with the same conclusion, so this is a surprise? Fact; It’s a bad time to buy unless you know how to make the situation work for you.
How many people/ bloggers/ articles/ opinions does it take to say the same thing?
What I have to laugh about is in all the ‘experts’ that write on the blog naysaying RE, a good half don’t even own real estate ( which makes me wonder why they’re on a RE blog) and it would seem NONE had the foresight to back up their new found expertise shorting the market.
Is the reality because they couldn’t buy they are now secretly happy those that did should suffer?
billddrummer
To all who argue about why people sit on the sidelines:
I’m sitting on the sidelines for three reasons–
I don’t have a down payment;
My credit stinks;
I don’t want to be saddled with a 6 figure debt.
BanteringBear
“What I have to laugh about is in all the ‘experts’ that write on the blog naysaying RE, a good half don’t even own real estate ( which makes me wonder why they’re on a RE blog) and it would seem NONE had the foresight to back up their new found expertise shorting the market.
Is the reality because they couldn’t buy they are now secretly happy those that did should suffer??”
You mean after all this time, Downer, you still don’t understand why people who don’t own real estate come to this blog? Is it completely lost on you that thousands came to learn about the market BEFORE they bought a house, oftentimes because they noticed some serious distortions in median price vs. median income? Can you back up your assertion, with fact, that half of the people here don’t own real estate? Can you provide us with the evidence that NONE here used their knowledge to profit from the bust?
skeptical
Without getting personal, many bottom callers have stated or insinuated that if you don’t own a house, you don’t have a right to comment on real estate.
Boy, what a boring blog this would be if only the underwater homeowners could contribute and commiserate.
I would submit that that filter alone would result in an overwhelming number of people who made bad real estate decisions, and therefore might not merit one’s attention. Readership and interest would decline. It’d be like listening to the sound of one hand clapping. Great suggestion….not!
As an aside, I was very disappointed when the new administration littered the country’s economic posts with the same hands that led to this mess (Summers, Bernanke, Geithner, et al). I believed a wholesale clearing of the house was in order, so that new thinkers, unsullied by past decisions that brought our economy to the brink, would be able to take bold action and change the course of our economy. Instead, the same old hands that got us into this mess took the reins to ensure the status quo was preserved.
It’s not a direct analogy, but the last person I would take advice from regarding real estate is anyone who bought a home between 2001 and 2008. Quite to the contrary of DBNO’s logic, I believe that not buying real estate in that timeframe actually indicates more insight than those mindless bulls who had “skin in the game.” (or the cajones to get an interest only NINJA loan with neg am and a balloon payment after 3 years.)
FWIW, I did short NEW, PMI, FNM, MGIC, and others. I was early on some. I wasn’t greedy enough on others. Does that qualify as “skin”? Hell no, if you ask me. It really doesn’t mean squat.
The logic of the argument is all that matters. The logic of the contributor is the soul criteria that should be used to judge a post. I could give a rat’s behind if someone owns or not, flips or not, rents or not. What matters is whether they present a cogent argument, backed up by facts, persuasively argued (and preferably with at least 8th grade grammar/spelling/syntax).
When I’ve gone after someone for cognitive bias, it’s been the case 100% of the time that they have bought a house in the last 2 years. You do the math.
And for those out there who think that they lack bias….wow, if only we could all be so perfect. We are all biased, in our own way. If you choose to ignore that fact, you will pay the price eventually.
In short, we are all just speculating at the end of the day. But anyone who wants to speculate on rising prices in a market with nearly 13% of all homes in some stage of default; >60% of all homes underwater; and 13% unemployment can have at it. I’ll continue to sit on the sidelines and call it as I see it, and wait for the day when the price point finally makes sense, giving all the variables enumerated previously.
Don’t vent on me if you’re underwater or skating on thin ice. You shouldn’t bought the place to begin with.
DonC
skeptical says “With this kind of unlimited intervention in the markets, we really don’t have American capitalism anymore.”
Huh? What on earth are you talking about when you say “this kind of unlimited intervention”? The mortgage interest deduction, which is a direct government intervention in the real estate market, probably costs $1T over a decade. And it’s been doing that for decades. And you’re worrying about $1.5B. This is like leaving all the doors and windows open and worrying that the insulation in the walls is only R9.
As you seem to be defining it, capitalism hasn’t existed in this country — nor in any other country for that matter — for time eternity. No big deal. Capitalism isn’t a religion, it’s just one of many systems designed to distribute goods and services. If it works in some instances — and it frequently does — keep it. If it doesn’t — and sometimes it doesn’t — then get rid of it.
In this regard, in case you hadn’t noticed, over the last few years what we’ve witnessed is the failure of capitalism. Capital market were given a lot of freedom and they just plain plum fell flat on their faces. Couldn’t handle the liquidity. So why would anyone think these markets — with their 97:3 leverage debt ratios and collateralized debt offerings — were a great idea?
skeptical
Errata to above rant: as I was a homeowner into 2004, I’ll give a pass to anyone who bought a home at a good price in 2003 or earlier. Beyond that, it was clear to any logical person that we were in bubble territory.
DonC
skeptical says “Without getting personal, many bottom callers have stated or insinuated that if you don’t own a house, you don’t have a right to comment on real estate.”
I don’t think anyone actually said anything remotely like that.
As an aside, I have no idea how to effectively short the real estate market. Plus shorting is for people with strong stomachs and a lot of capital — when you short your downside is effectively unlimited. Given that you have expressed a certain degree of risk adversity, not a bad thing, you would seem to be a terrible candidate for engaging in short sales of any kind.
smarten
Skeptical, I’m not going to rant on you. In fact, I agree with many of your observations. You state that, “for those out there who think that they lack bias….wow, if only we could all be so perfect. We are all biased, in our own way. If you choose to ignore that fact, you will pay the price eventually.” My point exactly.
You continue to be an example of being very vocal in ones real estate views without resorting to name calling and degredation. I thank you.
smarten
DonC said, “I have no idea how to effectively short the real estate market.”
I don’t trade in the stock market so I’ll have to defer to those who do. But a couple of years ago I thought “they” [whomever they may be] introduced a residential real estate index for 12 or so major geographical markets that could be traded on the Chicago Exchange as a commodity? If this investment vehicle in fact exists, then you have the ability to “short” real estate if that’s your desire.
The problem though is what we’re seeing in Reno/Sparks. Even though most of us feel the residential real estate market as a whole is not going to rebound anytime soon, the median sales price is likely to increase. That being said, IMO it would be a poor decision to be shorting real estate on one/more of these commodity indices. In fact in a perverted sort of way, it may actually be a good time to be going long [but as I said, I’ll leave those decisions to the experts]?
Regardless, I think there IS an investment vehicle that allows investors to bet on the future [one way or the other] of residential real estate.
Sully
two RE ETF’s:
SRS ultra short (bear)
URE the long version (bull)
Looking at the charts, the SRS appears to be at or near its bottom. Little room to move here.
Much better idea then trying to trades futures, unless you have a crystal ball thats in working order. 🙂
Sully
Yeah we really do need an edit button. I got that wrong the SRS, as its a short fund, is scrapping near a bottom which means there is a possibility it can move up which is not good for RE. Maybe its better to not try and bet on RE for awhile.
DonC
Sully — those are REIT indexes, aren’t they? So the SRS is not really a vehicle for playing the residential real estate market. Also, and this holds for all indexes or ETFs, for technical reasons relating to the daily average calculations, even if the market goes south, you probably won’t see the type of returns you probably think you should be seeing.
I guess you could short homebuilders or financials. But these approaches are hardly perfect vehicles.
Sully
Yes, thats correct. Bad example.
Sully
The only one I could find that was made up of residential related was the XHB, homebuilders index.
It does have options available, but is a long fund, not short.
BanteringBear
I’ll go ahead and suggest that the appropriate way to short houses is to not buy them at all while they rot away on the mls. Unlike the stock market, you don’t have to borrow shares, and there are no margin calls when massive government housing stimulus creates marketplace distortions. Once you do decide to buy in, you can count all that money you saved as income earned, but not pay taxes on it.
DonC
BB says “I’ll go ahead and suggest that the appropriate way to short houses is to not buy them at all while they rot away on the mls.”
That’s very good advice. However, you’re usually best off not buying when they’re flying off the MLS. You want to buy when they’re not moving and people think they’re never going to move. I doubt that anyone is going to be able to time the bottom — some will but that’s just probability — so buying on the way down is as good as buying on the way up.
You don’t get that many down cycles in a lifetime. I’ve known a few people who are still waiting for the “next correction” after the October 1987 crash. No reason for panic buying but if in your personal situation it makes sense to purchase and you get a good price and a good loan rate, then it’s actually a better than normal time to buy. (IMHO of course.) This is especially true given that the the largest cohort in our history is just beginning to from households. This has been delayed but it won’t stay that way forever.
Renting is also an OK option. For most people I’d favor a home purchase because it gives people some leverage, sets their housing payment levels, and forces savings. If you are very disciplined the latter two factors don’t matter but very few people are that disciplined.
smarten
Mr. BB says, “the appropriate way to short houses is to not buy them at all while they rot away on the mls.” What a bunch of crap.
Correct me if I’m wrong [someone], but “shorting” an investment purchase means you’re selling something you don’t own at today’s price with the expectation you’ll make money on the sale by purchasing it back at a lower price sometime in the future. How do you propose making money on the sale of real estate if you don’t sell today and purchase at tomorrow’s arguably lower price? Or is it that you’ve somehow made money by doing nothing and avoiding the whole purchase/sale thing?
What you’re suggesting is what I call the osterich [or Titanic] technique; stick your head in the sand and do nothing. In fact that’s the same mentality that supports your decision to buy nothing and do nothing insofar as everything is concerned [being oblivious to everything that’s going on around you].
You can do the osterich thing if you like, but do some of us a favor and please don’t come up for air long enough to allow you to post comments such as these on this blog [I really don’t care about your other horticulture blogs].
For someone who’s so quick to call others “stupid,” you’re a real piece of work.
smarten
To the extent I made my last point together with derogatory and disparaging remarks, I apologize I guess I just couldn’t resist[. That runs contra to the civility I feel posters should exhibit to one another.
That said, I stand by the point I tried to make.
bob_c
All the wealth is made by those invested when
the market makes big moves (up or down).
Those who let fear paralyze them from taking risk
and investing in their beliefs, should not offer commentary.
bob_c
I can’t even argue with the illogic of bantering bears previous post. It is so revealing into how
a perma bear evolves.
DownButNotOut
‘Errata to above rant: as I was a homeowner into 2004, I’ll give a pass to anyone who bought a home at a good price in 2003 or earlier. Beyond that, it was clear to any logical person that we were in bubble territory.’
SK- How gracious of you to absolve all those that bought between 2001-2003, ones you previously dissed. This must validate renting for you, huh? I’m thankful that the last property I purchased was in 2000, so I don’t have to be grateful for the forgiveness you’re offering.
That’s a big head you’ve got on your shoulders.
skeptical
DBNO,
No worries. Let me know if you need anything else.
DonC
smarten — I think BB has it right. Yes selling short involves selling something you have to buy later. That’s the problem. If it takes off then you have to cover at what might turn out to be a very high price. And you have to do this even if the price plummets the next week.
So his idea of not buying and just waiting for the prices to drop has much to recommend it. It’s a more conservative — your time line isn’t set — but essentially same way to play it.
Plus as I mentioned I don’t think there is a realistic way of shorting the residential real estate market so it’s a bit of a moot point.
[And wouldn’t an Edit/Delete button be nice? I have wanted one from time to time.]
BanteringBear
“To the extent I made my last point together with derogatory and disparaging remarks, I apologize I guess I just couldn’t resist[. That runs contra to the civility I feel posters should exhibit to one another.
That said, I stand by the point I tried to make.”
You’re a mental case, Smarten. It’s obvious. You’ve been making disparaging comments for years, all the while telling others how they should behave on the blog. When you can’t control your diarrhea of the mouth, and lose it, you offer disingenuous apologies in a transparent attempt to distance yourself from the behaviors you supposedly condemn. These trite little apologies after the fact fit perfectly inline with your sleazy character. If you’re going to say something, at least stand up to it. Have you always been such a wuss?
DownButNotOut
Thanks Skep. Since you’re asking, in ’83 I bought a property that was under water in ’86. Can I be forgiven for that? I’d appreciate it.
BanteringBear
Obviously there’s no way, in a literal sense, to short the housing market. But, since loudmouthed people who bought depreciating assets like to deride others who aren’t sitting on albatrosses, and accuse them of not “profiting” from the bust, I offered an example of how they actually are profiting from their “expertise.”
If these people who are supposedly burying their heads in the sand would have purchased depreciating assets when these loudmouths did, they would have lost hundreds of thousands of dollars. Instead, they were smart, and they sat on their money while others hemorrhaged it. In turn, they didn’t end up with $900k mortgages. Yes, a $900k mortgage!
This is really no different than those who had the foresight to get out of the stock market, or not get in, before it plummeted. Are they ostriches with their heads buried in the sand? No. Sometimes, the best “investment” is the one never made.
BanteringBear
“bob_c said,
in March 16th, 2010 at 6:33 pm
I can’t even argue with the illogic of bantering bears previous post. It is so revealing into how
a perma bear evolves.”
I’ll tell you what, bob_c- when you understand the word illogical, and how to correctly use it in a sentence, you can start arguing about my posts. Fair?
MikeZ
[bob_c]: “Those who let fear paralyze them from taking risk and investing in their beliefs, should not offer commentary.”
“Should not offer commentary?”
Ridiculous! Stop trying to silence those who dare to disagree with you.
We’re all adults here, act like it.
billddrummer
To all,
If I had stayed the course, my home would have been paid off in 2009, and I wouldn’t be paying rent on a much smaller apartment now.
But multiple refinancings and second mortgages later finds me with no house but still paying my hard money lender on the second that was wiped out when my first went to foreclosure.
You can call me idiotic, stupid, or whatever you want. But as I’ve moved through the past three years, I’ve learned not to repeat the mistakes of the past.
That doesn’t mean I won’t make new ones. Just that I probably won’t make the same ones again.
DownButNotOut
‘Obviously there’s no way, in a literal sense, to short the housing market’
Really? and you base that off your vast knowledge of all things?
You might want to reconsider that statement.