February median sold price, units, DOM, and $/sq.ft.

Agent Insights Market Trends by Guy Johnson

February’s median sold price rose to $171,500 after plunging five percent in January to $167,000.  Similarly, February’s sold price per square foot also came back from January’s plunge – rising to $101.42 from January’s record low $97.06.

The number of houses sold in February was a robust 330 units – a very strong showing for a February.

Speaking of short sales, February’s sales breakout was:

  • Bank-owned properties – 37%
  • Short sales – 35%
  • Equity sales – 26%

Short sales continue to comprise over a third of monthly sales.

For those readers who prefer the median sold price for houses and condos combined, February’s combined median sold price was $163,900; up 2.8 percent from January’s combined median of $159,400.

Month Year #Sold Sold Price Sold Price per SqFt Average DOM
Feb 2010 330 $171,500 $101.42 138
Jan 2010 334 $167,000 $97.06 133
Dec 2009 420 $176,500 $101.15 127
Nov 2009 460 $175,000 $103.51 112
Oct 2009 560 $180,000 $103.65 124
Sep 2009 520 $185,948 $103.31 128
Aug 2009 482 $179,900 $102.64 116
Jul 2009 515 $180,000 $103.45 126
Jun 2009 536 $180,317 $104.09 136
May 2009 425 $175,000 $102.31 139
Apr 2009 429 $190,000 $105.71 133
Mar 2009 369 $200,000 $105.85 133
Feb 2009 293 $205,000 $111.52 132
Jan 2009 233 $200,000 $113.04 117
Dec 2008 294 $218,950 $121.74 145
Nov 2008 269 $220,000 $122.24 152
Oct 2008 354 $230,000 $131.43 144
Sep 2008 358 $239,250 $136.72 145
Aug 2008 321 $250,000 $142.14 140
Jul 2008 397 $251,000 $145.48 139
Jun 2008 369 $262,500 $148.05 142
May 2008 314 $260,215 $152.30 134
Apr 2008 314 $275,000 $154.05 172
Mar 2008 238 $274,000 $150.93 166
Feb 2008 195 $289,000 $156.48 149
Jan 2008 165 $285,000 $170.23 146
Dec2007 228 $283,950 $167.22 143
Nov2007 204 $299,750 $172.24 126
Oct2007 241 $296,000 $173.55 116
Sep2007 230 $299,945 $179.46 114
Aug2007 311 $305,000 $182.49 118
Jul2007 300 $315,000 $189.78 113
Jun2007 329 $320,000 $196.78 104
May2007 364 $313,200 $190.81 107
Apr2007 320 $309,500 $193.93 121
Mar2007 324 $315,000 $189.61 121
Feb 2007 269 $315,000 $191.18 126
Jan 2007 245 $312,900 $199.79 133
Dec2006 291 $309,000 $193.51 114
Nov2006 281 $318,000 $197.32 111
Oct 2006 363 $312,400 $201.44 105
Sep2006 344 $314,950 $198.08 98
Aug2006 349 $325,000 $210.92 94
Jul2006 373 $335,000 $210.62 93
Jun2006 424 $339,000 $214.54 91
May2006 374 $339,950 $219.05 99
Apr2006 368 $334,600 $212.08 88
Mar2006 387 $340,000 $215.54 99
Feb 2006 283 $335,000 $217.29 101
Jan 2006 274 $365,000 $216.38 98
Dec2005 333 $355,000 $217.31 89
Nov2005 385 $349,000 $220.00 81
Oct2005 484 $359,450 $223.06 77
Sep2005 531 $354,500 $219.26 77
Aug2005 582 $360,500 $220.52 73
Jul2005 608 $353,000 $218.99 71
Jun2005 679 $350,000 $215.69 69
May2005 644 $333,250 $209.95 68
Apr2005 558 $326,750 $207.57 77
Mar2005 584 $325,000 $200.17 81
Feb 2005 342 $318,500 $197.54 88
Jan 2005 341 $310,000 $195.19 85
Dec2004 450 $312,500 $190.72 77
Nov2004 448 $309,950 $191.62 63
Oct2004 512 $299,250 $188.72 53
Sep2004 496 $292,750 $185.78 61
Aug2004 505 $285,000 $182.95 56
Jul2004 544 $304,300 $179.28 61
Jun2004 533 $285,000 $172.16 65
May2004 476 $278,750 $169.64 65
Apr2004 526 $259,950 $158.08 67
Mar2004 508 $245,000 $142.56 71
Feb 2004 365 $237,000 unavailable 81
Jan 2004 379 $229,000 unavailable 78
Dec2003 441 $240,000 unavailable 82
Nov2003 444 $220,750 unavailable 78
Oct2003 430 $219,880 unavailable 76
Sep2003 587 $223,000 unavailable 71
Aug2003 512 $220,000 unavailable 75
Jul2003 533 $210,000 unavailable 77
Jun2003 475 $207,000 unavailable 77
May2003 450 $198,950 unavailable 85
Apr2003 478 $197,750 unavailable 82
Mar 2003 428 $192,000 unavailable 77
Feb 2003 321 $186,895 unavailable 79
Jan 2003 316 $186,000 unavailable 96
Dec2002 379 $193,500 unavailable 93
Nov2002 423 $190,000 unavailable 82
Oct2002 483 $189,900 unavailable 83
Sep2002 410 $174,000 unavailable 85
Aug2002 459 $180,000 unavailable 74
Jul2002 469 $176,000 unavailable 83
Jun2002 445 $185,000 unavailable 80
May2002 470 $178,450 unavailable 77
Apr2002 360 $169,500 unavailable 93
Mar 2002 377 $169,000 unavailable 84
Feb 2002 323 $170,900 unavailable 89
Jan 2002 268 $172,475 unavailable 99
Dec2001 287 $182,000 unavailable 86
Nov2001 323 $161,500 unavailable 85
Oct2001 357 $166,500 unavailable 79
Sep2001 355 $168,000 unavailable 81
Aug2001 448 $160,350 unavailable 84
Jul2001 433 $169,900 unavailable 90
Jun2001 426 $166,225 unavailable 96
May2001 404 $162,050 unavailable 97
Apr2001 370 $158,750 unavailable 94
Mar 2001 385 $159,900 unavailable 97
Feb 2001 294 $159,950 unavailable 103
Jan 2001 264 $165,000 unavailable 102
Dec2000 272 $156,500 unavailable 100
Nov2000 355 $154,500 unavailable 93
Oct 2000 348 $153,000 unavailable 98
Sep2000 356 $160,000 unavailable 104
Aug2000 412 $163,375 unavailable 94
Jul2000 368 $155,000 unavailable 110
Jun2000 466 $165,845 unavailable 104
May2000 363 $158,000 unavailable 105
Apr2000 312 $155,000 unavailable 113
Mar 2000 339 $162,700 unavailable 102
Feb 2000 244 $149,620 unavailable 110
Jan 2000 217 $156,000 unavailable 112
Dec 1999 264 $155,000 unavailable 118
Nov 1999 293 $149,900 unavailable 98
Oct 1999 289 $147,895 unavailable 108
Sep 1999 311 $157,000 unavailable 106
Aug 1999 360 $148,500 unavailable 112
Jul 1999 375 $147,800 unavailable 105
Jun1999 372 $150,000 unavailable 103
May 1999 307 $145,500 unavailable 106
Apr1999 324 $151,700 unavailable 111
Mar 1999 308 $151,000 unavailable 121
Feb1999 249 $148,900 unavailable 120
Jan 1999 210 $143,000 unavailable 115
Dec 1998 265 $140,000 unavailable 118
Nov 1998 279 $153,000 unavailable 126
Oct1998 286 $142,825 unavailable 115
Sep 1998 279 $144,500 unavailable 102
Aug 1998 331 $145,000 unavailable 113
Jul 1998 335 $150,000 unavailable 108
Jun 1998 351 $148,500 unavailable 103
May 1998 302 $145,500 unavailable 99
Apr 1998 235 $149,000 unavailable 111
Mar 1998 267 $142,500 unavailable 114
Feb 1998 201 $139,900 unavailable 126
Jan 1998 165 $149,490 unavailable 131

Note: The medians table above is updated on a monthly basis. The median home price data reported covers the cities of Reno, Nevada and Sparks, Nevada [NNRMLS Area #100]. Residential data includes Site/Stick Built properties only. Data excludes Condo/Townhouse, Manufactured/Modular and Shared Ownership properties. Data courtesy of the Northern Nevada Regional MLS – March 2010.  Note: This information is deemed reliable, but not guaranteed.

51 comments

  1. smarten

    Again, one month does not make a trend. But at least as of February of this year, the median sales price is back into the $170K-$180K range it has been since last May [in other words, we’re continuing to scrape the bottom (yes, in retrospect it was a bottom. For how long no one can say, but a bottom nonetheless)].

    Last December I expected February’s sales volume would be higher than January’s and it’s not [although it’s pretty darn close to even]. In the last ten years there has only been one year [2004] when February’s sales volume wasn’t higher than January’s. Don’t know what this means [if anything] given March 2004’s sales volume was up about 50% over February 2004’s. Although I don’t expect March 2010’s sales volume to increase by 50% over February 2010’s, I do expect it to increase. Insofar as the median sales price is concerned, if it stays above $170K [as I expect it will], then we can probably look back on January’s dip to $167K as being an aberration. But we’ll see.

  2. skeptical

    Smarten,
    Glad there’s at least one bull out there, or all of us pessimists would just be murmuring to each other in an echo chamber. Your comments at least give people something to talk about.

    That said, you can’t have it both ways. You keep calling a bottom, based upon median sales price. However, you have regularly disparaged that stat as being relatively unimportant in this market. $/sqft did bump up in Feb, but remains at multi-year lows.

    You further support your argument that Jan was an aberration by predicting a solid March.

    Terrible logic all the way through. It’s too bad, really, because you often make great points, but in this case you have no point at all.

    You may ultimately be proven correct that we have seen/are seeing bottom. Then again, even a broken clock is right twice a day. Just call the bottom for the next few years, and eventually, like your buddy Jim Cramer, you’ll be able to claim that you nailed the bottom.

    kudos.

    You regularly argue that median sales price is, for the most part, not a major point of relevance

  3. skeptical

    Forgot to mention — 74% distressed sales does not a bottom make.

    It’s insane how immune we’ve become to such incredibly high numbers of distressed sales — which do not result in move up buyers. These numbers, by the way, do not include the numbers of houses sold on the courthouse steps, which are then either flipped or occupied (thereby either increasing supply, or decreasing demand).

    I could go on. But anyone trying to call a bottom with 74% distressed sales is just guessing, and has no credibility.

  4. GreenNV

    The sales numbers do in fact count the majority of previous courthouse steps sales – they show up in the organic “equity sales” category. If Guy or anyone else with MLS access wants to shoot me a list of February’s equity sales, I’d be happy (and rather curious) to break out the true equity sales from the flipped Trustee’s Deeds.

  5. Reno Ignoramus

    I suggest that Green’s point is very well taken. I suspect that a big percentage of the so-called “equity sales” are sales by flippers who bought the property on the courthouse steps a few weeks/months ago. These are basically the same as bank REO sales; the seller just happens to be a human being (or an LLC comprised of human beings) instead of a bank. (Green/Mike has done a fine job of documenting these flippers in previous threads).If we were to include these flipper sales in with the REO/short sales, I suspect that that they would all total well over 90% of all sales. It would be most interesting to know what percent of “equity sales” were sales by JSP type of sellers who have owned the house for say, more than 5 years. I really hope somebody makes that data available to Green.

  6. Reno Ignoramus

    Guy, would it be possible to get some price band data?
    How many of the 329 sales were for less than $100K?
    Between $100K and $200K?
    Between $200K and $300K?
    Between $300K and $400K?
    Between $400K and $500K?
    Over $500K?

    Thanks.

  7. skeptical

    Mike,
    This matter came up a month or two ago. There was a question as to whether the very high sales volume was being affected by courthouse sales. The answer that came back (Guy?) was that courthouse sales aren’t counted in sales numbers, as they are not part of the MLS.

    What am I missing here? Are courthouse sales affecting sales numbers, median prices, etc… or not?

  8. Martin

    Let me make a prediction in advance of the price band data.

    I predcit that the over $500K segment is still dead. as. a. doornail. Moribund.

    The over $400K segment ain’t going to be much better.

    The only thing the realtors have for their happy talking points now is the sales volume. They never point out that one half of all sales are still below $170K. And they never acknowledge that over $300K the market is anemic.

  9. Reno Ignoramus

    Skeptical,

    When a house is sold at a trustee’s sale on the courthouse steps it is NOT included in the MLS data and it does not contribute to the sales number Guy reports. When the house goes back to the bank at the trustees sale, and the bank then later hires a realtor and sells it as an REO on the MLS, it is so included.

    When a private purchaser buys at the trustees sale, that transaction is also NOT included in the stats. But when that purchaser hires a realtor to list it on the MLS it is technically now called an “equity sale” in Guy’s jargon. But as I said above, it really is not an “equity sale” in the sense of the seller being somebody who has owned the house, and lived in it, for a period of time.

  10. GreenNV

    RI, thanks for the spot-on reply to skeptical (and the personal kudos). In addition to the reprocessed TDs, I suspect many of the “equity sales” are sellers that had to bring a check to the closing table.

    The NNMLS is pretty strict about allowing sales data to be published, citing privacy issues. I don’t even need sold pricing (which I can pick up from the Assessor and Recorder), just the addresses. Help us out Guy, Di, JoAnn, Mitch, or any of you lurkers (honey muffin?) with MLS access for the gross data. I think RI’s 90% non-organic figure is pretty spot-on, off the cuff.

  11. smarten

    Skeptical –

    Based upon median sales price, our SFR bottom was reached last May. And we’ve basically been skirting along that bottom ever since [but for January which may or may not prove to be an aberration (I never said January WAS an aberration)]. I’m not being bullish on anything. From here we may continue to skirt along the bottom [which is what I personally believe is going to happen]. Or, we may drop to new lows [which is what you and Mr. BB believe (in fact, you expected February’s median to be lower, didn’t you?)]. So I’m really doing nothing more than calling a spade a spade.

    Now if you measure a bottom by something other than median sales price, such as PPSF, we didn’t reach a bottom last May. Or if you measure a bottom by sales volume, we reached it two years ago. Or if you measure it by the percentage of distressed sales, it’s hard to imagine we can go much lower [or do you disagree?].

    My comments suggesting median sales price may not be an effective barometer of the market were spoken when sales volume had dropped to such a low number [January, 2008?], it was nearly non-existent [or, such as when there were 2 IV SFR sales/month]. So there’s no having it both ways Skeptical.

  12. Guy Johnson

    Another sold was entered into the MLS, so I adjusted the post accordingly. February’s median is now $171,500.

    Skeptical,
    RI’s answer to your question is correct.

    RI,
    Here is the price banding you requested:
    Less than $100K? 38 or 11.5%
    Between $100K and $200K? 167 or 50.6%
    Between $200K and $300K? 67 or 20.3%
    Between $300K and $400K? 29 or 8.8%
    Between $400K and $500K? 12 or 3.5%
    Over $500K? 17 or 5.2%

    GreenNV,
    Solds coming your way.

  13. Guy Johnson

    Also, possibly of interest; February median sold price for…
    bank-owned: $150,000 (average DOM: 71 days)
    short sales: $167,000 (average DOM: 185 days)
    “equity” sales: $225,000 (average DOM: 83 days)

  14. Reno Ignoramus

    That price band data is very insightful. Thanks Guy. We continue to have, as has been the case for at least the last 18 months, a tale of two markets within the total market.
    One market, below $300K, is where 85% of all sales occur. 60% of all sales occur below $200K. And 50% of all sales occur below $170K.

    The line of demarcation clearly has become $300K. Only 15% of all sales happen over $300K. And, as Martin predicted, the market over $500K has become almost insignificant in Reno. And as it should be by any traditional non-bubble measure. A $500K house is about 10 times the median household income in Reno.

  15. SkrapGuy

    Back before the buuble and all the nothing down fog up a mirror voodoo loan nonsense, a $300K house was an expensive house in Reno. Damn few people in Reno could have afforded a $300K house by traditional lending standards. Real wages in Reno have at best stagnated since before the bubble, and that is for people who still have a job.
    A $300K house has again returned to where it ought to be in Reno, which is essentailly a working class town……beyond the reach of most households.
    And as for $500K houses, well, we have noted many times before that there are not enough cardiologists here to prop up that comatose market segment.

  16. skeptical

    Skrappy,
    You are absolutely correct. I believe that in about 3-5 years there will be some amazing nice properties on the market, bubble priced at $1-1.5M, that will be offered for less than $500k.

    These high end owners might have deeper pockets than most, but life happens. People die, get divorced, become empty nesters, or just want to move somewhere else. As these events occur, Montreux and Arrowcreek owners will be unloading at severely distressed prices.

    Smarten, you claim that we have been scraping along bottom since May 09. Let’s just note it for the record and revisit the topic in 6 months. I think we are about to see a big dropoff in median sales price in that timeframe. One of us will be correct.

  17. DownButNotOut

    All this is based off the Reno basin, correct? Here’s a prediction: Reno RE is not a good investment. Sorry, let me turn the LP over so I can play it again.

  18. Martin

    Guy, why has Somersett disappeared from the IDX version of the MLS featured on the blog?

  19. BanteringBear

    Smarten posted:

    “Based upon median sales price, our SFR bottom was reached last May. And we’ve basically been skirting along that bottom ever since [but for January which may or may not prove to be an aberration (I never said January WAS an aberration)].”

    The chart which is included in Guy’s post is evidence that this statement is completely false. Insofar as median price is concerned, the bottom, thus far, was in January 2010. Even the February 2010 median price is below that of May 2009. When talking about PPSF, the bottom was in January 2010 as well. Making bold statements which are in direct conflict with the raw data does nothing but destroy one’s credibility, assuming they ever had any.

  20. RenoInMyFuture

    First time poster here, but i’ve been following this post for about 1.5 yrs.
    We seem to be focused on median price here, but that doesn’t tell the whole story. If you look at the graphs for Reno on http://www.housingtracker.net/ you will see that the 25th% and 50th% are forming a base. However, the 75th% is still in decline. Infact, if you compare to most other cities in the USA the gap between these percentiles remains relatively constant through the decline. Assuming the gaps will adjust and remain constant, I would project that the 75th% is to high in Reno and will hit about $400K in about 1 to 1.5 years. This corrolates well with the expected reset of mortgages for these high priced homes.
    P.S. http://www.patrick.net/housing/crash.html is one of my sources which help me balance the optimistic NAR spin.

  21. Guy Johnson

    Martin,
    A few months ago the RSAR renamed the MLS area formerly called “Reno – Somersett” to “Reno – Foothills”.

  22. Jay

    Count me in as a new home buyer, as of Feb 11, 2010. I bought in the Granite Ridge area, a nice single story, with the mountain trail just above me. I got 4.875%, fixed, for 30 years, FHA, with 3% down, and the seller paid almost 1/2 of the closing costs. The short-sale (Chase) took 5 1/2 months to complete. My credit union appraised the house at 7K less than my offer, so we re-submitted it at the lower price, and they accepted it. 🙂

    I also believe home prices will fall further in the next couple years, but the time was right for me. After giving up on the auction home in Cold Springs in June 2008, (which had broken water pipes and mold), prices came down, along with interest rates,and the home-buyer tax credit also helps, as 2009 was a good year for me.

    Thank You, to Guy, Mike, Diane, Kim, my RE agent, and everyone else on this blog.

  23. DonC

    Obviously the market has stabilized. Call it what you want or argue about the exact time, but the evidence indicates that the market in general has bottomed. Personally I don’t like median sales prices since they are a better measure of what is being sold than price movements but, as Smarten suggests, when all measures indicate a bottom then it doesn’t matter so much what measure you want to use.

    Add to this the data that shows that the Reno market is now significantly undervalued based on traditional pricing factors, and that the national economy is recovering, and the conclusion that the bottom is here or was here a while ago seems inescapable.

    Does this mean prices will go up from here? Not really. The markets can be wrong for long periods of time. But looking out five years it’s difficult to believe that prices won’t be higher then than they are now. So depending on your time frame it’s not a bad time to think about buying. (Or you could wait, the bottom is likely to be around for a while — no need for panic buying).

    That’s for single family. The condo market is probably a different animal. That may take a really long ugly time before it gets better.

  24. smarten

    IMO you people need to look at the bigger picture.

    Since last May the SFR median sales price has been by and large trading within the $170K-$180K range with the exception of January which dropped below $170K. But to show how fickle these numbers can be, look at Guy’s revised median sales price for February. One additional sale [out of 334] bumped the median up from/to $170K/$171.5K. So I say one month does not make a trend and don’t focus on January; focus on the other eight months.

    We’re now about to enter the prime selling season and first time homebuyers have until the end of April to enter into a purchase contract. These facts tell me it’s likely unit sales over the next several months are going to increase [in fact, compare the number of unit sales in January of 2010 compared to January of 2008 – they’ve doubled!]. If they do, January will be seen as an aberration. Historically, increased unit sales signal an increase in the median sales price.

    Here’s another piece of data IMO to look at – the percentage of SFR sales above $400K. Although I haven’t kept a running tally of the numbers [which might be a useful thing for you to do Guy if it’s not too much more work], the number last month was about the same as the percentage of SFR sales between $300K-$400K [far from “deader than a doornail” or “dying on the vine”]. I find this number to be telling given that not that long ago the percentage was almost nothing.

    My friend Skeptical predicts that “in about 3-5 years there will be some amazing nice properties on the market, bubble priced at $1-1.5M, that will be offered for less than $500k.” If I’m not mistaken, we’ve been there for sometime. More than six months ago we were talking right here about Montreux Renaissance SFRs that were selling in the very low $600Ks compared to sales in the $1.5M range at the height of the bubble.

    We’ve talked about the very high percentage of distressed sales. But honestly, how much higher can the percentage get [RI suggests the percentage is closer to 90%]? And to me, it makes no difference [distress wise] if a speculator like Page Ventures makes a purchase at a trustee’s sale, and then resells it conventionally. The resale is not distressed.

    I’m not saying the housing recovery has begun [or that it began last May]. But to me there’s little doubt that the free fall we’ve experienced since the bubble highs seems to have leveled off. I again ask the question I’ve asked several times before: how many months’ figures is it going to take before even the most hardened of bears acknowledges there has been a change?

    I congratulate Jay for making what appears to have been a wise purchase [at least for him (although Jay hasn’t shared his purchase price, given it was a REO and he was able to purchase it at today’s FMV, it probably was a good 50% or more of its bubble high)]. A 30 year fixed rate 97% LTV mortgage at 4.875% is excellent and in retrospect, will probably be viewed as an historical low. Jay’s purchase demonstrates that there ARE buyers, even on this blog, who have chosen to buck what goes for conventional wisdom. Either they’re all stupid, or maybe, just maybe, they know something.

    One final request for Guy. I think it would be useful to track the number of active listings [you used to include this number]. I find this number to be far more useful than DOM and I’d be curious how inventory levels have changed over the last couple of years.

    Go at it guys but remember, this was the same mentality used against RI and Mr. BB when Diane first started this blog.

  25. DonC

    To follow up on Smarten’s points, if you say the same thing all the time, and markets go up and down, you will be right sooner or later. The trick is to say different things at different times.

    I posted this before and was surprised to see it generated no response since it seems the best indicator of whether Reno is under or over valued. In 2006 National City and Global Insight published a study as to whether housing was over or under valued. They found it very over valued. In fact they found that Reno was 38% OVER VALUED. http://money.cnn.com/2005/12/29/real_estate/buying_selling/handicapping_housing_markets/index.htm No claims that, like Yun, the study was a shill for real estate agents.

    Fast forward to this year. The same companies reran their model for 2009. The conclusion was different. It found that most markets were under valued. Specifically, it found Reno to be 26.5% UNDER VALUED. http://money.cnn.com/real_estate/storysupplement/overvalued_cities/

    That’s a huge turnaround. The methodology is good since it rests on tying incomes to house prices and interest rates. Plus the model has been robust over time. This doesn’t of course mean that prices have to go up. If Reno was 38% over valued it could become 38% or more under valued, which would mean prices would continue to drop. In this sense it can’t predict whether we’ve seen a bottom or not. But it does suggest that over time it’s far more likely we will see prices go up rather than down.

  26. Free Falling

    I’m with Smarten on this one. Ten months trading in a narrow band with good sales velocities indicates a bottom to me. I’m not sure why the 75% distressed sales surprises anyone or is indicative of further price deterioration to come. Since 50% of Nevada homeowners are underwater, of course the majority of sales are distressed. Those with equity bought long ago or paid down their mortgage to the point they can afford it and have or should refinance at historical low rates. With most of their equity gone, there is little incentive for the equity owners to sell unless they are moving or dying as suggested. Market prices will need to move up significantly before the percent of distressed sales will go down, and I don’t expect prices to move up anytime soon, or very quickly until we see improvements in employment in Northern California and Northern Nevada.

    The bear in me does worry about how long the upside down homeowners will continue paying their mortgages now that market value is fairly clear. Strategic defaults by homeowners who can make their payments but don’t think it worthwhile will hold prices at current lows for some time yet. WSJ recently had an article effectively advocating underwater homeowners to walk. I can’t find the link, so they may have pulled it.

    Skeptical can find now some nice former million dollar shacks in Somersett listed for less than half original price. No need to wait 3 – 5 years. With attractive pricing, they are being snapped up quickly and moving into the short sale wait and see game. Too bad for Diane that her bank isn’t smelling the coffee yet.

  27. bob_c

    no one believes the rally in stocks (hence net
    outflows of stock mutual funds for last year)
    and everyone believes in bonds (net inflows 56
    billion)—this parallels real estate

    since when do we tell the markets what they are
    supposed to do…aren’t the markets supposed to tell us?

  28. BanteringBear

    The bottom calling is getting noticeably louder around here lately, especially amongst those who, SURPRISE, recently bought a house. What’s conveniently ignored, however, is how the tax credit has artificially propped up prices and pulled forward demand from the future. The longer it goes on, the less effective it becomes, and that’s why we’ll see prices and sales erode.

    Mortgage rates will most certainly be rising at some point in the future, and that will lead to a further deterioration in house prices, as the interest eats up more of the payment, and people qualify for smaller loans. Like I’ve been hammering home for years, it’s MUCH better to buy a home at a lesser price and a higher interest rate than vice-versa. You can always refinance the rate, but you can’t rewrite principle. Also, an extra payment here and there goes much further in reducing the balance.

    All of this also ignores the worst economy in the history of Reno, NV. The idea that housing will bottom, and recover, before the economy rights itself is hysterical. I don’t know what sort of illicit substances lead people to these sorts of conclusions. Apparently, it’s good stuff…

  29. bob_c

    my point is: i don’t believe this ‘recovery’
    (of which reno’s economy is near the bottom)

    but aren’t we suposed to listen to what the markets tell us?

    if the pessimism i witness proves correct….maybe nothing will be worth anything

    so what are you waiting for BB….armageddon?

    do you have gold and supplies buried in a remote location?

  30. bob_c

    BB

    your cash better not be fdic insured either….or in treasury bonds or in paper form

    the sky is falling, the sky is falling

  31. Sully

    FWIW, I took the median prices and put them on a chart. The chart is bell shaped (as expected), but the interesting thing is that the current median is about where we would have been at this point in time(projected in straight line), if we hadn’t had a bubble in the first place.

  32. DonC

    BB – You have a valid point about interest rates. If they move upward that can and will effect the model, making houses at current prices less affordable. However, there are two factors that suggest this may not be a big issue. One is that the data suggest deflation is still more of an issue the inflation, giving the Federal Reserve a fairly long run way to keep interest rates unchanged. Two is that banks have very restrictive practices when qualifying people for loans. If these are loosened you might see housing prices trend upward.

    That said, your point — which is that interest rates are a big deal and are currently low — remains valid. But if housing is under valued by 25% then there is room for price appreciation even if interest rates move upwards, so long as the increase is moderate.

  33. skeptical

    Here’s what I believe is being casually disregarded by the recent homebuyers: distressed sales; unemployment; underwater homeowners. OBTW, Free Falling, it’s not 50% underwater in NV, it’s closer to 70% (or more). And credible contributors like RI and GreenNV estimate 90% of all sales being distressed.

    What planet do you sanguine bottom callers live on? You cannot hit bottom with 90% distressed sales. Every REO or short sale lowers the market price for every home on the block. And the rolling thunder of foreclosures continues unabated.

    Then there’s the much discussed, but apparently often ignored shadow inventory of 10,000+ homes. It’s a mountain of supply that will hit the market as soon as the banks believe what Smarten and the homebuyers believe, that they can get a decent price and unload. This will serve to draw out any recovery in homeprices for several years at least.

    I think anybody buying a home above $250k in this market is either willfully ignorant, or conciously disregarding the risks.

    JDS Uniphase hit over $1k/share in Feb 2000. It now trades at ~$10. It, too, was a bubble baby. Just like million dollar homes in Reno.

    This is really just a purely academic discussion, though, isn’t it? It only really matters if you are going to buy a house. I’ll yield to the homebuyers the market below $250k. You probably will not lose your shirt at that level right now, as median incomes in Reno can provide demand.

    However, anyone purchasing a home above that level is taking on substantial downside risk. The higher the price, the higher the risk. Why not rent and wait this thing out, and possibly then be able to fund your retirement or send your kids to college, instead of paying off an underwater mortage for the next few decades?

  34. CommercialLender

    Bob C,
    The ‘market’ told me my wife’s [Company X Tech Stock] was a good value at $63/sh, problem is I listened to it and now sit on 1,000 shares in the low 20’s, way below my basis 10 years ago. (I know what you are trying to say, just poking fun.) A lost decade on that investment, oops.

    ****

    Distressed sales: while I find it a telling statistic in some ways, it is somewhat missing the point. A true market value is what a buyer is willing to pay, and we make the long-standing presumption in real estate that a buyer is for a somewhat long term hold, not a flipper. Thus, I’d like to see stats on the buyers, namely, what percentage of all buyers are intending to be long term owners. That they picked up the home from a bank, the courthouse or a flipper matters less than who these buyers are as they are the ones setting values.

    ****

    Finally, there are continued rumblings in my business: LNR is rumored to be on the verge of BK (they are a commercial servicing concern), Centerline (another servicer) just was bought, CWCapital (same) is rumored to be in a level of distress, lawsuits are starting to fly against special and master servicers, Barney Frank is stirring the pot against Fannie and Freddie, and he’s also trying to get B-piece note holders to mark down and walk away from the values of their underwater positions. These are ingredients to a fiery hot pot of CRE-deflation chili.

  35. Skyler

    110 Sawbuck Road in Caughlin Ranch. 8,477 sq. ft. Listed for $900,000. Or $ 106 a sq. ft. It’s a short sale, but a big honkin’ Caughlin Ranch mansion type house at $106 a sq. ft?

  36. nunzio

    house needs major updating

  37. E.Edward

    OMG…. Never seizes to amaze!

    There will be no price stabilization until the FED gets completely out of Housing.

    ONE MORE TIME…These overinflated median home prices would be much less RIGHT NOW if not for artificial interest rates and gimmicks….. Can anyone argue? Housing has bottemed? Really?….

    :Northern Nevada is now approaching 14% unemployed {likely well beyond 20% per u6 stats.}

    :Foreclosures just keep coming with no end in sight.

    :Wages are falling and cost items are rising

    How does this spell stabilization??

    It seems like the only thing stabilizing is home buyer denial…

    Just my opinion

  38. smarten

    Mr. BB states that “the tax credit has artificially propped up prices and pulled forward demand from the future…That’s why we’ll see prices and sales erode.”

    So given the benefits of the tax credit will be gone in less than two months, when exactly are you predicting “prices and sales [will] erode?”

    Just want you to go on record so we can return to the subject whenever it is you answer.

  39. DonC

    E.Edward says “ONE MORE TIME…These overinflated median home prices would be much less RIGHT NOW if not for artificial interest rates and gimmicks….. Can anyone argue?”

    In US the housing bubble was created by too much liquidity from China and a political structure that fell in love with the efficient market hypothesis. In Ireland it was created by too much liquidity from the EU, especially Germany, and a political structure in love with the efficient market hypothesis. Turns out that letting bankers so what they want is not a good idea.

    http://www.irisheconomy.ie/Notes/IrishEconomyNote10.pdf

  40. DonC

    Skeptical – There are always two sides to risk. You can do something when you should be doing nothing. Or you can do nothing when you should be doing something. Stated differently, sitting on a bank account earning less than the inflation rate is not a road to financial success.

    If Reno housing is undervalued by historical standards then you have more upside than downside. That’s not to say there isn’t a downside or that the market is at a inflection point or even that the market has to return to historical norms. Just because the market is down doesn’t mean it can’t go down some more. But there is likewise a downside to making a different investment or doing nothing at all.

    In this regard, if you’re preparing to send children to college then a house is a great idea. Every dollar that goes into a house is deemed “not available” for financial aid purposes. Every dollar that is otherwise invested is deemed to be “available.” This can make a big difference in how much you end up paying.

  41. GratefulD_420

    Interesting times as usual.

    In one hand we have stabilizing pricing (apparently) & falling inventory(apparently) & increased sales activity (for certain).

    On the other hand we are looking 72% distressed sales.

    Interesting that folks such as DonC can out right say “Obviously the market has stabilized” as matter of fact. I would like to understand how the market can stabalize with 72% distressed sales? Will these all be gone tommorow and when will we return to 95% equity sales? If you can explain this then maybe your certainty has merit.

    I think that some of the blog’s long-time ago predictions are coming true…. that Median Sold Price cannot capture the pricing (fall) of the market…. so then we went to PSF…. but I fear that also cannot capture what we are seeing here. There is no quality feature in either measurement.
    Everysingle day I wait,,, I see my dream houses getting closer & closer to my price. They are all coming down. Every single day. I don’t even care what the median or PSF has to say… the quality of what I can buy for $400k keeps going up and up. This trend will continue as long as the distressed sales continue. You have to be FRICKEN KIDDING ME to tell me the market is stabalized with 72% distressed sales!!!!

    The only hindsight for me was that as the quality of house availible at the $450k range became availible…. I had to lessen my sights to $400 because the taxes on these places (used to be $650 to $850k) are so extreme! I hate high taxes more than a high mortgage!

    Guy… where did the SilverWolf house go to? Don’t see it listed or pending anymore?

    Mike… what happened to the Erminia foreclosure down in your hood? It hit the MLS so fast… like it was loaded and ready to go… then vanished?

    Are there secret deals being worked on these…. or have they been forever vanished to the SHADOW INVENTORY???????

    Cheers & goodnight!

  42. skeptical

    Paraphrase of DonC:

    ‘Well you could do nothing, when you should do something, or something, when you should do nothing or do something and nothing, or neither of the above…’

    Boy, you just bowl me away with that argument.

    Also, the parents that bought the McMansions in Somersett as a great way to finance the kiddie’s college tuition in 2005 are likely regretting that decision right about now.

    But without wasting any more time, I think I’ll just second what Grateful said. I really can’t improve on that.

  43. bob_c

    some of us dont qualify for subsidies for our
    childrens college no matter the size of our home

  44. CommercialLender

    Being objective, I see both sides: that homes might still fall in value due to a variety of factors including unemployment, distressed sales and shadow inventory, and also that homes might soon increase in value due to a variety of factors including being at a perceived bottom, more sales occuring, and replacement costs.

    It boils down to whether you think “its always darkest before dawn” (Smarten, DonC, et.al.) or “its always darkest before pitch black” (BB, Grateful, et.al.).

    Me? I dunno. I vascilate. I’m in the CRE space which is getting darker by the day, except ironically lending is starting to increase. I see tons of money on the sidelines poised to buy CRE deals, except that they, too, are waiting for values to continue falling. I hear big leases being signed in Silicon Valley, except that you realize they are existing tenants moving from location A to location B all the while not hiring any more employees. So, I am left to think “its always darkest when I over-analyze.”

  45. DonC

    skeptical – The choice is not between a house and renting, it’s between a house and some other asset class. Since you want to use a McMansion in Somersett as an example, let’s do that. Say we have three families: the Houses, the Banktons, and the Stocktons. They each have $500,000. The Houses buy that Somersett McMansion for $500,000. The Stocktons decide to rent and buy some stocks, say CompUSA and Circuit City. And the Banktons stay conservative, decide to rent, and get a nice CD at a bank, say IndyMac.

    So today who more regretting their decision? How about last year at this time? Basically the situation is not as cut and dry as you want to make it.

  46. DonC

    GratefulD asks “I would like to understand how the market can stabalize with 72% distressed sales? Will these all be gone tommorow and when will we return to 95% equity sales? If you can explain this then maybe your certainty has merit.”

    CommercialLender has already kindly explained this. As he wrote, “A true market value is what a buyer is willing to pay”. IOW the motivation of the seller is irrelevant. So long as there are buyers at a given price it matters not if all or none of the sales are “distressed”.

  47. DonC

    CommercialLender says “It boils down to whether you think “its always darkest before dawn” (Smarten, DonC, et.al.) or “its always darkest before pitch black” (BB, Grateful, et.al.).”

    I’m not really predicting that we’ve seen the darkest of times. Given that prices have stabilized that seems like a good guess, but markets can be wrong for extended periods of time, and just because you’re under valued doesn’t mean you can’t become even more under valued. Minimums don’t always have to be global. If I had to guess I’d say the market has bottomed or is very close to it, but I leave bottom predicting to the Cassandras since those types of predictions are well beyond my pay grade.

    What I am saying is that over the next five years, and certainly the next ten years, it’s highly probable that housing prices will return to their historical levels. Since at current prices housing is below historical levels, that suggests more upside than downside.

    Ultimately the decision to buy should be based on how well you can sleep. Personally I’d be comfortable buying a house in this market but I’m not a chronic worrier. Mileage will vary.

    What’s interesting is that I think you and I are somewhat mirror opposites. You’re more likely to act decisively on the way out (which I admire BTW) and I’m more likely to act decisively getting back in.

  48. GratefulD_420

    “CommercialLender has already kindly explained this. As he wrote, “A true market value is what a buyer is willing to pay”. IOW the motivation of the seller is irrelevant. So long as there are buyers at a given price it matters not if all or none of the sales are “distressed”. – DonC

    That is a pretty good saying by CL… it does follow the adage I truly believe in, the price is what someone is willing to pay for it.

    Unfortunately, DonC…. CL’s explaination does nothing to answer the questions I had…

    “I would like to understand how the market can stabalize with 72% distressed sales? Will these all be gone tommorow and when will we return to 95% equity sales”

    Your slight of hand or misdirection is a poor trick to avoid answering some real questions. I think that CL’s adage applies, only that the price being paid for the distressed properties is less and less every day. Everyday, that distressed sales make up the majority or any large percentage of the market the prices will continue to drop.

    Again the problem we have is how to measure this. PSF is great, however it still does nothing to incorporate the ever so important factor of quality. Besides what I see on the listings and the street everyday I’m not certain how we statistically quantify this. Maybe the best is to use the “Grade” given by Assesor as a weighting factor or grouping…but some of this grading was just about as bad as the 2005 mortgage assessments!

    CL… I’m not so certain about the doom and gloom. I see the movement from buyers and lots of investors, especially since stocks have picked up……I see the majority of foreclosures and shortsales are all “pending”… the availible inventory is not so overwhelming as before (whether this is real or not…. it is what it is). So these are all obvious signs to a healing market.

    However…. I’m still perplexed how it can truly stabalize OR go up when there are so many distressed sales happening and so many more in the pipeline.

  49. GratefulD_420

    o.k. I was just sticking to the points above… but I have to ASK !!!!!

    DonC……..

    1.) ” it’s highly probable that housing prices will return to their historical levels.Since at current prices housing is below historical levels, that suggests more upside than downside.” – DonC

    What historical levels? The historical bubble levels? do you have a value for that?

    2.) “But if housing is under valued by 25% then there is room for price appreciation even if interest rates move upwards, so long as the increase is moderate.” – DonC

    Very true statement,,,,, except what housing is undervalued by 25%?? Is this in Reno? because that is the discussion,, please don’t act like you weren’t suggesting that this was indeed the case.

  50. Martin

    Housing is undervalued by 25% in Reno?

    You mean, all those bubble built places in Arrowcreek and Somersett are undervalued by 25%?

    Oh please. That’s not even worthy of a response.

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