February’s Reno-Sparks Market Condition Report provided by our friends at First Centennial Title has arrived. Click on the report below to enlarge.
From the report:
- OVERVIEW: Market is little changed from February with all measures barely moving from the same period 30 days ago. Current Market Speed, which measures conversion of listings to closings, is unchanged at 22, down 1 point from February. As an example, Market Speed in Las Vegas is 64 (3 times faster). Speed in Phoenix is 34, which is about 35% faster. These speed differentials are caused by the high numbers of REOs in those markets. If the REOs where removed from these competing markets, all would be about equal in pace and tempo.
- SUPPLY (ON MARKET): Slight gain from previous month.
- DEMAND (SOLD PER MONTH): Demand decreased slightly for SFR. Condo up slightly.
- FAILURES (EXPIRE-WITHDRAW): SFR and Condo steady in the current range.
- IN ESCROW (FUTURE CLOSINGS): SFR and Condo inventory in escrow hug up at the current level. This suggests that closing in the near term will likely not increase or decrease significantly.
- PERCENT SELLING: Unchanged.
- MONTHS SUPPLY: This key measure is tightening slightly for both types signaling that demand/supply realities are not shifting significantly.
- MARKET SPEED: The pace of the Reno market is beginning to rise ever so slightly. The best performing Reno sub-market remains the perennial favorite, Fernley SFR, returning a Market Speed of 35 (no change from last month). The slowest is Yerington SFR, Gardnerville, and Sparks Condo tied at a very sluggish 13.
- PRICES: All prices very stable in the current range with a slight positive propensity.
smarten
So the data suggests that at least for the moment, the residential real estate market has stabilized. This was one of my beefs with Mr. BB. The data is the data and the facts are the facts [what he supposedly lived by] yet he and others were in absolute denial.
No we don’t know what’s going to happen next month [although this data suggests probably not much more of anything]. But we sure know what has happened the last 10 months or so and compared to the last couple of years, it has been relatively flat/stable.
As I suggested in another post Guy, I would find it helpful if your monthly data posts included the number of properties listed for sale, compared with the same period in previous months/years. I know that here in Incline Village, the number of SFR listings is down appreciably [more than 30%] from last year at this time.
skeptical
I expect sales to pick up appreciably in March/April due to the expiring tax credit. If sales to not go up significantly in the <$300k strata through the end of May, this market is in trouble.
Above $300k is already dead. Still amazing to me that the old median was $400k. Bubblenomics at work.
Isn’t February supposed to be a much stronger month for real estate than January? If so, how is stability good? A real sign of stability would be rising sales and rising prices coming out of winter, IMHO.
GratefulD_420
“So the data suggests that at least for the moment, the residential real estate market has stabilized.” – Smarten
With unprecedented intervention….. the market is stabalized.
… if with all the help that is being given we are balanced…. what happens when the support is removed?
Tax credit is ending. FHA has increased standards for mortgages (a lower FICO requires greater downpayment). Feds will stop buying mortgage securities, allowing rates to move with market. These are three major factors of support that are being removed simultaneuously (albeit the rates are not expected to rise for some time with Fannie and Freddie ready to purchase at will).
smarten… for overall listings… here is one of the resources I use (this is for all of washoe, others have posted here before)….
http://www.housingtracker.net/asking-prices/reno-nevada/
I really think the pricing bands are extremely interesting, especially when looking at the top 75 percentile over the last few months versus how well it was holding over the last few years….
ohh yeah thay DATA, THE FACTS on WHICH WE LIVE BY are very interesting and clearly “stable.”
MikeZ
[420] “These are three major factors of support that are being removed simultaneuously”
And /if/ prices remain stable, even then, will that be evidence of a bottom … or will there be a new reason to deny the stability of the price data?
smarten
Thanks GratefulD. I found the graph of historical for sales/listings particularly helpful.
I hear you with all of the external interferences which you state have resulted in “temporary” stabilization and will soon be removed. But there are always external interferences. The fact remains that for the last 10 or so months, the free fall in housing sales/median sales prices has appeared to have leveled off.
I don’t think anyone is saying we only go up from here. All I’m trying to say is that for whatever reasons, things appear to have been relatively stable for the last 10 months or so, and I define that as a bottom of sorts. “The” bottom? I never said that.
MikeZ brings up a good point. If the market continues to remain relatively stable for the rest of the year [as many on this blog have predicted], notwithstanding the removal of the many external interferences to which you point, how then will you explain what the data suggests?
Joe
I’ll be one to admit a bottom if sales/prices remain steady for the rest of the year. But how can one believe that the current sales numbers haven’t borrowed from a future pool of buyers that jumped in for the tax credit? And what about the majority of current sellers’ credit being hurt from their short sales? They won’t be qualifying for a loan anytime soon.
GratefulD_420
“And /if/ prices remain stable, even then, will that be evidence of a bottom … or will there be a new reason to deny the stability of the price data?” – Mike Z
Don’t know… that is the question I was pointing out.. not certain why it frustrates you. It is just a reasonable explaination.
Also interested that in a stabalized market the “listed PRICE” data continues to fall, with the high end finally moving down in a hurry. I’m not saying I understand exactly how to interpret this data, however this very real and local data does not represent a stable market.
I also think its been pointed out for a long time how misleading the Median Sales Price data can be. So why now do you say this is the one piece of DATA that cannot be overlooked? This is why Guy started tracking price/sq ft, which is better however still can be misleading and does not capture what we are looking for. What every here wants to know is value. Is value going up or down? I’m going to be very clear with my opinion here….. the value of Reno housing is going down and will continue to go down as long as there is 70% distressed sales and sufficient inventory. Period.
Now don’t think I’m a doomsdayer, cause I’m not. I see the buyers & investors in the market which have had a significant impact on stabalizing some areas of the market such as sales and inventory. Can they keep up their buying in the face of continuing value drops? Without the direct support of the feds? If the stock market drops?
Instead of arguing moot points related to the Median Sales Price, can’t we figure out a better way to capture what is really happening to the market value of Reno real-estate?
Sully
Grateful, value like beauty is in the eyes of the beholder. Its highly unlikely you’ll find a consensus on value.
I grew up in an era when good and bad, right and wrong, excessive and moderation had a definite meaning. There was a gap between the words and it was very black and white.
Nowadays, it appears the gap has closed and there is a small gray area between the words. I frequently find myself having to ask ‘Is that good?’ when talking with a younger person. That is probably why I sometimes sound argumentative in my posts, it’s not personal, just curiosity.
From where I’m sitting, it looks like far too many decisions are being made from the gray area. Younger people want to start off with what their parents ended up with, completely disregarding the decades it took them (parents) to get there. Hence, a boatload of bad decisions are now coming back to haunt them.
I suppose every era has to learn from its own mistakes, as it appears no one is interested in reading history. In matters of principle stand like a rock, in matters of taste swim with the current. I think we have swum too far out and need to get back. Then the sense of value will be restored, along with some common sense.
smarten
Grateful, in addition to what Sully states, I don’t think you can make the blanket statement that “the value of Reno housing is going down and will continue to go down as long as there is 70% distressed sales and sufficient inventory. Period.” I don’t mean to sound like a broken record [because we’ve discussed this before] but there is no single Reno housing market. It all depends which strata of the market you’re interested in.
A lot of posters feel there’s tremendous “value” in a Smithridge condo selling for less than $30K. There has apparently been a bidding war [thus many purchasers see “value”] on many REO SFRs listed for less than $180K. On the other hand those Montreux McMansions listed for $2M or more probably don’t exhibit “value” in today’s marketplace.
It all just depends.
So does our definition of a market “bottom.” If median sales price has become irrelevant, then maybe we should ask Guy to stop tracking it. And what other measure [that Guy doesn’t already track] would you suggest, that is a more accurate barometer?
Once we all get on the same measuring stick page, I think we can all speak the same language. But until then, IMO it’s kind of like trying to define “value.”
Carney
I think what this blog needs is somebody to point out, for the 427th time, that the median sales price is not a 100% accurate indicator of conditions in all strata of the housing market.
Then, 5 minutes later, somebody else can post and point it out for the 428th time.
skeptical
Some on this market believe we have hit bottom. Others think we are still falling and have a ways to go. It’s kinda like Justice Brennan’s definition of obscenity, “I know it when I see it.”
It’s already mid-March. Where does the time go? By the end of Sept, there will be much additional clarity to this whole argument. I think by then we’ll have a better feel as to whether bottom is in the rearview mirror or still up ahead around the curve. That’s the trouble with bottoms, unless you’re really lucky, you only truly see them after the fact.
I’ve read some articles lately indicating bidding wars in SoCal and in LV. It’s hard to believe that SoCal, which is still very overpriced IMHO has seen the worst. LV, for its part, is worse off than Reno. For now, I just consider these media releases to be “advertising” for real estate agents. After all, bidding wars are anecdotal and not easily provable with stats.
That said, if those two markets firm up, perhaps it will be a “tell” for Reno?
DonC
GratfulD sayd “With unprecedented intervention….. the market is stabalized.”
Assuming that there has been “unprecedented” intervention, which there really hasn’t been, wouldn’t this signal the success of the policy? IOW if the point of the exercise was to stabilize the market, and this has been the result, then the policy has achieved its end. So let’s give the policy an “A” or an “A+”.
FWIW the data you cite, which is nice BTW, seems entirely consistent with what smarten has been saying. The low end has mostly washed out and the high end has held out and is only now starting to correct. This is a good thing. Typically higher end homes don’t move down in price but don’t move. The quick downward movement is atypical but actually healthier than the alternative of flat prices and no sales.
Moving forward, you’re mostly looking at short term indicators. You have some good points but you’re omitting the points which cut the other way, as, for example, the huge slug of cash Fannie and Freddie are releasing when buying all the defaulted loans. That money has to go somewhere.
Longer term you have housing prices which are below historical standards and a lot of household formation, including a lot of delayed household formation. This suggests more upside than downside.
Nelson
I travel to LV for business frequently. Yes, there are bidding wars going on. For houses at the low end of the market, almost all REOs. You can buy houses in LV now for well under $100K and while they are not primo properties, they are not dumps either. The median is LV is lower than it is in Reno. Over $300K in LV is dead. So, in may ways it is realtor hype. They put out word that bidding wars are erupting all over town. They never add that the bidding wars are all happening at the bottom end of the price spectrum. Houses over $300K in LV have a hard time attracting lookers, let alone bidding wars.
Wendell
2,336 NODs year to date.
Is this just irrelevant?
Does this suggest “more upside than downside” DonC?
What’s your viewpoint Smarten?
Thanks.
skeptical
DonC,
Household formation in an area with declining population and >20% real unemployment? Ok, if you say so.
Also, if $1.6 trillion deficits, the lowest real interest rates in the history of the nation, Fed purchasing of trillions of MBS; and programs (state and federal) preventing foreclosure for hundreds of thousands is not unprecedented, then you and I live on different planets.
The trouble with that kind of intervention is that it is not sustainable. It creates market distortions. And when it ends, the market will react, like it or not.
I try to keep an open mind, and stay alert to tells such as SoCal and others. I always want to consider the other side of whatever argument I am on. While I’m open to the possibility that some strata have hit bottom, it’s only with continued, massive intervention. Someday that intervention will end, and it’ll be interesting to see what happens next.
skeptical
Forgot to add, price reductions are up big\. We have 113 in the last 5 days, according to Mitch Argon’s site. That’s pretty high. Reductions usually hover at ~60 over the last 5 days.
Are these sellers just trying to get bids before the end of the tax credit? In any event, it sure isn’t a sign of bidding wars, although most of the reductions are in the sub-$300k strata.
MikeZ
[420] 1) “listed PRICE” data continues to fall 2) high end finally moving down in a hurry, 3) Median Sales Price data can be misleading, 4) PPSF can be misleading
Ok! You have 4 more reasons all warmed up and on deck, just in case the first 3 (expiring tax credit, tightened lending standards, feds stop buying mortgages) don’t pan out.
I’ll say this, 420, you sure do come prepared.
[420] Instead of arguing moot points related to the Median Sales Price, can’t we figure out a better way to capture what is really happening to the market value of Reno real-estate?
I agree that median sales price, DOM and PPSF – all of which show 6-9 mos of stability right now – are imperfect.
The only problem is … from your responses so far, it seems that “a better way” is just a euphemism for “a set of metrics that merely validate your preexisting opinions.”
skeptical
MikeZ,
I think the Case Shiller method is the best way to calculate the state of the market.
The methodology is that they look at properties and compare them to the last time each property was sold. So, if a house sold for $500k in 2006, and sold for $350k in 2010, then that house affects the index accordingly as a ~35% reduction over 4 years.
Pretty laborious yard stick, and Case Shiller focuses on the 20 biggest cities in the US. I would hope that most would agree that Las Vegas is likely the most correlated big city to Reno. The same bubblenomics were at work. Same state tax laws, same benefit from tourism, same distance from California, etc… Vegas dropped ~21% on Case Shiller for 2009. Hardly a stabilization.
My view is that the same house can be bought cheaper today than it cost last year. Further, it’ll be cheaper next year. This is the Case-Shiller methodology. Would anyone on this blog consider buying a Reno home for more than it sold for in 2009?
The trouble with PPSF and Median Sales measures is that when a McMansion in Montreux hits the market, it skews the stats. For example, if it sold for $1.5M and $300/sqft in 2006 and sells for $750k and $150/sqft today, the overall stats in Reno IMPROVE. Yet, we all know that it is more an example of a collapse in price than a stabilization. Case-Shiller on the other hand would correctly reflect a 50% depreciation over 4 years.
So, until we get Case-Shiller for Reno, we’ll have to rely upon more anecdotal data and less precise measures, like medians and PPSF. The high end collapse that is occurring now will continue to help improve those two data points, while in reality being the result of a collapsing market strata.
MikeZ
[skeptical] Further, it’ll be cheaper next year.
Let’s see how sure you are about that …
I have $100 (payable to the charity of your choice) that says the Feb 2011 median price – as reported here – will not be lower than the Feb 2010 median price.
Do you have $100 to set aside for my charity, should I somehow, against all possible odds, be right?
I’ll want to see an image of the canceled check or money order and I’ll provide the same, should I lose.
Let’s make this interesting!
smarten
skeptical says “if [a McMansion] sold for $1.5M and $300/sqft in 2006 and sells for $750k and $150/sqft today, the overall stats in Reno IMPROVE.” That’s true skeptical, but if it sells for $1.5M and $300/sqft in 2010, the overall stats in Reno by and large improve by the SAME amount! Thus in a vacuum, your example neither demonstrates overall market stabilization nor collapse.
John Newell
That would be a sucker bet, MikeZ. Even if Skeptical is right and comparable houses are cheaper next year than this year, you would still almost certainly “win” the bet because, as has been pointed out ad nauseam, even if prices continue to fall in the middle and upper markets, median sales price will continue to rise if the sales volume in the middle and upper markets increases.
Personally, I think we will continue to see a relatively large number of short sales and REO sales in the middle and upper markets until the end of 2012, which will result in lower prices in those sectors and stagnation on the low end. There were too many five-year interest only/NegAm/ARM voodoo loans taken out in 2005 to 2007 on $500k+ houses for me to believe we have seen the end of the storm.
billddrummer
Great bet.
DonC
skeptical – I think you’re being too influenced by media peddling the Kool Aid Narrative. Part of that narrative involves insisting, in light of actual facts, that the economy is being held up by massive government intervention.
Given the size of the economy, government intervention to date has been the proverbial sparrow’s burp in the middle of a typhoon. At best, the programs set up to stabilize prices by keeping people in their homes has been marginally effective. Realistically they’ve been ineffective. The recent move by Treasury to pay people to move rather than pay to reform their mortgages would seem to acknowledge this.
As for demographic trends, the only things I’ve seen show Reno growing about 50%, or about twice the national average, between 2008-2028. http://www.nsbdc.org/what/data_statistics/demographer/pubs/docs/NV_Projections_2008_Report.pdf These projections are generally pretty accurate though not necessarily perfect.
If you like the Case-Shiller approach, the FHA compiles statistics by comparing sales of the same property over time. You can look at the latest report — which includes Reno — for 20094Q here: http://www.fhfa.gov/webfiles/15454/finalHPI22510.pdf
The mistake you’re making is looking too much in the rear view mirror. The trick is to look not at what is currently the situation but what is likely the situation 2,5, or 10 years from now. Yes things have been down for the last few years, but this hardly means they’ll keep going down. Usually it’s the opposite. Had you looked in the rear view mirror in 2007 you would have concluded that housing would continuing appreciating at very high rates.
DonC
John Newell says “That would be a sucker bet, MikeZ”
Why do I think Mike understands that? LOL For exactly the reasons you state.
The “problem” is that traditionally the higher end hasn’t capitulated during downturns — the higher end owners have just waited it out. So even if we see more distress sales at lower prices we may have a large overhang of inventory that keeps the lid on prices longer than the next two years.
skeptical
John Newell expressed my response exactly. I guess you just didn’t get my point MikeZ.
MikeZ
I get your point skeptical, it’s your math – and the reasoning based on that math – that I don’t get:
These are median sale prices, not averages, so when that $500K house sells, just one house $1 below the median will cancel any movement in the median price.
MikeZ
Sales growth in the markets above the median price large enough to offset sales growth in the markets below and move the median upward probably indicates we’re off the bottom and have begun a recovery.
Wendell
I note that neither DonC nor Smarten responded to my question about 2,336 NODs so far this year and is that just an irrelevancy in the market going forward.
It was not a hypothetical question.
Orwellian
So in other words, MikeZ, declining prices in the mid to upper end of the market resulting in more sales in those strata will indicate the market is off the bottom.
Declining prices signals the market is at bottom!!
But, but,….if prices are declining….how can we be at the bottom?
This is the problem with only looking at sales volume as the measure to determine if the bottom is at hand.
Martin
How frickin hard is it to grasp that prices at the low end of the market have probably bottomed and prices at the top end have a long way still to drop?
Just because the median may be leveling does not mean prices for houses listed at 3 or 4 or 5 or 6 times median have leveled.
Come on.
Riley
The median has leveled at around $175K.
Therefore, the prices of houses listed at $600K cannot drop, because the median has leveled.
Man, I love this blog.
Gary
Skeptical, in the absence of a localized Case-Shiller index for Reno, Zillow probably has the most consistent pricing data set. I don’t know how successful they are at it, but from my own experience, I know they make an effort to disallow sales that may not represent the true market. I sold my house a couple of years ago priced below the market in order to escape what I thought would be continuing steep declines. Zillow temporarily disallowed my sale until they could determine that there weren’t extenuating circumstances, such as sale to a closer than arms-length party, to explain the below-market price. I think it took about a month or so before they stopped footnoting the sale price, and presumably started including it in their overall price calculations.
But yes, Skeptical, Case-Shiller is definitely king of its domain. And following the “Reno is special” argument, I think we deserve our own C-S index 😉
smarten
Martin said, “how frickin hard is it to grasp that prices at the low end of the market have probably bottomed and prices at the top end have a long way still to drop?” Exactly!
And how hard is it to grasp that if prices at the low end of the market have probably bottomed; prices at the mid/high end of the market are falling [and still have a long ways to fall]; as a result, unit sales in the mid/high end of the market are likely to increase; and as a result, the median sales price will likely increase?
Riley said, “the prices of houses listed at $600K cannot drop, because the median has leveled.” Exactly NOT!
Let’s say that $600K house you’re referring to drops in price to/and actually sells for $177K; prior to that $177K sale, the median remains at $175K; and, everything else remains the same; the median sales price will increase even though prices at the higher end have dropped.
That’s why I keep harping on the fact that there is no one “market,” and we have to define our terms when we talk about what constitutes a “bottom.” If the under $170K SFR market has “bottomed;” the $600K SFR market has not; you’re a buyer in the under $170K market; the fact of the matter is that insofar as you a buyer are concerned, the SFR market has bottomed! What then is accomplished by you waiting another 2-3 years for the “market” to “bottom” because it still has a long way to go [either as defined by the Case-Shiller index, or any other yardstick]?
I didn’t mean to intentionally ignore Wendell’s “question about 2,336 NODs so far this year.” My response is, your point? Again, if you’re a buyer of a $170K SFR; that segment of the market has “bottomed;” unit sales are increasing; and so is the median sales price NOTWITHSTANDING “2,336 NODs [how many actual trustee’s sales?] so far this year;” So what? Are you telling me that the number of unit sales are going to drop because of 2,336 NODs? Are you telling me that the median sales price is going to drop because of 2,336 NODs? Are you telling me that the absorption rate is going to increase because of 2,336 NODs? And assuming the data reveals the answers are no, no and no, so what?
Sully
smarten, I tend to agree with the direction you’re going. The under 350K is probably the comfort zone for 80% of the residents here. Over 350K would be doctors, dentists, lawyers, etc. Also, the Calif sellers that are now sitting on a boatload of cash and want to cash buy something before Obama and Pelosi spend it for them. Then there’s the over 1 million, which will probably sit for a long time unless a whole lot of people suddenly get lucky in the casinos.
Reno Ignoramus
Smarten, I think Riley was attempting a bit of sarcasm when he said that because the median has leveled off that means $600K houses cannot drop in value. At least I think he was. I think he was taking a poke at those who argue that the “market has bottomed” with the implication that prices in all strata of the market have therefore also bottomed.
I also appreciate Carney’s post. So, Carney, I guess that since your post yesterday, somebody has now pointed out, for the 429th time, that a stabilizing median is not an accurate indicator that prices in every strata of the market are also stabilized.
Who now wants to point that out for the 430th time?
DonC
Wendell — I think the answer is “so what”. Yes there will be foreclosures. Everybody knows that. The issue is: are there going to be so many foreclosures that the market can’t absorb them.
You have to look at both supply and demand. And when you look at supply, you have to look at all sources of supply. How many people in Reno, who would put their houses on the market if prices were better, aren’t going to put their houses on the market? How many new homes are the new home builders putting on the market next year?
Foreclosures. New homes. People who want to sell their house and move to Florida. It’s just supply. At current prices this supply is being absorbed. To believe that prices will fall significantly further you have to believe that demand will also fall off. That could happen but it seems more likely that we’ll see the opposite as the economy recovers and the overhanging inventory is absorbed. In either case demand will be animated by animal spirits that neither of us can predict.
Reno Ignoramus
Sully, according to Guy’s stats, only about 15% of all sales are for more than $300K. I think the “comfort zone” for most buyers today is under $300K. At least it is for about 85% of them.
Wendell
Thanks DonC and Smarten for your response.
To you, the foreclosure numbers are irrelevant. So I guess for you the so-called “shadow inventory” is also irrelevant.
I can understand how one might have a more optimistic picture of the market moving forward if the foreclosure numbers are deemed to be meaningless and of no significance.
Thanks again.
Sully
RI, you’re probably right. I used 350K because thats the under number I see certain houses selling for, in the southwest, that were going for 500K two years ago. It was just a guess, but even so 350K for 80% isn’t really out of line by that much.
Sully
Actually, I meant to say listed for 500K not selling for two years ago.
Broten
I agree that the “comfort zone” for most buyers today is under $300K. And it is absolutely clear to me that with each passing month $300K in Reno buys a nicer and nicer house.
You all can talk over and over about the median and is it falling or not, and is the bottom here or not. I can tell you that I have been looking at the $300K price point for the last several months and ALL I see is that with each month my $300K can buy a nicer house. And I do not see that in any way changing as of today.
The median may have stabilized over the past 9 months or so. But compare today what $300K can buy to what it could have bought 9 months ago, and there is a significant difference. I am SOO glad I did not buy 9 months ago when some were saying the “bottom is in.”
And I don’t need any lectures about missing the bottom. When the bottom finally arrives this market will turn upward with all the momentum of an earthworm.
smarten
So now Wendell, with your permission, let me take a bit of a leap.
We’ll assume that the under $170K segment of the market has bottomed; the over $300K segment is still by-and-large overpriced; sales volume is increasing; and so is the median sales price [as well as PPSF].
Now let’s assume that the price segment of the market you’re interested in purchasing is $350K-$400K. It’s not that you want to spend this much money, but you’re prepared to do so for the right SFR which exhibits [at least to you] sufficient “value.”
But you’re concerned because so many on this blog have been pounding home the point that the market has a long ways to go DOWN; prices [in a vacuum] haven’t dropped enough; 85% of sales are “distress;” there are in essence no “move up” sellers; there’s this unexplained shadow inventory of more than 10K Reno/Sparks SFRs; and, NODs continue to plod along at their near historic highs. Does all of this mean you continue to sit on the sideline until “the economy” [or employment] improves? Does it mean that if you don’t, you’re a fool [or stupid] and get ready to be underwater come next year?
My answer is of course not! Just because a particular Reno/Sparks property is priced above $350K doesn’t mean it’s overpriced; it’s destined to drop another 35%-50% in value; and, you’re stupid to be considering a purchase. As proof, just look at the number of multiple bids being obtained on REOs above $175K? Listen to our friend skeptical: if you can drop the bejesus out of the seller’s asking price; it has already dropped 50% in value from its bubble highs; and, it evidences value to you; it’s O.K. if you choose to become a buyer.
Sane Economist
DonC,
One concept you seem to have difficulty with in your demand /supply equation above, is that short sales and foreclosures take people OUT of house buying for at least 5 years. They don’t just move to Florida and buy something else. Combine that 19 million empty houses of which 2 million are brand spanking new, and it’s pretty clear that supply is way ahead of demand with demand pretty much dead in the water and looking worse every day.
FUBAR
I love this blog.
DonC
Sane Economist — If we take your hypothetical then the “sellers” still live in Reno and they still need housing. You’re saying they have to rent because they can’t buy. Fine. Rental demand goes up, rents go up, the rent/buy ratio changes, buying becomes more attractive, and some renters turn into buyers.
IOW you can take a housing unit and move it from one category to another but this doesn’t magically create or destroy the unit. And you can turn a household from renter into a buyer or vice versa, but this doesn’t mean that the household appears or disappears. At the end of the day you have the same number of units and households as you did when you started.
Right now the rent/buy ratio is favorable to buying, which suggests to me that you have a floor under prices.
skeptical
Fact: Supply is substantial and rising as evidenced by massive shadow inventory (10k+) and new NODs since the new year (>2300).
Fact: Increased supply with constant or declining demand results in decreasing prices.
Fact: Population is declining in Reno.
Fact: 85% of all sales in the Reno market today results in no move-up buyer. In other words, when a bank sells a REO, there’s no displaced family needing a new/better home — they already left months ago.
I’m not sure why some of the bulls on this blog insist on providing their opinions and theories about how this market might be in a perfect place to buy without any fundamental basis to those theories. What is the angle? How do they benefit by insisting that all the well documented facts above don’t matter. That’s the only think I don’t get.
MikeZ
[Orwellian] “So in other words, MikeZ, declining prices in the mid to upper end of the market resulting in more sales in those strata will indicate the market is off the bottom.”
No.
You need more than just more sales in the upper end to move the median. You need enough new sales above the median to offset all the new sales below the median.
The theory of a rising median without a coincident general market recovery requires sales volume growth localized in the area above the median.
You have to believe that the low end dried up and the high end came alive to write off a rising median as a false indicator.
Now, that could happen, it’s not impossible, and I did quality recovery with “probably” but I’ve never seen it in 30 years of following RE and any such imbalance would have to be ephemeral.
MikeZ
[skeptical] What is the angle? How do they benefit by insisting that all the well documented facts above don’t matter. That’s the only thing I don’t get.
?? You’ve done this twice now: cast apersions on those who disagree with you, implying some hidden, ulterior profit motive.
Stop it, please.
MikeZ
[To no one in particular]
Oh, and splitting the market into price bands that confirm your theories, whatever they are: bull, bear or bottom, is cherry-picking the data.
smarten
Skeptical, just so we’re clear.
I don’t think any of us who aren’t doom and gloomers are necessarily “bullish” on the immediate future of the Reno/Sparks residential real estate market [I’m sure not]. All I’ve said is that measured the way many measure the market, it has pretty much stabilized over the last ten months or so. But stabilization doesn’t equate to being bullish. So please don’t mischaracterize our statements.