The national average for homes with negative equity is 24 percent. In Reno-Sparks, that average is 56.3 percent. Yes, more than half the homes in Reno-Sparks have negative equity. And this number is expected to increase.
See the RGJ story here: Percentage of underwater homes in Reno-Sparks continues to exceed national average.
billddrummer
Jack,
Under normal circumstances I would thank you for correcting my math.
But not this time.
If the most important thing is whether the math is right, rather than the idea, then your contribution is less than useful.
MikeZ
[Sully] Of course, when it does happen, they will complain that you didn’t say “it was going to be this bad!”
When WHAT happens, Sully? Put your crystal ball to use and draw your line in the sand: tell us all what will happen in the next 12-24 mos.
Sully
MikeZ; okay. I’ve already said this but here it goes again.
The stock market will correct, initially by about 50% trend back up for about six months then continue downwards until Oct/2012. In the meantime, the wealth effect will kick in, people will no longer have faith in the idiots running the money scam and simply quit spending. House sales will drop, new housing starts will come to a halt, etc.
If you go back to your basic economic textbook and re-read the part about supply and demand you might get an idea.
During recessions the govt (normally) prints more money and creates more jobs, by building things (one way) and simulating the economy in other ways.
This time around they just printed a few boat loads of money and bailed out banks, which in turn spent it all on buying stocks of their competitors and treasury notes. They used the spread to make money, hence Goldmans near record recent profits.
This is very basic (to keep it short); but this mess has a couple more years to run before it play out.
In the meantime just watch the stock market. It should start churning or running somewhat flat until end Sept. By October it should start looking like a slide. So you only have about 5 months to wait to see if this plays out.
However, this does not necessarily mean the median price of a house will drop off the cliff. It could actually go up, simply because all those $1 million houses will be selling for $500K!
smarten
And to augment what Sully has stated, none of us has trumpeted that residential real estate has no where to go but up from here. All we’ve said is that measured by unit sales and median sales price, the Reno/Sparks market began to stabilize [by reaching a bottom] about a year ago. Where it goes from here is anyone’s [and as we see, everyone’s guess].
And FWIW [and it may not be worth much], on May 17 our friend Don Kanare [www.insideincline.com] reported that, “it was another big week for the Incline Village [“IV”] real estate market with 12 properties going into escrow. 83 properties have closed escrow in 2010 and there are 52 places currently in escrow. 16 of the properties in escrow are short sales, so figuring only 25% of those will close in the next 45 days, it looks like by the end of the 2nd quarter about 40 more homes and condos will close escrow. That would bring the total sales for the first half of 2010 to around 123 properties compared with 66 in 2009.” Given I don’t think we can point to the first time homebuyers’ credit as being the cause for this upsurge in Y-O-Y IV unit sales, feel free to come up with your own explanations.
billddrummer
To smarten,
Seems to me based on what you posted that IV is healing.
With a doubling of sales volume, that’s truly encouraging.
Now, I would hope that lot sales are showing the same sort of rebound. But alas, I fear not.
A lot I’m familiar with has lost 40% of its value over the past 18 months. Yet the realtor representing the owner insists that the lot is ‘worth’ fully $135,000 more than the appraised value.
Either the appraiser is wrong (unlikely) or the realtor is delusional (much more likely).
But it is good to see more homes selling.
sleezy
sully predicting a 50% correction then a 6 month rally?
try blowing smoke up someone else’s ass.. you don’t have a freakin CLUE!
BanteringBear
Smarten posted:
“And to augment what Sully has stated, none of us has trumpeted that residential real estate has no where to go but up from here.”
Excuse me, Mr. Smarten, but isn’t that exactly what you bottom callers are saying? A “bottom” indicates that a trough has been reached and there will be no more downside risk, only upside potential. (BTW, since the bottom calls began in earnest last year prices have still eroded a bit, showing that the calls were, indeed, premature).
PriceItRight
Median sale price for May could take a significant dip making posters on this blog to wonder if relative stability of last one year has given way to further drop in prices. But the trend (if it appears on Guy’s post in two weeks from now) could alternatively be explained by looking more closely at the distribution of sold houses in various zip code areas.
The costliest area in town, zip 89511, hasn’t seen any SFR activity in last one month (Apr 21 – May 20) as per public data available on Washoe County Assessor’s website. I don’t know if the Assessor’s office is just being late in posting the transactions. But if not, then it is very strange and can have a significant impact on the median sold price for current month. Guy can probably give precise numbers, but I think zip 89511 typically comprises of about 10% of SFR sales and the median price for the area is about twice of the city.
Sully
sleezy, you can wait the 5 months just like MikeZ.
BanteringBear
Sleezy = derrick = denial = diablo = blah, blah, blah… ignore the troll with 30 different monikers.
Sane Economist
Given that employment and low delinquency rates are the 2 most important driver’s of house prices, I feel to see how anybody can call for a bottom in Reno. This graph says it all. http://calculatedriskimages.blogspot.com/2010/05/states-unemployment-vs-mortgage.html
I
billddrummer
To BB,
There’s medication available for schizophrenia.
Perhaps we have a new patient.
smarten
Mr. BB states, “Excuse me, Mr. Smarten, but isn’t that exactly what you bottom callers are saying? A ‘bottom’ indicates that a trough has been reached and there will be no more downside risk, only upside potential.”
First of all, thanks for showing me the [Mr.] respect I’ve extended to you for sometime. Second of all, you’re absolutely WRONG again. A bottom [and I’m using the term with respect to Guy’s monthly data posts which primarily track unit sales, median sales price and to a lesser extent, price/sq. foot (and do not list median sales prices for different price bands)] indicates nothing more than the downside slide has stopped sliding. I have never said that this bottom signaled the end to downside risk. In fact if you go back and read my comments, you will see that I have always stated that this could be a “false” or “double” [or triple or whatever] bottom meaning we could very well go lower from here. But to deny that we’ve reached a short term “bottom,” is disingenuous. IMO, and again you know this, for the last year we have been skating along the bottom and [but for one month which we now know was an aberration] roughly within a median sales price range of $170K-$180K. In fact my vote in Guy’s poll was that this skate would continue through the end of the year.
We could very well continue this way for some period of time. Or, we could see a drop in median sales prices to another “bottom.” Or, I guess we could break out of this $170K-$180K median sales price band we’re in and actually see some improvement. But by no means have I ever stated nor suggested that it’s only clear upwards sailing from here.
BTW, if you’re chastizing some of us who were calling a “bottom” last year because we were “premature,” what do you call yourself given you were calling a big, big market correction as early as 2006, if not before? Think about it for a moment. If we weren’t “premature,” then it should have been obvious to everyone, don’t you think?
BanteringBear
Don’t be a hammerhead, Smarten.
If the median price fell another 20% from here, are you arguing that your bottom call was still correct because there was a brief lull? If you are, you’re delusional. You seem to be saying that calling a bottom which proves to be a “false bottom” (I don’t even believe in the term) which actually is NOT a bottom, hence “false”, is an accurate bottom call. I think you’d make a good politician. I could see you standing in front of a microphone:
“I was actually FOR the legislation, before I was against it, and I am for the legislation again so the fact that I am for the legislation proves I was never against it because I was for it before I was against it and I am against anyone who was for the legislation when I was against it because they are not for the legislation as I am for it, therefore they are against anything I am for which means I am right and they are wrong.”
smarten
Well there you go again Mr. BB.
I’m sure you don’t recognize it, but you’ve already admitted we’ve reached a bottom, at least of sorts. Why else would you say we bottom callers were “premature” [as opposed to wrong]?
According to you, when will we have reached a “bottom?” How many months does the median sales price have to stay above $170K before you admit it’s a “bottom?” Or is your song going to be we’re all premature because the real bottom [which might be 10 years from now] is still ahead?
The market is always changing. There are highs and lows. So if the Reno/Sparks median sales price stays above $170K for let’s say 2-3 years; and then turns around and drops 20% below $170K; will I say we reached a bottom about a year ago? You bet. Just like I can tell you that in 2008 we reached a “top” even though we really won’t reach an empirical housing top within our lifetimes [because 60 or 100 or 200 years from now, housing prices will be higher (just compare them to housing prices 100 years ago)].
BTW, you didn’t answer my question. What do you call yourself given your market call was several years premature?
BanteringBear
Smarten posted:
“BTW, if you’re chastizing some of us who were calling a “bottom” last year because we were “premature,” what do you call yourself given you were calling a big, big market correction as early as 2006, if not before? Think about it for a moment. If we weren’t “premature,” then it should have been obvious to everyone, don’t you think?”
Big difference, Smarten. When I was calling for the complete collapse in real estate prices, I had said it would happen over the course of years, and time has proven me right. I also said that we would see temporary improvements from time to time in the median all along the way to the bottom, but it would be years in the future before everything shook out.
While your bottom calling was premature, if prices do end up stabilizing and improving from this point on out, I will certainly give you credit for being in the ballpark. But, if prices fall down to the $135k range, or worse, would you consider your bottom call accurate? I certainly wouldn’t.
SmartMoney
Anyone claiming that we have “bottomed” during the past six months is clearly wrong. We can see that by looking at the median price here http://www.housingtracker.net/asking-prices/reno-nevada/ It keeps going down down down. We have lost 11% in just the past six months!
MikeZ
Thank you, Sully, for a direct answer.
I disagree with almost everything you expect to happen but I also appreciate a direct answer in a forum where so few people will actually commit to anything specific.
MikeZ
[Bear] Excuse me, Mr. Smarten, but isn’t that exactly what you bottom callers are saying?
No, Bear. There’s not just up, there’s also sideways. Markets can move sideways / remain flat for years.
smarten
Mr. BB. Are you predicting that the SFR median sales price as Guy reports it each month will fall to $135K? And if so, when?
And you didn’t answer my question: how many months does the Reno/Sparks SFR median have to remain stable/improve before you would admit it has “bottomed?”
MikeZ
[Sane Economist?] Given that employment and low delinquency rates are the 2 most important driver’s (sic) of house prices…”
Two most important? Oh, that’s simply ridiculous. Demonstrably ridiculous. You’re making this up as you go along!
Supply, demand and availablity of qualified buyers are all far more significant.
BanteringBear
Smarten-
I’m not “predicting” anything. I do believe there is a strong possibility that the median will fall that low. As far as “when”- there’s absolutely no way to tell. I fully expect the government to start sweetening the pot should prices start cratering, so all bets are off as to how long this will be drawn out, and at what cost.
The main thing working against Reno at this time is a casino and construction based economy in an absolute tailspin with no end in sight. Low paying jobs afford cheap houses. I don’t believe speculators and wealthy transplants can carry a market as large as the Reno/Sparks area long term. Factor in a tremendous amount of overbuilding, which continues, and a nearly endless supply of foreclosures in the pipeline and I just don’t see how prices can stabilize until the inventory is cleared by end users, not speculators looking to flip houses.
BanteringBear
Funny thing, Smarten, you’re not answering my questions, but I’m answering yours. This is a common theme with you. Demand answers from others, but answer to nobody. It’s a very rude habit, BTW.
smarten
Mr. BB –
As if I had to comment on the obvious, you have no standing to accuse anyone of being rude.
And glad to hear you’ve removed yourself from the prediction business. I’ll have to remember that one.
lurker
Sane,
Do what I do and ignore MikeZ. You are right, and he is wrong. MikeZ shouldn’t correct someone unless he knows he’s right. My biggest pet peeve is idiots who correct others that are right. Employment is the primary predictor of the general direction of the real estate market. Period.
MikeZ, you are a buffoon.
MikeZ
“Bear’s not predicting ANYTHING!”
See, Sully, this is answer avoidance, by a real pro.
He’ll disagree with everyone else, and tell them how stupid they are, but he’ll never draw his own line in the sand.
BanteringBear
Boy, you’re really on my jock lately, MikeZ? What am I avoiding, huh cowboy? I’ve never shied away from anyone around here, and I’m certainly not going to back away from the biggest housing cheerleader this blog has seen since it’s inception. What’s your angle, big guy?
BanteringBear
Rep. Barney Frank was in the news this week, lying through his teeth saying that he wasn’t always in favor of shoehorning people into houses they could not afford, but rather preferred affordable rentals as a better choice. Unfortunately, he didn’t count on the fact that there was video footage of him saying the exact opposite during the halcyon days of the bubble, going so far as to boldly proclaim the bubble wouldn’t burst.
What ol’ mushmouth was addressing before he promptly inserted his loafer into his yackhole, was the problems with Fannie and Freddie, their insolvency, and the role of the government in subsidizing homeownership.
This all points to a potentially drastic reduction in purchase money for first time buyers as well as people who have no business buying houses since we’re likely to start seeing a push for more skin in the game, perhaps even a return to 20% down, preventing people from levering up 96 1/2% on a house purchase. This spells bad news for home prices.
MikeZ
Sorry, Bear, but sometimes the truth hurts. I liked you better before you went all OCD on smarten.
Back then you had credibility, and facts on your side, now, not so much. Now it’s just personal attacks.
Got anything in your sack-o’tricks besides name-calling, big boy?
Move to Reno?
We are not at the bottom yet. Yeah, the lowest price houses will probably not go down very much, if at all but there is still room at the top for more price reductions. Hence, the median price might very well go up as the market continues sinking. Unemployment is the key element here. The bad economy is forcing people to use less housing by having more people living under one roof. Once unemployment goes down, more people will be looking for housing.
smarten
M2R –
We’re supposedly talking about a residential REAL ESTATE market “bottom.” You say we’re not there yet. Yet you admit the lowest price houses are probably there and the median sales price may very well go up as the market continues to sink. What then exactly, to you, represents a REAL ESTATE market bottom?
You appear to be saying that once more people begin looking for housing, because of higher employment, that will be the key. But if you look at Guy’s monthly unit sales numbers, they’re up markedly YOY. Now this may not be because of increased employment, but demand is up. So would not that, according to you, be the key?
Sully
smarten, do you remember the discussion regarding the Mexican standoff a couple years ago?
I think we are still in that scenario. When prices were sky high, anyone with half a brain decided to wait a bit longer. As prices declined, many people sitting on the sidelines hit their own price limits and bought. There will always be those waiting for that unrealistic low price, regardless.
There are compelling reasons to wait, un and underemployment, foreclosures, etc. But then again, there are those that watch it happen, those that make it happen and those that wonder what happened!
Deals are out there, they just have to be found. There is nothing wrong with taking BB’s side, nor is there by buying now; providing the transaction pencils out and you can sleep well at night.
Predicting an exact top or bottom is like estimating the time it takes to get a job done. You may not know how long it should take, but sure can tell when it’s taking too long.
Move to Reno?
smarten, it’s like Sully said, it’s a personal decision making process to when to buy. To me, a real estate bottom is when the entire market turns from a buyer’s market to a seller’s market and I hope to buy before that happens. But when that happens everybody will know it. The bottom will then be history and we can all look back it and together shout with one voice “That was the bottom!” There is just too much uncertainty regarding the economy, unemployment, voluntary and involuntary defaults, the bank’s shadow inventory, vacant houses, etc to say that we are at the absolute bottom right now.
Plenty of investors and wannnabe flippers out there looking for the deal.
smarten
M2R, so it’s like pornography; I’ll know it when I see it? And if you’re waiting for “the ENTIRE market [to] turn…from a buyer’s…to a seller’s market” then not only will you surely miss the bottom; and not only will you very likely miss opportunities in the particular strata of the market you’re interested in [assuming you’re interested]; but based upon this definition, I agree with you that “we’re not at a bottom yet.”
But my definition [and I believe Guy’s] differs from yours.
Sully, I do remember our discussions re: “Mexican standoff.” But my recollection is that was when NOTHING was selling. Delusionally priced sellers were unwilling to lower their prices and bargain hunter buyers were unwilling to pay more anything more than a killer deal. With all due respect, I do not see that scenerio today [especially given the marked increase in unit sales].
Notwithstanding, I agree with your observation that “there will always be those waiting for that unrealistic low price” and as a consequence, will never find anything.
Move to Reno?
Wait a second, smarten, I didn’t say that I was waiting for the ENTIRE residential real estate market to turn into a seller’s market before I buy. I plan on buying sometime before that happens, if the Lord is willing and the creek don’t rise.
Anyway, all this talk about a seller’s market returning to the Reno area is pretty exciting stuff. I better go take a beta-blocker.
I heard that in Japan they are still waiting for the seller’s market to return. Of course, their country is not being over run with millions and millions of illegal aliens.
Sully
Admittedly I’m burning the candle at both ends. Since I purchased a year ago, I’m locked into the purchase price and (in hindsight) have no regrets. However, even though this purchase met or exceeded my criteria in all areas except a view I’m still scanning the listings for that view. For this potential purchase I am thinking like BB and can’t reconcile the current offerings for houses with views. Hence, my constant disagreement with Don C that the Reno market is 30% undervalued. Could also be that I’m becoming too much of a local and resent some jackass in NYC telling me what I should be happy paying. 🙂
Move to Reno?
How much is the view worth to you?
Sully
Not the 200K I seem to be seeing!
smarten
Where did you purchase a year ago that doesn’t have a view Sully? If it’s Silicon Valley [I can’t imagine a view being worth $200K in Reno/Sparks], have I got a property for you [send me a PM and we can talk about it].
And if you don’t mind sharing, why did you purchase what you did a year ago given a view was/is so important?
Sully
I think I said back then. It was for necessity. I sorely needed more space and wanted to get away from the airport landing pattern. The purchase was here, a foreclosure, nice area. Like I said it met all other criteria, except for the view.
The view houses I have seen are IMO overpriced. Other factors also come into play versus my criteria list.
This particular purchase also comes with a very easy to rent basis, in case I do find that view house and don’t feel like selling right now. In other words, to break even on taxes,fees etc. I don’t need to try and get above average rent and have a nice cushion for under average rent available to me. One other factor, my wife allows even less leeway for views than I do.
The view therefore, isn’t important – but than again wanting an SL-55 AMG isn’t important either. Doesn’t mean I wont buy one.
BanteringBear
Funny, MikeZ, but I can’t remember even one useful bit of information you’ve ever contributed to this blog over your four plus years of limited posts. It’s been nothing but little shots from the peanut gallery at Derrick and others until recently when you started screaming “THE BOTTOM IS IN, THE BOTTOM IS IN, THE BOTTOM IS IN!!”, then subsequently attacking anyone who disagrees with you. Credibility? You have none. You’re just another in a long list of my jealous haters. Join the club, cowboy, but you’re awful late on the bandwagon.
smarten
M2R said, “Wait a second, smarten, I didn’t say that I was waiting for the ENTIRE residential real estate market to turn into a seller’s market before I buy. I plan on buying sometime before that happens.”
Don’t mean to be picky M2R, but your exact statement WAS: “To me, a real estate bottom is when the entire market turns from a buyer’s market to a seller’s market.”
I guess you didn’t mean what you said and I can accept that. But if you plan on buying before the entire market turns, when will that be and how will you know that you’re there?
Move to Reno?
Where did I say that I would only buy at the absolute bottom? I don’t think that I did so I did mean what I wrote.
To answer your question, it all depends when I find something that matches my requirements of sq ft, lot size, view, room lay out, etc. I did make an offer last December on a house but somebody offerred $15k more. I’m definitely not getting into any bidding contest.
DownButNotOut
Lurker – ‘Employment is the primary predictor of the general direction of the real estate market. Period.’
If it’s the primary predictor,what your saying is the rising cost of housing during the bubble was caused by low unemployment? That argument doesn’t hold water. If what your saying is until the employment percentage lowers, we’ll continue to have a flat or declining RE values, that makes sense. But as far as being the primary predictor of RE direction, there are numerous reasons besides employment that enter into the equation. It’s further illustrated by the fact the housing crash wasn’t caused by unemployment, unemployment was created by the crash.
skeptical
The bottom callers continue to state that prices have been stable for over a year, which is the definition of a bottom.
Well, the low water mark on the median was $170k in JANUARY 2010. That wasn’t a year ago. Data since then has been heavily skewed due to the expiring tax credit. How can anyone state with certainty that the bottom has been seen?
Non-traditional headwinds, as enumerated by M2R and others (economic uncertainty, unemployment, voluntary and involuntary defaults, shadow inventory, supply, etc…) lie in the windscreen, not in the rearview mirror.
Any prospective homebuyers should really do the due diligence for themselves and any prospective property, and keep all of the above in mind.
What I don’t understand is the sarcasm, absolute certitude, and arrogance that has been displayed by the bottom callers. I don’t know how this whole thing will come out in the wash, but I’d like every bottom caller to remember their remarks come July and August of this year and beyond. After some of this historic federal intervention has had a bit of a chance to wear off. Pride goes before the fall….
MikeZ
96 comments! Is this a new record for RRB?
MikeZ
[Sully] “…I am thinking like BB … Could also be that I’m becoming too much of a local and resent some jackass in NYC telling me what I should be happy paying.”
So, instead, you listen to a jackass from Washington State telling you what you should be paying.
Can you appreciate the irony?!
Sully
No, can you?
smarten
Skeptical said, “What I don’t understand is the sarcasm, absolute certitude, and arrogance that has been displayed by the bottom callers.” Honestly Skeptical, I don’t know what your talking about. Sarcasim? Arrogance? There’s only one poster on this blog I’m aware of who exhibits these attributes, and I don’t think he’s a bottom caller.
And please let’s understand…There may very well be a difference between calling a SFR market bottom without a clear definition of what that term actually means [certainly as defined by M2R and I suspect you too], and calling a bottom based upon monthly unit sales and median sales price. And FWIW, I see no substantial difference [at least insofar as this subject is concerned] between a median sales price of $170K versus $172K.
Move to Reno?
What? You only use two metrics to call a bottom?
Why not include “sales to list price ratios” and “days on market”?