The RGJ kicked off their Reno 2020 series of stories today, with the headline of this morning’s print edition reading "Is Reno on track to be Detroit of the West?". Though the article won’t be online until Tuesday, the report the RGJ commissioned from the Center for Regional Studies is – you can read it all here. It is sobering.
This photo essay on the Ruins of Detroit (thanks, Andrea, I’ve been saving it) is really quite beautiful, though also quite depressing. One of my great interests is Industrial Archeology, and Detroit is becoming one big dig. Hope Reno can avoid this fate.
Kalifornian
just as I was to re-activate my interest in Reno as investment opportunity… what a depressing article
Kalifornian
Over past few weeks, I was shopping for investment property here in the Bay Area. Basically, something in the range of $300K, with HOA fee $300-400/mo will get me a condo/townhouse in a good school district that can be rented for $1600/mo, if I’m lucky – then for $1800 or even $1900/mo.
HOA fee and potential assessments (all buildings are obviously in need of some repairs) scare me away.
Let’s see:
$1200 – servicing debt
$400 HOA
$300 prop tax
even if renting in the high-end, it barely breaks even, and I did not count smaller repairs, and vacant time changing tenants
Now, if I was to buy a SFR in New NW (northgate) for $180K and rent it for $1200/mo:
$700 servicing debt
$200 prop tax
$30 sewer
$70 insurance
also not a cash-cow, but at least some flow…
what do you think of this math? still too naive?
Reno Ignoramus
I find it interesting that there is nothing in this report that has not been observed here on the RRB over the years.
That Reno’s continued reliance on gaming is suicidal has been commented on here ad nauseum.
That Reno has an uneducated workforce that is unattractive to desireable employers has been commented on here ad nauseum.
That Nevada has an unsustainable tax structure has been commented on here ad nauseum.
That most jobs in Reno are low wage has been commented on here ad nauseum.
This is a fine report, but it contains nothing new to long time readers of the RRB. It does a have a lot of nice charts and graphs though, which validate its conclusions and also validate what many posters have been saying here for the last 4 years.
bob_c
Detroit has a declining population….reno has a growing population. This phenomena
will not occur into a growing popualtion. For decades its been common knowledge that
reno can’t survive on gaming alone, why has the population not taken a hit?
MikeZ
So, to summarize: “The University of Nevada, Reno, facing cuts in state support, has concluded that unless we spend much more on education, the entire state risks an economic death spiral.”
The points about economic diversty are sound and I agree. The rest of the report is conveniently self-serving and, possibly, propagandized.
Drive by poster
On a slight tangent – I’ve been monitoring the local ads and craigslist for rentals lately in Reno. Do people think that describing the rental as an “executive” rental somehow means you get to charge more? I’m not entirely sure what an “executive” rental is, but I do know that if you share a wall with someone else (e.g. duplex or god forbid a condo conversion), it ain’t “executive.” And, I’m fairly certain that Double Diamond and Damonte Ranch have few and far between truly executive rentals.
Kalifornian
I’d assume 4 bdrm SFR in Somersett, with good views (!) will be “executive” rental.
GrandWazoo
“The points about economic diversty are sound and I agree…”
OK MikeZ, given you agree that economic diversity is important to Northern Nevada, but investing in education is not, how exactly do we get economic diversity in Reno? A bunch of under educated Bubbas sitting on their front porch, cranking down a case of beer and scratching their collective asses, hoping that creative lightning strikes?
I don’t think that is going to do it. Prove me wrong.
Sully
A bunch of under educated Bubbas sitting on their front porch, cranking down a case of beer and scratching their collective asses, hoping that creative lightning strikes?
Apparently that wont work, as its been tried for now for several decades. Just spending more on education will not solve any problems, probably just create more. It takes community participation to build a diversified community.
bob_c
Detroit lost a major middle income industry…reno is losing an industry
that thrives on near poverty.
Kalifornian
all that talk about uneducated workforce in Reno…
Like it or not, but for a long time by now all the workforce in the Bay Area is arriving in planes, ships, and trucks — from India, China, and Mexico.
what prevents that workforce to spill into Reno? I would guess it would be enough for Cisco/Oracle/VMware, etc to open 1 big office in an abandoned casino, and the flow would start.
diane cohn
And then there’s this: Is A 90 Day “Mortgage Meltdown” Foreclosure Moratorium Imminent As The Robo-Signing Scandal Goes Mainstream?
MikeZ
Wazoo, the reality is: times are tough and spending cuts are a reality, yes, even in education. When the economy turns better, and it will, there’ll be more money for education, until then, don’t hold your breath.
GrandWazoo
“When the economy turns better, and it will …”
Frankly sir, you are dreaming if you think the problems of the northern Nevada economy are somehow going to automagically work themselves out on their own. Read the “self-serving and, possibly, propagandized” study again, slowly, and outloud.
It has hit the fan here in both size and speed that is truly breathtaking. I was born in Detroit, and lived in the shadow of that city for most of my life until moving here five years ago. The decline that has gripped and mostly destroyed Detroit took over forty years. The whole time most of the Michigan citizens kept chanting the reassuring mantra of the assured and eventual turnaround that ultimately never took place. You sir are suggesting the exact same thing in a region that is even less diversified and educated than Michigan. A region that finds itself going from a budget surplus to worse off than Michigan in the space of a few short years – and that is really saying something.
UGA
What does budget surplus have to do with the economy being good or bad? The gov’t should do less and take less money. Then we’d have a surplus, but the economy would not be better off, other than it would help if we got tax cuts.
Regardless, the economy will turn around, everntually. When things are going up, people think they will forever, when they are going down, peolle think the same thing.
Unless there are unions like the UAW running the gaming industry, then what happened to Detroit ain’t happening here. When people have money, they will gamble, and travel and come here, and spend money.
Drive by poster
Out of curiosity, what does anyone think is going to drive the “turn around” of the Northern Nevada economy that is going to make things “better”? It’s not going to be gaming/tourism – the decline in the Northern Nevada gaming/tourism industry began before the economic meltdown.
I know that there is this mantra of “we have low taxes, so companies are going to be lining up to relocate here.” But, Nevada has had lower taxes than California, Oregon and almost everywhere else for longer than any of us have been alive, and companies have not come. Now, we can argue as to why they have not come yet, but just based on my anecdotal evidence, it’s because Northern Nevada does not have the infrastructure (in terms of both human capital and hard infrastructure) to encourage these companies to relocate. Turns out – “low taxes” does not mean anything when your company would go out of business because the people here are not able to do the work you require.
So, for those who think the answer is “cut and further gut” until things get better – what do you think is going to happen to make things get better?
Martin
All very fine points Drive by. Reno’s gaming industry has been dying since 1980. We are 30 years into this slow death; this is nothing that just started with the Great Recession.
EDAWN and the Chamber have been preaching the necessity of keeping our community a tax haven from the confiscatory tax environment of California for decades. As you correctly point out, they have essentially accomplished nothing in the way of bringing business here. Oh sure, every now and then some business that employs 30 people relocates here from California, and EDAWN puts out the obligatory press release. They never say anything when a business leaves the area however.
So indeed, what is going to happen that is going to make things better? That question is at least 30 years old now.
Topbull
Kalifornian: I also live in the bay area and have a similar SFR rental so I can give you my perspective.
Serving Debt: you can take ~$200 off $700 for principal payment.
If you want a management firm to take care of your property, you should add +$100/mo.
The cash flow is almost tax-free (fed+state) because you can write off the depreciation of your rental property.
Smarten's Vanishing Equity
“I know that there is this mantra of “we have low taxes, so companies are going to be lining up to relocate here.” But, Nevada has had lower taxes than California, Oregon and almost everywhere else for longer than any of us have been alive, and companies have not come.”
This fallacy is akin to the tax cuts for the wealthy which were supposed to promote economic growth. There is absolutely zero proof of such, but an overwhelming amount of evidence to the contrary. Lie-la-lie, lie-la-la-la-lie-la-lie, lie-la-lie..
bob_c
5 year inflation adjusted bond now yielding minus -.31% + rate of inflation
here comes massive quantitative easing as cash is fleeing to any asset
reno isnt the problem…….its the country
billddrummer
After I read the collection of articles in the RGJ, I was dismayed to see that none of the interviewees seemed to have any solutions–just more of the same tired bromides–“diversify our economy beyond gaming/tourism;”–“attract manufacturing and high-tech jobs to the region;”–“promote the unequaled quality of life.”
It’s troubling to see what the newspaper identifies as ‘leaders in the community’ who seem just as baffled as the rest of us about how to turn around the death spiral which has become the Northern Nevada economy.
I would submit that the real estate crash and recession merely accelerated the decline. It was bound to happen anyway–those events merely hastened the drop in economic activity.
As has been mentioned earlier in this thread, these ‘solutions’ have been proposed for fully 30 years–and not much has changed. Sure, there are more houses and commercial buildings here than there were in 1980, but a disturbingly large number of them are vacant.
Just look at the number of closed casinos downtown, the number of abandoned retail stores, the number of half-finished subdivisions, the number of vacant homes.
The slide show of Detroit was fascinating. The authors could compile a similar montage of the downtown landscape. I still remember the Mapes, the Sundowner, Harold’s Club, the Nevada Club, Eddy’s Fabulous Fifties, the Money Tree, the Onslow (those revolving statues were cool)–the list goes on and on.
But solutions to the death spiral? Haven’t seen any yet.
To be fair, I don’t have any either. Unless Nevada is willing to radically improve its educational system to attract higher skilled people to the area, don’t expect the high-tech solution to work. Highly educated people expect good schools, both K-12 and local universities. With a 20-30% budget reduction, UNR is unable to compete for academic talent, either from prospective students or from prospective faculty.
As I said before, my daughter attends NYU because she believes her prospects are better with an NYU degree than a UNR degree. In her case, the Millenium Scholarship wasn’t a compelling reason to attend school in state–even though it would have paid for her first year of college.
I gladly sacrifice to allow her to pursue what she considers a meaningful education.
And despite what the university says in its ads, and despite the number of buildings constructed over the past generation, I fear that UNR will continue to be a ‘second tier’ choice for the best and brightest of Reno.
Drive by poster
For what it’s worth, I have some personal experience with some of the best and brightest at UNR. I can say that, sadly, a shockingly large amount are depressed that they ended up at UNR instead of an out of state school. Again, my experience, they aren’t at UNR because they couldn’t get into an out of state school, they just couldn’t afford to go.
I have a solution, but the people of this State are never going to accept it. It’s going to require – gasp – spending more money. And, that’s going to take – double gasp – not cutting taxes, but probably increasing taxes in the short run. Because, yes – if the economy grows, then the tax revenue grows, even if the rates are lower. But, that only works if the economy grows. But, this will not ever happen. Sadly, my experience when suggesting that perhaps this State needs to improve education, amenities, infrastructure, etc. is nothing short of “If you don’t like Nevada how it is, then leave.” This is the first state I’ve lived in where people are reflexively defensive about how things are, while even admitting that things are bad.
MikeZ
“When the economy turns better, and it will …”
Frankly sir, you are dreaming if you think the problems of the northern Nevada economy are somehow going to automagically work themselves out on their own. Read the “self-serving and, possibly, propagandized” study again, slowly, and outloud.
No, no magic, mostly time, and if you really think things won’t get better, then you should be packing.
MikeZ
Highly educated people expect good schools, both K-12 and local universities.
Speaking only for myself, this highly educated person came here for a good job, not good schools. I attended a few excellent out-of-state universites, but I never ended up working in any of those states (jobs were always much better elsewhere), so the claimed geographical link between good schools and good jobs is tenuous, at best.
Listen, if you want great public schools, gas up the car, pack up the U-Haul and move to California (13% unemployment, go figure, those great CA schools don’t seem to be helping) and pay 10% in state income taxes plus 2-3 times Reno’s rate for property taxes. And don’t forget Mello-Roos.
GrandWazoo
” if you really think things won’t get better, then you should be packing”.
Glad you agree with the self-serving UNR study MikeZ – to quote from it:
“The Nevada Legislature determines that the budget gap must be entirely covered by reduced spending, leading to significant cuts in education, higher education, and local government employment. Teachers, faculty, and government employees leave the state, with the accompanying loss in consumer spending and housing demand. Research dollars flowing into NSHE institutions declines, leading to more cuts in
spending and economic impact.”
I am perplexed that you feel this is a good outcome to those of us who wish for a better Nevada. Good luck to you – you’re going to need it.
MikeZ
my daughter attends NYU because she believes her prospects are better with an NYU degree than a UNR degree
NYU is an excellent facility. As your own situation demonstrates, there’s no need to move your family to Manhattan for your daughter to attend NYU.
And when your daughther graduates NYU and takes a job outside of Manhattan, that too will contradict the claim that geographic proximity to excellent educational facilities draws educated families or jobs into the immediate area.
MikeZ
” if you really think things won’t get better, then you should be packing”.
Glad you agree with the self-serving UNR study MikeZ – to quote from it:
Wazoo, one of us has a reading comprehension problem.
GrandWazoo
One of us has a reality perception problem:
“when your daughther graduates NYU and takes a job outside of Manhattan, that too will contradict the claim that geographic proximity to excellent educational facilities draws educated families or jobs into the immediate area.”
billddrummer
To Grand Wazoo and MikeZ,
Whether or not my daughter takes a job outside Manhattan, it’s unlikely she will bring her highly educated self back to Northern Nevada.
GrandWazoo
Exactly the point of the UNR study, Bill D. I wish your daughter the best of luck and congratulations to her on NYU.
Zen
I have an engineering degree from UNR. I passed my engineering national board exams on the first try without studying. Over 50% of those taking the same exam that day did not. I took the test in California. Where do you suppose most of those not passing went to school? I have also never had any problem keeping up with my contemporaries educated out of state. My wife is a physician. She did her undergrad at UNR and went to medical school at UNR. She passed all her boards the first time. She works with doctors educated at different universities all over the country. Nobody has ever mentioned the poor education she received at UNR. Whatever experiences you may have had or heard about to lead you to believe an education at UNR is inferior, my wife and I had a vastly different experience.
BobO
I like Reno. I am looking to buy a single family house there as an investment and later as retirement home. Prices are cheap!
bob_c
no-one care to comment why the 5 year TIPS now yielding -.39% (NEGATIVE)
this is a mind boggling and epic event—japan style stagnation
***a person gets out what they put into their education*** UNR is fine.
skeptical
Bob C. Thanks for the observation on 5 year TIPS.
I think it only reflects the enormous flood of dumb money into bonds. I’m not calling it a bubble or a mania, yet. People are afraid to put their money anywhere else. It reflects the desire of people and pension funds to get a return OF investment, rather than a return ON investment. They’ve been stung too badly in the last few years with “riskier” investments.
It will not end well, though. With the Fed creating trillions out of thin air, a tipping point will one day come. It won’t come until it comes, and I cannot tell you when it will happen. But, one day, faith in the dollar will be lost, and there will be a huge exodus of foreign money from bonds and other dollar denominated assets.
Then the jig will be up, and the Fed (and the country along with it) will be well and truly screwed.
Since this is a Real Estate blog, I’ll bring it back to the focus of this website. What does that mean for real estate? Well, I do not know. But I suspect that if we enter a highly inflationary environment, RE will be a better place to have your $$ than bonds.
FWIW.
Beryl Love
I really enjoyed reading this thread. Thanks, Mike, for starting the discussion.
Looking ahead to future installments of the series, what can be done (at the state legislature or otherwise) to accelerate the recovery of our real estate market?
Beryl Love
Executive Editor, Reno Gazette-Journal
blove@rgj.com
Reno Ignoramus
I have said many times that the RGJ folks must read this blog. I guess now it is official. Maybe now the RRGJ won’t be 6-8 months behind what is discussed here.
Welcome, Mr. Love.
inclinejj
As I said before, my daughter attends NYU because she believes her prospects are better with an NYU degree than a UNR degree. In her case, the Millenium Scholarship wasn’t a compelling reason to attend school in state–even though it would have paid for her first year of college.
So you have two job applicants with equal merits in front of you. One graduated from UNR the other from NYU. Do you say, wow UNR prestige University? No.
I faced the same thing. Went to UNR for 3 years and figured out that no one considered it a prestigue University.
Best thing I ever did was move out of Reno and came down and finished school at Cal.
Good Job on your daughter Bill, Congrats.
tofu mary
Hey Beryl… I’m not sure this idea works within the confines of Nevada State Law given all the counter-parties and federal crap-program-banker-bailouts involved… But the ONLY way to accelerate recovery of the real estate market in Reno-Sparks is to let the SHTF (sh*t hit the fan)… as in, send every crappy-late loan to foreclosure ASAP, dump these properties on the market, let them compete for cash vulture pickups at whatever the market pays, and friggin move on with life! Extend and pretend has got to end for recovery to happen. Sometimes you just have puke it out to move on… now is one of those times. Silver, gold and geothermal seem to be Northern Nevada’s real competitive advantage… focus on that with UNR!
MikeZ
Whether or not my daughter takes a job outside Manhattan, it’s unlikely she will bring her highly educated self back to Northern Nevada.
Perhaps not, but the point remains: Neither NYU nor Columbia nor any other of the many fine universities in the Manhattan area are creating many jobs in Mahnattan, nor do companies move to Manhattan for those schools.
Brown Univeristy, one of the finest Ivy League facilities in the nation, is in Providence, Rhode Island. Go take a look at the Providence and RI economic data. People who think good schools come first and good jobs come later haven’t looked beyond Silicon Valey, which is an anomaly.
MikeZ
no-one care to comment why the 5 year TIPS now yielding -.39% (NEGATIVE)
this is a mind boggling and epic event—japan style stagnation
Correct, no one cares.
The fact is: the near future could be 70s-style stagflation. Or it could be Depression-style deflation. Or, it could be back to normal. The truth is, you don’t know. None of us do.
Now, if you have some kind of sound macroecnomic point to make, well, then stop playing guessing games and make it!
Kalifornian
Hey come on
with those “prestigious” universities. Most of senior positions in Silicon Valley are now taken over by people graduated from universities you never knew existed, in far away countries.
I always thought UNR is undeservingly low-ranked, but it’s not Ivy League for sure.
bob_c
mike z-
rude
oops median just came in at 170k, no wonder
bob_c
yield -.43% as of 246am est
Paul
The target demographic for Reno should be retirees. EDAWN should forget about trying to lure companies from CA – its just not gonna happen. Those businesses that leave CA are going to Utah or Texas, where there is an educated workforce and a strong public school and university system. I don’t even think that UNR isn’t a good school – its just that most of its top graduates want to move somewhere else. The real problem is that only HALF of the students in Washoe County even graduate from high school. That’s an immediate deal killer for any Fortune 1000 company.
EDAWN should get a mailing list of everyone over 55 in the higher income zip codes in CA. Start mailing glossy photos of Reno, tout the cheap housing, clean air, lack of traffic, the regional medical centers and the easy-access airport. Short security lines, cheap flights to see the grandkids. Bring your pension with you and get a 10% pay increase when you move (no CA income tax). Hey, at least its nicer here than Phoenix.
skeptical
Tofu Mary,
You just about absolutely nailed it. Could you please run for office (or at least contribute a bit more to this blog)?
Permabulls seem to be only responding to individual picadillos instead of the enormous secular evidence that things are about to go from horrible to worse….
John Newell
inclinejj wrote:
“So you have two job applicants with equal merits in front of you. One graduated from UNR the other from NYU. Do you say, wow UNR prestige University? No.”
That is the problem in a nutshell. My undergraduate degree is from UNR, whereas my graduate degree and professional degree are from private institutions. As I have written here before, my experience was that the educational level was not appreciably different for a motivated student, despite the more extensive resources of the private institutions. The difference is the prestige (and as a function thereof, the contacts the student makes), and the impact that prestige can have when starting a career.
And while the impact of that prestige lessens as a person develops a career history, it can still open some doors that might otherwise be closed. For example, my MA is from Rice University in Houston, Texas. If I wanted to live in Texas again (which I do not), holding a degree from Rice would be a great benefit to me, even with a career history already established. Even outside of Texas, and even with a career history established, holding a degree from Rice, which is known to be a “good school,” garners comments when people see my resume. I have never had anyone other than fellow UNR graduates say, “Oh, you went to UNR,” with any degree of enthusiasm. (I should note that in some fields, such as mining, a degree from UNR can be a door opener, but that is the exception rather than the rule).
That is not to say that I am ashamed of my degree from UNR – the education I received benefited me as I went through graduate school and then law school, and it has positively impacted my working life. Furthermore, I would not discourage someone from attending UNR as an undergraduate (at least in most fields), nor even as a graduate student in some fields. But anyone who decides to attend UNR (and enrollment this semester is a record 17,679 students) should know that they will be at a disadvantage against graduates of more prestigious institutions.
tofu mary
Thanks, skeptical, was a little worried I might be out of line. Check this out, add 2+ years to Sacramento’s number, and you’re probably looking at Reno reality.
dave yang
Question to Beryl Love, RGJ Editor
Do you feel that the http://www.rgj.com website promotes a positive impression of the Reno/Sparks region ? I find it to be a gloomy website where frequently I find either a meth addict staring back at me, or some young woman’s cleavage. If the RGJ is interested in the positive promotion of the Reno/Sparks region, it should start by rethinking their website business model to promote a positive image of the region.
MikeZ
[Paul] “Those businesses that leave CA are going to Utah or Texas, where there is an educated workforce and a strong public school and university system.”
Texas? TX ranks 46/50 verbal, 49/50 math (SAT), #36 in graduation rates and dead last in percentage of adults with GED/HS diploma. TX is the bottom of the dumb barrel.
MikeZ
bob_c, if you have some kind of sound macroecnomic point to make, then make it!