2385 Warrior is a pending short sale, currently listed at $320,000, dropped from $340K right before it went pending. It is a really nice house in the country and was unsuccessfully listed for $625,000 a couple years ago (the listing photos were much better then when the owner still cared). The owners stayed current until a missed 8/1/2010 payment and the NOD was filed 11/2/2010 – pretty quick. Just another foreclosure story, until a sign went up over the weekend: "Moving – Free Llamas". You interested, geopower?
455 Dori Bell went back to the bank this morning with an opening bid of $377,000 and an amount owning of $582K plus a second, if I remember correctly. The first missed payment was 2/1/2010, the NOD was on 7/8/2010 and the NOS was on 11/5/2010, so this home went pretty rapidly. The owners had listed the house a couple years ago for $750K, then took it FSBO with the last asking at $617K which would have reasonably covered everybody. They tried, and the bank didn’t meet them half way, and they ended up with the booby prize.
Next door at 440 Dori Bell, a NOD was filed 8/21/2009 for a missed 5/1/2009 payment. And it has just sat there in limbo ever since with no additional filings.
None of these 3 has a BK filing, by the way. So why are these properties being treated so differently by the banks? Why are some foreclosures proceeding on fast track schedules, short sales evidently being approved, and others just falling into the ether? Is it something that can be predicted?
Harvey
I really love these stories.
Owners listed at $625K, now a short sale at $320K.
Owners listed at $750K, now back to the bank at $377K.
Leverage on a depreciating asset can be a reach bitch, can’t it?
There appears to be no rhyme or reason as to what the lenders do. Some houses go NOD 91 days after the first payment is missed, then NOS 35 days later, then TD in3 weeks. Then there is my neighbor across the street. Last payment was in March of LAST year, 2009. NOD recorded in October of LAST year. Now 13 months since the NOD and no NOS as of today.
Norton
I can go you guys one even better. I work with a guy who stopped paying his mortgage in January of 2009. At some point there was a NOD about a year ago, and nothing since. This guy has now gone 23 months without making a payment and has “saved” about $42K by not paying the bank. He did buy a nice new car, however. I wonder how bad the economy would be if there were not guys like this using the mortgage money to buy other things?
skeptical
Mike,
Great stuff as always. Thank you for the color commentary and interesting data points.
I like to look at Mitch’s site to see price reductions in the last 5 days. It is a stat that gets no coverage and probably means nothing. But I like to look at it as a barometer for the market at the moment. Numbers have been >100 price reductions over 5 days consistently since mid-summer. Well, today the number is 24.
Could be seasonality. Could be people getting over the Thanksgiving Day feast, and not too motivated to do much of anything, including selling their home.
But I gotta hunch that we are skidding along here. Homes above $150/sqft will surely have to come to reality and let go of the kool aid. Below that? Might not be a bad time to buy.
I love Reno. It’s a great place to live. At a certain price point, other people will agree. Las Vegas may be the new Detroit. But I don’t think Reno is. It’s too close to that emerald treasure called Tahoe. Call me neutral at this point. I ain’t a permabear, unless your house price is too dear…..
smarten
Are we reading correctly? Skeptical, by his own words, says he’s no longer a permabear? He’s gotta hunch that we are skidding along here? Call him neutral? Might not be a bad time to buy? Wow!
MikeZ
So why are these properties being treated so differently by the banks?
Different banks, different policies, different people, is the obvious answer.
skeptical
Smarten,
I said neutral. Don’t get too excited. There’s plenty of over-priced stuff out there. But, there’s a deal or two as well. This market is case by case.
MikeZ
I have to agree w/ smarten here, it looks like skeptical just switched teams.
Or perhaps I’m missing something in context … what’s the difference between: a market that’s “neutral,” “skidding along” and one that’s been “stable for the last 14 mos?”
skeptical
Look at Case-Schiller this morning if you really think the market has been stable for 14 months. Or, you can go to Trulia or Zillow and check out price trends over the last 14 months to look for “stability.” Before you attack their methodologies, I am commenting upon the trends in their data — trends, which ought to be considered.
My comment was that, at this moment, I am neutral. If a prospective buyer finds a great house in a good neighborhood at or below comparable prices, and it’s a principle residence, buying might not be a bad move, especially if renting would be more expensive (getting to that point on some properties in Reno).
So, I am neutral as of today. Anyone who bought 14 months ago would have lost money.
OBTW, outside of the great housing crash of 2006-present (and gold), I have been an outstanding contrarian indicator. I have been wrong more times than I care to recount. So, consider the source….
Sully
skeptical, at the risk of starting another Hatfield/McCoy version debate, I think your comment about losing money is a bit off. Following the trend lines it would appear to be correct. However, using my own purchase 18 months ago (and knowing the price range it was 14 months ago) that is not the case. Taking into consideration renting for the last 14 months; I am still ahead. Not by much though.
As I’ve said in the past, buying in the general market range (under 300/350K) for reasonably priced houses is probably not worth worrying about. Of course that would depend on individual circumstances. It’s the over 400/450K market that’s a problem and more likely than not a money losing proposition over the past 14 months. When considering the actual number of houses in the over 400K range versus the median income for the area, these houses will not sell like hot cakes for a long time to come.
bob_c
Just read the case-schiller data. It is based on sales of repeat or comparable properties. The results are quite moderate for the last 12 months; -1.5% nationally
and -3.5% las vegas (closest market to reno), but that housing prices are still
ABOVE their 2009 lows. These figures are based on actual tracked sales—not
on estimates. They match Guy’s data. Las Vegas and Washington were the only markets to post gains (though nominal) in Q3 2010 versus the -2.0% quarterly national drop. Their graphs clearly show the national housing bubble and the fragility
of the 18 month relative stability.
bob_c
i see the holes in my point……reno’s relationship to las vegas and las vegas to the national average
lets say reno lost 2.0% —the tax credit would wipe that out (if you qualify),
so we are flat
the medians co-inside with guy’s data so there has been no dramatic change in last
12-18 months
i also do see the pressure on the 300K+ market
but my big concern is MACRO—–our country needs jobs!!!!!!!!!!!!!!!!
city by city we can try to steal from each other, but if we force industry to bring jobs back to our soil (using tech as an example):
are all these displaced middle managers that did nothing going to be satisfied with
a $15/hour assembly job????? tax the companies to force them to bring jobs
back, but the jobs that left are primarily manufacturing/industrial/clerical—so
our unemployed will be forced to do lower wage/less skilled jobs
that will go over real well and the unemployed would choose benefit extensions to
percieved demotions
the teens working fast food….the commoner doing assembly and ONLY those truly
worthy in management
>>>an accross the board workplace demotion for the entire country, getting back the
jobs we thought we were too below us or were tomenial to do<<<
smarten
Skeptical said, “if a prospective buyer finds a great house in a good neighborhood at or below comparable prices, and it’s a principle residence, buying might not be a bad move.” Gee, that sounds pretty much like someone I know a year ago last March.
Skeptical goes on to say that, “anyone who bought 14 months ago would have lost money.” Don’t agree. Only if you bought something overpriced 14 months ago, and you sold it today, MIGHT you lose money. If you were a purchaser like bob_c or me who is not selling into this market, we haven’t lost anything! And if you’re a purchaser in today’s market who has no plans to resell anytime soon, you haven’t lost anything either.
Which leads me to my next question. Exactly who on this blog [besides Derrick] has actually lost money on a purchase he/she made 1-1/2 years ago?
Carleton
Depends what you mean Smarten. Do you mean somebody who has bought and sold the same house within the span of the last 18 months? That would be the perfect study because it would be the exact same property. But how many people, especially today, buy and sell the same house within 18 months?
Or do you mean somebody who bought within the last 18 months and whose house is now worth less than he paid for it? I can site you to an example in my neighborhood of a person who bought a house only last March ( 10 months ago) who could not sell it today for what he paid for it. He readily acknowledges such is the case. The problem with this though, is that some here on the RRB will say: how do you know that it cannot be sold for what he paid 10 months ago if you haven’t tried? (Because the house across the street which is same quality, same size, same age, is now on the market for $30K less). Or, he must have overpaid 10 months ago (which he did not). The simple fact is that houses all over Caughlin Ranch, where this house is located, are still losing value. They are worth less today than they were in March.
It will just end up being another RRB pissing contest.
Cornell
Hey folks,
If I paid $40 a share for Intel stock on November 30, 1999, and still own that share today, I have not lost anything as Smarten says. There is no loss until I sell.
The fact that a share of Intel is today worth $20 is irrelevant in terms of “actually losing money” until I sell.
However, it is not irrelevant that my share is today worth 50% less than I paid for it.
There is a difference between acknowledging that an asset has declined in value and “actually losing money” on that asset.
skeptical
Smarten,
Clever. Asking who has lost money on a purchase in the last 18months. Hopefully, anybody who bought that recently hasn’t yet sold at a loss. Perhaps a better way to frame it would be to ask how many that have bought in the last 18 months are seeing lower comps around them now vs. at the time of purchase.
Regarding your place. No quarrel. I benefited greatly by reading your forensic deconstruction of the purchase process. In fact, I’d call it one of the more enlightening posts I’ve read here. You obviously made the right choice for you.
Without dealing with the specifics of your purchase, though, others who purchased $1M+ properties in the greater Reno area likely could have saved a few bucks by waiting. Just check out housingtracker.net and look at the 75th percentile for Reno. It’s pretty ugly. The counterargument to that site is that it only tracks asking prices. However, when you’ve had steady erosion in published asking prices (in the 75th%) from ~$583k (May 09) to ~$412k (presently), you’ve got an ugly market, no matter how you want to spin it.
For the savvy buyer who knows the market very well, and knows what price the market will bear, there may be deals out there as good as yours, Smarten. That doesn’t mean you still can’t make a foolish mistake by spending too much on a house that’ll be 5-10% cheaper next year (not peanuts for a $400k house).
So, again, I am neutral.
Smarten's Vanishing Equity
Skeptical said:
“For the savvy buyer who knows the market very well, and knows what price the market will bear, there may be deals out there as good as yours, Smarten.”
I just took a look at IV listings and I’d guess that, if Smarten was looking to sell today, he’d be lucky to get $1M for his place. That would represent a loss of, what, $500k? That’s not a great deal, to me.
Raymond
Let’s say it for the 435th time on the RRB……
Prices at the Smithridge condos have probably bottomed out.
Prices at the higher end neighborhoods, like Caughlin Ranch, have not bottomed out and are still falling.
MikeZ
skeptical, what’s the difference between”skidding along” and “stable?”
This is a serious question.
MikeZ
Anyone who bought 14 months ago would have lost money.
“Anyone?” That’s just not true. Mike M. has documented the profits of PAGE and NRES, which have been buying and flipping area houses for a year now.
smarten
Skeptical –
I don’t quarrel with your observation that many who “bought in the last 18 months are seeing lower comps around them now vs. at the time of purchase.” However, your earlier statement was that “anyone who bought 14 months ago would have lost money.” You don’t realize a gain or loss until you actually sell. Just ask all those dot commers who made millions when they exercised stock options [but chose not to actually sell their stock], and then lost almost as much when they actually sold.
If I own a piece of real property [or anything else for that matter] I have no intention of selling today, although a snapshot of current comps may be interesting, it means little to me until I choose or am forced to market my property in a sea of then comps. Prices go up, and they go down. The pendulum swings to the left, and then to the right. The democrats take over the House of Representatives, and then they lose it. If I don’t want to lose [or make] as much, all I have to do is wait out the swings. So I believe that to say anyone has “lost” money while riding the waves; while he/she realizes income from or a benefit in the form of occupancy and/or income tax benefits; would be a misnomer.
Mike McGonagle
Hey, no takers on a couple of free spitting llamas? I thought BB might want to “gift” them to smarten!
The 18 month hold and dump sales I come across are generally in Cyan, the only thing that was selling a couple years ago. The comps are definately down, sometimes WAY down there.
Sully
Mike, are you serious about the llamas? Cause I can call a friend in Los Gatos that has some already.
Cousin ITT
smarten, so you figure out the Mrs. smarten is boinking Bode Miller during his rehab and wants her community property back. Was your purchase such an iron clad once in a lifetime deal of the decade that if you had sell your home in 180 days, would you not have your dinner served up to you on a platter?
skeptical
Mike McG,
My apologies. Did not intend to to digress from one of the more important issues to be presented on this blog in quite some time. Llamas. Nice.
BB is indeed in deep hibernation if that didn’t bring him out of the cave.
Kyle
Off topic, but this blog likes all the “where does Nevada rank?” lists.
Did you see where Nevada goes Number One in the Nation for high school dropouts?
Seems Nevada is a “dropout factory.”!
Yea, you can just see all kinds of out of state businesses lining up to move here to take advantage of Nevada’s superb workforce.
Tom Joad
Did you also see where the Brookings Institute has ranked Las Vegas as the fourth worst economy in the world? Not in the US. In the world.
And please refrain from the its Las Vegas and not Reno nonsense. As Las Vegas goes, so goes the entire State of Nevada. 80% of Nevada’s economy is in Las Vegas.
Rubiconer
One does not need a high school diploma to work in a casino, a restaurant, or in a mine. Nevada’s two premier industries are secure nothwithstanding the dropout factory.
Nevada will retain its status as the most backwater State in the US outside of the deep South. You can be assured of that.
bob_c
What in the hell is this country going to do about unemployment????
I see no non-crisis outcome.
Irv
Bob C, my reading of it is that the our government leadership views the solution as everyone either working for a governmental agency or being on a public benefits program, with the shrinking work force of private sector employees being taxed increasingly more to pay for those other two growing components. Eventually that ship sinks.
Rubiconer
And, today, Moody’s downgraded its rating of Nevada’s state government debt to “negative”.
Which means future bond issues by the State will have to carry higher interest rates.
Highest dropout rate. Highest unemployment rate. Highest foreclosure rate. Highest per capita state budget deficit. Worst state economy.
I realize that none of this is as important as the fact that Nevada beat Boise St.
Sully
…..and the hits keep coming. Might actually be a contrarian indicator. Are there anymore lists NV can be at the wrong end of?
Fired up
Number one for high school dropouts? Bitch all you want about the sorry state of Nevada education, but the blame for that one lies squarely at the feet of the parents. What the heck are all the unemployed parents doing anyway, if they aren’t at least ensuring their kids are attending school?
Time for people to take personal responsibility and stop blaming the system. Maybe the schools here are better than the data reflect, but stats are weighed down by the dropouts.
geopower
I’ll have to consult with my livestock expert/girlfriend on any llama additions to the family. Boomer would certainly enjoy chasing them around the yard though. I’m aiming a little more conservatively right now- maybe ducks in the spring.
It looks like things are certainly coming down to reality even around your “rarefied piece of dirt.” I think for those folks in a position to buy, there’s a pretty nice lifestyle to be had for a reasonable price around Reno right now (and undoubtedly for some time to come.) But my perspective is definitely imported from the crowded California side of the pass. I know those who grew up around here, or other properly rural places, still think prices are way too high. How can someone who grew up in neighborhoods of townhouses and apartments explain the value of an acre of yard to people who grew up on 40 acres or more?
It’s nice to see that the banks have learned to move some foreclosures quickly, though disheartening that they seem to be so inconsistent about their speed. It seems like processing the foreclosure inventory will be done around the time the original owners are qualified to buy again. Anyone know of any more waves of foreclosures expected? Rates resetting on any large subsets of mortgages soon, or just the continued slow bloodletting?
CommercialLender
Smarten,
True, one does not ‘take’ a principal loss until one sells at a loss. However, mortgages are rented money where each month one’s mortgage carry cost on the value of a home in excess of it’s market sure smells of a loss to me. Same with RE taxes that would otherwise be lower today, as with insurance premiums that are based on the value of the loan outstanding among other metrics. So, while not recognizing the current loss on paper, one is recognizing current opportunity losses to their cash flow.
Not to pick on you for I agree with your specific situation: it was the house you wanted, the one the wife wanted, good relative deal, decent financing, long term hold plans, etc. but your strategy is not entirely free of current loss.
Cornell,
You have $40 Intel stock, too!? What are the chances! I probably have almost as many opportunity-cost-losses in Intel than Smarten has in his house, so be real careful taking any advice from me!
Steve Herschbach
The place I bought in Reno this spring is no doubt down in value, which applies a slight downward pressure on my net worth figures. No big deal. But how do decreasing home values translate into property tax savings in Reno? I am used to places where a mil rate is applied directly to assessed values, and so dropping home prices translate immediately into lower taxes. The way property taxes are calculated in Reno is more convoluted and so it seems one is not so quick to see a lower tax bill. For those of you that have seen your houses go either up or down dramatically in value in Reno, how did it affect your property tax? What kind of lag times do you see?
Sully
Steve, first year after purchase taxes were slightly higher than prior year. Second year (current) taxes and assessment lower taxes were 25% less than last year. Assessment for next year shows about a 25% increase, but tax amount not yet known.
We’ve been over the tax system before on this blog. Purchase price has little effect on assessment, although they claim it is part of the calculation I don’t believe that. It’s more of pinning the tail on the donkey blindfolded. 🙂
Sully
Steve, I dug up the reply to an email (below) this might not answer your question directly, but they are real good about answering your questions if you send them an email.
The total assessed value amongst similar homes can vary because the homes are as you stated, similar. In other words, it very likely that the homes you are comparing are not exactly the same. Since the improvement value is based on replacement costs new less 1.5% depreciation/yr (up to 50yrs.) the improvement values can be very different from house to house depending on what improvements exists on each parcel (i.e. pavers, decks, pools etc.). In addition, if a house is an extra year older it is also receiving an added -1.5% in depreciation.
Aside from the improvement value, land value may also vary slightly. Land values may vary within a similar area/neighborhood due to certain adjustments (i.e. traffic, views and etc.).
Lastly, given that both improvement values and land values may vary amongst similar houses, the total assessed value ((Improvement Value + Land Value) x .035) can vary.
Martin
Steve, trying to understand the tax assessor’s formula is like trying to understand provisions of the IRS Code. Not impossible, but also not something accomplished reading the first five times through.
Lakedweller
I see no one has picked up on the symbolism of having to sell the Llama. In this case, the Llama was probably a pet, but consider that Llamas were bred to provide wool and as guard herd “sheperds”. But nobody has the desire or experience to maximize the value of this asset. The way I see it there is a disconnect in the US economy between being employed and creating value. Too many people thought they could go to their 9-5 job, write a few letters, punch a few buttons and get a decent wage. Businesses allowed useless employees to retain employment because revenue growth overshadowed efficiency. When revenue stopped growing, businesses had to shed the dead weight. It is time for all of those dead weight people to find a way to contribute to society. In return society will support them. It takes time for large groups of unemployables to re-evaluate, re-educate, and re-integrate into the work force.
I don’t agree with bringing jobs back onto American soil for the sake of creating employment. And I don’t support increasing taxes on corporations to motivate them to keep employment here. America is a consuming nation, our economy relies on all of us consuming as much as possible. Increasing the costs of products in the name of creating employment is counter-productive.
Let capital flow to where it is most efficiently deployed. This should result in higher earnings and a net benefit for the global economy. If American corporations are generating higher earnings by outsourcing to Chinese/Indian labour, that American corporation has more money to grow its company, which will likely result in a more higher skilled jobs in America.
Look at General Motors to see how the opposite of this is happening in Motor City. GM faces high labour costs, resulting in lower earnings, causing lower investment in new products, impacting their corporate market share, reducing demand for new cars, resulting in less jobs for Americans! Not to mention the cost to all taxpayers to bail them out!!!
We have to find the value creator in each of us. It is not easy and there isn’t a one-size-fits-all solution. Nevada is a decent state in terms of barriers for entreprenuers. That should be a focus at the municipal and state levels. Can Mr. Smith create value for our economy without being impeded by red tape and bureaucracy?
Can I keep a llama in my yard to sheer its wool to provide the material for my wife to knit a dozen sweaters that can be sold at the local market at a price that provides for my family and meets the needs of the customer? I probably need multiple permits and inspections to do this simple economic activity. Until that changes, our economy will not recover in a meaningful way.
lurker
Lakedweller,
I’d be interested to learn what you have produced and how you have benefited society? Where have you been productive? How have you made your living?
Lakedweller
Its a good way to audit yourself. What worth am I to my family, my community and my local economy?
My daytimes are spent employed as a development manager for a real estate development company where I am in charge of cost control and project management. Most days my value (emplyment expenses) is earned by pushing/fast tracking the development process, finding savings in construction methods and limiting expenditures on incidental items, but my mistakes can usually be tracked and a value attached to them. It does not make for a relaxing day. But I love my job, so the stress is worth it.
I also contribute to many volunteer organizations:
Junior Achievement is a grass roots organization that brings business leaders into the classroom to introduce students to business basics and entreprenuerial thinking. I teach 4 hour sessions to over 100 students every year.
I sit on the audit committee for United Way. This volunteer group reviews the goals and programs of United Way funded charities to mke sure they are delivering services in an efficient manner and that they continue to align with the strategic plan of the United Way.
On top of this I am loving husband and father to three young children. I am a coach of my children’s sports team and actively participate in fundraising activities.
GreenNV
How far can property tax discrepancies get over time with Nevada’s arcane tax system? I pulled 2 recent sales at $495,000. 1001 La Rue in Newlands Manor was built in 1941 and pays a total of $1729.58 in annual property taxes. 1820 Graysburg in Somersett was built in 2006 and pays $5486.08 in property taxes.
Since property taxes represent the largest portion of our city and county operating income, is it any wonder why we are so developer friendly? The NV property tax formula is directly responsible for the rubber stamp approval of new development, even when it doesn’t make any sense.
MikeZ
And, today, Moody’s downgraded its rating of Nevada’s state government debt to “negative”. Which means future bond issues by the State will have to carry higher interest rates.
You either misheard or misunderstood the press release.
http://tinyurl.com/2ajll9y
Nevada Retains High Credit Rating from All Three Major Rating Agencies
By Nevada News Bureau Staff
December 2nd, 2010
…
Fitch Ratings and Standard and Poor’s rated Nevada’s credit worthiness at AA+ and Moody’s Investment Services at Aa1.
…
Raymond
Green, Do you know what percentage of county revenue is generated by the property tax and what percentage by the sales tax? I know that combined they comprise about 80% of county revenue, but I was wondering how they break out?
Thanks.
MikeZ
America is a consuming nation, our economy relies on all of us consuming as much as possible.
An economy based on consumption (70%!) is unsustainable over the long-term and we need to be working to change that. I think the rest of your post is right on the money.
Lakedweller
MikeZ,
I am still on the fence about 70% consumption being a bad thing. Americans work more hours in a year than any other country in the world. If our consumption is enabling our workforce to work more, is that a bad thing? It would be interesting to find a study that tried to correlate consumption to production amongst developed countries. For example, if I eat out for 10 meals a week so that I can work a 60 hour work week, is that a bad thing?