This past year’s guess December’s median contest proved fun and quite popular. So let’s do it again – only this time we’ll have two contests – one for the median sales price and another for the median sold price per square foot.
If you would like to participate in either (or both) contest, please make your prediction in the comments below for what will be December 2011’s median sales price for the Reno/Sparks market and/or December 2011’s median sold price per square foot for the Reno/Sparks market. Though not required, feel free to elaborate on your rationale. To be eligible for the contest all predictions must be made by midnight January 31, 2011.
As with the previous contest, to determine the winner I’ll use the median sales price and median sold price per square foot as determined by Reno and Sparks’ sales reported by our MLS (Northern Nevada Regional MLS). I’ll use the same criteria that I use each month to report sales data. Namely, the median sales price and sold price per square foot will be calculated by pulling all residential sales during the month of December 2011 that occur in the cities of Reno and Sparks, Nevada [MLS area #100]. Residential sales will include Site/Stick Built properties only. Sales of Condo/Townhouse, Manufactured/Modular and Shared Ownership properties will be excluded. I will pull the sales numbers on or shortly after January 7th, 2012.
Good luck and have fun with it.
skeptical
Guy,
The question this time around seems a bit more difficult than it did last year. Maybe age brings wisdom and the knowledge that no one knows what the future holds.
Bright spot for the market?
Price reversion to levels not seen in ten years. Lower prices will bring demand.
Downsides?
– Continuing high levels of unemployment and slow economy.
– Huge inventory and plenty of shadow inventory to back it up.
Even if the economy pulled a V-shaped recovery (highly doubtful), there is enough inventory to soak up excess demand for a number of years.
So, with all that deep thought — my prediction. I think the median at the end of Dec 2011 will be slightly down from today. Put me down for $160k.
As for ppsf, well keeping with my theme of a slightly downward drift, I’ll tag it at $90.
Move to Reno?
$174,471. $101 a sq ft.
Recovery in the economy is taking hold. While unemployment is high, the price of buying is very reasonable for those who are employed. Better to buy than rent if going to stay in one place for for more than 5 years. If going to own for more than 10 years than definitely buy.
Probably $101 a sq ft is below replacement cost today.
MikeZ
12/2011 Median sale price: $172,250
12/2011 Median price per square foot: $97.42
mackenzie childs
Median sale price: $174k
median PPSF: $101.05
MVC/RRBVIP
12/2011 Median sale price: $167,500
12/2011 Median price per square foot: $94.50
RRB reader
12/2011 Median sale price: $158,500
12/2011 Median price per square foot: $89.50
Grand Wazoo
12/2011 Median sale price: $155,000
12/2011 Median price per square foot: $85.00
lurker
Nobody wants to give a rationale for their guesses? Sure is boring watching a bunch of numbers getting thrown up…
Zen
$152,625 (median) & $87.24 (median price per square foot) are my numbers. Why, you ask. Why not? I took 7.5% off the December 2010 numbers. Last year I took 5% off the end of the 2009 lows, which came in November, and my guess turned out OK. My gut tells me it’s going to get a little worse before it gets better. Right now my guess is that 2012 sees a slight uptick after a bad 2011. In the end though it’s just a big fat guess. Good luck to all!
Ed
$146,000. ppsf $79
Grand Wazoo
I agree with Zen, things are going to get worse in the next two year state budget cycle, which affects quite a few workers in Reno:
– state budget reduction cuts state workers
– county and city budget is cut, this cuts county and city workers
– UNR budget is cut, university faculty/staff are laid off
– gaming continues to decline, gaming workers cut and state budget continues distress
– those companies that are expanding continue to avoid Nevada due to low education of work force
That’s how I see it.
MVC/RRBVIP
I really thought about going the same route as Zen and Grand Wazoo, as I think the scenarios they lay out are quite possible. However, I decided instead to predict a modest increase YOY because I suspect the $200k to $500k segment will experienced some increased sales volume. The troubling aspect is that most of this increase (if it occurs) will be distressed sales and REOs as the 2005 and 2006 5-year ARMs and 5-year interest only mortgages either succumb to current default proceedings or enter default.
Tom Joad
Median price 12/2011……..$159,800
Median sq. ft. 12/2011……$90.25
Considerations:
1. There are about 15,000 properties in some state of foreclosure in Reno/Sparks.
2. Half of all homeowners with a mortgage in Reno/Sparks owe more than the house is worth.
3. Half of all listings are either empty or tenant occupied.
4. Unemployment is at 14%.
5. 70% of all sales in Reno/sparks are distressed sales producing no move up buyer.
6. Interest rates can only go up from here.
GreenNV
Median = $187,000
$/sf = $106
I think the market mix in December skewed the median down, so I took November 2010 numbers and added 10%. Scary, January 2011 to date is $142,195 median, $153/sf, and $252,811 average with 2 sales over $1M screwing up the mix.
As long as the median priced home says attractive to investors as cash flow positive, I expect increased competition in this sector which will drive the median up. This might even create some move up buyers, as median household income should support a higher sales price. The high end will continue to tank, but this won’t really affect the median.
Or not.
skeptical
Mike,
Some questions for your provocative post:
1) What specifically did you see in the market mix in December which makes you believe the data is anomalous?
2) Do you see that same mixture continuing in January, which to date shows a pretty stunning drop in median prices? If so, why do you believe that mixture is anomalous?
3) Any explanation for the skyrocketing ppsf in January with a plummeting median?
4) The move up buyer comment caught me off guard. Where will that guy come from, seeing as how almost 3/4 of all homeowners are underwater and 70% of all sales are distressed?
5) 10% increase y-o-y from Nov 2010? That would be the largest y-o-y increase in the median since the bubble infused halcyon days of Jan 2005 to Jan 2006. That is a bold prediction indeed.
While I respect your boldness, I do question your logic. Any additional comment/info/elaboration to the above greatly appreciated.
Grand Wazoo
Mike’s contest entry would suggest he is bullish on the local economy, while some of us are not. I for one hope Mike wins.
What I’m seeing from my hiring perspective is that the quality of the local workforce in my domain is really going down. The best people seem to have left Reno, and it is nearly impossible to lure someone with skills in demand to come to Northern Nevada – they all read the papers too. Positions we used to post even just two years ago would draw 30-40 qualified applicants, now we get under 10, mostly local and some not even meeting the minimum qualifications. It is really shocking.
GreenNV
Wazoo, I am hugely negative on the local economy short term. I’ve been having a side conversation with “andrea” about the brain drain in the region, and completely agree with you that a lot of the best and brightest have left the region. But one thing I’ve learned from the bubble and crash is that this “median” figure we all chase defies traditional market pressures. The median could go up 30% here and it wouldn’t really shock me – it has happened in some of the most distressed Inland Empire communities. But I don’t necessarily equate an increased median home sale price with stability or the general health of the market.
Skeptical, point by point:
1 – A lot of sales that should have close in November got dumped into December due to the robo signing issue. These are all foreclosures, and on the lower end of the scale. An awful lot of traditional sales (and shorts with maneuvering room) were pulled off the MLS for the holidays.
2. There are a lot of standard listings (new or returning to the market) returning to the MLS right now. Also a lot of “back on the market” listings. I think the market mix will normalize as the month goes on and the people who had the latitude NOT to be on the market return.
3. I worry about the plummeting median, but the sample size is only 25 or so to date. And in retrospect, my $/sf figure represents the average and not the median.
4. I think the 70% under water figure quoted is more state wide and that Washoe is closer to 55-60%. Still not good, but 40% aren’t under water. If the investor market around the median priced home continues and gets competitive and drives the price in this segment up, there will be a significant class of early 2000’s buyers who didn’t refi or HELOC. There is a significant class of owners who are not underwater or out of work that might take this opportunity to move up. I wrote posts about One Block and Another Block a couple years ago, and was surprised how conservative the average home buyer was being, despite the media reports of all 100% financing. I’ll do an update on these soon.
5. Our medians are back to 2001 levels, really before the bubble. Even at 3% annual appreciation, I feel the median is at least 30% under where it should be based on replacement cost, and our median household income would support this cost.
So shoot me down or at least ponder my points. I don’t think an increasing median is a sign of a healthy market, but I think it will happen. Reno has over corrected, and the response could be surprisingly dramatic. Who knows? It is as an apt scenario as anything I’ve see posted here.
skeptical
Greenie,
The additional data does help. You make some very good points, especially regarding the mix shift and robo signing impact. I suspect you are correct regarding the return of organic sales to the market going forward.
That said, I still think you are ambitious regarding a possible rebound. Prices always overshoot to the downside in the aftermath of a bubble. Reno could go further still before this is all over.
Regarding affordability, I wholeheartedly agree. I, therefore, may be one of the possible investors you ponder about due to the ample opportunities for positive cash flow.
Regardless, your posts are always full of info and thought provoking. I think we all benefit greatly by reading them. Same, of course, goes to Guy, who does a fantastic job on this blog. Sincere thanks to both of you.
Where are the guesses for Smarten, BillD, Grateful, IJJ, and RI, among others (including the hibernating one….).
Grand Wazoo
Mike:
Knowing your thinking now I may agree with you – assuming the lower end has collapsed all it can, as the top end of the market collapses the median $$$ sold may in fact go up, even though the RE value expressed in $$$ per sq/ft may continue to go down. So perhaps we may need two winners a year from now – median price and price per square foot.
Anything you can share what “andrea” has shared with you, without compromising any confidences, I’m sure would be most interesting to us all here on this thread.
These are interesting times for sure.
inclinejj
Is a contest really a contest w/o a prize?
Tom. excellent post. With all the problems facing the state? How can anyone think the market will correct any time soon? Granted it is a great time to buy if you have cash!!
Free Falling
Well I’ll throw my hat in the ring at $180,000 median and $100/sf. As I see it, July and August 2010 are the new “normal”. I agree with Green NV’s assumption that the latest sales are banks trying to clear their books of some lemons before the end of the year. Moving into 2011, I believe we will see more top quartile homes being priced to market or reverting to the banks and finally moving. This should lift the median. We also have more builders (Lennar/Toll Brothers) aggressively moving back into the market. I have no idea how they are making any money at the current price point, but their sales will help elevate the median and psf.
I have no grand hopes for significant changes in Washoe County employment in 2011, but I believe those that are still working are feeling much more confident than a year ago. The lay offs are slowing but it will be some time before we see hiring return.
I also agree that we are a good 30% below long term sustainable pricing. I think the correction will start in 2012. My bet for Dec 2012 is median back up to $210,000 at $117/sf.
Guy Johnson
There will be prize. Actually, two prizes – one for the winner of the median sold price and one for the winner of the median sold price per square foot.
Sully
I give up, I can’t get the December numbers to line up so I’ll just go with my 2010 number of 145,000; and a ridiculous 84.05 sq ft.
I realize this makes me look like a permabear, which I’m not. However, I cannot for the life of me see how Bernankes’ mad money making machine is helping resolve anything.
So, in conclusion, I still think we have to wait until 4th qtr 2012 or 1st qtr 2013 to see a real bottom in this market.
Skippy
$148,500 $82.11 ppsf
Rents are going to go down in Reno, making houses at current levels less attractive as investment properties.