For this month I have combined the Median For Sale Price table with the Median Sold Price table. I did this for ease of comparison of the two metrics. Let me know if prefer the data in one table or separated into two, as I did last month. Thanks again for all of your suggestions.
June’s median Sold price increased continuing the upward trend observed since January. However, the number of homes sold dropped significantly (from 409 in May to 334 in June). The Median For Sale price also increased comparatively, however the number of homes for sale (inventory) jumped to a level not seen since November of last year. 5,212 homes were listed for sale in June.
The rise in inventory coupled with the decline in Solds caused our current Months Supply of Inventory to reach its highest level since I began tracking the data.
| Month | # Homes For Sale | Median For Sale $ | # Homes Sold | Median Sold $ |
|---|---|---|---|---|
| June 2007 | 5,212 | $359,000 | 334 | $300,000 |
| May 2007 | 5,034 | $354,950 | 409 | $295,000 |
| April 2007 | 4,829 | $354,900 | 378 | $297,000 |
| March 2007 | 4,625 | $350,000 | 372 | $293,700 |
| February 2007 | 4,404 | $349,900 | 310 | $285,000 |
| January 2007 | 4,838 | $349,250 | 323 | $280,000 |
| December 2006 | 4,682 | $349,100 | 337 | $290,000 |
| November 2006 | 5,311 | $350,000 | 318 | $300,000 |
| October 2006 | 5,738 | $350,000 | 409 | $299,900 |
| September 2006 | 6,055 | $355,000 | 385 | $299,900 |
| August 2006 | 6,340 | $357,700 | 372 | $306,650 |
| July 2006 | 6,398 | $359,900 | 411 | $322,900 |
| June 2006 | 6,433 | $359,900 | 463 | $325,000 |
| May 2006 | 5,952 | $365,000 | 425 | $316,000 |
| April 2006 | 5,200 | $364,448 | 412 | $316,000 |
| March 2006 | 4,897 | $365,000 | 434 | $328,000 |
| February 2006 | 4,399 | $369,900 | 321 | $317,000 |
| January 2006 | 4,245 | $370,000 | 325 | $325,000 |
| December 2005 | 4,040 | $375,000 | 385 | $319,900 |
| November 2005 | 4,432 | $376,895 | 443 | $331,000 |
| October 2005 | 4,695 | $376,900 | 559 | $335,000 |
| September 2005 | 4,565 | $380,000 | 603 | $336,500 |
| August 2005 | 4,368 | $385,250 | 695 | $334,950 |
| July 2005 | 3,860 | $387,000 | 677 | $345,000 |
| June 2005 | 3,411 | $384,500 | 607 | $335,000 |
| May 2005 | 3,113 | $375,000 | 717 | $326,000 |
| April 2005 | 2,808 | $365,000 | 650 | $315,000 |
| March 2005 | 2,611 | $350,000 | 660 | $309,000 |
| February 2005 | 2,198 | $348,250 | 411 | $301,000 |
| January 2005 | 2,078 | $349,000 | 381 | $295,000 |
For new readers to the Reno Realty Blog, the table above is updated on a monthly basis. The median home price data reported covers the cities of Reno and Sparks, NV.
Data courtesy of the Northern Nevada Regional MLS – July 2007.
BanteringBear
“The rise in inventory coupled with the decline in Solds caused our current Months Supply of Inventory to reach its highest level since I began tracking the data.”
Ouch! More than 15 months worth of inventory at the current absorption rate, which doesn’t even include the monstrous number of newly constructed homes. Sellers are cutting their own throats by continuing to list their homes at absurd prices. Little do they know that their window of opportunity is quickly closing as lenders continue to tighten their pursestrings a little more each and every day. The coming fall and winter should be very interesting to say the least.
Move to Reno?
The other really big news yesterday is that S&P is finally getting around to re-rating all of the subprime mortgage based bonds and CDO’s. The results are not going to be pretty since a lot of hedge funds as well as big pension funds are holding billions of these securities which are now going to have a 40% haircut.
http://www.bloomberg.com/apps/news?pid=20601103&sid=akJOnhaU63wk
MikeZ
With today’s news that Nevada is leading the entire nation in foreclosures (1 per 315), maybe we could have some threads dedicated to the process of buying foreclosed or REO property?
Diane and Guy (or anyone else here), have either of you researched or participated in that process?
MikeZ
RE: “Nevada (1 per 315)”
Oops, NV is 1 per 175. CA is 1 per 315.
Mike Van H
The Kings Inn which was foreclosed upon back in June, goes up for auction today on the Courthouse steps at 11:00 a.m. for $3,500,000 cash. I would assume those Courthouse step auctions would be part of the buying process of foreclosures yes?
Casa de Dolor
The Nevada foreclosure process is outlined in NRS 107.080. It takes approximately 6 months for the entire process to get to the courthouse steps. 1. Homeowner misses a couple of payments, tries to work with lender, 2 months. 2. Notice of Default, three more months pass.(by statute) 3.Post notice of sale, 1 month. 3. Sale at courthouse.
No great deals at these sales; the bank usually is the highest bidder and takes the property back. If the bank or holder of the Deed of Trust bids less than what is owed on the loan a deficiency occurs and the homeowner can be held liable for that amount. If the holder of the Deed of Trust forgives the deficiency then the IRS will send the homeowner a 1099, since the IRS sees the forgiven part of the debt as Income. Nothing like adding insult to injury.
Property becomes an REO, Real Estate Owned by the Trust Deed holder and they will attempt to sell for market value, usually with a Realtor; no great deals here either.
When the bank gets to many REOs then we might see some price reductions.
I’m a criminal lawyer so forgive me if I got some of this wrong. As a criminal lawyer I know one thing – what the lenders did to my home town of Reno is a “crime.”
Casa de Dolor
Banteringbear: Good luck on you Washington deal; I was surprised by the heat you took from the boys on Ben’s blog. Sounds to me like you did the right thing after much research and considered thought.
Reno Girl
Guy, from your Short Sale post: “I spent considerable time researching, analyzing and providing data to Bank of America explaining precisely what the housing market was like in Reno, Somersett, and the Village at Town Center; and why the offer was a strong offer; and why BofA was not likely to receive another offer. I included comps, solds, trends, builder inventory levels, medians, the competition, and projections.”
Was wondering if you wouldn’t mind sharing with us exactly what the builder inventory numbers were that you provided to BofA. This might give us an idea of how much inventory, resale + new, is really out there. Thanks!!
BanteringBear
Thanks Casa de Dolar. It’s a tough crowd there to be sure, but it doesn’t bother me. Personally, I’m not anti real estate, I’m anti overpriced real estate. Some of the guys on Ben’s blog have a “never ever buy real estate” attitude which doesn’t make a lot of sense. When you can purchase a property which is inline with local rents, there’s nothing wrong with that. I look for undervalued fixers, with motivated sellers. As far as Reno goes, I haven’t seen anything worth purchasing in quite some time. I think that’s going to change real soon.
Reno Ignoramus
So 334 houses sold in June. 4,878 houses did not sell.
A year ago in June, there were more houses on the market at 6,433, the all-time high to date. However, a year ago, 463 houses sold, which is 129 more than last month.
A year ago in June, 7.2% of the resale inventory sold. Last month, 6.5% sold. And the median sold price has dropped $25,000 from June of 06 to June of 07.
A couple of weeks ago, I asked if anybody had a reliable number on the amount of new inventory on the market. Also, is there any way to know how many new houses are selling every month? Surely more than 334 people bought a house last month in Reno-Sparks. It appears, as people have commented here, that the developers may be laying some big pain on the resellers. Guy?
I know there are readers out there who criticize the so-called “negative” tone of these posts. But folks, these numbers are what these numbers are. Even though the inventory of resale houses has dropped from a year ago, the market has deteriorated in sales volume and price.
The bottom appears nowhere in sight.
SkrapGuy
In many other markets across the country, we are seeing rising inventories and dwindling sales volume, while the median price holds steady or even increases a bit.
The explanation offered is that the higher end of the market is selling better than the bottom, and that higher priced homes make up an increasing percentage of a dwindling number of houses actually sold.
Guy, is there a way to break down the 334 solds in June by price category?
Many market observers suggest that the truest measure of the market is to know price sold on a per sq. ft. basis. Is there any way to gather that data for Reno-Sparks, Guy? I am not necessarily asking you to do it Guy, just asking if there is a place where a non-realtor can gather that data?
RenoIgnoramus
Yes congrats to you BanteringBear. I wish you much joy in your purchase. I, too, am not “anti real estate” as some have suggested here. In fact, I own two houses, both bought at traditionally sound fundamental values well before this Voodoo money driven ponzi scheme got rolling. I like you, Bear, hope to see the day when houses become affordable again. When the median income family can buy a decent house without having to commit financial suicide with “creative financing” that inevitably leads to foreclosure. I feel sorry for all the honest people over the last 5-6 years who went out into the market looking to buy a house only to lose out to some $40K a year guy with a stated income, no-doc, I/O, nothing down, liar loan claiming to make $150K.
It will take us years to wring out all the fraud and greed, but I believe we will get there.
Enjoy, Bear!
Casa de Dolor
Skrapguy: If you have Excel, just go to the Washoe County Assessor’s site; you can get a lot of information.
Casa
GreenNV
RI, as best as I can tell, the builders moved about 180 SFDs in June.
Casa is spot on about the futility of Trustee Sales. Of the 67 from June, only 1 went to a private party. The rest became REOs.
Q1 2006 averaged 81 NODs, 7.5% of which ended in Trustee Sales. Q1 2007 averaged 193 NODs, 31.5% ended in Trustee Sales. Q2 2007 averaged 203 NODs. The huge increase in NODs is scary enough, but the rising odds that an NOD will end up in a Trustee Sale is frightening.
smarten
Casa de Dolor wrote: “if the bank or holder of the Deed of Trust bids less than what is owed on the loan a deficiency occurs and the homeowner can be held liable for that amount.”
With all due respect, I do not think this is a technically accurate statement. A non-judicial foreclosure cannot result in a deficiency judgment, even if the security is sold for less than the outstanding indebtedness [i.e., the deficiency].
If you’re a trust deed beneficiary; you fear the value of your security is less than what is owed; and you want to preserve your right to pursue a deficiency against the trustor[s]; you MUST prosecute a judicial foreclosure [because if you prosecute an ordinary suit for money you will be deemed to have “waived” your security, the suit must be for judicial foreclosure].
Stated differently, the beneficiary must make an election of the remedy he/she/it wants to pursue – expedited nonjudicial foreclosure via the NOD/trustee’s sale path with no hope of a deficiency judgment; or, judicial foreclosure with the option of recovering a deficiency judgment.
Pursuing a judicial foreclosure means hiring an attorney [usually]; filing a lawsuit; securing a formal order of sale; the process takes longer and it is drawn out [which ends up costing the beneficiary even more]; and, the court reserves jurisdiction to possibly impose a deficiency against the trustor[s], should one actually occur [there can only be a deficiency if the security sells for fmv].
I bring up the subject because rarely do institutional lenders pursue judicial foreclosure [many don’t understand the difference(s)]. However as prices drop, I think you’re going to see the process change. And when it does, the beneficiary will have less incentive to bid in the full amount owed at the foreclosure sale which means properties will not sell for bloated amounts above fmv.
Two final albiets – first, the case of the sold out junior. Where a junior lienholder [HELOCs anyone?] who has not foreclosed is wiped out by a senior lienholder’s foreclosure [because now his/her/its security has become worthless], he/she/it can file an ordinary lawsuit for money against his/her/its former trustor[s]. I was thinking of this as Jaded demonstrated the number of foreclosures resulting in the holder of a HELOC being wiped out. Now that’s adding insult to injury.
Second, in California lenders are by-and-large [there are some limitations] prevented from obtaining deficiency judgments where their loans are secured by mortgages, and the loan’s proceeds are used to purchase the property that acts as security [this is called anti-deficiency legislation]. For this reason I’ve always wondered why California lenders spend as much effort as you would think Nevada lenders should now be spending, ensuring that the borrower actually has the financial wherewithal to actually repay his/her loan. In California the borrower can have all the wherewithal in the world but it is immaterial because the lender is restricted to ONLY pursuing his/her/its security. If that security isn’t worth enough, then tough twinkies to the lender for being stupid enough to make a loan without taking adequate security!
See, another one of the many advantages to owning California versus Nevada real estate [just a joke]!
Casa de Dolor
Smarten: I stand corrected, you are absolutely right. Now you can see why I stick to Criminal Law. That 1099 can be quite a shock though.
Casa
Reno Ignoramus
Thanks Green for the info on builder sales. Do you have any idea how many houses the builders have for sale?
It is quite interesting to observe the content of the discussion on the blog today compared to when Diane opened up the blog about 18 months ago or so. Back then, anybody who suggested that this market was in for bad times for years to come got blasted to bits by the market cheerleaders, all of whom are pretty much gone now. Does anybody here recall the fullpage ad taken out by one certain very large real estate company in Reno, the self-proclaimed “leader in Reno real estate” that appeared in the Sunday edition of the RGJ right after New Years in 2006? I have a copy of it. It assures the residents of Reno that there is no such thing as a buuble in the real estate market here, and it projects prices in 2006 to rise anywhere between 4% to 9%. So, as it turns out, these “real estate experts” were off about 25%-30% in their forecast.
Today on the blog we are having a sophisticated (Ph.D. level?) discussion about the formalities of the foreclosure process and the ever mounting amount of REO properties in Reno. Quite a change indeed.
The discourse over the past 18 months has been as follows:
There is no housing bubble.
Even if there is a housing bubble in other places, there is no housing bubble in Reno.
Even if there is a housing bubble in Reno, it is very small and shallow and will have no lasting impact on prices. Prices will quickly rebound.
Even if the housing bubble in Reno is larger than we thought, prices here cannot significantly decline because of “population demographics” and Reno’s healthy economy.
Even if prices have declined more than initially predicted, our market shows its inherent strength in the relatively few number of foreclosures and bank owned properties, particularly compared to our dreaded neighbor to the south, LV.
Even though the number of foreclosures and bank REO appears to be increasing, there is no evidence that this REO is in any way contributing substantially to further price erosion.
Anybody want to suggest the next step in this downward spiral?
GreenNV
smarten, awesome post. I have a program that translates Legal to English, so I think I read you!
Am I correct in reading that in a Nevada
foreclosure, the lien holders(banks)can go after all the owners assets, not just the property at issue? If so, it might help explain why my Fab 50 (50 properties held by 5-6 real estate insiders here in RNO) are so far staying out of the REO forum. Fear of serial reposession and attachment on their other assets?
So you pretty much outed yourself as an attorney with this post. Mea culpa, I’m an architect. But I am really curious from what walks of life the rest of you posters are from. Tell some tales.
Reno Ignoramus
There is a significant point in Smarten’s post that he sort of mentions only in passing. That is, the deficiency judgment in a judicial foreclosure is not for the difference between what the bank is owed and what the bank (or any buyer) pays, but for the difference between the what the bank is owed and the FMV of the property on the date of sale.
The number of judicial foreclosures over the years has been very very low because it is a far more costly method than a non-judicial foreclosure conducted by the Trustee. But if Smarten is correct that we may see an increase in judicial foreclosures, then there is going to be some work for a few good appraisers needed to determine the FMV at the date of sale. Hopefully these will not be the same appraisers who made a lot of money in 2002-2005 “hitting the number” and who played a major part in the absurd run-up in prices.
Reno Ignoramus
To answer your question, Green, once a deficiency judgment is obtained, it is just like any other kind of judgment. It is enforceable against any of the judgment debtor’s non-exempt assets.
smarten
GreenNV wrote: “am I correct in reading that in a Nevada
foreclosure, the lien holders (banks) can go after all the owners assets, not just the property at issue?”
I don’t know Nevada law, but if there is no anti-deficiency legislation [and I don’t think there is], the answer’s yes.
In fact, if someone wants to start tracking foreclosure sales where junior lienholders are wiped out [either in whole or in PART]; then approach them with an offer to buy their now “unsecured” position at a steep discount; he/she might make more in this market than waiting for the market to bottom out.
When Guy did his post on his first short sale, I was thinking of BofA having discounted its second so the sale could go through. If it didn’t give the sellers a release [and I’m betting it didn’t], those sellers may very well continue being on the hook for the difference – not just with the IRS in the form of cancellation of indebtedness, but with BofA or its assignee.
So just out of curiosity Guy, did your sellers get a release from BofA? If not, did anyone advise them it might be a prudent thing to do? If not, you might want to add this “thing to do” to your “short” list.
To address Reno Ignoramus’ observation: “the deficiency judgment in a judicial foreclosure is not for the difference between what the bank is owed and what the bank (or any buyer) pays, but for the difference between what the bank is owed and the FMV of the property on the date of sale;” yes, you’re correct and here’s the reason why. If the lender low balls his/her/its bid at the sale, the borrower’s deficiency increases [the very thing that happens in auto repossessions/lien sales]. Since a judicial foreclosure proceeding is equitable, the court has the power [at least in theory] to prevent an inequitable deficiency.
Can you imagine being a borrower; losing your property; and then being stuck for a deficiency judgment which might exceed [because of deficient accrued interest and costs of sale] what was originally borrowed? It’s the ultimate in negative amortization.
Yes, the Reno real estate market could get very interesting very soon and this phenomena may explain why sellers are continuing to make big negative cash flow payments rather than simply walking away.
Move to Reno?
A couple of comments. First, in some States, people who make the “purchase money mortgage” available to buy the house cannot obtain a deficiency judgment against the borrowers even with a judical foreclosure. Their recourse is limited to gaining title to the property.
#2 is that “fair market value” is determined by the courthouse sale.
As for the folks who are making all these home equity loans, we would have to see what the contracts actually contain. I see no reason for B of A to give a release of all their contractual rights as opposed to releasing their interest in a particular security property. I would not be surprise that when the statue of limitation in these cases gets close to expiring, that B of A will take action.
In the “good old days” people who got into a financial mess would simply wait for the dust to clear and then declare bankruptcy to wipe the slate clean. Not sure how the recent changes to the Federal bankruptcy law affects the ability of people to just “walk away” from their debts.
SkrapGuy
Regarding the phenomenon of the median price staying stable, or even increasing, in the midst of declining sales and rising inventory, and the explanation that the upper end of the market is selling better than the bottom, look at Somersett today.
There are 133 listings. Only 8 have a pending offer. That is pretty bad at only 6%. But, of the 8 pendings, 5 of them are for listings above $875,000. The bottom of the Somersett market, and particuarly Sierra Canyon, and the Village, are dying on the vine. So it appears that perhaps this explanation, at least with respect to Somersett, may be valid.
GuyJohnson
Excellent commentary, guys (esp. Casa de Dolor and smarten). I’ve said it before and I’ll say it again, this is exactly the kind of information that makes this blog such a valuable resource for so many readers. [However, it probably doesn’t help our “readability” score any. 😉 ]
Diane and I continually hear from other real estate agents (local and otherwise) who read this blog and find the information contained herein helpful. Sometimes we’ll be pleasantly surprised to see a spike in our blog stats (# of readers) and discover that some well-known site has linked to us. Such was the case last week with my Short Sale post. A little digging revealed that iVillage.com had posted a direct link to the Short Sale post on one of their national forums. These kinds of things happen occasionally and we’re always very pleased when they do.
Thank you to all of you for your contributions (comments, links, word-of-mouth referrals) to this blog. And, as always, thank you for reading.
– Guy
Now, on to your questions…
MikeZ wrote: “Diane and Guy (or anyone else here), have either of you researched or participated in [the process of buying foreclosed or REO property]?”
MikeZ, I have not, but with the comments in response to your question, I believe you have the information you were looking for. Thank you for initiating this very informative thread.
Reno Girl wrote [in reference to my Short Sale post]: “Was wondering if you wouldn’t mind sharing with us exactly what the builder inventory numbers were that you provided to BofA.”
Reno Girl, the subject property was located in Monterey Development Group’s The Village at Somersett Town Center. At the time I was communicating with BofA, The Village had 52 units available for sale. 32 of these were the Duets (town homes) and 20 were the Courtyard homes. The last time I visited the Village’s sale office I was told that since February they’ve sold five units (that’s about one a month). At that sale rate, with 52 units available, there’s over four years of inventory sitting in the Village. As you may or may not know, the Village is also offering Lease purchase options. I believe the way it works is that at the end of your 12-month lease, half of your lease payments will be credited to back to you, should you decide to exercise your option to purchase. I was told that four buyers have done the lease purchase options so far.
Anyway, with the 10 or so homes listed on the MLS plus the 52 units of standing inventory from the builder, it was clear to BofA that having a strong offer on the table was not something to be discounted.
Reno Ignoramus wrote: “It appears, as people have commented here, that the developers may be laying some big pain on the resellers. Guy?”
R.I., see my response above to Reno Girl’s question.
SkrapGuy wrote: “Guy, is there a way to break down the 334 solds in June by price category? Many market observers suggest that the truest measure of the market is to know price sold on a per sq. ft. basis. Is there any way to gather that data for Reno-Sparks, Guy? I am not necessarily asking you to do it Guy, just asking if there is a place where a non-realtor can gather that data?”
SkrapGuy, off the top of my head I would point you to the Washoe County Assessor’s site. Not sure if you can get what you’re looking for easily. You may have to perform a manual data scrape. Perhaps one of our readers can offer a suggestion. On another note, did you find the recent Price Banding charts that I posted useful?
Smarten wrote: “So just out of curiosity Guy, did your sellers get a release from BofA? If not, did anyone advise them it might be a prudent thing to do? If not, you might want to add this “thing to do” to your “short” list.”
Smarten, you guessed correctly, BofA did not release the Sellers. In fact, one of the conditions of BofA’s approval for the sale was that it reserved to right to “seek recovery of the deficient balance”. Such a condition naturally concerned the Sellers. We asked BofA to remove that clause, but they refused. Given the circumstances my Sellers were not sure how much they could’ve pushed back.
shandra
Is it true what smarten says, a lender can only seek a deficiency if judicial foreclosure is used, whereas in non-judicial foreclosure, they cannot seek deficiency? I have not read this before…