Sales slowed
in September, most notably in the over $500,000 range, with overall activity off
39% from the year prior. Meanwhile, the median price slipped to $275,000. Months
supply of inventory in the $500K-$1 million range is now approaching three
years, with five years supply in the $1-2 million range and an infinite supply
of homes over $2 million. Honestly it’s a pretty dramatic slowdown… Perhaps
the day of reckoning for our luxury market in Reno Sparks has finally come. full report
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smarten
Mike Van H [and others] have written that: “until prices come down enough for regular Joe Schmoe to afford a starter home, the [Reno] housing market will be screwed.”
I have to respectfully disagree.
Again I refer to the San Francisco Bay Area where less than 10% of the population can afford to purchase a median priced home. Yet look at what’s happened to prices.
If rich California [or for that matter Chinese, Indian, etc.] retirees [or others] migrate to Reno; and they can afford [and are willing to purchase] a starter home or greater; what difference does it make that Reno resident Joe Schmoe cannot?
And that’s the real problem [IMO]. Whereas 5 years ago there was a steady stream of relocatees who could afford a Reno starter home [and were willing to become homeowners], that’s no longer the case.
When this stream returns [for whatever the reasons], I believe the equation will change regardless of what Joe Schmoe can afford.
Ann O.
Speaking of the impact of Californians on Reno real estate (and the security of people renting from amateur investors)–if you read to the end of this article you will see that another Reno home will be coming onto the market soon. http://origin.insidebayarea.com/trivalleyherald/localnews/ci_7070300
Somehow I don’t think this will be the solution to this couple’s problems.
Move to Reno?
Mike Van H., your situation where your home went from $89k to $147k in 14 years and then went to $255 in a couple of more years, shows that the real estate market doesn’t move evenly, year after year. The correct way of looking at your situation is that it took 16 years for the price of your home to go from $89k to $255k.
Anybody who bought a new SFR for $170k in 2003 got a very good deal.
GuyJohnson
smarten,
As of this morning here’s how the current Active listings breakdown:
56% owner-occupied
37% vacant
7% tenant-occupied
– guy
Bob
The Bay Area has a tech economy that can support the overpriced housing. Reno does not. There is no industry here that pays for people with engineering or tech degrees.
Until that happens Reno is way different than the bay area.
homepop
Someone asked when Reno real estate has gone up like this before. I bought a 3 BR 2 1/2 bath 1600 square foot house off lower King’s Row in 1978 for $40K. I sold it (job transfer) in 1980 for $89K. This was the period when the MGM Grand and other large casinos were moving into town.
Lexi Cerretti
I just posted home sales stats on our blog for Incline Village. What a difference 30 miles makes (and cash buyers). I would note that the average sales price is scewed due to a $13 million and $9 million sale this summer. Average single family price is up 30% to $1,888,372 year to date through Sept. 30, and median price is up 15% to $1,215,000 from the same period last year. Read the rundown here http://buytahoehomes.com/blog/incline-village-real-estate-sales-07q3
smarten
Sorry Lexi –
I don’t mean to pick on you but what you’re preaching is exactly what I’ve been talking about for months. The lay person listens to statistics and conclusions spouted by real estate professionals in a vacuum; or he/she reads recent Montreux monthly newsletters that proclaim “we’re right on track and ahead of last year;” and, he/she thinks the market is going gang busters [what a difference 30 miles makes] when in reality, IT ISN’T!
The facts reveal there are about 7,800 SFRs/condos in Incline Village/Crystal Bay. Currently, there are a little less than 500 for sale on the local MLS [well over a 2 year sales absorption rate and that doesn’t even include the hundreds and hundreds (or possibly 1,000 or more) of other Incline Village sellers who’ve simply thrown in the towel in desparation by taking their properties off the market]. Yet YTD, there have been but 208 sales [compare this number to the approximately 350 local real estate board members] – only 107 of which were actually SFRs.
For the last two years [the sales stats are almost identical YTD for 2007 compared to 2006] 2/10ths of ONE PERCENT of all residential properties listed for sale are actually selling in Incline Village/Crystal Bay and we’re supposed to conclude the market is immune from what’s going on around it? Throw out the two mega sales you mention in your post [and what about the other $9M and $30M sales in the last three months; 521 Silvertip which sold last month for $3M; and, 863 Lakeshore which sold the month before for $2.4M? (and these are just the sales I know about and can rattle off of the top of my head)] and what’s really, really left over?
The fact of the matter is that the overwhelming majority of properties listed for sale at $2.5M or less in Incline Village/Crystal Bay during the last year [many hundreds if not 1,000 or more] HAVEN’T sold notwithstanding the fact they’ve spent many, many months on the market. Every day Don Kanare [http://www.insideincline.com] reports on price reduction after price reduction; most resulting in nothing more than seller frustration and ultimately, another long term rental offering! In fact, Don recently recounted on his web site of the success one of his clients had on a property reduced in price TWICE in a week [and by some 21% no less] which his client was able to snap up for LESS than the seller paid two years ago. And what about the owner of a $2M plus Lake view property on Fairway which isn’t selling and is rumored to be in foreclosure?
And since I am a renter, I can tell you that my wife and I have scoured over virtually EVERY Incline Village/Crystal Bay rental to hit the market in the last year so we know what’s really out there. I find it simply amazing how many rentals are really unrealized sales [in fact, many were simultaneously being offered for sale (and most of the time, their owners’ agents didn’t even have a clue)].
The Incline Village market is in a tailspin and professionals who have a disincentive to share the truth are themselves in denial because they point to virtually meaningless statistics [there just aren’t enough sales to make any meaningful conclusions other than, there aren’t enough sales]. Is the Incline Village market holding up for truly special properties offered at $5M and up? Yes. What about POS condos at under $400K? Yes. But for virtually everything else in between [and we’re talking at least 10 times the number of properties that have actually sold in the last 10 months], it’s a graveyard and I think you know it.
Also as we’ve discussed on this blog, when you have only a couple of lower priced sales; a couple of statraspheric sales; and virtually nothing in between; median prices increase notwithstanding the fact that fundamentally, there virtually aren’t any sales. This phenomena describes Incline Village/Crystal Bay to a “T.”
So just like Reno’s high end residential market, sellers in Incline Village/Crystal Bay are by-and-large in denial. Sure they’ll sell if they get their unrealistic prices. But if they don’t [and the statistics for the last two years prove that typically, they don’t], they’d rather take their properties off the market than sell them for what the marketplace truly dictates.
The day is coming very shortly, when Incline Village/Crystal Bay sellers must face the same fate $1M plus sellers are about to face in Reno [in fact, it’s already started on the California side of Lake Tahoe’s North Shore]. Let’s see what happens to median prices then.
BanteringBear
Jason posted:
“I dont think you will see homes selling for 175k in spanish springs or wingfield EVER!”
Really, Jason? Hmmmm. What sort of FUNDAMENTALS are you basing your opinions on? Or, is this just a case of wishful thinking on your part? I’m curious to find out where this logic comes from.
Mike Van H posted:
“In late 2003, I was looking at homes in Spanish Springs for $169,000, NEW homes. We weren’t in a depression then.”
Exactly. And prices had already begun their bubble ascent at that time. I know plenty of people who purchased in Spanish Springs pre-bubble. They’re hard working middle class types who bought what they could afford. Many paid a little more than $100k.
John
Smarten – It’s John the Montreux stalker again. Thanks for your feedback about renting a cottage in Montreux. I think its a great idea and let me tell you why. We looked at a very nice Stonehaven house early in the year. Its been on the market for a long time. Don’t know exactly how long. Listed at 1.75 or so. It was purchased in 03 for 1.20 by the seller. The realtor says the land alone is worth 800k, and that replacement value is above the asking price. We just put in a ballpark verbal offer of 1.3 to 1.4 to test the water and were basically told by the owner, via the agent, forget about it. The owner is prepared to wait out the winter even though he had to move to another city months ago and has two mortages to fund. I am honestly surprised by this given what is going on in Reno right now, and how the future looks.
Don’t get me wrong, this is a beautiful house built by Lake Crest Development, and in the Bay Area would cost twice the price or more. But I am thinking, if the land is really worth 800k (doubtful, but just assume so for comparison sake) then just buy land directly across the street from this home in Galena forrest, where there are many lots for sale for 200k, hire Lake Crest to build an even bigger nicer home at 200-250 per sq foot, and come out way ahead. Granted you will not be in Montreux, but you can join the club with all the money you save, and walk right on over to the pool. Its only 1/2 a mile away.
What do you think? Are these high end resales ever going to get realistic, and if so when, or is it just time to rent or maybe even better, build. Builders must be as hungry as realtors right now.
Once again, your expert advise is appreciated as its hard to judge the market from California. By the way, we currently rent in CA, are serious buyers, and can close and move in matter of weeks.
Move to Reno?
Sure, it would be great to turn back the hands of times to 1999 or whatever but we can’t. Time moves on. Check out the price of concrete or plywood or land. Builders just can build for the prices they charged pre-bubble. Of course prices got ahead of themselves during the bubble what with speculators buying and ordinary folks suckered into homes they couldn’t afford but it doesn’t mean that the market is going back to the 1999 or 2003 prices. The way i see it is that during the next 12 to 18 months excess inventory will be taken off the market at about 2/3 of the bubble top. Which, btw, will be an excellent buying opportunity.
After all, Reno has a great location.
Jason
well said MTR. I agree 100% with you.. While we may have seen an unrealistic run up in price the last 5 years or so… Construction costs have gone up as well. Like you said all one needs to do is compare the costs of raw building materials from 1999 to present.
we will NEVER I repeat NEVER see 1999 prices again. with today’s construction costs profit margins wouldn’t support those of 9 years ago.
Jason
I would LOVE to see what houses in spanish springs were selling for 169k in 2003.. Since you claim that you saw “MANY”. Please offer some proof.
California Boomer
We have been looking at Montreux for 2 years now. We are California professionals looking to retire in about 4 years. Our in-laws have lived in Incline for over 20 years, so we know the whole area very well. We like to ski and golf, but don’t want to put up with Tahoe snow. We also prefer high-quality medical care nearby–and a major airport–and no state income tax. A Montreux condo property like the Cottages would be perfect for us. With a Silicon Valley apartment, we could just fly back and forth at will.
Regarding Montruex in denial. The realtor with the most listings also lives there! Talk about a conflict of interest in representing either buyers or sellers in wanting to keep prices unrealistically high! About 30% of Montreux owners are mega-wealthy tax expatriates. Another 30% are older Tahoe/Incline emigrants who are tired of the bad weather. These people are immune to prices. The last 40% are from Reno who appreciate the quality and amenities of Montruex. So only about 40% of the residents are price-sensitive when in comes to selling their property. The bottom line is Montreux prices are sensitive to what is going in the Reno market but are, in fact, partially insulated from it.
The Cottages are the lowest end of a very high quality market and by my count 7 or 8 of them are on sale (some for well over a year). Their prices are being threatened for Reno market buyers by the Renaissance development which offers more house but lower quality for the same money and the same amenities. One of the very large Cottage homes just reduced its price from $2,400,000 to $1,999,000, which is the first big crack in the ice that I have seen. We’ll see what happens to the rest of the market as we go into the dead season.
SoCaltoReno
Not only are the numerous Renaissance homes for sale putting pressure on the other properties for sale in Montreux, so are properties such as Diane’s new listing in today’s blog which has 3800 sq feet on the golf course in Somersett for 699k. Renaissance homes in Montreux with the same sq footage and of the same quality, some not even on the golf course, are asking 1.3 and were selling early in the year for 1.1 mil. Yet they are still asking 1.3 for the largest floor plans. In addition there is a release of newly built and under construction homes in Montreux called Chalets. Currently there are 5 or so in MLS with more under construction. Not one has sold as far as I can tell and according to the Washoe County Assessors site, and they have been already been reduced by 100k in the past 6 weeks. On top of that earlier this year 5560 Lausanne at 5017 sq. feet in Montreux on the golf course sold for 1.45. In addition, 5700 Dijon at 4100 sq. feet sold late last year for 1.5. Both of these homes are in the older established section of Montruex in the trees surrounded by large very expensive homes. There are currently 50 homes for sale in Montreux. The cool aid well may run deep in the real estate office at Monteux, but no matter how much spin the resident realtor applies to the current situation, things are only going to get worse and the deals are only going to get better so don’t cave in now. Is this market really justifying a 500k return over 4 years on a 1.2 mil Stonehaven, as John points out? Only time will tell, but my bet is no.
smarten
Okay Anonymous Southwest Owner; since no one else will bite, I will [besides I want to keep this thread open because if I’m not mistaken, it now represents the most comments of any previous on this blog].
I think you “qualified” for a $999K ARM at 6.25%. But I don’t think you spent $1M on a Reno home, and I don’t think you came up with a downpayment. I’m guessing a $797K purchase price; 1st and 2nd combo loans [either a seller (probably builder) carryback for the downpayment and a new 80% 1st mortgage]; and, combined monthly mortgage payments of about $5,000.
Now can you tell us all what happened in July when you bought [and where]?
BTW, what’s your line of work in Reno that generates $200K/annually in salary?
California Boomer
In fairness to Montreux, their facilities are much better than Somersett’s and the setting near the tree line is much less high-deserty. How much of a premium that should command remains debatable. The construction quality in the Cottages, the Manors, and Stonehaven is absolutely top end. Again, how much is that worth? Renaissance is just infill of their least desirable setting with homes of distinctly lower quality, but access to outstanding facilities.
Montreux’s problem is that the mega-rich aren’t interested in any of those offerings. The people who are potentially interested are not going to buy at unrealistically inflated prices.
Doofus
Montruex’s problem is that is inconviently located (Derrick can get to RNO faster), an architectural characature of poor taste and excess, full of Nouveau’s and wanna’bes, way over priced, and yet some buyers are still putting a value on buy into there. I SO don’t get it. Quick drive down to Dillard’s is an asset for this class of clientelle?
You got mega bucks and the big “schwing”? Why are you hanging with the trash in the south meadows? The are much better properties here.
Mike Van H
To the commenter above who wanted me to provide proof of those prices, that’s nearly impossible to do considering it was 2003 and I visited dozens of new home developments looking for a new pad. I can tell you there were three developments at the time all West of Pyramid Highway (turning West on tha tstreet by Albertsons). And all three had their smallest models priced at about 169-172K range. I should also say though that 4 months later when I looked again, prices had risen by $40,000 and there were waiting lists and camp outs at every development. So those prices were short lived. Strange, no one camps out at developments waiting for model releases anymore.
Mike Van H
Also isn’t Montreaux on County Land and not City Land? Is there a benefit or drawback to that?
stjoe
Again I find this discussion about the collapse of Reno real estate prices both fascinating and Again I find this discussion about the collapse of Reno real estate prices both fascinating and hilarious.
As someone who lived through earlier localized booms and collapses in Honolulu, the Inland Empire Philadelphia, and San Diego, I can assure you from personal knowledge that the prices for even high-end real estate can collapse and collapse quickly. I remember price cuts of 40-60%
Those who say it will never happen need to remember the wise words of George Santayana said:
Those who cannot learn from history are doomed to repeat it.
Those who do not remember their past are condemned to repeat their mistakes.
Those who do not read history are doomed to repeat it.
Those who fail to learn from the mistakes of their predecessors are destined to repeat them.
Anonymous in Southwest
Alright,
Anonymous Southwest owner.
I bought an older home, paid 695K, actually never asked “what” I would qualify for, as we already had selected a home listed, did a 80% 1st, bought down to 6.025 by paying points, and a second of 20% at 9.8%. You are right on combined payments, however, both loans are 30 year fixed NO ARM here.
Thanks for playing…
smarten
Thanks Mr. Anonymous:
A 30 year $140K fixed rate second at 9.8%? What was the thought process behind this decision [not behind the 100% financing decision but rather, 30 years at 9.8%]? Was the second a seller carryback? If not, did you pay loan origination fees on the second [and if so how much]? Finally, does the second provide for a pre-payment penalty and if so, for what period of time and how much?
Where is the house located [and how much “older” is “older”]?
And you didn’t share what you do in Reno that generates $205K annually in income. At least one inquiring mind wants to know.
Thanks Anonymous.
Anonymous in Southwest
Anonymous Southwest here…
response to Smarten:
A 30 year $140K fixed rate second at 9.8%? What was the thought process behind this decision [not behind the 100% financing decision but rather, 30 years at 9.8%]? Was the second a seller carryback? If not, did you pay loan origination fees on the second [and if so how much]?
–NO loan orig fees, fixed and no pre-payment. My thinking was that with a large bonus compensation, I would chunk at this and pay off in a 5 year- period.
Finally, does the second provide for a pre-payment penalty and if so, for what period of time and how much?
See above
Where is the house located [and how much “older” is “older”]?
Built in 61, 1/2 acre, 3760 sq feet
And you didn’t share what you do in Reno that generates $205K annually in income. At least one inquiring mind wants to know.
Sales executive and Western Region Manager for Silicon Valley firm.
Carson City
The price in Carson City is also coming down quickly. The seller asked for 1.2M a few months ago and just lowered the price by OVER $300,000.00 (Yes, over 0.3M)
David Graham
Hi,
I will like to rent this house for 15 days for friends who will come there for honeymoon it’s my gift to them since I cannot attend their wedding. 15th Dec 2007 to 30th Dec 2007 is the suggested time frame advice.
Regards,
David Graham.