…As opposed to severely distressed. Washoe and Storey Counties, along with Carson City, were ranked by Wells Fargo Wholesale Lending as simply distressed, while our sister to the south, Clark County, was ranked severely distressed. This is an improvement over Countrywide’s recent category 5 ranking for us, the worst possible.
What does this mean to you? If you’re a buyer, it looks like you’ll need great credit scores, financial documentation, and 15-25% down to make a purchase. If you’re a seller, it means you’ll be lucky to get a buyer at all under these conditions. Thanks to Robert for the link.
I’ve been out with more buyers again the last two days, this time looking in the low millions range. The interesting thing is, I ran across short sales in Arrowcreek, Southwest Vistas, Mt Rose Estates, St James Village and even Montreux. Our troubles seem to be trickling upward. The higher end is not immune.
And for everyone out there who thinks they can swoop in and get a killer deal from the banks through a short sale purchase prior to foreclosure, think again. Subject to third party approval? Virginia Broker Frank Llosa calls these fake listings. Thanks to Perry for this excellent find.
Bob
http://news.rgj.com/apps/pbcs.dll/article?AID=/20080228/NEWS18/80228017&oaso=news.rgj.com%2Fbreakingnews
So much for that turnaround!!!!
NAS
Bull’s eye on this one, Diane.
Just walked away from a “short sale” of sorts and learned from it. Our agent (Hi Guy) and listing agent were great, so no complaints there. In the future, I’ll take a pass on short sales/bank approval/third party business and wait it out till the house is an REO. With some luck, the bank we do business with may actually hold
the note!
Realistically, an REO will have challenges, but better odds than the short sale. It would be refreshing to find some homes with “normal” sellers that haven’t ATM’d, upside downed their properties and grasp the competition out there.
And, if you would allow me one quick whine-For all you who “don’t really have to sell” with listings cluttering up the MLS? I think your wasting everyone’s time. Go
list some crap on Ebay or something. Thank you.
Sully
I agree, these “not for sale” listings are a waste of time. They are also distorting the median asking price and the few sales probably distorting median selling price, hence the “distressed” rating.
My frustration with this market has me looking in other areas – Henderson, St. George. Being retired and not depending on the economic influence of any particular area, I’m not ready to buy into the “Reno is Different” crowd.
So PLEASE people – lead, follow or get out of the way!
Tom
Yo, Sully —
Henderson in August? Figure into your cost projections an annual thirty days of temporary living somewhere else! Or plan on that month for the annual visits to the kids and grandchildren.
St. George is extremely boring — unless someone headed there plans to be busily involved with Church-centered activities.
Not having found anything in Reno, we are now looking at the Kahala district of Honolulu. No Chains!
Caleb Mardini
Thanks for the post. This is good info.
Sully
Thanks Tom, actually the two reasons you mentioned are the reasons we started looking here first!!!
Bob
lol, so reno is only one pick behind hawaii!!!!?
GreenNV
I’ve got to agree that short sales are a lost leader waste of time. A bunch have recently surfaced on Craig’s List at 2/3 the purchase price (and not generaly identified as short sales – thank’s agents, you got on my list of “never deal with in the future”). The banks just aren’t doing this sort of deal right now, so why waste your time even listing these? Lead harvesting?
And Diane is right, the pox, just like the Mormon beetle, is moving south and up the real estate food chain. Tons of Arrowcreek, St. James, and even blessed Montreux dilitante ego spec homes going down the tube and showing up on the default radar.
Remember when the concern was an REO in the neighborhood? Now it is on your block. In fact, there are many newer blocks, streets, and even entire developments, where EVERYONE is under water right now. Group hug.
Washoe County Merely Distressed | Reno and Its Discontents
[…] duh, its clear to anyone that Clark County is severely distressed. Who wouldn’t be after having to call a do-over Democratic convention? Oh wait, this is […]
Reno Ignoramus
Hey NAS, I agree completely on the non-seller sellers. I don’t get it. Are they hoping that lightening will strike and some Greater Fool who has been sleeping in a cave for the past 3 years will come out and offer full price in fear of being priced out forever? It seems to me all they are doing is shooting themselves in the foot. When Diane takes a potential buyer out to look at 120 houses in 4 days, how can such a buyer reach any other conclusion than the GLUT of inventory calls for lowball offers?
Diane, do you recall that I have been posting here for a long time that the Voodoo money was not limited to subprime borrowers. I have been saying for well over a year that it is a big mistake to think that the Voodoo witchdoctors handed out silly money only people with lousy FICOs. By the time this whole mess is over and done with, which I continue to maintain will be years, not months away, we shall see REO all over Arrowcreek, St. James Village and Montreux. All over everywhere actually.
Tom, I will be on Oahu in about a month. Want me to check out anything for you?
LongerWalk
Diane/Guy: You occasionally relate that you are out & about with buyers . . . how is that side of the market doing? We know the sellers are hunkered down for now, holding fast to a magic number (or are just trolling, not fishing), but the buyers? Are there only a fraction of those a year ago, two years ago, or are they out there and just not ready to plunk their $$ down? In other words, compared to the overabundance of houses sitting out there, what is the percentage of buyers now in the game?
On the Sidelines
“It would be refreshing to find some homes with “normal” sellers that haven’t ATM’d, upside downed their properties and grasp the competition out there.
And, if you would allow me one quick whine-For all you who “don’t really have to sell” with listings cluttering up the MLS? I think your wasting everyone’s time. Go
list some crap on Ebay or something. Thank you.”
While I agree much of this has happened, it’s painting with a rather broad brush. What about the investor who jumped in at the end and never used the home as an ATM but bought at the tail end of the UP market? What if reducing the price to what you feel is the correct level ends up being a cost to the seller? A cost the seller simply can’t afford at this particular time? It’s real easy to make blanket statements and point fingers but there are many directions that fingers can be pointed.
The one place I don’t see alot of fingers being pointed at are the builders who had their own “in house lending” and lied to A paper borrowers and put them into subprime 2/28’s so they didn’t have to come up with any down payment. The average loan officer, lender, broker didn’t even get a chance in most cases due to the concessions offered by the builders based strictly on the fact that they lied to borrowers and told them they MUST use the in house lender to get the “free” upgrades. While this is an illegal practice, the average borrower was not aware of that and basically got caught with their pants down the day of signing at the title company. Working in a broker shop for the last two years I can assure you that we did have borrowers file complaints with the state for these very practices.
The bottom line is not everyone who has their house listed at what many of you consider “over” priced can’t financially drop the price to the point that it causes them to pay out of pocket to sell the house.
Speaking from personal experience, we have 3 investment properties that have 0 equity and have never once been refinanced. Would you suggest we list these homes below our purchase price?
Would YOU do that?
The point I’m trying to make is not everyone is an irresponsible owner who knew they were buying above their means and lied on their mortgage application, or continuously refinanced and took cash out and are now stuck with poor decision making based on living outside their means. One more example would be our primary residence which has dropped in value simply due to the fact that there have been 8 foreclosures in our neighborhood of less than 100 homes. Would you say that we were irresponsible for buying our house because we should have KNOWN this would happen 5 years ago? Our house that we live in today, is most likely valued at 100K LESS than we paid for it 5 years ago, This is OUR fault? I think not.
Most of the time I find this to be a very informative blog but there are other times the outright arrogance and condescention is unbelievable.
Allen Murray
Good point Sideline, for some reason, many on this blog assume way too much and don’t have the ability to understand another point of view. I suspect in any given market, the majority of sellers don’t have to sell. Another point I want to make is that if you were a zero down buyer with marginal credit and purchased a house that is now worth less than you paid, you don’t have the option to lower the price below what you owe the bank. Sellers in this situation also aren’t losing anything by walking away except their already marginal credit score. Greed was brought up as the reason for sellers not reducing their price, I submit that greed is the reason why these wannabe buyers aren’t buying now, because they want to save as much money as they can and can’t stomach the fact that they may lose some money. If some of these non greedy people (BB?) really wanted to help the less fortunate, they would buy the bus driver’s home in the post above…..
smarten
Allen states, “another point I want to make is that if you were a zero down buyer with marginal credit and purchased a house that is now worth less than you paid, you don’t have the option to lower the price below what you owe the bank.” Sorry Allen, I must disagree.
I invite you to replace the word “house” with “car” and then restate your observation. You DO have the option Allen.
Lots of people sell their cars for less than what they owe against them. In fact there have been some recent television stories on this very subject – negative equity auto loans are turning into the new subprime mortgage. Sellers of these vehicles realize that they must sell for less than they owe [especially the ones who put next to nothing down]. If they don’t like the prospect, then they end up driving their klunkers for another 4-7 years until their loans are paid off [then they don’t have to shell out anything out-of-pocket]. If they can’t afford ti shell out, then they lose their car and you’d better believe, their lender comes after them for the deficiency. And typically, that deficiency is far greater than it would have been had they sold at fmv and shelled out the difference out-of-pocket.
The same principle applies here. If your house has depreciated to a level which is less than what’s owed against it; or you put nothing down; you have two options. If you don’t like the prospect of shelling out the difference out-of-pocket [or you can’t afford to pay the difference], then live in your klunker for as long as it takes to retire the loan. If you’re unwilling or unable to do this, don’t waste agents’ or buyers’ times trying to sell your home for more than it’s worth.
Once lenders “get it” and start filing judicial foreclosures [so they can recover deficiencies], believe me, property owners ARE going to understand the rules of the game.
This isn’t a blame or greed game Allen. It’s simple economics. When you take out a mortgage [or an auto loan] you agree to repay the obligation it secures over its term. Live by your agreement or if you must sell, don’t waste our time trying to sell for more than its fmv. It’s not an issue of “I don’t really need to sell.”
Just my opinion.
Allen Murray
First of all Smarten, you seem to assume that I’m in that position? I sure hope that’s not the case. The second flaw in your statement is that you “assume” again that the negative equity seller can afford to pay for their house after their adjustable mortgage increases, or can afford to pay for the deficiency, many cannot. Your free market theory is correct in that the lender can and should seek a judgement for the negative loan balance, but that’s up to the bank, and has nothing to do with the seller being able to lower the price. Last summer I was trying to purchase a property from a guy that was in that exact position, I offered him a price about $75K lower than his balance which was FMV, he was in pre foreclosure, offered it to his lender, and they laughed at him. Lastly, with the bankruptcy option, which I don’t agree with either, the debt may not necessarily have to be repaid. My buddy is a local bankruptcy attorney and he says business is a good as ever. Maybe you should quit watching so much TV and start working with reality. Cheers Smarten!
smarten
You’re too sensitive Allen. Never did I state nor intend to imply I was talking about you personally – I’m talking about the seller who refuses to price his/her property at 5% below today’s fmv because he’ll/she’ll have to pay hard dollars out of pocket to cover the deficiency.
And I don’t assume the negative equity seller can afford to continue paying his/her mortgage. I understand many cannot. But unlike you, I don’t assume the answer is walk away and make it someone else’s problem. If there were real consequences to walking away; that were worse than finding a way to pay the mortgage [like the consequences of walking away from a negative equity car loan]; walking away would NOT be an option.
You on the other hand are not a real seller. You refuse to price your home at today’s fmv [let alone at 5% below that fmv] because to you, it makes no economic sense. Although you and my first hypothetical example are different in many respects, you’re really very similar [see, I learned this watching TV].
Neither of you is a real seller. That being the case, the two of you are doing a disservice to the rest of the market. How you ask?
First, you’re wasting the real buyers’ time by forcing them to look at and then summarily dismiss your listings because your asking prices are fantasy.
Second, you’re unnecessarily skewing the market by increasing the number of listings [even though yours raren’t “real” listings] and making the ratio of real sales to fantasy listings even lower than the less than 4% it currently is.
Third, you’re wasting the time of sales professionals who given a choice, would rather devote their efforts to real sellers and buyers.
Finally, you’re condescending to boot [hey, if you don’t like my price tough; I don’t need to sell anyway]! What kind of response do you think this kind of attitude engenders?
And while you’re at it, why don’t you talk to your bankruptcy attorney friend about whether or not fraud on a lender survives bankruptcy [it doesn’t]?
The point of my post was simply that if you’re not a real seller in this market [which by your own admission you’re not], get out of the way and don’t ruin it for the few serious sellers.
Allen Murray
Ok, Smarten, let me turn the tables here, have you ever considered that you and many others aren’t real buyers as much as I’m not a real seller? You obviously think FMV is less than what most sellers think it is. You, as a buyer, don’t “need” to buy and are looking for a deal. Why don’t you guys quit wasting all the realtors time trying to squeeze out every penny from a upside down seller or lender when the chances are slim to none? Honestly, I would do the same thing if I were you, that’s what’s free markets are about. The difference between you and me is that I’m not telling you to step aside and quit wasting everyone’s time. If my house wasn’t getting shown regularly, I might take your suggestion. Like you said earlier, we are in a Mexican standoff, who’s going to flinch first? I believe buyers will, you believe seller will. In the meantime, I’ll enjoy my McMansion, you enjoy paying your rent, it works for both of us.
Secondly, I don’t like the idea of people walking away from any loan commitment as you imply. I am a guy with an 800+ FICO who has never been a day late on a phone bill. All I’m saying is that for the majority of these people it makes sense to them, and you can get as many judgements as you like, collecting is another story. As usual, your “theory” makes perfect sense, but is not reality for the masses.
Lastly, I don’t think I’m any more condescending than some of you, you included, and I am offended by some of your suggestions as you obviously are with mine. Honestly, of everyone on this blog, I agree with you the most often. Maybe its my delivery that irks you=) Cheers!
smarten
I’m not irked by you Allen.
Also unlike you, I am “real.”
I as a buyer am willing to pay today’s fmv for a property I really am interest in.
The problem is that you as a seller are not willing to sell at fmv because your idea of fmv isn’t reality.
By way of example, you want $1.3M for a property that is probably worth about $825K. When you told this blog some months ago that your out-of-pocket [wholesale] cost in your home, as a builder, was about $825K; and, you were prepared to sell it for “cost;” you’ll recall I expressed an interest. But when you later clarified that your idea of “cost” was your out-of-pocket [wholesale] cost plus overhead and profit [which I guess must be about $475K], rather than fmv, I labeled you what you’ve now labeled yourself; a seller in name only [i.e., not “real”].
When properties just aren’t selling, the way they’re currently not selling in Reno, it’s disingenuous for the seller with fantasy pricing to assert he’s/she’s just as justified in asking his/her fantasy price as the buyer who according to the seller, seeks the same version of fantasy pricing. And that’s where we are [my Mexican standoff label].
To make my point, I challenge you to share comparable properties to your McMansion that are actually selling today for $1.3M and above. Since this level of pricing now puts us into Montreux and St. James Village sphere and we know that’s not where your McMansion is located, show me the comparables!
I suspect there aren’t any which means, you’re just not prepared to sell at today’s fmv. But that in no way means I’m not a “real” buyer willing to purchase at today’s fmv. If you disagree, show me where I’m wrong.
BTW, the only person I know [other than you] who has a FICO score in excess of 800 is my wife and quite frankly, I’ve qualified for more credit [and have more income] than she. So FICO scores in a vacumum don’t necessarily tell the entire story. Nevertheless, I applaud you for attaining this level of credit.
BanteringBear
I grew up around the corner from Allen’s house. It’s not a bad neighborhood, but I think he overbuilt for the location. The area is dated and I just don’t think million dollar home prices are justified. Furthermore, I’d be completely shocked if Allen even found a buyer at $825k. If the true “cost” to build was more than $800k, I think Allen gambled and lost on this one. If he can afford to live in it for 25 years, then maybe it’s a decision that works for him. I sure wouldn’t want to be married to a depreciating asset of that order. I believe most of those homes are going to bottom out in the $300k-$400k range.
PS, Allen:
As a builder, you’re probably aware that Travertine is NOT a marble. Perhaps you can enlighten your listing agent.
Allen Murray
Smarten, as we both realize, FMV is the point at which a sale occurs. Obviously, you haven’t found a property that you believe was priced at FMV or you would have purchased it. Obviously, nobody has felt that my house was priced at FMV, or it would have already sold. So the question is, whose idea of FMV is correct? I would say somewhere in between both of us.
My house was originally listed at $1.3 last May at which time my realtor pulled comps and supported that, at that same time Zillow had it at $1.45 which I agree was high. Before we listed my house for sale, my realtor and I walked into about 10 comparable houses in my neighborhood to gauge the competition and price it accordingly, I knew it had to be the best deal out there to sell. It was showing like gangbusters the first few months, and I felt pretty confident. After the showings tapered off, I knocked $100K off of it, because I wanted to be a “real” seller. Again showings picked up, but nothing else. At the time I reduced the price, a house less than 100 yards from me sold for $1.3m and it was smaller and older. Another house a block away that was larger sold for $1.2m. Remember, I build, buy and sell for a living, and also own rentals, so I’d like to think of myself as “real”. Thanksgiving through the new year was absolutely dead, maybe 1 or 2 showings. Since the new year, things are picking up, in the past 3 weeks, I’ve had 2-3 showings. That’s truly how I gauge my pricing, if its not getting looked at all, like most listings, I’m way out of the ballpark. If its getting shown regularly, I’ll hold tight. Funny you ask for new comps. I was communicating with my listing agent this morning and he is working on new comps. He too wants me to reduce the price, but I told him I am at rock bottom and will hold tight. He does spend many advertising dollars, so I told him if he felt there is no chance of selling, not to waste his money and I’ll sit tight for a while. His response is the same as mine, lets see what happens this spring. He also expressed recent concern about appraisals coming in low, which is definitely happening. But I’m not so sure bank financing is as big of an issue in the $1M+ market.
As you know, what my place cost me to build has no bearing on its value, so lets not go there. Why don’t we use our situations as a way to gauge the market. If my house sells before you find your “deal”, you better hurry up and buy. If you buy a house before mine sells, I better reduce. Like you said, a Mexican standoff. I’m not going to give you specific comps since I don’t want BB to let the air out of my tires while I’m sleeping, but if you are interested, call Diane, she’s seen it, and I’ll make you a smoking deal=)
Allen Murray
Uh oh, BB does know where I live…….and actually BB, travetine and marble are from the same qauarry, first comes limestone, travertine, then marble. I think you are correct on the slightly overbuilt, if I had it to do over again I would definitely downsize, but I think Pennington has me on the overbuit title….Cheers!
BanteringBear
“…and actually BB, travetine and marble are from the same qauarry, first comes limestone, travertine, then marble.”
Sure, and moss grows on the Douglas fir trees on my property. But the trees are not referred to as moss.
Allen Murray
hahah, very occasionally you’re funny….
BanteringBear
Allen:
You are consistently referring to other active listings as the “comps”. I’m no realtor (perhaps Diane and Guy could weigh in on this one), but what I consider “comps” are the recent closed sales. Fantasy prices mean nothing. In order to sell a house in this market, it needs to be priced below the most recent closed sales. This would allow it to stand out amidst a sea of hopelessly overpriced shelters.
BanteringBear
On The Sidelines posted:
“Speaking from personal experience, we have 3 investment properties that have 0 equity and have never once been refinanced. Would you suggest we list these homes below our purchase price?
Would YOU do that?”
Um, yes and no. Yes, if I needed to sell them, I would list them at whatever price would move the properties, even if it was considerably lower than what I had originally paid. I’d rather take my losses now, than bleed much more cash in the long run. No, I would never have purchased “investment” properties which did not provide positive cash flow. These are not actually investments but rather, lost bets.
Further:
“The point I’m trying to make is not everyone is an irresponsible owner who knew they were buying above their means and lied on their mortgage application, or continuously refinanced and took cash out and are now stuck with poor decision making based on living outside their means…”
I disagree with you in that these were, indeed, very irresponsible decisions on your part. If you would have done the appropriate research, you wouldn’t be in this situation. If you cannot afford to bring the cash to the table, you were living outside your means. If you simply “don’t want to” bring the cash to the table, you are still suffering from denial. Take your medicine and move on. No sympathy here.
Allen Murray
Active listings don’t mean crap, and its getting to the point where recent sales don’t mean crap either. Its really hard to figure out what a house is “worth”. Yes BB, that’s true, and as for On the Sidelines, yes you can take your medicine now as BB suggests, or you can hold tight, if you have good income, the depreciation and interest expense write offs are good, but I think you could write off the loss on your sale also.
doofus
Guys, just get a room! Seriously, it’s been an interesting discussion.
I’ve sort of come to suspect that price doesn’t matter much right now. Virtually nothing is moving at any price. Every seller could drop their asking tomorrow by 20% and not much activity would be generated. Most buyers still wouldn’t be able to qualify. The sellers wouldn’t be able to convince the banks to go along with the short sale, or come up with the cash to exit. And the “serious” buyers would sit it out waiting for a better deal.
Reno Ignoramus
“It’s really hard to figure out what a house is worth”.
Quite right. That is because the market is deteriorating quickly and yesterday’s comps(as in yesterday’s SALES)are not indicative of present value in such a downward market, especially because there are now so few sales.
If you want an example of this, go to my post in the Somersett section in the Forums. I refer to 4 houses priced the same, but quite drastically different in size. Clearly, 1 or 2 of those “sellers’ are out to lunch in their pricing.
Ann Onn
Sorry, Allen, you sound like a decent guy, but if Dean Baker’s “Beat the Press” blog is right today, Smarten will win the standoff. Baker cites a NY Times column that says foreclosures now exceed homes sales in the West, especially Nevada (Las Vegas, I suppose).
Baker’s interpretation: “The implication of this story is that a large number of homes will still be put up for sale regardless of how much builders cut back on construction and homeowners try to delay putting their home on the market. In other words, the folks who say that the housing market will stabilize any time soon must be smoking some really strong stuff.”
Ann Onn
Sorry! Link for the preceding comment:
http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=03&year=2008&base_name=foreclosures_top_sales
SkrapGuy
Ann Onn, I believe that right here in Reno foreclosures were higher than sales in January.
Allen Murray
Don’t be sorry Ann, if Smarten buys before I sell that means he thinks we are close to bottom, and maybe so will some of the other pent up buyers. I believe we do have pent up demand in our area. Perhaps my discourse leads some of you to believe that I think my house will sell soon, but I’m not confident that will happen. Also, keep in mind as with any upward and downward trend, the mainstream media and public opinion are always behind actual reality. So by the time you hear in the news papers or from your bartender that the market is starting to come back, you will be behind the curve. Many of you who keep pointing to data or articles seem to be waiting for some guru or newspaper to tell you now is the time, and that’s fine for the masses, but if you really want a deal, you will have to take a bit of a chance. That’s like me point to articles during the boom saying see, now is the time to buy, prices went up 6% last month according to the Wall Street Journal.
MikeZ
prices went up 6% last month according to the Wall Street Journal.
I’m not sure you read that article correctly!