If you didn’t catch the Special Report on the front page of today’s RGJ, you should check it out. Among other things, the report states just how big is the economic impact to the local economy due to the housing downturn. According to one luminary, the financial impact from defaulting residential developments in the area add up to more than $250 million just for notices of default and actual trustee’s deeds.
And who is this source? None other than Reno Realty Blog’s own Mike McGonagle. Mike went on to say, "While the construction loans are probably not tapped out, this is still a huge figure and will substantially impact the local economy. I don’t think I have ever seen anything this far-reaching before with the magnitude of the properties failing."
Check out the entire story here: Housing drop puts builders in a bind
Guy Johnson
What isn’t mentioned in the article are the hours Mike spent providing the reporter with the info, raw data, links, and recommended people with which to speak. Kudos to Mike for being recognized as the go to source for this type of information. Mike has always been a valuable contributor to the blog; it now appears he has an additional role as RGJ reporter.
Job well done Mike. Next time though, get them to mention the blog. 😉
BanteringBear
It’s a decent piece, for the RGJ…
From the article:
“Although homeowners get the most attention when it comes to falling home prices, decreasing property values have also severely hurt developers, especially those who bought land at the peak of the housing boom.
Land values for residential development in the area have dropped at least 50 percent from the 2005 peak, said Mark Krueger, managing director and senior land adviser for Grubb & Ellis, a real estate brokerage in Reno.”
Music, sweet music. Raw land values are in an absolute free fall. While 50% may seem like a significant drop, it is, there is worse pain on the horizon. If there’s anything tougher to unload than a house, it’s raw land. Historically, the prices are much more volatile than improved land. And it’s not just developers who were speculating in raw land. Oh, no. The banks were doing stated income loans on land, too, so every Tom, Dick, and Harry could get in on a piece of the action! Hah!
Ann Onn
I hope this is close enough to the topic to ask here. Can anyone give me an idea of cost per square foot for new construction not counting the lot? Our homeowners insurance agent says it would cost $200 a square foot to replace our custom home. She bases that figure on Corian kitchen counters, a small area of hardwood floor, a couple of skylights, a couple of vaulted ceilings, and a couple of Andersen french doors.
inclinejj
Not many of the home builders are in financial shape to buy more land now..Most of them are letting land and subdivisions go back to the banks..The only people who are stepping up and buying into the shut down and foreclosed subdivisions are the vulture funds..
Only 1/3rd of the top ten home builders in the country will make it till 2011..it is amazing how tapped out these companies are..after record sales for 5-6 years they are way top heavy with debt..
Now just as expected the default rates with A paper loans are soaring..
Sully
A while ago Allen said he was building a custom mid-range house for 134/sq ft. This was not including lot and other fees. This might be a rough enough estimate for you.
stjoe56
I have a friend who is an old time commercial realtor. He puts together parcels (10-30 acres) for commercial development.
This afternoon at lunch he told me the story of a Reno land owner who sold his property to Developer A for $17 million. While it was in escrow Developer A flipped the land to Developer B for $44 million.
SJ
Ann Onn
Thanks, Sully! That’s definitely helpful.