The Reno/Sparks Association of REALTORS® has just released their June and 2nd Quarter Market Report. This is a thorough market analysis containing very good charts. Be sure to check out the Median Home Price History chart and the Historical Market Absorption chart.
Of note from the report: “As of June 30, 2009, there was 6.3 months of inventory [in Reno and Sparks, NV] based on the 30-day June sales rate. This is the first time since October 2005 the Month’s Supply of Inventory (MSI) is in the range which the National Association of REALTORS® defines as a balanced market.”
Click on the chart to open the report.
FutureRenoHomebuyer
Guy,
Good info. On initial look, it seems a more bullish/less bearish report for the market.
Of particular note was the rising sales of homes above $350K. One question on that, however, is what was the average percent discount (list price vs. final sales price)? Probably difficult to obtain, but it should would be valuable to know.
Also, is it seasonal, expected improvement, or the beginning of a trend? Only hindsight will tell, but the increase in percentage of distressed new listings in June isn’t necessarily a good sign.
Lastly, will the shadow inventory begin to assert itself?
Still happy to wait until 2010 at the earliest, though the data bears watching.
billddrummer
Guy,
Thanks for the report, great stuff.
I had a more detailed post ready, but it got erased somehow.
Essentially, what is encouraging is that the percentage of distressed sales is falling steadily, and may drop below 50% of total sales shortly.
Another thing that’s interesting is that significantly more short sales are closing compared to the beginning of the year. This could mean that banks are becoming more responsive, that realtors are getting better at presenting offers, that buyers are more flexible, or a combination of the three. Whatever is at work, that’s good news.
On the flip side, there are still far more properties entering the pipeline through new trust deeds than are exiting as closed. Through today, 251 TDs have been filed this month, more than closed REO properties last month. (In fairness, that’s all TDs, and some of them include commercial property. But the vast majority are homes.) But not all of those properties have immediately been placed in the MLS to sell. Many of them will languish on some bank’s balance sheet for months, until someone finally gets around to unloading them.
With the number of ‘shadow’ units on the landscape, it’s premature to call a balanced market, in my view. The market could be balanced in relation to the properties on the MLS, but this is the first time we’ve seen this volume of shadow inventory that hasn’t hit the MLS.
Notwithstanding that, great job pulling together this data, and thanks again for sharing it here. Us non-realtors would never get exposure to these statistics otherwise.
SmartMoney
The report says that for the first time in seven years the market is “undervalued”. Well, it stayed overvalued for seven years, who is to say the market won’t stay undervaled for seven years?
Also, during the bubble prices became “very overvalued”, at the bottom of bubbles, prices always become “very undervalued”. We are certainly not “very undervalued” at current levels.
CommercialLender
So, I’m no expert but I see 2 things of note:
1) in the graph of ‘residential market pricing’ – the trendline graph:
1a) I somewhat discount their finding of a 4.1% ‘affordability level’ and their associated finding that we are now below trendline. Their data starts only in Jan 00, which was a boom time in equity, particularly stocks, the begininning of many exotic mortgages, and a time with a very tight labor market, even in Reno. I’d like to see a trendline that goes back to the end of the last real estate boom, 1994 ish. I think we’d find the trend line much flatter, maybe 2/3 or 1/2 of their 4.1% per annum figure, is my guess.
1b) this trend line analysis fails to account for quasi-permanent or at least long-lasting sea-changes such as lack of liquidity, increased credit standards, loss of jobs/wages, and increased taxation. These factors are all worse than existed during their trend line data period and are all fairly long lasting and hard to reverse. I.e. the future trendline will most likely be much lower than the past’s trendline.
2) I note on the ‘pendings’ and ‘listings’ page the comment that Bank Owned listings are up 46% month over month. There may be many reasons, but could it be banks are now dumping as much as they can on the market, though clearly not all they currently have in inventory. This would point to seeing inventories balloon in the next few weeks/months. I can only imagine sellers on the fence are now reading the ‘green shoots’ tea leaves and thinking they might now sell. It will be interesting to see if inventories again balloon as this late summer, seasonal buying period starts to fade.
I may be currently too pessimistic for my own good here, but I am trying to decipher if this good data here and elsewhere is a trend or simply the result of normal seasonal buying only. If its a trend, then the Realtors might tell you to “buy now or forever be priced out of the market” 🙂
big baby
And yet you couldn’t wait to buy ..
LMFAO
Sully
I did some research on the county site and downloaded their sales to date. Deleted all but SFR – here is the result:
over 500K 187 sales 24 bank related or 12.83%
496-220K 1035 sales 272 bank related or 26.28%
under 220 1496 sales 775 bank related or 51.80%
total 2718 sales (to 7/17/09) 1071 bank related or 39.40%
I didn’t separate short sales from foreclosures, just used anything that had a bank,loan or mortgage company name as prior owner.
It’s interesting how the percent of bank sales doubled from the previous group.
DonC
Seems like a bottom or something close to it. That’s good because you have to put in a bottom before you can move upwards. But just because you have a bottom doesn’t mean you’re moving up.
I don’t understand the affordability trend line. Are we to believe that houses will continuously become less and less affordable over time? This seems like a strange assumption.
Also, with unemployment very high, the fact that affordability is good doesn’t mean the next boom is around the corner. If you don’t have a job it may be impossible to buy even the most affordable house. Prices may be going down, making homes more affordable, but rising unemployment is shrinking the population of potential buyers who can take advantage of more affordable housing. It’s just very hard to see residential housing recovering in the absence of job growth.
Reno Ignoramus
What is the inventory (how many years) for properties listed over $500K, and how does it compare to what it was in 2005? This is not a rhetorical question, Guy.
The ‘tale of two markets’ bewteen the bottom where the action is heavy and the top where it’s still very slow continues.
Sully’s numbers are telling. So far 187 houses have sold over $500K and 1,496 under $220K. In other words, almost 9 times as many houses have sold under $220K than have sold over $500K. That 6.3 months of inventory totally distorts the realty that what we have now are two vastly different markets within the market at large.
I doubt this ‘good news’ comes as much consolation to all the Somersett and Arrowcreek sellers who are listed at 55% of what they paid and can’t find a buyer.
Martin
To emphasize RI’s point, remember that one-half of all sales are for $180K or less.
A “tale of two markets” indeed.
Guy Johnson
R.I., Presently, there are 547 Active (non-pending) SFR listings priced over $500,000 in Reno and Sparks (MLS Area 100). Over the past 90 days there have been 71 sales in this category. That equates to about 24 a month. Using that figure yields about 23 months of inventory with the aforementioned criteria.
I don’t have an easy way to calculate 2005’s inventory in the over $500K range. If anyone out there has a copy of Diane’s monthly market reports from back then [2005], I believe Diane reported the inventory at that price band. Feel free to post the data.
smarten
RI, you speak of “a tale of two markets.” Actually, I view it as three markets.
There are a whole heck of a lot of listings between $220K-$500K that are selling differently than those above $500K. Although it’s difficult to tell from the chart, it looks like last month there were 4 to 5 times the number of sales between $250K-$449K that there were above $450K. So I think it’s wrong to lump this segment of the market into the same as above $500K. And as you pointed out in a previous post, the median sales price is increasing because the number of sales above $220K is on the increase.
Richard Stabile Bergen County Real Estate
That is a great chart. In elliott wave terms we are really declining in inventory. I think it will over shoot your balance area and get well over done.
Raymond
Using Sully’s numbers, we can project about 4,680 total sales for this year (about 390 a month).
Using Guy’s numbers, we can project about 280 sales over $500K (about 24 a month).
So sales over $500K are projected to come in at about 6% of all sales. Those with an agenda can spin all they want, but 6% of the total sales volume is pretty anemic.
I’m sure most of us can remember at the height of the bubble when $500K was regarded as an almost pedestrian sum to pay for a house. Now, it defines the upper limit of the market comprising only 6% of sales.
Perhaps spending one half of a million dollars for a house ought to be a fairly uncommon occurence when that amount is about 9 times what the average household in Reno earns.
MikeZ
RE: the market is “undervalued”
“Undervalued” is based on either 4.1% (legend) or 4.2% (bullet item) annual growth rate since 2000.
I call BS on that annual growth figure.
Income didn’t grow at anywhere close to 4%, neither did inflation, so home prices were already outgrowing income and inflation by 2002.
Sully
MikeZ, in talking to residents of the area for 50 yrs or more, the average growth ran about 2% a year prior to the dot com boom. Some years were negative.
The dot com boom brought high tech to the area, and employees that needed housing, causing a supply demand problem.
The funny thing is, most of the building started after the dot com bust, which is where the chart shows the biggest gains.
But then, this area isn’t the only one that got caught up in the speculative boom and it fed upon itself. If we extend the 2% average to present date, the median line would be lower.
As far as the affordability line goes, that’s a guess pure and simple. As there is no way to tell what base data is used.
I find it hard to believe that a 365K median (Jan 06) was anywhere near affordable for the majority. Which has been covered here many times in the past.
CommercialLender
MikeZ, you make my point posted above. BS indeed, but what do you expect from the association of Realtors (no offense, Guy et.al.) but cherry picked data supposing “its a great time to buy”.
****
All this talk of $500K and hi-end versus low end misses a major point. There are many areas where the entire market is ‘hi-end’ and nothing ever sells for anywhere near where the ‘median income’ times what a traditional price of 3.5-4x income would indicate. Marin County, Los Altos, Hillsborough and others here in the Bay Area have ‘median incomes’ of $140-150K ish (exact data eludes me), but not a house can be found for less than $1.3M, most $1.7M (even still).
Reno was never and will never be a similar market. That there were homes priced significantly over 4x times median income was supposed to appeal to a small segment of retirees or small segment of affluent 2nd home buyers, never for Reno as a market whole. The trite phrase ‘haves and have-nots’ is truly pronounced in the strata of neighborhoods found in Reno, while in Marin or Hillsborough it is not. So, its entirely possible the Reno high end market could take a decade to recover, all the while picking off the occasional cash rich retiree or CA high net worth 2nd-homer, while the lower end could stabilize at some point very soon.
The point missed was by the homebuilders: they vastly over estimated the high end market demand as sustainable, and still do, with Galena Forest, Montreaux, and Tahoe area developments like Martis Camp, etc. and even more so with moderate developments like Arrowcreek and Somersett. Its entirely possible the sub-$200K and $200-300K strata could hum along for years just fine before any gains happen in the high end.
SkrapGuy
4x median income, CL? You must mean 10x median income if we are talking about honest, real income. Not liar loan income.
Unless NINJA loans return, there are many neighborhoods in Reno that will NEVER return to their bubble highs.
CommercialLender
SkrapGuy,
We are saying the same thing: hi-end retirees buying mostly cash (income multiplier is irrelevant) and cash-rich Californians buying 2nd homes (much higher incomes than in Reno with likely big cash downpmts and thus the Reno multiples are again irrelevant). These buyers were few, but the Reno area homebuilders thought they were many. Posters on this blog continue at times to compare the high end market in Reno to Reno incomes, but they are not correlated.
billddrummer
To SkrapGuy,
The moveup buyer who cashes out their existing home with enough equity to move to Arrowcreek, Montreux or Somersett is becoming extinct.
I believe the large number of those move-up buyers drove the demand for homes in those neighborhoods. With those buyers out of the market (perhaps forever), I think you’re right.
And to CL,
I was under the impression that Martis Camp (and its adjacent development, Lahontan) target a higher level of homebuyer than anything in Reno. 21 lots in Martis Camp adjacent to Northstar sold for $550,000 apiece last September.
I don’t think any lots in Reno are going for that price, no matter where they are located.
3niner
Does anyone know how many properties are bank owned, but do not yet show up in the MLS? These would be part of the “shadow” inventory, but any rational view would consider them as part of the real inventory.
billddrummer
To 3niner,
I did a search yesterday on the recorder’s website, and 1555 TD’s have been recorded from 1/1/09-6/30/09. If you look at the YTD chart in this report, about 1100 bank owned properties sold through June. So it seems to me that about 400 bank owned properties were in inventory at 6/30/09. According to the report, 184 new listings were bank owned, which would leave more than 200 unmarketed through MLS.
If my logic is wrong on this, please correct me. I’m used to it because I’ve got teenage daughters.
Sully
3niner, that would be almost impossible to find out. There is a house in foreclosure a block from me. The owner is Countrywide, they don’t even show it on their own website – its been posted (taken back) for over 2 months now.
This particular house would most likely sell fast right now, so I’m not sure what the bank is waiting for, unless the new NV foreclosure mediation law is holding up the listing.
Tom
Follow-up to 3niner’s point above:
There are apparently pocket listings, noticably in some pricier parts of the Mount Rose corridor, which show up as office listings on certain brokers’ websites, but which are not showing up on MLS searches. Doesn’t this mean that like the yachts berthed in Newport Harbor, a higher percentage of properties in those communities might actually be available for sale than would be statistically reflected by looking at general public, `published’ listing data alone? It would be interesting to know the approximate actual proportion of various communities up for sale via public and private offering inventory figures.
billddrummer
Continuing,
So far in July, 340 TDs have been filed. In June, 358.
Monthly numbers from earlier in the year range from 191-303. I believe the impact of the various moratoria affected the number of filings before May, but don’t now.
I think July TDs will far surpass last month. We still have 3 days to record, and the tally is already nearly the full-month number for June.
Interesting discussion. Another datapoint that I found showed 322 Notices of Sale recorded, with dates from 7/27-8/14. Now, I know many of these sales won’t happen as scheduled, but it points to yet more inventory coming down the pipeline.
Good for buyers, bad for sellers.
billddrummer
Another thing:
I would have liked to see inventory by price band, as well as sales. My figures showed that there’s a 24+ month supply of MLS-listed homes priced at over $500,000.
Bailout roast pig suckling
Semi-annual foreclosure activity from Realtytrac at:
http://www.realtytrac.com/ContentManagement/PressRelease.aspx?channelid=9&ItemID=6965
Shows Reno/Sparks as ranking 13th in the nation for percentage of foreclosures per household. According to the report, 3.6% of all Reno households entered some stage of foreclosure in the first half of 2009. Still well behind Vegas (#1 with 7.45%), but certainly not a good sign for all the bottom callers out there.