‘Correction Is Very Real’ In Reno
The Reno Gazette Journal has this update from Nevada. “The amount of sales and the median price of an existing single-family home in Reno continue to fall. The median price in July for the Reno metropolitan area fell 5 percent compared with the same month in 2005, according to the University of Nevada.”
“The once red-hot housing market that has slowed in every month this year. At the same time, sales continued to slide, down 40 percent to 366 homes sold, from July 2005. And with an inventory of single-family homes of more than 5,000, the median time a home is on the market has stretched to 75 days, up 39 percent from July 2005.”
“‘The market has already corrected a solid 10 percent, and the market is poised to correct another 10 percent,’ said David Morris, broker and 29-year veteran of the Northern Nevada real estate market. ‘The market correction is very real and it is going to be very deep.’”
“He said the resale market is being pressured by the new homes market, where deep discounts and incentives have become commonplace. Morris estimates that the downturn will last about three years. ‘Prices are probably going to adjust across the board for the majority of houses a solid 20 percent,’ Morris said. ‘There will be a few that will adjust by the spring or summer of ‘07 by 30 percent, and a handful that will adjust worse than that.’”
“Realtor David Graham said that because of the market shift, buyers have changed their behavior. ‘Properties are being shown, but buyers are saying that it is too expensive,’ Graham said. ‘Buyers are being very selective today before they make an offer, and price is the determining factor.’”
“‘(The price) was much too aggressive to start with, and the market conditions are saying we can’t support that price,’ he said.”
‘Also in the report, existing condos and townhomes in the Reno area dropped 13 percent in July, to $165,000, compared with July ‘05.
Other cities with July changes for single-family homes: Minden/Gardnerville fell 15 percent to $355,140 during July from the same month a year ago. Dayton’s median rose to $300,000, up 4 percent year over year. Fernley rose 6 percent to $254,925. Fallon fell 8 percent to $212,450.’
Also in the report, existing condos and townhomes in the Reno area dropped 13 percent in July, to $165,000, compared with July ‘05.
Add closing costs to the seller of 6-8% onto the 13%, ouch.
Imagine that…A city of gamblers, gambling with real estate. I would have never put 2 and 2 together!
OT, but txchick57 has got to see this: the Dallas market, your favorite!
http://calculatedrisk.blogspot.com/
“‘The market has already corrected a solid 10 percent, and the market is poised to correct another 10 percent,’ said David Morris, broker and 29-year veteran of the Northern Nevada real estate market. ‘The market correction is very real and it is going to be very deep.’”
“He said the resale market is being pressured by the new homes market, where deep discounts and incentives have become commonplace. Morris estimates that the downturn will last about three years. ‘Prices are probably going to adjust across the board for the majority of houses a solid 20 percent,’ Morris said. ‘There will be a few that will adjust by the spring or summer of ‘07 by 30 percent, and a handful that will adjust worse than that.’”
I know we beat up on the RE Industry (they deserve it), but this guy seems to get it. How many realtors are saying that prices could/should drop 20%-30% like this guy (David Morris)? I like the honesty. This is much better than the 5% correction BS we continue to hear.
Yeah.
Yesterday we were hearing 5%-10% clip bottoming out in 1.5 to 2 years. Today we are up to 20%-30% clip bottoming out in 3 years. At this rate we are only a couple of days away from 50%-70% with a bottom developing in seven years.
“Morris estimates that the downturn will last about three years.”
I’d like to know how all of these “experts” are arriving at their recovery estimates. While most are admitting to a housing slowdown, the new line being quoted is “the slowdown will last for just a few years.”
They have it backwards- the bubble lasted for a few years, now its going back to normal.
Lessee: 5000 inventory and 366 closed in the month of July = 13.6 months of inventory to clear. That’s the highest I’ve heard for any market yet!
Jon
Major logjam here….nothing is moving.
I get like that if I eat too many eggs.
Here in coastal Florida it is worse. Last month Palm Beach County had an 18 month supply and western Florida from Sarasota to Naples had areas approaching 2+years if I am not mistaken. For Sale and For Rent signs as far as the eye can see.
FL is cooked, toasted, burnt, melt.. for lack of a better word
Exactly! 366 closed, 5,000 to sell! And so how do they say the average time on the market is now…..”75 days”. You betcha, 75 days after the four 90-day listing periods have expired and been repriced downward 30%…. The STILL don’t get it. These reporters can not add 2+2………. well, they do at 2+2, but they get 1. Hmmm.
It’s actually worse when you consider the local paper has close to 8500 listings in the Reno-Sparks area right now.
OH yeah, downtown SD has that beat. 18 months worth or so, and the pace of sales is decelerating.
Josh
Lessee: 5000 inventory and 366 closed in the month of July = 13.6 months of inventory to clear. That’s the highest I’ve heard for any market yet!
Jon
And I bet some of you thought I was exaggerating.
I agree with his “solid 10%”, but we’d be even futrher down the ladder if all the “reduced” listings would sell. It’s ugly, oh so very ugly here.
I follow your comments about the Reno market closely - my parents live there ( retired ). Their observations are right inline with yours.
The real estate market there is probably >70% dependent on 2nd home purchases or early retirement purchase from Californians. There is no way anyone working for a living in Reno can buy a house there.
The only money that was flowing into NNV that was enabling locals to buy was RE money (realtors, loan agents, escrow officers, appraisers, contractors, furniture stores, home improvement stores, ect) The last few years saw people making money they never dreamed of making, and it made them giddy. When the RE industry is in full collapse, you’re going to see an area left standing with its pants down. RE is the only thing that gave our area the illusion of wealth.
You have been on the money on your local market!!
Reno? RE, no.
Any reports from Incline village? thanks
Here’s a good incline village OT.
My aunt was looking for a place to buy there (second home) late April 05. When she was riding with the REA, the lady told another REA that she (my aunt) “only wants to spend $1 million in incline” and proceeded to laugh - with my aunt sitting right next to her!! Bummer for that REA that my aunt already bought in OR. . . Still at the height of the market, but she doesn’t care, she’ll keep the house til she’s in the ground. Never sell = never realize a loss!
Maybe soon they’ll be calling it DECLINE Village!
An old friend of mine purchased his first house back in 2000 and we thought he paid too much ($140k). To think that those homes are selling at nearly $400k now is just absurd.
You make a good point nnvm. The 10% drop indicates we’re in a decline — it not only doesn’t reveal the long-term outlook for the bubble bust, it doesn’t take into account the non-action that’s backing up behind the dam as sellers hold the line, buyers refuse to buy and a whole bunch of debtors approach judgement day.
If the hot money that’s been flitting around the country driving up prices has disappeared, then in the future homes in Reno will have to be sold to people who live there. If that’s mostly ordinary folks making $40K, prices will eventually drop to a level where they can afford to buy. In fact, prices may even dip lower because a certain number of “normal” local buyers have taken themselves out of the game by rushing into the market and overspending. They won’t be around to help drive a market recovery a few years from now, so real estate may languish at the bottom for quite some time due to the abnormally small number of “normal” buyers left standing.
If there’s an economic slowdown and high-ish interest rates (I expect both) that will further reduce the pool of normal buyers.
And of course the impact of watching Option ARM/IO buyers get immolated in this downturn will be death-knell to those ‘innovative’ loans. So how do you sell a 600K house to a guy making 50K a year with a traditional loan? You don’t, and the rout is on.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aknzIIhdNVww&refer=home
Article re UK first time home buyers “dwindling” etc etc.
Reno housing is in big trouble - that is for sure. Household income is in the low 40k range, and at the peak, the median home was >400k. It is not a very large city, and most people outside of the western U.S. probably have little knowledge of what happens there. Statistically, when housing really bottoms out 5+ years from now, the numbers out of Reno will rival the worst bubble markets anywhere. If you pick up one of the real estate sales magazines, or just look in the Sunday paper, you see the majority of the houses for sale are in the 450k-800k ( or higher ) range. It is not easy to find something less than 400k in Reno itself.
I agree, and I believe we have a lot of Reno-like cities here in the West where, if you take away the bubbles influence, the influx of equity locusts and the like, the collapse will be huge!
Basically California, give or take a county or two.
I think Bozeman, MT will play out much like Reno. Completely dependent upon second homes, speculation and early retirement courtesy of large equity cashouts from the coasts.
Market here is completely dead. I only see minimal discounts, but nothing sells. A colleague of mine moved into a new home thinking his house would sell easily, and it has been vacant since march. Price has declined from $589k to $539k, still no action. Of course he bought for $275 in 2002 and did about $50k in cosmetic improvements… Everyone thinks that a house should double in value every four years.
Groundhogday….how bad is the drought effecting that area of Montana? I see an awful lot of ranches in that area for sale.
Actually in the Bozeman area it has been an extremely wet year. Northcentral and eastern montana have been baked this year (lots of fires) but probably a normal amount of rain. Hard to make a living ranching under the best of conditions and with land prices high there is a lot of incentive to cash out.
True, we cowboys can’t make a living anymore unless we cater to the “city slickers” who want to PAY to do what others do for a living. Until prices for land in MT, WY, or CO come back down to $1,500 to $2,000 per acre, I won’t get my own spread.
In the article, Mr. Morris makes the comment that this upturn-downturn is something that should be expected and has occurred in the past. I have to disagree. NNV has never experienced an appreciating market like the one we’ve seen over the last 4-5 years. Locals here have no idea how bad this thing can get. When I explain to those I meet what happened in So Cal in the early 90’s, they look at me like I’m speaking another language. I gaurantee you that there is a large percentage of the people picking up this article today that are saying to themselves “this can’t be right”.
I don’t think NNV folk have any idea of the nature of the tsunami that’s about to hit them.
The following is my advice to sellers:
All you have to do is put your fingers in your ears and chant,”Bad things don’t happen to me, only to other people.”
Repeat until you feel better or until you are foreclosed upon.
If you are foreclosed upon repeat the following chant,”Nobody could have foreseen this and it is all (fill in the blank) fault!” Add some spittle for effect.
I grew up in Reno. My parents’ house appreciated right around 6% annually from 1970 to 2000. From 2000 until today it appreciated close to 300% in total (assuming the latest comps). The smart locals have known all along that the prices were artificially inflated. Some sold their income properties for absurd prices to naive speculators knowing all along if they ever wanted to, they could repurchase them down the road at pennies on the dollar. This is going to get really really ugly for a lot of fools who believed that this gravy train would keep rolling. A 50% drop would be mild.
I live in Reno now (for the last year or so), and I lived here about 30 years ago (I was in CA in the interim). Reno (and NV in general) is a boom-and-bust state. I bought my first home in Reno in 1976 for $40K. I sold it a few years later for $90K. What caused this boom? An influx of new megacasinos, starting with the MGM Grand (then became Bally’s, Hilton and now Grand Sierra). So, fast appreciation has occurred here before. There will be a bust and then another boom, dependent on what happens in CA, primarily, IMO.
Who the hell is Brain Kaiser? Prices should flatten!?!?! The are down. Unbeliveable!
This is what Brian Kaiser said in August 2005:
Housing: Still hot
It all points to continued prosperity, observers say, and one key factor adding to the sizzle is the housing market.
“Numbers-wise, people are still buying almost as fast as last year,” said Brian Kaiser, an analyst at the Nevada Small Business Development Center at the University of Nevada, Reno.
Much of the nation is seeing swelling housing prices amid growing concern that the bubble may soon pop. Not so in Northern Nevada.
“I honestly don’t believe this is a bubble,” Kaiser said of local figures that have rocketed in recent months.
“I don’t see the bottom falling out. Yeah, things have gone up really fast. But I’d expect similar numbers for the rest of the year as long as interest rates stay low.”
http://tinyurl.com/mqf2z
The internet/Google will hang these bubble deniers!
EXCELLENT FIND!
Beauty!
I’m just curious as to whether or not this is a form article given to area newspapers to give the local homeowners a warm and fuzzy feeling and not incite a panic:
http://www.sltrib.com/business/ci_4174067
I’m guessing this is the same drivel that was spouted 3 months before all of the rapidly declining markets began their fall. There’s very few people around this area that believe it can happen here, but Utah is on top of the nation in personal debt and personal BK. I say the writing is on the wall.
I am certain it will happen here (SLC) after visiting this blog every day. The only question is how soon? I’m looking to refi in March 07, but I am increasingly worried about what could happen between now and then. The intererest rate rise doesn’t worry me as much as the potential for depreciation and a credit tightening. You are right about one thing though, no one else I’ve talked to thinks anything like a bursting bubble could possibly happen here.
Is it not true that SLC is at the very end of the “bubble” phenomena nationwide? It’s lagging at best right now, if not seemingly countercyclical.
Didn’t SLC miss much of the crazy appreciation seen here in CA from 2000 to 2004? Things only “got hot” there in the past year or so, as I understand it.
So in a sense, I think the area is only catching up now. By March ‘07 I would guess you would still be OK… though as you have noted things have turned very quickly in many other places.
Trend 08/14/2006 1 month 3 month 6 month 12 month
Median Price$290,000 0.0% +10.7% +61.2% +71.6%
Inventory 2,425 +14.4% +33.2% +11.4% -54.3%
These are the latest numbers from HousingTracker. The median home price a year ago was about $169. So inventory is increasing and if these numbers are any indication, price is just beginning to slide. It’s true, for several years prices remained flat, then certain areas started to take off. I bought my house in March 05 for $179k. (nice area, 2,300 sq ft) and according to Zillow it’s at about $211k. But I have friends in the Sugarhouse area who have seen 30+% appreciation in the past year and a half. And prices in the Park City area have gone through the roof. The thing about the Salt Lake Metro area is, you can still get a decent home on a good size lot in a fairly nice area for under $300k. And the unemployment rate is hovering around 3%. Our landing may be a little softer than some, but it’s still a landing.
Yes - I agree with your last sentence.
I was in SLC in March ‘05 and was amazed how “slow” RE seemed compared to everywhere else I had been lately (Boston, DC, San Diego, NYC, Seattle, LA, Portland, even compared to Denver). I recall seeing huge houses in very desirable locales, many of them “For Sale” or “For Rent.”
So compared to around here it was amusing, I suppose, to read in summer 2005 when the SL Trib had an article about a rising home price market with a quote from a local saying: “… and people are bidding $10,000 over asking!”
I guess I’m thinking, like you perhaps, even while considering your Sugarhouse anecdote (many, many places in CA saw that rate of appreciation; some for much longer than 18 months), that since SLC’s bubble has been smaller and later than most, the damage will be limited (relatively) when softness arrives.
Time will tell…
Take a look at the inventory over the past few months. It’s slowly starting to build up.
http://www.housingtracker.net/askingprices/metro/Utah/SaltLakeCity/
I think people forget how the announcement of the 2002 olypmpics in 1995 enhanced speculation here. I knew people who bought cheap houses around the central valley for $80k and those neighborhoods weren’t really that bad - went way up since then. Also, Park City went way up in price until… of course everything dived after the olympics were here and gone. It’s like that Simpsons episode where Homor buys pumpkin futures since the prices keep going up throughout October until the day after Halloween when pumpkin prices collapse. Dohhhhh!
We had our little bubble. I didn’t really appreciate how reasonable the prices were in 2003. I’m not worried though. It will be back to those prices within two years. I’ll “save” my time renting in the neighborhood in Salt Lake I want to live in anyway until the time is right to buy.
Cheers!
I think people forget how the announcement of the 2002 olypmpics in 1995 enhanced speculation here. I knew people who bought cheap houses around the central valley for $80k and those neighborhoods weren’t really that bad. Also, Park City went way up in price until… of course everything dived after the olympics were here and gone. It’s like that Simpsons episode where Homor buys pumpkin futures since the prices keep going up throughout October until the day after Halloween when pumpkin prices collapse. Dohhhhh!
We had our little bubble. I didn’t really appreciate how reasonable the prices were in 2003. I’m not worried though. It will be back to those prices within two years. I’ll “save” my time renting in the neighborhood in Salt Lake I want to live in anyway until the time is right to buy.
Cheers!
Listed home inventory actually began increasing in 2004 (yes, 2004) in Reno. Reno’s prices will be cut in half from where they are now by 2009.
Few non-texans understand there was a Great Depression in Texas from 1985-90. A 1050 sq. ft., 3 bdrms, 1 and a half baths, chain link fenced backyard in an eight year old subdivision sank from $40,000 in 1984 to only $9,000 in 1987 in Austin, Texas. It was not near a railroad, or a highway or a chemical dump or an industrial part of town. The buyers simply vanished.
When the mall pizza place begins offering a free soda with a SLICE of pizza, you know you are in a depression.
Good points. I was living in Austin in 1987. The malls were less than half occupied. Office vacancy was over 40%; worst in the nation. And look at all the space they’ve added since 1999.
28313 Lomo, Rancho Palos Verdes, CA 90275 $1,280,000*
Status: ACT Orig Price: $1,385,000
Any reasonable offer accepted!!! Owners have already moved to new home and want this sold now!
You got to love this. Owners pleading for a buyer.
LMFAO!!!!!!!!!! Bite the big one you morons!
His idea of reasonable and my idea of reasonable are probably in different realms of reasoning.
Agreed. I would love to buy into Rancho Palos Verdes.
But a million+ for what?!?
I agree with Buffet. The high end markets are going to get hit the hardest.
“Already moved on.” Well… they’re home speculators now. Good luck to them.
But can I help it if I *like* the fact for the first time in my life RPV has building inventory? I cannot remember this many homes on the market *ever* before! Even in 1991 through 1995! And prices fell 40% on some streets. Wow!
What the &*%! is going to happen once layoffs start? There are a bunch of old Boeing and Ratheon on the hill. They’re seeing layoffs (”forced retirement”).
Oh boy, this downturn is going to be a duzy…
Neil
They can roll around on the floor and bark like a dog, it won’t change a thing. Price sells.
Good luck with that. RPV is so inaccessible to the rest of Los Angeles, unless you’re retiring or working from home any commute you have will be a killer. There are hundreds of places for sale in Redondo, Hermosa, Manhattan that are cheaper, and a better location.
No lie, I recently read the comments in a listing that actually said “owners want out!”.
That’s great. Anyone want to place a bet on their monthly for both properties at the moment?
$12,000
$16,000
$20,000
???
Very funny
Now this is something I can sink my teeth into! I am from Northern CA and Reno has been on my radar screen, I like the place, and have thought of moving north west of Reno out in the country to get some open space, but when I started looking at the prices earlier this year I was just dumbfounded….I don’t know the area *that well* but i do know that these home prices can not be supported by the economy, its just INSANE!! I can’t wait to read other locals observations about Reno and the surrounding areas….
I live in Reno and can vouch for the slowness of the market. Plenty of For Sale signs. Not many twirlers I’m afraid.
My neighbor is buying a new house in Somerset subdivision but put in a contingency for selling his crib.
He said he is buying new house to get smaller lot now that kids are grown. Tired of lawn maintenance. I wonder how he’ll enjoy sitting on his patio eyeball-to-eyeball with his new fat-ass neighbor whose caught in an upside-down flip.
He said the developer was trying to move the remaining 3 houses and was anxious to take any offer. Said they were from San Diego, but did not recall the name. He indicated he bought about 100-150K below original sales price. Who knows. Still may have paid too much.
During one of my tours to look for an escape route from California, back in 2002, I think it was, I looked around the Reno/Tahoe area.
At the time, I remember seeing some nice-looking houses in a new development just off the highway up the hill between Reno and Tahoe, with a desert view looking East.
As I recall, they were asking about $1 million at the time. I remember thinking that the developer must have been smoking the funny stuff, because I couldn’t get my head around the price for that location. I mean, were they thinking that Reno was the next Sedona? Or that the desert would become a spaceport for flying saucers? Or the Reno would flood, and the property would have an ocean view?
Speaking of Sedona…they are in the same condition. There are very very few communties that immune to this.
Beautiful or not.
I believe you are referring to the Mt. Rose highway and the Galena and Montreaux areas. They are far superior to Sedona in both natural beauty and year round activities. Lake Tahoe is second to none when it comes to freshwater lakes. Comparing second class Sedona to world class Tahoe is like Walmart vs. Neiman Marcus. End of story. I wonder what you have been smoking…
Oh, Bantering, just relax.
Tahoe is great. Sedona is, too. But they’re different.
It should be said that Tahoe is less great than it used to be because of the urban area equity bandit/locusts, second homeowners and the dotcom/Bay Area entitled invasions.
That guy trying to sell Reno houses for $1 million in 2002 was casting about hoping to snag coastal California numbrains with too much money (or credit).
Tahoe is beautiful but the water is freezing. If I can’t swim in it, its got no value as a “lake” to me.
Somerset? They were almost toast in the Verdi fire last week. He probably didn’t know whether to Sxxx or go blind when that fire raced up to the back fences of that Subdivision.
Check out the graph from that article! It speaks volume:
http://tinyurl.com/ftzf6
oops, “speaks volumes:”
It’s a tiny thumbnail on the Reno Gazette page; I almost missed it, which is why I posted the link above. If you haven’t seen it, check it out - it’s the shape of things to come.
WOW! Great find!
There’s one thing I’ve been thinking about regarding Reno. Reno is known to have a large transient population, i.e. a very mobile labor force. People move into and out of the city in rates much higher than the average for the USA. This is usually attributed to the gaming/tourism based economy.
My prediction is this: When Reno real estate declines, the jobs will decline, as we have discussed. But Reno will be especially bad shape because a large number of people are not rooted by family ties to the area and will leave. Well, what does that mean? Less people, less need for shelter, right? Even more price declines for Reno. And more people exodus. And so on.
People move into and out of the city in rates much higher than the average for the USA.
A side-effect: It’s housing prices will lead those area with slower rates of moving in/out of the city, because it’s housing is forced to be more liquid.
whoops: area -> areas, it’s -> its. happy friday to me.
“People move into and out of the city in rates much higher than the average for the USA.”
Thought that was because people were in and out of prison, running from the law, etc.
Yeah. I think so, for some of them. There are a lot of low-paying service jobs in Reno where an ex-convict might get a job.
Not in the casinos though, you have to get a special ID from the Sheriff’s department to get a job in the casinos.
Looks like the Northern California and its satellite bubbles are beginning
to deflate.
Reno down 10%, July-05 to July-06
Sacramento down 5%, 2005-Q2 to 2006-Q2, (NAR)
San Francisco, Marin and San Mateo all -ve , year-over-over in July ( Dataquick).
Northern California has the biggest local bubble in the nation.
And within Northern California, San Francisco City has blown the biggest bubble.
If you have lived in your home for a long time, 25 to 30 years, why would you worry about a decline in RE prices? You will still be way ahead of your original purchase price.
unless they’ve mortgaged/heloced themselves to the hilt, no? the ‘wealth’ effect.
now we’re headed for a full-strength dose of the ‘poverty’ effect.
Well, if you a short term oriented person you are truly screwed on your investments! My point is, an example, if you had invested $10,000 in wwy, Wrigley in 1972, your investment would be worth $700,000 today. Even if we had a depression and the price dropped by 50% who cares? My goodness, stop thinking short term. Even if my house drops 50% from todays prices, which I doubt, I am still ahead. Lets stop with all the negative and think positive.
Well why didn’t you give your advice to all the stupid flippers and other douchebags that thought short term profits in residential real estate was a great idea!
Playing the “if only” game is a pointless exercise as well as the past has already been written. Keep to “what ifs” , although almost as futile, at least have the possibility of playing out.
I did, a year ago on this blog!
I’m sure you did Peter, but I think most of us here do try to take a longer term perspective. I know that you know that a purchase of a house in 1972 has been great due to inflation making your costs very low over the long term. Do you think that the inflation scenario that you have lived through is possible going forward? Keep in mind the power of large numbers when dealing with percentages.
I have no idea where inflation, interest rates whatever will be over the next 20 or 30 years. What I do know is that this RE bubble is huge. There will wonderful opportunities in the next year or so. I can not worry about the future only the present. If you are thinking about buying in a year or two, Do not sweat 10K or so if you will live there a long time.
The part you are forgetting is that there are many people who bought well after 1972. In fact, a whole generation (the x’ers) has bought into this bubble… but hey don’t worry, you’ll do just fine. You bought in 1972. You’ve got plenty of equity to spare… oh wait, you’re probably a boomer who, like most boomers had to keep up with the Jone’s and HELOC’d/2nd mortgaged your spending sprees and your 2nd homes and your BMW and Mercedes.
YOU are out of your mind. 55 years old with a Subaru. What a great car. My point in all of this, and you have confirmed it, think Loooooong Term.
I’m a boomer. In 1972, I was 13 years old. You can bet I wasn’t buying real estate then. When you read about the boomers retiring, you’ve got to remember that the press is referring to the leading edge of a generation that spans a couple decades.
Unless it pops really quickly, this bubble is going to hurt every generation. About the only people who might be “safe” are those older folks who have already retired and downscaled into a less expensive home. But even they face the potential of a crushing property tax increase.
This bubble hurts everyone from every generation.
Lots of people who have been in their home for that long are approaching retirement and are extracting their retirement $$$ via HELOC’s. Because these boomers never saved enough, the equity in their home is all they have. Seriously, they have nada. This has been reported numerous times in various articles and comments here. Negative savings and instant consumer entitlement have all contributed to a extraction of retirement “wealth” from the only source they had…the house ATM…so now many of these people who previously had good equity with small mortgages have completely drained their equity already and are saddled with much higher monthly payments…and just how will they pay those payments?
Catherine, they were greedy, plain and simple. They did not need to take equity out of their houses. Come on folks, live simply and enjoy the fact you woke up this morning.
Some people don’t care. My grandparents live near Fresno, bought in 1959, and sit on 100% equity. My grandfather could care less about the market and will die in that house.
Exactly, your grandparents lived within their means and if they ever have to sell or truly need money they will have it available. If they are fortunate enough not to have to pull equity out, your family will benefit from their wisdom.
I agree with both of you…but unfortunately for those people getting up in years, they’ve already squandered their golden nestegg. My point is, there are people, lots of people that wanted that boat, that vacation, that whatever…and rather than save up for it, they spent their equity, thinking there was no way they could lose.
There are greedy people in all generations.
O.K. Catherine, but so what? No one forced them to buy a boat or take a $5000 vacation. They made that decision plain and simple. Their problem no one else’s. If they lose their house, they are responsible!
You go Peter !!! Alot of people have adopted lifestyles beyond their financial means. I live in a house that’s paid for, have no debt, save 30% of my income (excluding retirement), and I drive a “basic” 2WD Ford Ranger that’s also paid for.
BRAVO!
Northeastener- Why would I buy a vacation house? I can rent someone’s house and when I leave, it is their problem and not mine. Screw all this keeping up with the Jones family. I can not afford it!
I’ve posted on this topic before.
My opinion is that one can only afford a second house if one can also afford to keep it staffed year round. That leaves me out, and probably everyone else as well except for the top 0.5% of rich folks in this country.
I live in Reno and have for the last 35 years. I have been in my current house for over 20 years and could pay off my mortgage tomorrow if I wanted to. No credit card debt, my cars are paid for. Yet I worry about the future and I do not have a warm & fuzzy feeling about what is coming up in years ahead. It seems like every time I have gone to Costco during the last several years there has been somebody loading a big screen plasma TV into a shiny new SUV. If I really want one I figure that I can pick an almost new one up cheap soon. But I really don’t want one anyway. Too bad, toys don’t mean much to me anyway. Although there is some new industry with decent wages, by and large Reno incomes cannot support the prices we have seen in the last few years. I tell my sons to save, avoid debt like the plague and be ready to act when there are real deals available. Something about those “old fashioned” values that have fallen out of style in recent years because “its different now”. Hopefully they are listening (they appear to be). I also tell them that at the heart of every con and most bad decisions is greed. Material belongings don’t produce happiness and the pursuit of materialism is foolish. That being said I am surrounded by by so many who seem to believe otherwise (he with the most toys WINS!) and have acted accordingly. I am going to try really hard to not find pleasure in what surely lies ahead. I think it is going to be really bad and that not only the foolish will suffer.
I really enjoyed reading your post. I agree with everything you say. It is a shame that our society has eroded into such a materialistic one.
Even prudent investor could get caught. Imagine someone put down 10 % in mid 2005 got short term ARM and needs to refinance next year.
With market down 10% equity is gone, giving them money becomes huge risk proposition. They may only get hefty interest rate loan.
I have lived in Reno for 10+ years. I too cannot understand how a lot of people could afford to buy houses. My current subdivision was built in 1998-2000. Houses cost $250K-$450K. Now they are 60 to 70% higher.
I have a deposite on two units at the Montage. I plan to live in them. (one will be my home office). When I reviewed the contracts, I notice a clause. It stated if the developer did not have 50% of the units under contract (with a 10% deposit) by Oct. 28, 2006, it could cancel the contracts without penalty.
SJ
We live here in SW Reno and I can say there is very few homes selling. If anything, I see homes that just sold a year or two ago, back on the market! What happended to them being a lifetime investment? (Flippers)
Looks like most homeowners are still in denial and not dropping their prices, some homes have “price reduction” but they are still on the market.
I did see a home on Plumas Street on the Lakeridge golf course with a “sold” sign, the other day, it was totally gutted and instantly went up for sale 4 months ago, sold, and now sold again! Aother one sold 4 blocks away, but other than that, its very slow here.
It’s strange, but I still contractors doing tear-downs, landscaping, and house retros- I’m sure all these houses too will go up for sale when competed. Last week in the old SW, I saw a cute 1930s home totally gutted, with a handmade sign out front that said “for rent” and right below it “for sale”, afew days later, the sign was revised, crossed out the “for sale” part.
On our street, there are 3 homes for sale, one homeowner just moved out yesterday, and the other two houses look to be vacant as well. Things should really start to get interesting on ours street before the holidays.
Some of those flippers are still getting lucky finding buyers, but the well is quickly running dry. There are countless contractors married to their projects who must be praying every night that they will be able to sell once they finish them. I suspect that as homes sit empty, with no buyers and no renters, and what does sell is at drastically reduced prices, bankruptcies and foreclosures will just start going through the roof. I am very surprised by how many houses are still selling quite honestly.