August 30, 2006

‘On The Back Side Of The Cycle’ In Nevada

The Review Journal reports from Las Vegas. “Dennis Smith, president of Home Builders Research, counted 2,869 recorded new home sales in July, compared with 3,071 sales in the same month a year ago. The slowdown is really being felt on the resale side, Smith said. Sales of existing homes in July totaled 3,512, down from 5,361 a year ago. For the year, resales have slid 22 percent to 26,817.”

“Real estate professionals point to a record inventory of 20,273 homes on the market as the reason why homes aren’t selling as quickly and prices are being reduced in many neighborhoods. ‘Can the housing market get much worse? Yes,’ Smith said. ‘Will it? Probably.’”

“SalesTraq President Larry Murphy said the ‘traditional new construction segment’ of the market, excluding apartment conversions and high-rise condos, showed a median price of $335,315, up 5.5 percent from a year ago. ‘It would be prudent to point out that these prices do not include the many incentives that are being offered by most builders,’ he said.”

“Values of the inducements will vary and the focus has changed from decorating upgrades and closing costs to financing, Smith said. Some of the larger builders are offering interest rate ‘buydowns.’”

“If an average value of 6 percent on the incentive packages were reflected in the price, the median for July would be in the range of $318,000, or less than 1 percent increase, Smith said. He speculated that the incentive factor is probably much higher, so ‘net’ median prices are at or below what they were a year ago.”

“‘Basically, the market is on the back side of the cycle,’ said Josh Seime, regional manager for Metrostudy. ‘When you start seeing a buildup of inventory, you know it’s going to get competitive.’”

“Detached production is declining as builders look to reduce their inventory, Seime said. Housing starts fell to 6,834 in the quarter, compared with 7,061 in the same period a year ago.”

The Nevada Appeal. “Incline Village’s predominant second-home market this summer felt the aftershock of slumping job and real estate markets in Southern California, the Bay Area and Southern and Northern Nevada.”

“A slowing job market (statewide, California added just 900 jobs last month; its recent average has been 17,400 per month), combined with recent hikes in interest, have led to a basin-wide real estate slowdown.”

“The proof may be in the numbers. From January to August 2005 348 homes, condos and PUDs sold in Incline. At press time, only 180 homes, condos and PUDs have sold thus far in 2006. ‘The numbers you see are off about 50 percent, which is actually an improvement from a month ago, so we’ll see, the real story will be after September and October,’ (broker) Chris Plastiras said.”

“Many Incline Realtors said this summer’s swoon and uncertain future to follow is a picture that is highly interpretive and speculative. Three things seem certain however: It’s not 2003 anymore. The ‘condo boom’ is over, for now; and there are more than 400 homes, condos and PUD (free-standing homes with lots collectively owned) properties on the market, the most in the past half-decade.”




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36 Comments »

Comment by Ben Jones
2006-08-30 12:26:27

‘The Clark County School District will begin its academic year today with 344 teaching vacancies, the school system’s largest shortfall in recent years. Rice said the main obstacles to hiring teachers has been a low starting salary coupled with the high cost of housing in Southern Nevada.’

Comment by nnvmtgbrkr
2006-08-30 13:00:15

Take away the recent housing boom and the temporary high paying jobs it has created, school teacher wage is about par for the region. A lot of folks are just hangin’ on by the finger nails right now and I say another 4-6 months of this and it’s over for them. I’ve been hearing so much lately from the realtors and other industry pro’s I work with that they can’t hold out much longer. Many have already wore out what little savings they had and a lot have been living on credit cards hoping each week makes a turn for the better (one of these works for me. I feel bad for her, but I begged her over the last few years to stuff some acorns away) Without housing, now way median income supports housing values. Cali money has now run dry, which was a huge push for a long time. Many folks moved here were getting jobs in the construction industry. We’re already hearing of mass lay-offs. My good friend is an insurance agent and he’s all pissed off because many of his group policy holders are consruction companies. Lately he’s been losing premium due to all the lay-offs, with one of his companies dissolving altogether. We’re about 11 months from the top, and about 5 months into some healthy declines, but we’re just starting to see the tip of the iceberg when it comes to the negative impact this whole thing is going to have on our economy. It’s going to be bad, real bad.

Comment by Backstage
2006-08-30 15:22:33

nnvmtgbrkr, are you near LV, or closer to Reno?

Comment by Backstage
2006-08-30 15:23:10

The 1st n probably means ‘northern’

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Comment by crispy&cole
2006-08-30 15:29:40

He is from the Reno area

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Comment by BanteringBear
2006-08-30 15:24:01

I agree nnvmtgbrkr, the Reno crash is going to be really, really bad. Those who overspent is not limited to the first time buyers, and the lower end. Countless people who owned a home outright, or quite close, sold for huge gains and moved up into nicer areas. Those who took their $550,000 cash from the sale and moved into the $1,000,000+ home are going to watch all of that equity disappear and be left thinking, “What in the hell did I do that for?” I know individuals who HELOC’ed the crap out of their places for all sorts of things, none of which were particularly necessary (cars, boats, CC’s, discretionary cash for living large, etc.) These people make much more than the median but find themselves in debt for better than a half million dollars with less and less breathing room from month to month. All it will take is a loss of income or a significant illness, and things could get really ugly if they had to sell. These people have children, etc. The excitement in these individuals voices over the years as their homes appreciated has been something to behold. It was feverish. Everyone was touting the local real estate like it would just go out of sight until the end of time. I can’t tell you how many times I have heard “My place is worth like $850k now!” Of course, that price was at least $100k-$200k over the recent comps and a total fantasy. The irrational exuberance is staggering. And right now, these people are firm believers that prices are still going up! I believe the Reno bubble to be as bad as any, if not the worst. Wages do not even come close to supporting even the cheapest places around. Boy is this gonna be something…

Comment by LossAngeles
2006-08-30 17:49:36

Boy is this gonna be something…

That reminded me of a line from the movie Runaway Train with John Voite. In the movie a lone switch man was ordered to intentionally derail a train. As he changed the track and stepped back those were his exact words. The irony of how parallel that was to this current situation !

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Comment by dude
2006-08-30 13:11:20

OT, I just calculated months of inventory for Palmdale, CA 93551. Are you sitting down?

13.9 months. We are most certainly on a backside and it’s big long steep slippery and ends in a long nasty skidmark.

Comment by Robert Coté
2006-08-30 14:36:14

Next spring Palmcaster will be seeing 2.2 y-e-a-r-s of inventory. Weird(er) stuff will start happening. The return of the permanent “for sale” sign. Cyclone fence knocked over under the accumulation of tumbleweeds. Multiple padlocks on the gates of abandoned projects. Obviously amateur electricity theft. Dead lawn, green lawn, dead lawn, green lawn…. Weird stuff even by Palmcaster standards.

Comment by KirkH
2006-08-30 15:33:51

Here in San Diego some of the for sale signs on my way home have lost their shallow-yard-dirt moorings and are leaning against fences. On a recent holiday weekend a highly intoxicated neighbor wandered in, wondered aloud why he couldn’t sell his $700,000 investment property then barfed in our kitchen sink. You could tell by his voice that he was just crushed by debt.

If you’re looking to buy you can gauge the seller’s desperation by the wear on their for sale sign.

Comment by Paul in Jax
2006-08-30 16:26:32

Well, at least he made it to your sink. An Aussie once told me you’re not really pissed (drunk) until you throw up on your shoes. Give him another month and maybe he’ll be shoe-puking drunk.

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Comment by dr digits
2006-08-30 18:50:33

Technically, you’re not drunk so long as you can hold onto one blade of grass and not fall of the face of the earth. An old Irish saying.

 
 
 
 
 
Comment by Ben Jones
2006-08-30 14:03:16

‘Retailer Home Depot on Wednesday said it would cut 300 jobs at its Atlanta headquarters, or about 5.6 percent of the location’s total staff.’

Comment by nnvmtgbrkr
2006-08-30 14:09:37

Are we having server meltdown again?

Comment by Ben Jones
2006-08-30 14:25:25

Yes, sorry, this should all be fixed by Monday night.

 
 
 
Comment by sm_landlord
2006-08-30 14:22:47

Starting pay == $33,073?

No wonder they can’t find new teachers. Move to Bubbleville for that wage when you have student loans to pay off? I don’t think so.

Comment by KirkH
2006-08-30 15:58:54

My friend has a masters in Education. He applied to the toughest (in terms of crime) school in San Diego county. The principal replied that he was in line behind 100 other people. Familes are leaving here in droves for that very reason. Of course no public school will hire a teacher with a Masters due to Union demands for mandatory salary increases so he’s doubly screwed.

The Federal Reserve and Public Education, two shining examples of the triumph of central planning.

Comment by david cee
2006-08-30 20:02:46

How dare the union to ask a teacher to get a raise in salary so he can support his family, after 7 years of education? What is this world coming to. We should all work for Wal Mart, with no medical and less than 40 hours so we can keep export all our jobs to China. Non Union jobs for everybody!

 
 
 
Comment by MovedToAugsta
2006-08-30 14:25:57

I tried posting this earlier: ZipRealty has 952,794 . That’s a pretty amazing job of 30k listings in one day!

Comment by Ben Jones
2006-08-30 14:27:35

I saw that posted on the Yahoo message board. Quite a jump.

Comment by Luvs_footie
2006-08-30 14:53:06

It’s getting to the stage where one wonders how many houses aren’t for sale……….that could end up being the smaller number.

 
 
 
Comment by Greg M
2006-08-30 14:27:10

Question from Australia: What is the normal course of activity after Labor Day in the States - as you enter fall does activity usually tail off? What is typically the busiest season for house turnover? TIA

Comment by dukes
2006-08-30 15:30:16

We just went through what was ’supposed’ to be our busiest season. It will slow down even further now that school is starting…

 
Comment by Backstage
2006-08-30 15:42:10

It varies by region, but Labor day is the end of the busiest season. Things are going to get really ugly during the fall.

In Northern CA, things are dead at the beginning of the year. At the end of Jan/early Feb, the sales pick up and rise into the spring. May & June are the busiest months, slowing some in July & August. By early September the sales start to drop until end of November, then they come to a crashing halt for the holidays.

That is why having increasing inventory and decreasing sales at the end of the summer is such a bas sign.

 
Comment by Paul in Jax
2006-08-30 16:37:52

In the mid-Atlantic during a normal market there is typically a busy season from March to early summer, a slowdown in late summer during the oppressive “dog days” which more than offsets any pre-school moving, and then a bit of an increase for a couple of months in the fall when the weather is really pleasant again. Then a dead market Thanksgiving until February. I always tried to list my fixer-uppers in either late February or late August, and I always tried to buy something that had been on the market through a winter.

 
 
Comment by david
2006-08-30 14:32:53

I work for amazon.com in Seattle, and the last few days I witnessed two incidents that really scary to me:
1) One of my co-workers rushed out just two days ago to buy a new house. He was afraid that if he didn’t buy now, he would never be able to buy a house during the next few years.

2) A few co-workers had a chat this morning. One was talking about his just-bought house with some ARMS loan. His plan is to live in the house no more than two or three years, at the end of which he can make a killing by selling his house.

3) A friend of mine just bought a $750 K in Bothell, WA. It was built 4 yrs ago around $450 K. He and his wife were very happy because they would be making a few hundreds K few years from now. In the mean time, they plan to rent it out. And the rent won’t be enought to even cover the loan’s interests.

Hmm, people don’t bring anything but their greed to the party, why do they expect so much in return? To these folks I just want to extend my deepest sympathies.

I love this quote from Ben Franklin, “Experience is a dear school, but fools learn in no others.”

Comment by BanteringBear
2006-08-30 15:29:16

“A friend of mine just bought a $750 K in Bothell, WA. It was built 4 yrs ago around $450 K. He and his wife were very happy because they would be making a few hundreds K few years from now. In the mean time, they plan to rent it out. And the rent won’t be enought to even cover the loan’s interests.”

Mrincomestream, care to share your thoughts?

Comment by mrincomestream
2006-08-30 16:20:05

No not really, I mean what could I possibly say that wasn’t redundant. I just don’t get the logic. People have lost their friggin common sense.

 
 
Comment by MC
2006-08-30 21:07:39

My IT guy just bought a $780K townhome in Woodbury (Irvine, CA) and it comes with a $4,500 Mello-Roos. Another friend just told me Friday night how excited he was to be getting his keys to his new $950,000 Shea home in Costa Mesa, CA…said he really worked the builder good.

 
 
Comment by david
2006-08-30 14:33:23

I work for amazon.com in Seattle, and the last few days I witnessed two incidents that really scary to me:
1) One of my co-workers rushed out just two days ago to buy a new house. He was afraid that if he didn’t buy now, he would never be able to buy a house during the next few years.

2) A few co-workers had a chat this morning. One was talking about his just-bought house with some ARMS loan. His plan is to live in the house no more than two or three years, at the end of which he can make a killing by selling his house.

3) A friend of mine just bought a $750 K in Bothell, WA. It was built 4 yrs ago around $450 K. He and his wife were very happy because they would be making a few hundreds K few years from now. In the mean time, they plan to rent it out. And the rent won’t be enought to even cover the loan’s interests.

Hmm, people don’t bring anything but their greed to the party, why do they expect so much in return? To these folks I just want to extend my deepest sympathies.

I love this quote from Ben Franklin, “Experience is a dear school, but fools learn in no others.” Let them enjoy the crash!

 
Comment by ChillintheOC
2006-08-30 16:38:07

An interesting observation to make today from a Burger King deep in the heart of Orange County, Ca. I was standing behind a very classy looking lady who was attempting to purchase a round of Whopper Value Meals for herself and kids…using a credit card. Unfortunately, her first credit card was rejected, so was the second, …and third. She finally had to run out to her car to dig out some cash.

Am noticing that more and more people seem to be having tapped out CC’s these days!

Comment by Carlsbad renter
2006-08-30 21:34:05

Let’s see, 3 CC’s tapped out and she had to dig change out of her care to purchase $10 (I’m guessing) worth of meals? Tell me she had a ring. Looks like her sugar daddy has just about been tapped out. My crystal ball says a divorce is in the making……

 
 
Comment by Auger-Inn
2006-08-30 16:51:30

I figured that X-mas 07′ was going to be bad but is anybody else getting the feeling that X-Mas 06′ is going to be “the Christmas that wasn’t”?

Comment by Observer
2006-08-31 05:50:28

I doubt it. Consumer spending in July was very good, the gain was double what it was in June. The stock market is seemingly indicating that the slow down in the economy won’t lead to a recession.

 
 
Comment by lauravella
2006-08-31 06:28:36

I just came back from the bayarea, along highway 80 in Auburn and Sacramento area, saw some large banners advertising homes for sale, with the price revised by covering up the original price-also saw some banners on homes near the freeway, even saw a new sign in the Sierras for a group of out buildings with land for 2 Mil. After driving around through S.L and Alameda, to my surprise, I saw about 7 sale pending signs -what the heck is going on? Two weeks ago, no sale pending signs in Alameda or San Leandro - perhaps mortgage rates dipped this week, and sellers came down alittle more?

 
Comment by lauravella
2006-08-31 06:54:55

Some news from the Reno area: My husband, who sells industrial electrical components here in the area said a co-worker told him yesterday the housing development contractors are starting to lay off construction workers here in the Reno/Sparks area- not ordering as much electrical as before.
Still so much residential building going on- housing developments area around this area that is still in the framing stages…

 
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