‘The Willingness To Buy Is Not There’ In Reno
The Reno Gazette Journal reports from Nevada. “Conventional wisdom might lead many to believe that sagging sales of existing single-family homes this year would be enough to send would-be Realtors to truck-driving school. But this year membership in the organization increased 13.5 percent.”
“‘People still think it’s a good business to be in, and that it is going to be an active business,’ said Reno-Sparks Association of Realtors President Stephen Haley. Haley said, about half of his members ‘have made less than three transactions this year.’”
“‘It’s a tough business to make it work,’ Haley said. ‘That realization takes about a year for a lot of people. So maybe a lot of those people that came into the business in the last 12 months will choose another course next year. But right now, there is nothing to indicate that that is happening.’”
“Sunil Joshi broke into the real estate business in 2004, during the height of the real estate boom. Joshi has had to learn to navigate a rapidly slowing market that has seen double-digit sales decreases, by percentage, in every month this year.”
“The Reno Gazette-Journal asked Joshi his opinions on the real estate profession, the changing market and what he has learned from the slowdown.”
“Q: ‘How has the real estate profession changed since the boom?’ A: ‘It’s changed quite a bit. We would go out and find some homes, and bam, it’s done. Now, when a buyer goes out you are expected to make a low-ball offer’.”
“‘Now, if I wanted to look for a home between $300,000 and $350,000, if I pull up a listing in Reno-Sparks, it will give me 500 homes. I can show 100 homes to one client, no problem. Just to satisfy a client, that has changed a little bit.’”
“Q: ‘How has buyer behavior changed since the boom?’ A: ‘Buyers are still there. The willingness to buy is not there. The problems coming up these days are the people that say that the market is going to crash, that it is going to go way lower than what it is right now. That is changing people’s mind, not anything else. As far as prices are concerned, people cannot afford to buy homes because (salaries) are still stagnant. That’s what is pushing people down.’”
“Q: ‘Have sellers changed?’ A: ‘Sellers are trying to do whatever they can. I noticed (Monday), there was a house listed (that I made an offer on) seven months ago. We made an offer on the house for $480,000, which was listed at $520,000, but they say they did not want to come down below $500,000.’”
“‘We then offered for $492,000. (Monday), I noticed they now have the house listed for $445,000. They thought at that time, ‘No, I don’t want to sell it for $492,000,’ when the buyer was willing and able to buy that house. If he didn’t stick to that pricing at that time, he would have gotten $50,000 more than what he has listed right now.’”
“‘Now, sellers are trying to cooperate with buyers as much as they can, because these new-home builders are offering way more stuff than what they used to offer. People are looking at homes that are 15 years or 20 years old, they are seeing that they can buy a new house for the same amount of payment. Sellers are trying anything possible to avoid having to pay two payments.’”
“Q: Is the slowdown a simple market correction or something more serious?’ A: ‘Looking at the market, it’s just the frame of mind that people have that that prices are just going to go lower and lower. It’s tough to say. I don’t know.’”
That ‘buyer’ could now “save” $55K for the same house. If they really want it, lowball another $150K (the price in 2003 I bet).
It still would be too expensive.
Yep…
Try a price of $45,000 or under for that house. Remember, people - asset inflation. It artificially raises the value of the house. No damn house costs $100,000, much less $450,000. And remember, the higher the cost of living is in a given area, the faster the money is being printed up on paper (or entered into the computer).
Stephanie Ellison
http://www.deafdrummer.org
I’m going to predict the bitter renter crowd gets burned again. Some of you think prices are going to drop down to 2002 or 2001 levels…or even 1997 (!) levels. That is just ridiculous. You guys are as bad as the flippers. “That $500K house is really only worth maybe $150K” - Who are you to say?? It is worth what somebody will pay for it.
Nope. I can see it now: 2010. Prices have dropped 30% on average in Californa. Market has been flat for 2 years. Rents have been going up an astonishing 10% a year the last two years and are up 32% since 2005. The BR crowd still thinks that same once $500K home that is now valued at $350K is still too expensive, even though it now cost roughly the same price to buy as to rent. So they keep renting.
Fast forward now to 2018. That same home is now valued at $800K and the BR’s are sh**ing themselves all over again.
Houses, like everthing else, goes in cycles. It is not the end of the world….just the very beginning of what will be a fantastic buying opportunity. Bank it.
PS - The real inflation rate is over 7%, once you figure in Uncle Sams cut on wage inflation - that is closer to 10%
Homes were EXTREMELY undervalued in the US 1996-1998. The run-up from 98-01 just got us even, nominally. Priced have already dropped down to late summer 2004 in the once hottest markets and IMHO likely bottom somewhere at the 2003 levels. Stil a bit over-priced but think about that 10% inflation.
PPS - I have nothing against renters or renting.I sold at the peak and now rent myself.
drugs?
“The real inflation rate is over 7%, once you figure in Uncle Sams cut on wage inflation - that is closer to 10%”
There is no wage inflation.
Wage inflation in the last 3 months has spiked. Close to 2% and it will ony increase. It has too. Now whether those are the numbers that are reported is a different issue but it would not surprise me in the least no see wages rise 5% next year…in fact I’m expecting it. No brainer. Wages are always the last thing to rise at the end of a cycle. Ithink they still rise 3 to 3 1/2 % with a recession.
Oh wow, I guess wages will be catching up with housing prices any day now.
That would be nice, getting a raise.
jdog, you stick with your opinions. If you want this crowd to agree with them, post some statistics.
The median wage numbers, like most other economic data coming from the government, are misleading. Average wages are going up, but that is because wages for the top 10% are going way up. The bottom 2/3 of people are seeing little if any increases in wages.
Sorry, jdog, but IMO you’re dead wrong. Historically, 96/97 brought us back to median… everything else since then has been artificial, and it’s all going away and then some.
Not to mention, if the core inflation goes high, so does the federal funds rate and all of those flippers with ARMs… will be in big trouble.
$150k? If that is what salaries justify. Maybe more, maybe less.
Oh, statistically, 1996 homes were near the historical norm, not below. Only by late 80’s standards were they undervalued.
But hey, its all academic for now. Very soon we’ll start to see panic. Not this month… Maybe not next month. But soon.
The only question is when does it end? end of 2007? Unlikely, but possible. 2008? maybe? It could be longer.
Let’s see what the inventory does. I expect we’ll have housing deflation while we have core inflation. Cest la vie.
“96/97…brought us back to median…”
Depends on where you live. In the DC metro, 2002 brought us back to the long-term mean after a decade of stagnation following the previous bubble: http://tinyurl.com/mld22
Still, by 2006, houses were roughly 50% overvalued here. Chop of 33%, and that should get us close to [observed] 2003 prices, which would match up nicely with the long-term trend.
“96/97 brought us back to median… everything else since then has been artificial”
If you are talking about Reno, it look like everything since 2003 has been artificial: http://tinyurl.com/m4g2r
I don’t see any reason why rents would go up by 10% per year. Rising house prices would tend to drive rents up because the alternative to renting are price-restricted. Falling house prices would generally drop all real estate prices, including rentals.
They aren’t making any more land. Therefore god declares rents must rise 10% a year. God said so.
Sure, except that you haven’t factored in ownership (of 2nd properties, etc) for the purpose of rental. The two options are not true substitutes because they aren’t truly independent.
Lots of current owners bought “investment” properties with the intent of renting them out, so as demand for owning (for investment purposes) went up, supply for rental went up also. I expect the opposite to be true on the way back down. As speculators exit the market (and maybe lose their primary home in the process), they either become homeless, or they become renters.
I’ll bet I could find you on some stock board in 2000 saying “JDSU at 50? No way!”
Idiot.
LOL. I love it when the occasional troll or fool shows up in here to try to make their case. We’ve seen quite a parade of them come and go already…LV Landlord springs to mind. This latest nimrod will go quiet and disappear in a few months, after it dawns on him that he grossly underestimated the carnage at hand.
Always love to see people resort to name calling when somebody has a differing opinion then thier own. “Houses will drop 70%. They will. They will. They will” Like I said you extremists are evey bit as bad as the realtors and flippers
It would be nice if this was to be the case but unfortunately the lending practices of the past five years have put a great majority in a situation whereby if one financial variable changes(ARM I/O resets) they cannot afford their properties any longer. Sad but true…..
Relax, jdoggy dog….the only bitter renter is you. Your prediction is pure shill and a last gasping breath in this monstrous re bubble. In a cycle where traditional fundamentals apply, buyers buy when rents and mortgages are in alignment so where does that leave your prediction? If you think this thing is over by 2018 you’re living in lala land. The time between the last Cali boom to bust was 8 years in which a recession was centered in the middle. The gnashing of teeth has not begun in Cali yet due to several factors, one being there’s still a mass of greater fools and continuation of loose money. By far, Cali is still in lag time behind the nation but there will be suffering in between, not as much as LV, Phx, Texas, Florida, Idaho is suffering NOW but soon to follow in Cali city near you. One thing your prediction forgot to address is what’s gonna happen when those funny money loans adjust and the market becomes overloaded with foreclosures and sellers running for the exits?
BTW, real classy what you said to txchick. Your credibility is in question and it’s sad you’re looking for trolling action on a very gray day in our nation.
“It’s tough to say. I don’t know.’”
No, it is not tough to say and I know: The biggest bubble would lead to the biggest bust. It is that simple. The Only question is the time frame.
Once the recession begins, the time frame would become clear.
Jas Jain
Exactly……..well put
- “Sunil Joshi broke into the real estate business in 2004
Many thanks to ‘Sunil’ for his imput based upon his 1 1/2 years experience. I can get a wino to give me as accurate info.
Well said! Good ol’ Su-shi sounded like he was drinking Sake in that interview.
The article said he had already taken another PT job. If his allegance was more to the industry, or if he were more seasoned, he may not have spilled the beans on the price activity to the newspaper.
“Q: ‘How has buyer behavior changed since the boom?’ A: ‘Buyers are still there. The willingness to buy is not there.
Correction, Dimwit RE Boy: the looky-loos are still there. Buyers they are not, until money changes hands.
I see it as a willingness to sell problem. What do department stores and car dealers do with excess inventory? Mark it down.
The spirit is willing, but the income is weak. Or at least it hasn’t doubled in the past 5 years.
With the median household income in Reno at less than $45k, and median home pricing at around $350k or so, even one of the countless wino’s downtown could conclude that affordability is nonexistant. Reno is going to crash and burn, period. As someone who grew up there, I find the asking prices for homes right now HYSTERICAL. Crappy old tract homes in marginal neighborhoods and in desperate need of care asking close to $400k. Reno is flipper alley. I spoke with an old friend a few days ago, and he said that there are a SEA of for sale signs with nearly nothing moving. I heard foreclosures are rising rapidly but have not seen the data so am not sure if that is accurate. Zillow is now showing homes worth less than their 2005 purchase prices. It is going to be a flipper slaughterhouse.
When I graduated from University of Nevada, Reno in 1996 real estate was already overpriced given the low salaries in Reno. There’s no way that slot machine technicians, truck drivers, state employees, forklift drivers, short order cooks, propane salesmen, motel maids, casino valets, and schoolteachers can support these prices. It’s all speculation.
The comments about wages in Nevada itself are relevant, but don’t forget that Reno is basically a suburb of California and a retirement haven. There is a LOT of wealth in Reno based on retirees and/or people who sold their homes at the peak in California (and thus could retire early or semi-retire) who don’t need to make a lot of money to live in Reno or (in the recent past) to buy houses there. You should see all of the top-end investment company buildings in Reno. Reno also has its share of investment scams designed to separate people from their money, some of it based on RE.
Just to add this to the perspective, not to deny that prices are too high here.
Also, it is important to look at Reno and Las Vegas as different markets. A recent article in the local Reno paper ponted out that while Nevada has a high foreclosure rate, 93% of the foreclosures are in the Las Vegas area. Much more speculation down there than in Reno.
Good oints homepop;…..Add to that the retiree’s that exit California with their pensions to seek the “No State Income Tax Haven” of Navada, gives them a imeadiate pay increase of anywhere between 8-10%…Buddy of mine just went with his 10K per month firefighter pension to Reno….Besides other tax savings (Sales tax, DMV fee’s etc.) its a no brainer for him & his wife…
He gets $120K per year pension as a firefighter???? Man, I guess going to college was a big mistake. How do I sign up as a firefighter?
Homepop. Reno has never been a retirement haven. If it is now, this is a new phenomenon. Your argument that there is a lot of wealth BASED on these retirees is a little naive in my opinion. The old argument that California retirees/equity locusts are going to prop up prices indefinitely and drive the economies over the long run is unsustainable and proposterous. Most of the wealth that matters in Reno is old money (quite a bit of it too). As far as your “all the top-end investment company buildings” comment, well, I don’t recall a large office building having been erected in the last 20 years or so. And as far as the Reno/Vegas distinction, I am well aware of it and only speak of Reno. When you say that there is “much more speculation down there” than in Reno, it sounds like wishful thinking. In one local paper, they estimated over 50% of all homes for sale right now in Reno are investors. Again, Reno is flipper central.
Bear;….You may be correct about the “current” circumstances regarding “Reno is flipper central”….I think homepop’s point is that there is a consistant draw to Reno by retiree’s….They are close enough to (Cal./Family) but get the benifits of tax savings….My firefighter buddy is 55 years old…The tax savings to him for the remainder of his lifetime could be in excess of 250K….Thats real money….
Grant;….I came to the same conclusion…..Out of High School I went and played pro baseball and he went into Fire Sciences….He would have gladly traded places with me at the time…..I would gladly trade places with him now….
Exactly! If they are not actually buying…they can’t be called buyers!
It’s just like at a strip joint. Just because a guy is sitting on “sniffers’ row” doesn’t mean he’s going to be in a rush to shell out dough for a lap dance. The girls working the pole could have given Sunil an abject lesson on the difference between a “looker” and a “buyer”.
post slump RE agents will be waht stock brokers were after the 80’s
=obsolete
the internet doesn’t lie
There must be “Patty Hearst” style brainwashing that goes in when you join the REIC!
A lobotomy, more like.
Let us all look at what has happened. Re prices have been driven in to the stratosphere by speculators who produced nothing other than moving dollars from assets to debt. With little to no wage increases it has made it impossible for would be buyers to purchase properties except by funny loans that will leave the holders of these funny money mortgages the ultimate owners with little or no recourse but to sell them off to the lowest bidder. (THIS is A CRASH in the making). Sorry but this is the eventual outcome of many many properties that will have their funny money loans reset this next year. They couldn’t afford the homes they purchased any more that would be buyers can now. LOOK FOR LOWER PRICES>
- With little to no wage increases it has made it impossible for would be buyers to purchase properties …
Wilt Chamberlin would call your statement a slam dunk. Thanks.
I remember reading in the paper about 2 yrs ago about some fool cashing in his 401K money (significant amount) to buy ‘dirt’ in Reno in which to build condos. I wish we had a follow-up to see how his ‘investment’ has gone.
Haley said, about half of his members ‘have made less than three transactions this year.’”
That guy has less than one clue how stupid that sounds.
Reminds me of Brian Fantana’s quote from “Ron Burgandy”:
They’ve done studies, you know. 60% of the time, it works every time.
Does anyone have any information on the Truckee/Lake Tahoe Markets?
Many, many homes for sale (and growing) with hardly anything moving, save for some real high end lakefront stuff, etc. Asking (wishing) prices still in the stratosphere. $350k gets you a 600 square foot fixer cabin near the lake (no views or anything). Truckee and the outskirts of Tahoe are a little less expensive but hopelessly overpriced as well. Unless money is no object, it is the worst time in history to buy at or near Lake Tahoe.
Right now is the worst time in my memory to buy anywhere in Northern California!!! It’s all extremely overpriced!
Northern California? Try all of California.
Add all of S. Fl to that list as well.
Anyone notice Ben’s major sponsor for this website is now a scam company offering interest only ARM option loans?
Do these people even check before advertising here? BTW these arent the generic google adsense ads. they are actual banners that Ben has placed all over the site, between each post, and in the right-hand sidebar.
What is up with this?
not sure but as long as it give Ben some cash flow and us some entertainment, I’m all for it.
From what I see, they are indeed “Ads by google.” Adwords and Adsense get too much credit, the system isn’t that great. Of course Yahoo!’s busted ad system makes google look good, but overall I’m not so impressed with it. I do believe that mortgages are one of the highest paying ads, so that is good that he is getting those ads. The ads that say “Ads by google” under them are fed by googles systems.
plus I think by clicking on those ads, in a small way you help pay for this blog that shines a light on all this nonsense.
I would click on the ads just to add to Ben’s coffer. These advertisers are barking up the wrong tree.
In fact, there’s something quite delightful in having the scamsters financially supporting the blog that is debunking them.
Now THAT’s capitalism.
Hey Steelietown,
Are you prepared to replace the ad revenue from the advertisers here? If not, put up and shut up.
I agree, I have no heartburn with it if it rewards Ben for his efforts….
how many people who read this blog are going for ARM?
If interest rates are high, I would consider an ARM.
It saves the cost of refinancing as interest rates decline.
Jingle Bells..the Realtor Smells..the REPO-MAN is Coming…
Let them Rot on the Lot until September of 2007 and Call me !
great tune, Mikey
Ben:
Why is Option One advertising on this website? aren’t they one of the worst disemblers of the housing bubbles? Can’t Ben can find more ethical sponsors! I was going to make a forcefuly analogy about Judas and silver but I thought better of it. Perhaps it’s only me but I have doubts where none were before……….
It’s only you.
Yep, just you. To quote diemos’ post above, “There’s something quite delightful in having the scamsters financially supporting the blog that is debunking them.”
Capitalism, indeed!
Lenin said: “A capitalist will sell you the rope to hang him”.
Ben sez: “The REIC will pay me the money to discredit them”.
“‘We then offered for $492,000. (Monday), I noticed they now have the house listed for $445,000. They thought at that time, ‘No, I don’t want to sell it for $492,000,’ when the buyer was willing and able to buy that house. If he didn’t stick to that pricing at that time, he would have gotten $50,000 more than what he has listed right now.’”
I thought your mother used to say that a bird in your hand is better then two in the bush.
Man, these people were stupid. Now see the GREEDY nature of these people make them sink.
“There is nothing more attractive right now than Nevada.”
John;…..Are you being sarcastic or serious ???
O.T.:
not only does FL have hurricanes to worry about but now here’s this:
http://www.voanews.com/english/2006-09-10-voa24.cfm
The U.S. Geological Survey says a powerful earthquake has occurred in the Gulf of Mexico, sending shock waves to parts of the U.S. Gulf coast.
The agency says no damage or casualties have been reported from the 6.0 magnitude earthquake that struck earlier Sunday.
It says the quake was centered 400 kilometers southwest of St. Petersburg, on the western coast of Florida.
Ben,
It appears many of our regulars left this weekend. But there seems to be a whole new crop developing.
Well I am a Bitter Renter as I could bought the place I rent in ‘04 but thought it was over-priced so stupid me said no. Now I’m still renting when I could’ve bought for not much more than rent on a 5/1 ARM. According to Zillow price is up at least 50-60K. Is Zillow that accurate? How is it that prices in Tucson AZ keep going up and up?
God, I have been kicking myself all summer as I feel that I missed out on a LOT of equity that I could’ve borrowed against and gotten myself out of a financial mess. Sorry for reposting this but I can’t believe how much farther this bubble has gone and no signs of it deflating here.
Boo Hoo. Please take your “Princess and a Pea”-sized problems — and whining — to someone who cares. Before this plays out you’ll be damned glad you didn’t buy in ‘04.
This would not have solved your problem, as you are really just shuffling debt around. You really need to get clever about living on the cheap and saving money so that you don’t need credit when some type of disaster occurs.
Buying a house is a big financial obligation. At a certain prices (which are hard to get anywhere now) it can save you money over renting, but you have to keep in mind that houses also tend to cause big unexpected expenses. You may need a new roof all of the sudden, which can cost $2,000-$10,000. If you are not in a financial position to absorb that kind of cost (i.e., you’d have to put it on a credit card) you’re just going to make yourself worse off.
Even if you believed that the appreciation on zillow is for real, if you did a seriously detailed look at all the costs and interests and taxes that you would be paying, I doubt you would come out positive for the transaction.
Further, consider what happens if the appreciation isn’t real and you cash out the equity: you’re stuck in a house that you can’t sell because you’re underwater on it with a mortgage that gets more unaffordable every passing year. You can solve your financial problems in other ways, you just need to set your mind to it and learn to enjoy being a cheapskate.
I missed out on a LOT of equity that I could’ve borrowed against and gotten myself out of a financial mess
Er, borrowing against home equity gets you into a financial mess, not out of it. As millions will discover very soon.
The way to get equity out a bubble-priced house is to sell it and then repurchase when prices return to sane levels.
I agree. I never understood how creating more debt was moving one forward.
Your right, but maybe I could’ve sold it and rented from the new owner. Either way I feel like I screwed up!
When will this market ever crash? At this point I don’t think it ever will, we’ve been hearing about this for HOW long? I know today is 9/11 and I remember thinking back then another attack could happen but nothing yet. Kinda feel the same way about the Bubble.
My grandmother used to tell me that the most common phrase used at the tracks was “IF IDA”. If only I’d bet on horse 6 and not horse 4 etc. Buying at or close to the peak of the bubble would have been a disasterous mistake, as we will soon learn it is for millions of others. Right now, the market IS crashing, and those who bought last year in bubble areas have already lost 5 to 30% depending on how overpriced the property. This trend has every indication of continuing for some time, and yes it will probably take years to undo the damage that has been done. Also, getting into more and more debt is not the same as getting out of debt. Getting out of debt requires disipline and hard work, not speculation and borrowing. Speaking personally, I am unconcerned as to if I think prices are going up or down. I need a home to live in and don’t want to rent all my life either. When I find a decent home at a price I can afford, I will think about buying, but here in San Diego, that would entail a 50% + price drop.
Umm, the bubble has already started to deflate in Tucson. Bro-in-law had a place in the Oro Valley. Bought 4 years ago for $275k. He was offered $600k for the place (unsolicited) in Nov 2005.
Put house on market for $575k in March — priced like similar homes. Little to no interest in the place. Kept dropping price, ended up selling for $465k in May. Happy to get nice gain, happy to get out a home before it was too late.
Fundamentals (rent, income) do not support the asking prices in Tucson, they will fall further.
jb
Thanks JB, looks like he still made about $190K before fees, did he buy in 2002?