“An Absolute Correction” In Nevada
The Review Journal from Las Vegas. “Earlier this month, the Greater Las Vegas Association of Realtors reported 1,689 single-family home sales in October, down 34.4 percent from the same month a year ago. It was the 10th straight month of double-digit, year-over-year sales declines.”
“‘It’s an absolute correction,’ association President Linda Rheinberger said. ‘We needed to have this. What’s interesting is prices are fairly flat. But we absolutely needed a correction and across the country; it’s helped with affordability. We have an affordability issue here in the county we’re going to have to deal with.’”
“In Las Vegas, new home builders pulled 864 permits in October, the lowest total since January 1993, Home Builders Research reported. ‘We never thought the monthly permit total would ever again get below 1,000,’ Home Builders Research President Dennis Smith said.”
The Las Vegas Business Press. “Nevada’s unemployment rate jumped to 4.2 percent last month, up from 4 percent in September. The housing slump, say officials, has caused the increase. The construction industry reported fewer jobs in October after months of strong employment gains.”
“‘We’ve been hearing for a while that Nevada’s housing market was losing momentum,’ DETR Director Terry Johnson said.”
“The construction sector (is) the primary driver of Nevada’s employment growth. The construction industry added an average of 2,000 jobs per month from February through September, continuing the strong growth trend seen in 2004 and 2005. October is the first drop, with construction losing 700 jobs statewide in October.”
The Reno Gazette Journal from Nevada. “The median price for an existing single-family home in the greater Reno-Sparks area dropped for the fifth consecutive month in October. The median price slipped to $312,400 in the Reno metro area, down 13 percent compared with October 2005, according to the University of Nevada.”
“That is down from the all-time high of $370,000 in January this year and down slightly from $315,000 in September. The once red-hot housing market has seen month-over-month decreases in all but two months this year. ”
“Home sellers might have to wait through winter, a traditionally slow time for the Reno-Sparks housing market. Because of that, Stephen Haley, president of the Reno-Sparks Association of Realtors, and analyst Brian Kaiser agreed February could be the most telling month of whether the market has hit bottom.”
“‘We’re not going to see much of an improvement in the market until after the first (of the year),’ Kaiser said. ‘These last two months of the year are traditionally very slow anyway for resales, and with the market at or near the bottom I wouldn’t expect the November and December 2006 numbers to show much of a reversal in this year’s slide.’”
“The median price for a single-family home in Reno rose to $380,000 in October from $370,000 in September, but that was still down 11 percent from October 2005, according to the report.”
“In Sparks, the median fell to $294,200, down 12 percent from October 2005, and the North Valleys fell to $260,000, down 12 percent from the same year-ago period.”
“The Sparks City Council considered changing an agreement with developer Trammell Crow Co. to reduce the sales price of land needed for housing projects planned on Victorian Square.”
“The price tag for the property would change from $10 per acre or $1.4 million to at least $100,000 plus possible revenue sharing of up to $2.9 million.”
“What happened: The city council voted 4-1, to change the development agreement. Developers said the original agreement for the land did not take into consideration market declines in property values, and increased costs for construction materials and labor.”
“While council members were concerned about the potential risk of loss to the city, many agreed that plans for the revitalization project had progressed too far to deny the price reduction.”
From Utah:
‘It isn’t grass growing in the fields of Washington City any more, it’s buildings now. Maryln Wallis, Washington City Building Technician, said in 2005 the city issued 874 building permits. In 2006 the number of distributed permits dropped to 670. Wallis said what has slowed growth is the price of land and spec homes.’
‘Land prices has just gone completely nuts around here,’ Wallis said. ‘It’s just, whew - the normal person can’t buy.’ Nobis said in the past six months he has also seen things slow down because of the increasing land prices.’
Washington City. The School Trust gets to pick and choose particular plots of land for development in the state of Utah. The money from their profit goes to the schools. They built a big golf course development off exit 16. The timing on this was perfect and the development flourised, they named it Coral Canyon. If you check out the Spectrum classifieds you’ll see plenty of them for rent with “brand new” and “never lived in” thrown in the description. Now they believe that superior speculation abilities and not just lucky timing was the reason for their success.
The School Trust plowed under alot of land between north past exit 10 and in Washington City for commercial buildings last year. They put in another exit(13) with roads, street lights, etc. I am talking about a huge area, miles. Its empty, not one bussiness has been put in that place. The weeds are taking it over.
They also have an area by my neighborhood called Silver Reef Creek. The homes would be high end, $700,000.00 plus, on fairly large lots 1 1/2 acre and up. If you look it up on the internet you’ll see that they are still looking for an investor/developer to pay for it. Almost a year, no offers.
Ben, I’m seriously thinking about taking pictures and sending them to you showing the true insanity going on here. Whole developments (36)of $900,000.00 houses for sale. Million dollar homes built for last Febuary’s Parade of Homes that are still “for sale” surrounded by empty “for sale” lots.
Was in St George, Utah a month ago and the give away glossy stock real estate guide was 3/4’s of an inch thick…
“…We needed to have this…”
You didn’t say this last year. What a joke. Why don’t reporters bring back the REIC spin-meisters previous comments:
Repoter: Hey Linda last year you said you better buy now or you are going to be out of luck? Now you say something else? Which one is it you REIC Shister??? HUH?? What is the truth? Do you really know or will you always just say “Good thing X or Y or Z happened, because that makes it a great time to buy”.
Linda - “UHHHHHHHHHHHHHHHHHHHHHHHHH”
Off the topic, a friend of friend came visiting to NYC and we had dinner. She is an environmental engineer working for the EPA making 100k in California. She lives in LA. Bel Air to be exact. She bought a house interest only loan for 700k 4 years ago. Took 100k equity out “just toplay with it”. Says her house is now worth 1.4mil. She pays around 2000 per month in mortgage, but says she can’t afford the mortgage when the ARM resets in 2 years. She says no problem, I will sell then and still make a profit. “Bel Air is the place to live in LA”, “selling won’t be a problem”. Then she says that she has noticed that neighbors houses aren’t selling. I asked her then how does she know her place is worth 1.4million if houses in the area aren’t selling? She looks at me in says, even if prices drop they will never drop to 700k again. So I will be fine.
I don’t know prices in Bel Air, but I do know that living in a 1.4 million house with a 100k salary , divorced with two kids doesn’t make financial sense. Some people have made serious fake money in the past few years and have developed very loose spending habits. Playing with 100k? Whatever that means.
700k in Bel-Air? 4 years ago. I’m going to have to research that. Sounds a little low or the house is crap. But I could be wrong. She could be sitting on a 1000 sqft 2/2 on a patio slab squeezed in between two mansions. Bel-Air is mecca in L.A.. but her assesment it won’t drop 50% could be more ego than fact. Sold some nice ones there during the last downturn at 40 to 60 cents on the dollar.
“he looks at me in says, even if prices drop they will never drop to 700k again”
umm, but you just took out a 100K refi, so your new underwater point is 800K. I hope she’s better at Enginneering than Accounting
1 - because she took out $100k of play money, it only needs to drop to 800K.
2 - because she needs to pay a realtor, it only needs to drop to about 850K.
3 - she needs a buyer, which is currently pretty hard to find nowadays.
Sure it wasn’t that famous address, “Bel-Air adjacent”?
REIC members must get a daily email containing talking points. If you talked to one member or a thousand, regardless of geographic area, you get the same BS verbatim. Every single one of them reads from the same script.
I gotta give it to them they are disciplined when it comes to spewing the REIC BS.
Kaiser said. ‘These last two months of the year are traditionally very slow anyway for resales, and with the market at or near the bottom I wouldn’t expect the November and December 2006 numbers to show much of a reversal in this year’s slide.’”
Whew! That was fast. I thought we were still at or near the top.
You gotta love the contradiction that follows: “Because of that, Stephen Haley, president of the Reno-Sparks Association of Realtors, and analyst Brian Kaiser agreed February could be the most telling month of whether the market has hit bottom”
So, are we at the bottom, or aren’t we???
By the way, Brian Kaiser has responded to the beating he took by the bears in the comments section of this article. He he, BanteringBear to be exact. Check it out at http://news.rgj.com/apps/pbcs.dll/article?AID=/20061121/NEWS10/611210348/1002
“It’s an absolute correction,’ … Rheinberger said. ‘…. What’s interesting is prices are fairly flat.”
How is it a correction if prices are flat? Or is she referring to the correction in the market for realtors and mortgage lendors? Because that is the only market that I would see effected by slumping sales and flat prices.
Prices are falling, but the reported median is flat. Also, the builders are taking sales from the existing homes market with discounts/incentives, etc. It’s down, but she won’t come out and say it.
In our area (Chico, CA), the median is falling, but prices are flat ….. that is, it’s back to the cheap crap as the only thing selling….because with the investors gone, it’s the only thing folks here can afford.
Without reporting the mean, median, mode (which I’d like to see) and the price sq/ft, I don’t know what one average (median) can really tell anyone, until the numbers are so painfully negative that it’s too obvious to even need reporting.
What you would really need to know is what is the median and 25th/75th percentiles. What would be really bad is if the 25/75 percentiles both go down, and the range between them gets smaller. I.e Downward consolidation.
“‘It’s an absolute correction,’ association President Linda Rheinberger said. ‘We needed to have this. What’s interesting is prices are fairly flat . But we absolutely needed a correction and across the country; it’s helped with affordability . We have an affordability issue here in the county we’re going to have to deal with.’”
Need I say anything else? Great job, reporter.
sc in dc - apologies…you beat me to it
AGREE!! If prices are flat - HOW DID THAT HELP AFFORDABILITY???
We need to email this reporter.
Guys, Ms. Rheinberger is the President of the Vegas NAR. I don’t know why but I get the feeling her statements are a weak attempt to spin irrefutable data. Seems like she’s trying for an onsides kick or something.
Oops! Sorry didn’t catch the sarcasm the first time around.
And recall how well the onside kick worked for Michigan late in the game against Ohio State. (Why they didn’t just let Rivas boom another kick into the end zone is beyond me.)
Because there was not enough time to get the ball back.
I like the term correction. It implies that the prior higher prices were simply not correct. Too bad for all who paid them.
“In Las Vegas, new home builders pulled 864 permits in October, the lowest total since January 1993, Home Builders Research reported. ‘We never thought the monthly permit total would ever again get below 1,000,’ Home Builders Research President Dennis Smith said.”
Guess you thought wrongly. Therein lies the problem in the thinking of most of these folks (and most all of us). They get something fixed in their head and can’t update it as the evidence becomes available. It is likely that in the month prior to that data, he still didn’t believe it could be less than a 1000. Might still believe it’s a one-time thing now that it happened. People act on the model in their head, whether accurate or inaccurate, and whether updated by data or not. Of course it’s more interesting than that because people can have similar models, see the same data, and draw different inferences.
“People act on the model in their head, whether accurate or inaccurate, and whether updated by data or not.”
So true. My mother behaves as if the Mafia still controls the price of olives. Her idea of serving olives is to pick out four and cut them each into eighths. (She also still thinks my office-bound brother is a better athlete than me.);)
“…We needed to have this…”
Wasn’t Linda Rheinberger the PermaBull who was predicting permanent price appreciation for LV last year? I seem to recal her RE narrations were very pompous and condensating.
Exactly. Why now only after the corrections are fact do we need them but a year ago when the market was exploding we did not need the corrections. REIC PR spin.
“…We needed to have this…”
I just had to go look…
Rheinberger says we still have thousands of people moving to our Valley each month, we have tremendous job growth, and stable interest rates, all of which, she says, mean it’s still a good time to buy a home.
-October 2006
“People are coming here, jobs are plentiful, our tax structure and climate are extremely desirable. This level (of price increase) is exactly what we’ve been experiencing. It’s normal for us.”
-May? 2005
The Las Vegas market has “normalized,” says Linda Rheinberger, president of the Greater Las Vegas Association of Realtors. Prices there are likely to rise 5 percent to 10 percent this year after jumping about 49 percent in 2004 and 14 percent in 2005, she says.
-April 2006
“One realty broker, Linda Rheinberger believes there might be too much emphasis put on Nevada’s interest-only loan numbers anyway. ‘It’s just to maximize return,’ she said of the financing’s popularity among investment buyers. ‘If you don’t hold the properties that long, it doesn’t make sense to put money down.’”
-March 2006
Actually, her quotes all seem balanced, almost cautious - I can’t find one where she urged people to “buy now or forever be priced out”, etc.
But then, there’s this that might explain it:
Rheinberger, who some believe may become Nevada’s governor one day, gives some conservative advice: “Get a good realtor, read the detail, stick in here for five years at least and hold on.” As with everything else in Vegas, it could be a hell of a ride.
MjM
A simple question for President Linda Rheinberger of the Las Vegas Association of Realtors: If, as you say, “We needed this correction and it’s helped with affordability….” how come nobody is rushing to buy these great bargains in Las Vegas or anywhere else for that matter.
Linda, you need to find a corrupt politician (there’s plenty to choose from these days) and put $100,000 in cash in his fridge and try to get him to introduce legislation where home buyers can get a very low interest rate with no deposit and 110% financing. Oh, that’s right! I forgot! That’s what we had for the past 5 years! Don’t hold your breath, sweetheart. Those halceon days appear to be gone and if they haven’t and the government decides to crank up the printing press again, anyone with dollar savings should cash them in for Euro’s…real quick.
I’ve been sticking all my savings in CDs (timed so that I’m still pretty liquid). Is there a vehicle out there like a CD in euros?
http://www.everbank.com
Try http://www.eloan.com for 5.5% money market
I use Fidelity for everything right now (maxxing out the 401k and savings). I’ll have see if they have anything to offer.
“The construction sector (is) the primary driver of Nevada’s employment growth. The construction industry added an average of 2,000 jobs per month from February through September, continuing the strong growth trend seen in 2004 and 2005.”
HEY, WAIT A MINUTE. I thought that the reason that housing was so strong in Vegas was that thousands of people were moving there each month (or something like that) for ever-growing number of jobs opening up there. So are you telling me that ‘primary driver’ of the jobs growth has been in HOUSE CONSTRUCTION, and that the population growth that fueled high home prices was caused by construction increases which were fueled by…high home prices?
What a pyramid scheme…forget about the coasts, Vegas is TOAST.
Its one great big incestuous circle jerk in which the whole country has participated.
I’ve been saying this for months:
You’ve got carpenters and mudmen (concrete, stucco) building houses for plumbers and electricians.
MjM
or vice versa.
AND vice versa.
Interesting analysis from Marketwatch.
“Mind over matter in housing market
Commentary: Buyers hold the upper hand, psychologically
By Dr. Irwin Kellner, MarketWatch
Last Update: 8:41 AM ET Nov 21, 2006
This means that last week’s reported plunge in housing starts and building permits is likely to be followed by more of the same for the foreseeable future.
As everyone knows by now, the 17 hikes in interest rates engineered by Fed policymakers since the middle of 2004 have punctured the housing bubble — the same bubble that the Fed, itself, helped create earlier when it pushed rates to a 45-year low.
The bubble blew up from the bottom of the market, as ultra-low interest rates, combined with creative financing by banks and other lenders, enabled people who otherwise wouldn’t have qualified for mortgages to purchase homes.
Once the Fed decided to raise rates, lots of low-end buyers found their monthly payments ratcheting higher, thus forcing many to sell. At the same time, others soon found that they couldn’t afford the house of their dreams and backed away altogether.
As a consequence, demand dropped while supplies rose, leading to a rare, but palpable, decline in selling prices. This has happened with both existing homes as well as newly constructed ones.
As prices fell, the balance of power began to shift from sellers to buyers. Instead of multiple bids leading to a sale above the asking price within days — or even hours — after putting their house on the market, sellers soon found themselves throwing an open house but with no one even bothering to show up, much less make an offer.
Buyers, though, could care less about the outlook for interest rates: They smell blood.
Prospective homebuyers have become increasingly reluctant to make an offer, figuring that if they wait a week or two, prices will go lower. All those unsold homes out there are proof of the pudding — they’re making sellers anxious while buyers simply bide their time.
Against this backdrop, the supply of unsold homes shows no signs of being worked down.
If the current selling rate does no more than hold at today’s pace, it would take the better part of a year before supplies are whittled down to more normal levels. And there’s no guarantee that sales won’t go lower — especially if the Fed hikes interest rates further.
But even if rates stay the same, the damage has been done. Once psychology turns, it takes a long time to reverse.
For now, it’s a buyer’s market — and the sooner they recognize it, the better off sellers will be. After all, anyone who bought a home more than two years ago can still sell it at a profit at today’s prices.
They just won’t make as much as they might have, had they sold last year at this time.
Dr. Irwin Kellner is chief economist for MarketWatch. He also is the Weller professor of economics at Hofstra University and chief economist for North Fork Bank”
http://tinyurl.com/ykdk8a
I don’t think the interest rate hikes popped the bubble. IMHO, the runup in prices to the point where few people could afford the houses did the bubble in.
I agree. This thing collapsed due to its own weight.
That’s the thing..
i can remember sitting in a builders model in 2002 and looking at the price they were charging for ther homes. I said to my wife, we arent getting any kinda of deal here , rates might be really low right now but the builders are charging more tfor their homes. So we walked out and still havent bought (despite looking for several more years). Even if you take a higher interest rate when you buy there is a chance rates will go lower in the future and you can refi. Once you settle on a purchase price, its done. There is no “refi” of the price.
The Las Vegas Business Press. “Nevada’s unemployment rate jumped to 4.2 percent last month, up from 4 percent in September. The housing slump, say officials, has caused the increase.
Slump, what slump? (Apologies to the late Marty Feldman)
I thought the market was normalizing!
“Slump, what slump? (Apologies to the late Marty Feldman)
I thought the market was normalizing!”
It’s Abby-Normalizing.
The only way prices could have remain flat is through massive amounts of fraud. In Vegas I bet every other deal these days involves a chunk of cash passed back to the ‘buyer’ on a purchase for or above asking price.
When are the lending institutions going to wake up, or are they just expecting the guberment to bail them out when all these fraudulent loans end up in their lap?
The most amazing thing is that stories detailing mortgage Fraud (folks actually bragging about it) have been appearing for months now, yet no one seems concerned.
I have always been concerned and have been bitching about it for months now. The only reason the prices have not been recorded at a lower amounts is because of the kickbacks and incentives ,as you said .
I consider it a total breakdown of the system putting us all at risk .
I have sleepless nights over it sometimes . Do honest citizens deserve what will be the final outcome from all this real estate market anarchy?
Flippers who bought in Vegas last year should have taken the deposit instead and gone to a casino for several days. They would of had more fun, ate some good food and may have had some money left.
Buying a house to flip in 2005 is a guaranteed loss.
It’s not just Reno and Vegas. From Carson City’s Nevada Appeal:
“Many Northern Nevadans still find themselves priced out of a single-family home despite a bear market. The Carson City housing market hit a high in 2005 when the median price of a single-family home jumped 34 percent over a year to $348,500. Prices have inched down this year, according to the Multiple Listing Service, which tracks Realtor sales. The median cost of a single-family home in September was $310,000, the most recent number available.
That’s still a bit much for Mitchell, who lives with his daughter, son-in-law and grandchildren. The U.S. Army veteran paid an additional $80,000 for his one-acre in Stagecoach, where he decided to settle after getting priced out of Douglas County, one of the most expensive areas for housing in the state.”
I can’t tell you how many arrogant Renoites I meet who are absolutely convinced that the housing market is going to be screaming upwards again in profit come spring …they are now blaming the “slight” slump on the winter …”afterall, Reno’s housing market is different”. I hear it over and over …
Don’t worry, reality is quickly setting in. I have been harping on this to friends, family, etc. for over a year now. All respected my opinions, but quietly dismissed my bold predictions of massive price drops. Now that price drops are a reality, they want to know how I knew this would happen. They now want my advice on real estate. All are convinced that a full blown crash is imminent. The word is out in Reno. This thing is done.
Is no one else the slightest bit stunned that Sparks city council would let Trammell Crow off the hook? It sounds like they have a signed deal to collect $1.4m from TC but they’re going to let them wriggle off the hook for what amounts to a $0.1m option premium.
If you were a taxpayer in Sparks, wouldn’t you be banging on the council chamber’s door with a torch?
I guess these days signed contracts mean little at certain levels. To be fair I can see how the city would rather have a smaller bit of something than a whole lot of nothing if Trammell Crow pulled out.
I’ve been looking @ buying a home in LV since May 2006. I browse zipreality.com @ least once a week. We look and made a offer on a home in July, but the sellar turned us down. He bought 18 months prior for $294 K wanted $324K we offerd $304 K. He decided to refi for $330K and I guess will wait out the the downturn. We are happy to wait too. The homes listed on zipreality.com around $360K need a 20% haircut to get us back in the market. Still 15% to much, but our horizon is 30+ years. I think we will be waiting 2 more years. Homes at best may come down 10%. The sellars are holding out. Bank forcolsures may be the next best thing.
Looking back at your post from the future (Oct 2009) I hope yout patience and prudence rewarded you with a wonderful home at a rwealistic price… and I hope you got the tax rebate for first time home buyers!
Looking back at your post from the future (Oct 2009) I imagine your patience and prudence rewarded you with a wonderful home at a realistic price… and I hope you got the tax rebate for first time home buyers!