‘This Is Not Like A Bubble Bursting’ In Reno
The Reno Gazette Journal reports on the housing bubble in Nevada. “In Reno, the median price, where half the 132 homes sold went for more and half for less, for a single-family home was $384,500, down from $412,000 in January but a 6 percent rise since February 2005. In Sparks, the median price was $330,000, up from $325,000 in January and a 6 percent rise from February 2005. The North Valleys slipped to $270,000 in February from $289,000 in January.”
“‘That’s back to a more normal rate of appreciation that we would expect to see, not the 20, 30, 40 percent that we have been seeing in some of these areas over the past couple of years,’ said Brian Kaiser, analyst at UNR. ‘This is what we’ve been expecting to see for quite some time. I’m shocked it took as long as it did to slow down.’”
“The median price of condominiums in Reno slid to $185,000 on 41 units sold in February, down from $242,500 in January but up 6 percent from February 2005. In Sparks, condo prices fell to $179,500 on 12 units sold from $193,950 in January but rose 3 percent, year over year. All this is evidence of a soft landing from the boom that engulfed Northern Nevada during the last couple of years, Kaiser said.”
“‘It absolutely could not maintain the pace that it was maintaining for any length of time without completely pricing everybody out of the market,’ Kaiser said. ‘It’s just not one of those sustainable things that you can have houses going up 20 percent a quarter or year, across the board. This is not like a bubble bursting and suddenly those houses that were worth $400,000 are worth $300,000. That would be a serious situation for the area.’”
“Minden/Gardnerville fell to $402,500 in February from $408,103 in January. Dayton’s median fell to $253,750 from $269,500 in January. Fernley’s median fell to $247,00 from $257,294 in January. Fallon’s median home price fell to $205,000 from $272,500 on just 17 homes sold. The February median still represents a 37 percent rise, year over year.”
Thanks to the reader who sent this in.
‘The February median still represents a 37 percent rise, year over year…’This is not like a bubble bursting and suddenly those houses that were worth $400,000 are worth $300,000. That would be a serious situation for the area.’
It is a serious situation, that until a few months ago only bloggers and a few economist were trying to raise awareness about. But with a 37% yoy increase in Fallon, even after a huge haircut, why couldn’t prices fall another 25-33%?
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Much as I like looking at these staggering numbers, I think your series is getting a bit big for 1 line per day. How about reformatting to weekly :cool:.
OT…fresno bee…sean snaith….
“There is no sign that the demographic, macroeconomic and financial underpinnings will dissipate. Barring any reversals … the talk of a bubble will just seem like a lot of hot air,” he said.
Hot air is one issue that Sierra Club representative Kevin Hall thinks could crimp the Valley’s growth. The Valley’s notorious air pollution could end up stunting growth.
“Air pollution is the hidden cost of living and doing business in the Valley,” Hall said.
I interviewed for a Professor teaching position at the Univ. of Nevada Medical School in Reno in 1976. I spent three days there and part of the time was spent with a realtor to show me the area. At that time they told me that they had a limited supply of water, banking was difficult because of the transient population, and other negatives; they didn’t want me to take the position and then quit after a year or two so they were up front on everything. I chose to take a position at a hospital in Kern County CA instead.
Reno is a speculative second home type of market you would think.
I can’t see any reason why the market there would not fall more . That 37% bump they got in 2005 was speculator/flipper driven which is always a weak market in the long run.Don’t think baby boomers want to move to that cold of a area either.
It’s always tiring to try to talk to a person that don’t get the basic economic principles. My strategy now is keep my mouth shut and just let reality play out with them and teach them a lesson.
I agree. I keep trying to tell people the situation, but all I get is “uh-huh, so how was your weekend”. Or “well that may happen in certain areas, but not XYZ city”. I mean you can’t deny the numbers, the history and the basic common sencse. So, I’m done too. I’ve given people all the info I can and now it’s up to them to make a decision.
I also think that a lot of people never lived through the depression, the oil crisis in the 70’s or a natural disaster (as I had the luxury of last summer). Some people have no concept of how quickly heaven can become hell. And more importantly how humans react to tough times. So if you have only seen good times, then hearing about the potential for bad times to come is just unthinkable. It’s the “not going to happen to me” syndrome.
I hope that things don’t get too bad for people, because we all suffer when they do. I hope for the best, but I plan for the worst.
I live in Reno. A number of homes in the upscale neighborhoods are being bought by young retirees from California. They sell their home, move to Nevada and buy a larger home for half the money. They invest the rest and use it to live on.
We sold out house in Davis for a nice profit and moved to Reno to semi-retire. I don’t know where these “young retirees” (I guess we would qualify, being 57) are finding larger homes for less than half the money. Reno prices per square foot are getting very close to prices in the Sacramento area and surrounding areas. And the market in the Central Valley areas are tanking, so that supply of buyers is drying up. What you are saying was true in the past, but not now.
The industry folks are freakin’ out here. They were all kidding themselves about a coming Spring bounce because that’s exactly what happened last year here. But by this time last year everything was rolling again after a slow Feb & March. Now, the snow is melting, the flowers are coming out, and it’s as dead as it’s been since I started in this biz in ‘94. (That’s right, it wasn’t this dead even in the mid 90’s, our last slow cycle) My office has only done a handful of purchase deals this entire year, with most of the business being “bail-out-of-the-adjustable” refi’s. With interest rates up we’ve been able to provide little relief for those folks.
I just checked our inventory numbers this morning and we had a big bounce last night. Also, seems like we got hit with a FSBO virus over the last couple of days too. It looks like the wall of denial is coming down. The “fear” is in the air.
My prediction? This joker with the RGJ was making light of a 25% decrease, but that number is conservative. The outskirt areas that saw the boom last will have the least depreciation due to the fact they didn’t appreciate that much. But the 395 corridor from Reno to Gardnerville will most likely see a 30%-40% hit, easy. From what I’ve seen, from last summer we’ve already seen a 5%-10% decrease.
Prices in Reno declined 6.7% from January to February 2006. It only takes a few more months of that kind of decline to get your 25% decrease. Is that so unlikely, Mr. Kaiser?
OT but from a report on Texas and water:
With the State’s escalating demand for municipal water comes increasing anxiety about water shortages. The Governor’s task force in 2000 identified limited water supply as one of the two “most serious natural resource issues facing Texas today” (Wagner & Kreuter, 2002). Part of the reason for this concern is the fact that conventional fresh water supplies in Texas are already 75%-80% developed (Texas Water Development Board, 1995) whereas the population of the state is anticipated to double in the next 50 years (National Wildlife Federation, et al., 2001).
For all you buyers of Texas property ….lots of land, maybe little water.
Water is a big issue. I live in the dallas/fort worth area….and am familiar with the DFW real estat market. Some municipalities are taxing property to the tune of 1% of value per year.
A definite uptick in prices due to the adoption recently of option arm loans and investors arriving buying multiple properties because ‘these things are so cheap’.
They don’t realize taxes will eat them up, we are on the edge of where the desert starts, the air is close to the dirtiest in the nation, and there is so much area being developed that it is just a matter of time before there is much pain…….NO ONE LEARNED THEIR LESSON FROM THE EIGHTIES….THERE ARE STILL FOUNDATIONS SITTING IN ROCKWALL FROM 1984 THAT ARE ABANDONED!
Water is a issue we do not talk about to much on this site . Water prices could skyrocket in the future also. So what if you have alot of land , if you don’t have water what good is it ?
Colorado Springs is going into its eighth year of drought, yet the city planners, who appear to be completely in the pocket of developers, steadfastly refuse to put any curbs on suburban sprawl and overbuilding. The last drought of this magnitude, back in the 1300s, lasted fifty years and forced the original inhabitants (the Pueblo Indians) the completely abandon the Front Range area. No wonder local realtors don’t like to talk about the water shortage.
I know someone who moved from the Bay Area in 2005 and bought a $1M home in Reno with $10K down, $800K I/O, and $190K HELOC @ 8 3/4%.
Now, what do you think will happen to this guy? I tried to talk him out of buying, but of course I am the “stupid moron” for not following all the sheeple off the cliff into the abyss by doing this type of transaction.
We will see who the “stupid moron” is. LOL
holly crap!!!
The house across the street from me (I live in an upper middle class (self-employed, MDs, small business owners) has been listed three times during the past 12-15 months. I believe it started out at either $625 or $650. It got listed yesterday. New asking price is $550.