Housing Market’s ‘Flooded’ In Northern Nevada
The Reno Gazette Journal has this report from Nevada. “For the first time since the housing boom began, Reno, Sparks and the North Valleys showed year-to-year declines in the median price, according to the latest sales data. And the resale value for existing homes in Reno showed a second consecutive month of declines in May.”
“Donna and Robert Kizer of Sparks have been trying to sell their three-bedroom Springland Drive home for three weeks and haven’t been encouraged by the limited traffic. ‘It’s only been three weeks, but there’s just been nothing,’ Donna Kizer.”
“Robert Kizer is waiting to take a job in Anchorage and every day the house goes unsold is another day the Kizers take money out of their savings. ‘It’s really scary what’s happening here,’ Donna Kizer said. ‘The market’s flooded. You drive down the street and there’s like three houses on every street.’”
“A glut of homes for sale have taken its toll on the once-booming local real estate market, said Nancy Fennell, president of the largest residential real estate firm in Northern Nevada. ‘We’re looking at parts of our market with seven months to over a year in inventory,’ Fennell said.”
“But sellers seem to be adjusting to the ‘buyer’s’ market. The listing price for existing homes fell, year over year, in May in all three areas, the first time this year that has happened.”
“The declines surprised Brian Kaiser, analyst at the University of Nevada, Reno. ‘I wasn’t predicting a drop,’ he said. ‘I know over the last couple months we knew it was slowing dramatically. I would have guessed intuitively, based on the rest of the economy, that (increases) would have stayed in the single digits, maybe 2 or 3 percent.’”
“‘But given the astronomical rate of increase that we saw in previous years, this sort of adjustment isn’t that shocking,’ he said.”
YOY Declines.
nnvmtgbroker - You were a year ahead of the media on this one! Where will your area be in a year?
Actually, had I found Ben’s blog a little earlier I would have been ranting a little earlier. In my circle of friends and associates I’ve been the party spoiler for some time now. Now everyone I know up here acts as if it’s my fault. Yep, I’m that powerful! Nice to see someone sent in that peice from the RGJ. I’m kind of surrprised, though. They been guilty of pushing a lot of RE crap over the last few years. But I think someone called it good here a few days ago, that once it becomes obvious this thing is toast, the media can’t avoid the juicy story of financial carnage.
Calling a YOY decline is really saying what I have been saying, and that is we’ve lost about 5%-10% from our market top. Just recently on MLS I started seeing some of what looked like panic price slashing, which, once it starts, is really going to cause an avalanche.
Kind of a funny story that happened yesterday before I left the office. A man called up, didn’t identify himself, proceeds to ask if what he’s heard about our market true (that being is it really dead and are people cutting prices) I gave him the honest answer. His reply was “sh*t”, immediatly followed by a hang up. My guess is his next move was a panic call to his realtor begging him/her to get his investment(’s) property, that he’s in the red with $500-$1000 per month, listed quick! Another California specuvestor bites the dust.
There’s been soooo much speculation up here it boggles me why people couldn’t see this coming for themselves. And as I’ve said before, this area is so reliant on RE that this thing is going to hurt BAD! Before all of this, the casino based economy could support a median home price of about 175K. Where do we go from here? Down……hard and fast. I don’t think it’s goin g to take as long here as maybe other places for this place to correct. But one thing for sure, it’s not “when” anymore. It’s going down!
Add in Vegas…This can only end bad. Take away RE, and toursim (I assume toursim will take a hit once people stop refi their vacations) The whole state is toast. Unless we get a gold bubble.
Yeah, has any body been noticing the recent spike in Vegas inventory. I mean it was already high but it took a jump this week, looks like its craps for RE in Vegas, “pay the donts, take the line”, it always ends that way in the long run.
I gave him the honest answer. His reply was “sh*t”, immediatly followed by a hang up.
Had to be Dave Liareah, we’ll know soon enough if the next press release has “oh sh*t” in the text
“Had to be Dave Liareah…”
LOL
nnvmtgbrkr
Thanks for you frank comments about the Reno market. I would like your take on the inventory situtation. Reading Sacramento Landing I noticed that the ratio of homes to population for Sacramento is 1:136 and the folks over there are calling it a crisis. If I’m correct the Reno market is much worse off with a ratio of about 1:60, do you think this assessment is accurate?
My Brother owns a home in Reno and missed selling it for 400K by one month in 2005. I have been trying to convince him to lower his price and get out, but with his bubble brain mindset he won’t lower his price. He told me I am out of my f**king mind and if Reno home prices reduced by 30% there would be bread lines dowtown and a return to the Great Depression.
Yeah, I agree with you, the RGJ has been Pollyanna-in-print for the last 5 years; I too am suprised they printed this story. I’m going to Reno today and will get some pictures for this blog. Last time I was there it looked like they were still building. Have you heard anything about cancellations and what about that condo market downtown? Thank god for Ben and this blog and your insights.
He told me I am out of my f**king mind and if Reno home prices reduced by 30% there would be bread lines dowtown and a return to the Great Depression.
Wow, he must think Reno is a pretty important economy. In my opinion, Reno could slide off the face of the earth and the rest of the world would yawn.
I tell you what, if you care about your bro you’ll stand on him hard until he gets it. That’s what I did what I did with close friends of family down in Orange and Riverside Counties (So. Cal.) I’m sorry to say your bro a little late to the game, though. Tell him to take his lowest comparable listing and go under that by 5%. Maybe he’ll sell it. The nice thing is he’s still in that range (under 500K) that is getting some interest. But from what I’ve seen lately, only those going 5% or more under the lower end of the range are getting sold. Period! You can tell your bro you talked to an industry insider and the market is officially toast. And I’m talking everyone, not just me. I’ve been doing this up here for 12 years and I’m very connected from Reno, to Tahoe, to Gardnerville. I talk with RE agents I get along with, escrow officers, appraisers, builders all week long to check the pulse of what’s going on. Trust me, everyone that didn’t prepare for this is running scared right now. All are starting to believe that this is no blip on the screen.
Oh, inventory and cancellations are everything you’ve heard and then some.
nnvmtgbrkr, I have a similar story. I knew something bad was brewing in my area last May, so I googled my way to Ben’s site. I was surprised to see the same thing happening all over. Guess what? There will be a similar story this weekend in my local newspaper.
sweet report
“The declines surprised Brian Kaiser, analyst at the University of Nevada, Reno. ‘I wasn’t predicting a drop,’ he said. ‘I know over the last couple months we knew it was slowing dramatically. I would have guessed intuitively, based on the rest of the economy, that (increases) would have stayed in the single digits, maybe 2 or 3 percent.’”
I grew up in Reno. Anyone with even half a brain familiar with the area knew these prices were over the top. 200k trailers in Sun Valley (scum valley) were the equivalent of selling used up Ford Pintos for 10k because “they are not making any more of them”. A 60’s tract home of 1500 square feet next door to my mother recently sold for 365k!!! Look for those idiots to take a bath to the tune of well over 100k when things play out. Bottom line…no high paying jobs. I don’t care how good Reno’s economy looks on paper, the wages are not there. Minimum wage jobs a plenty in the casino arena. Speculators and equity locusts did a good job of building this house of cards. Remember the tulip craze anyone??
Tell it like it is NNbrker………
nnvmtgbrkr,
The floor sir, is your’s.
Sorry i’m late to the game. US Open’s on.
Man, those roughs are brutal. One little errant gust and you are in a world of hurt. And once you get in just a little trouble it’s a massive struggle to just dig yourself out. Mein Gott! The parallels are frightening.
I hear you on the parallels. I know I should feel bad watching all these pro’s get bent over seven-ways-to-Sunday, but I find my self endulging in a morbid, gleefull facination at the crash and burn I see unfolding in front of my very eyes.
Boo Hoo Hoo
The declines surprised Brian Kaiser, analyst in the Nevada Small Business Development Center at University of Nevada, Reno.
“I wasn’t predicting a drop,” he said. “I know over the last couple months we knew it was slowing dramatically. I would have guessed intuitively, based on the rest of the economy, that (increases) would have stayed in the single digits, maybe 2 or 3 percent.
________________________________________
“analyst” = drives looking thorugh the rear view mirror!
We will be this (“I wasn’t predicting a drop”) over and over again for the next four years, so get used to it…
Yes, and if he’s still in the game in 4-10 years, when he predicts a drop, it’s time to start buying.
it’s not a bad market, it’s just we are going to see more days on the market and we are going to see prices flatten.”
_______________________________
NO PRICES ARE DOWN. NOT FLAT.
The sky is blue!
Yeah, I just love the one where they’re saying the market was just overpriced, and that it’s just “settling-out” at where it needs to be. It’s returning to “normal”.
It gets exausting, doesn’t it?
The decks of sinking ships are “flat” — I don’t see the problem.
I am sick of reading and hearing about these sellers complaining and whining about “woe is me, no one wants to buy my house…”
If you need to sell, you need to act now. Take a drive around the neighborhood, look at the prices on all the houses for sale then throw out a low ball price, 30-40K lower than the competition. They are all the same houses, you have 15 of the same exact cookie cutter home on sale and 1-2 buyers (if your lucky) 99% of their decision is going to be based on price.
It would seem like common sense, wouldn’t it. But your right, there will be 5 of the exact same houses at 450K, and three more at 500K. Hmmmmmm.
I’ve said this before, the one thing this has taught me is people, for the most part, truly are idiots. Humans suck! Where’s Gary Larson when you need him. He’d have a hay-day with this one.
I’m watching this very scenario play out in the development where I live. I rent a 2800sf on 1/2 acre for $1925, gardener included. The HOA for the development is $150 a month (central park, 2 man made lakes, about 125 houses total, gated, etc.), and my landlord is paying property taxes of 1.15% on his purchase price in early 2004 of around $650 to 700k.
The same floor plan listed just down the street, four months ago, for $849k. Two weeks later a FSBO put up the same floor plan; he has now listed with an agency. A month later, two more of the same floor plan, on the same cul-de-sac even, went up FSBO; one has since listed.
So now we have four of the same floor plan for sale; three are listed, one is still FSBO. The first one to list has “dropped” their price to $829k. The third one to list has a nicer place because their lot borders one of the lakes, and they have a pool. They are at $819k. The other listing which started out as a FSBO at $809k went with $799k. The fourth one, the remaining FSBO, has no price listed, just a phone number to call on the lawn sign.
Extra pressure comes from a 2600sf model that is listed for $775k and hasn’t gone anywhere for over 90 days.
Looks like all that our “traditional strong selling season” has brought is the listings, but not the buyers!
Come fall, these people are going to realize that $10k price cuts here and there is just not going to deliver results.
well what do you know - I went to realtor.com to double check my facts, and the $829k has dropped to $819k, and the $819k with the pool to $814k.
(anything Dr. Evil might say at this point would be appropriate)
Can you believe that? Not the price cuts, but that someone would be dense enough to think that a $5k or $10k cut in the price of an $800,000 home would be enough to convince a buyer that their place is better than the three others just like it?!
What’s even more interesting is apparently we now have sellers engaged in down-side bidding wars. It looks like your neighbors may be tracking their competitors’ price reductions and making parallel reductions. And of course, if I were a buyer, I’d just continue to wait on the sidelines and watch these guys wipe each other out.
I imagine him drawing three cows standing by a fence talking about HELOCing their barns to afford self-milking machines.
Gary Larson is retired I think…
Its so crazy in these massive developements in Florida. I don’t know about Nevada but I hear its the same deal. You have 150-200 homes, 1/3 are for sale. There are only 3-4 models to choose from. You basically end up with 15-20 of the same exact unit, all at different prices. Most are priced with in 5K of each other, a couple are at that “make me an offer” level and then you have those dumb-ass out of state investors usually with a 516 area codes (New York) or someone out in California who has no idea whats going on in the market and still trying to make 40% flipping the house so everyone is coming in with prices between 250-275K, a couple are in there at 225K and then some fool things they are getting 350K.
I like calling these guys on the phone “how much are you selling this house for?” “356K” “What are you nuts? The guy next door is selling the same one for 250K”. I usually get “WELL BUY THAT ONE THEN” (CLICK)
“The declines surprised Brian Kaiser, analyst at the University of Nevada, Reno…I would have guessed intuitively, based on the rest of the economy, that (increases) would have stayed in the single digits, maybe 2 or 3 percent.’”
This guy is a professor and an analyst and he “guessed intuitively”? So much for research.
Gee, what happens when they go to drop their price next month and inventory has doubled and they didn’t drop it enough? Welcome to the nightmare! The so-called-experts like Brian should be telling people to cut cut cut and get out before they are doomed!
Gee, what happens when they go to drop their price next month and inventory has doubled and they didn’t drop it enough? Welcome to the nightmare! The so-called-experts like Brian should be telling people to cut cut cut and get out before they are doomed!
‘I wasn’t predicting a drop,’ he said.
Memo to Brian Kaiser: Sometimes prices on real estate go down.
Can you imagine if we were all in this guys class at the UofN? It would be like a really bad comic getting heckled.
That is a scene that I would pay a significant sum to be in the room on.
Ben:
There is a new business there, after this bust is moving full swing and the public is in a really surly mood.
Have a reality show where the RE economist is berated, threatened, starved and ultimately kick off the show ending their 15 minutes of fame.
Mark my words, in 12-14 months, this show or some derivative of it will exist.
My God, people with their house on the market for THREE WHOLE WEEKS and it hasn’t sold yet??! Horrors!
I agree with LinOrlando. But mainly, I continue to be stunned by what I perceive to be people’s expectations in these matters. As I’ve droned on about before, back in ‘99 for some decades previous to that, it wasn’t at all unusual for houses to take several years to sell on Maryland’s Eastern Shore (so long as they weren’t on the water), and my sister-in-law in Dubuque had a house that took OVER three years to sell in the early ’90s.
My thoughts exactly. WTF is three weeks. If you are worried already, then you are likely so far over your head that the bank in already at your heel.
The psychology of panic and greed isn’t a mystery. I suggest everyone go out and rent or buy the DVD, DVD player, plasma screen if necessary and watch the definitive scientific treatise on the subject: “It’s A Mad, Mad, Mad, Mad World.”
Great flick. Seriously, if you haven’t seen, go get it and enjoy. Good call RC!
Hey, wanna ‘take over payments’ on a slightly used plasma?
Just kidding. My plasma was an awesome housing investment. Huh? Well where I live my POS shack goes for about $550/sq ft. The plasma saved me 6 sq ft or $3300. I was seriously considering adding on before the minor remodel including the plasma.
nnvmtgbrkr,
Good call! I remember seeing it as a kid and at the time being filmed in color was a big deal! I’m told it was Jimmy Durante’s last performance?
As you have predicted Tahoe is now about to take their turn in the barrel!
I suspect the movie twisted me as a kid as I eventually ended up living near where some of the scenes were shot. My first apartment was near the California Incline and my first non-investment home was near the scene with the two taxis and I now live near where several other scenes were filmed. Excuse me, I need to go make an appointment with a professional.
i’m the homeless guy asleep under the big w
What would be the big “W” in our times?
Let’s see, if you were from So Cal, first it was Riverside and Palm Springs, then it was Vegas, then it was Phoenix and Reno, then Boise and Medford and Prescott. Hmmm……I’m guessing the “Big W” lies somewhere in Nebraska right about now.
I can’t believe that people in Reno didn’t see this coming. I bought a home there in 2002 (long story as to why) and absolutely hated the area. Dry, dusty, hot, cold, boring, dreary, residents stuck in a big rut (sorry nnvmrtgbrkr) - other than Tahoe there’s not a whole lot going for the area. Wasted a year of my life there before renting out the house and moved to So Cal. Since moving, I couldn’t believe the appreciation I was seeing, there was no justification. Sold the house to my tenants last year in August (no realtor, no commission!) for double what I paid and never looked back.
I’m thinking there will be some serious deals to be made in the newer south end developments in the next few years. Parts of Saddlehorn, Arrow Creek, Double Diamond - all overpriced when I was there and can’t be any better now. There’s little in the area to support those prices. Gotta tumble and tumble hard.
North valleys are going to take the huge hit. At least in South Medows you are still ‘in town’ with good schools (well good for the area…). I noticed the North Valleys prices were just as high as Spanish Springs.
I agree that the north valleys are going to take a hit. I neglected to mention them because other than the nicer horse properties, the area just isn’t very desirable. Single and double wides for everyone, free of charge!
No, it’s really been built up. There are some nice houses out their these days. However, it’s still the north valleys.
No offense taken. I don’t actually live in Reno. For the sake of remaing as anonymous, I don’t pinpoint my location. But where I live is much nicer than Reno. Carson is worse, in my opinion. Absolutly no city planning. It’s like someone vomited up a town (can’t really call it a city, though it is our capitol)
Hey! It’s not that bad.
Don’t forget it’s next to MoundHouse with all of the Lyon County brothels. Everyone wants to live there. This area is different! It’s next to at least 4 brothels in 10 minute driving distance.
I live in Carson. I agree about the city planning. One street has 3 different names depending where in town you are. That said, Carson has a very different feel than Reno. A ton of state workers, and the local casinos are packed full of senors.
nnvmtgbrkr;….I am going to be at the KOA with my Motor Home on hot August nights….Lets have lunch and B-Sh*T..I played for the Reno Silver Socks Looooooooong time ago so I know a little about the area….
“Since moving, I couldn’t believe the appreciation I was seeing, there was no justification.”
That sounds familiar. The periods in history when money trees (aka owner-occupied homes) bore as much fruit as they did over the past eight years are few and far between. In fact, is there any other period that had as bountiful a harvest, soon to be followed by a brutal drought?
Tahoe straddles the state line. Any differences CA/NV? And didn’t the Incline Village tax revolt get heard in the NV Supreme Court yesterday?
Yep,
http://news.rgj.com/apps/pbcs.dll/article?AID=/20060616/NEWS10/606160396/1002/NEWS
“Robert Kizer is waiting to take a job in Anchorage and every day the house goes unsold is another day the Kizers take money out of their savings.”
Just out of curiosity, how does one find employment in Reno and then wait to take a job in Anchorage (talk about blowing hot to cold)? How long is that job in Anchorage going to wait to be filled? Take money out of their savings; damn I would discount the damn thing to a price that would unload in a day before I’d deplete my savings.
Sounds more like some flipper who got stuck. Unless this idiot is some type of specialist that someone can’t do without, there won’t be any job left to take in Anchorage by the time he sells.
What suprises me and is not touched apon too much in the MSM is the
simple fact that prices do not need to decline to cause a debacle. If they
stay flat, have a gentle landing, or even went up 1 or 2% the result is
the same.
Too many people have no skin in their houses. Too many 100%, 105%,
125%, 80/20’s etc… have created a situation where these people are
screw unless property continued to skyrocket. They basically bought
houses on margin, and the market doesn’t have to dip for them to
lose. Add in the cost to sell (fee’s, % etc…) and they must must must
have a jump in price or they have to bring a check to closing.
They have no money (blown on Escalades & granite), so they can’t
sell. They are stuck, period.
Since it is sliding, they are utterly screwed but regardless, they were
dead meat even if property rose 2%.
Having lived in Northern Nevada for 12 years, I know that the area is known for having a large transient population. I very large percentage of people move in and move out in any given year. This has to do with the ease of getting jobs in the casino/tourist economy. People usually leave when they seek better opportunities.
I predict that due to the highly mobile population of Reno, that a downturn in the economy will cause the population to slow or even shrink much more quickly than most people would predict. Not that many people in Reno have real “roots” keeping them in town. When the jobs go away, they will leave town in no time at all. I believe this fact leads to the conclusion that a downturn will be more swift and severe in Northern Nevada than elsewhere.
I live in Bozeman, MT and wonder whether we will face similar dynamics to what is happening in Reno. Very transient population (ski resorts, fishing, hiking, hunting etc…._) very low paying local jobs, huge real estate appreciation over the past 5 years, will it all implode. Locally everyone insists Bozeman real estate can never go down because this is a great place to live.
Current stats:
1133 residential listings in the Gallatin Valley
~70k total population
~30k homes
So about one out of every thirty homes is currently on the market. Is that high relative to other markets?
Billings here. Home prices have shot up pretty well here, but Bozeman is nuts! It’s a nice place to live, but there’s no way your wages can support prices that are nearly double what they are here. 1 in 30 homes for sale is very high. Look for the downturn soon. How can anyone still be in denial? Start talking it up, remind people that RE *does* go down. Even in highly desirable places. Especially when first-time buyers can’t get in, “priced out forever” crap aside.
STL Engineer
I agree with your assessment. My family lived in Sparks for a few years in the 90’s. Actually loved the place. Great place for outdoor activities year round. Left in 2001 for family and career reasons. We looked at moving back in 2004 and found that we could not afford our old house even with a substantial pay raise. Staying put for now.
Yeah, Northern Nevada is not too bad. There are many good areas. There just aren’t enough good paying jobs. I wouldn’t have left if I could have found a good paying professional job as an engineer.
Did you go to the Great Basin Brewery in Victorian Square in Sparks? That was my favorite place to go when I needed to not think about engineering.
I’ve been there a few times and enjoyed it as well. There was also a good brewery in (I think) the Silver Legacy. I can’t remember the name though.
Does anyone have any info on what RE is doing up at Incline Village?
Swelling inventories as far as I can tell. I check the listings periodically. And as far as price, well, it’s gonna cost you. Try finding ANYTHING under $450 and that includes shacks. I heard a great number of the big money players and celebrities have bought up there in the past 5 years or so. It really sickens me what the ultra-rich and greedy have done to the place where I grew up. Tahoe was a place where middle class local families (within an hour) had cabins and spent summers and enjoyed the beauty for what it was. Not anymore. The rich ***** took that fun away long ago. Some of the overdevelopment is sickening. If I sound bitter I am.