Sierra Nevada Real Estate

Average and Median Sales Price of Single Family Homes in Reno & Sparks

January 2009 - May 2010

May Market Update

Volume Peaks Then Wanes As Tax Incentives Leave

The current market is all about first time buyers, whose dream of home ownership is being realized with easy qualifying mortgages, low interest rates, low home prices, and low money down. The first time home buyers tax credit is now over, and the fall's fevered pace has slowed into spring. Homes already under contract are still closing, but the pace of shopping has slowed with the advent of summer.

Federal Reserve Chairman Ben Bernanke has announced that the recession is "very likely over" but few residents of Reno or Sparks are feeling the love. Contrasting that statement is Aprils record 13.7% unemployment rate in Nevada and record high notices of default (foreclosure) plus a huge spike in homes being auctioned on the courthouse steps (trustee sales) every month in Reno and Sparks.

One in every 483 U.S. households received a foreclosure filing last month, the highest monthly rate since the real estate tracking firm RealtyTrac began issuing reports. The company said foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 261,255 properties during the month, a seven percent increase from the previous month and a 48 percent increase from May 2007. "May was the third straight month where we've seen a month-to-month increase in foreclosure activity and the 29th straight month we've seen a year-over-year increase," said James J. Saccacio, RealtyTrac's CEO.

The housing crisis is particularly intense in Nevada, as the state has lead the nation in foreclosures for three straight years now. With one in every 118 households receiving a foreclosure filing in May, Nevada posted the highest state foreclosure rate for the 17th consecutive month. Foreclosure filings were reported on a total of 9,009 Nevada properties, an increase of nearly 24 percent from the previous month and a 72 percent increase from May 2007. What can a homeowner do when they find themselves unable to make their payments? Read my latest article on foreclosures and short sales aka "You're Screwed".

The new Obama loan modification initiative (HAMP) is scant help to distressed homeowners. Neil Barofsky, the special inspector general for the government's $700 billion Troubled Asset Relief Program, in a report released April 10, 2010, states "Unfortunately, HAMP has made very little progress in stemming this onslaught (of foreclosures), resulting in only 230,000 permanent modifications initiated over the approximately 12 months of the program's existence."

What is even more disturbing is the secret formula of "net present value" used to determine whether the home qualifies for a loan modification, or whether the lender would receive more money by foreclosing. As an example, during a Nevada foreclosure mediation between a borrower and the lender, the lender informed us that the NPV of the property was $178,000 as a foreclosure, and the actual market value of this property is around $135,000. It's hard to believe that a bank would give up a profit of $43,000 in order to modify this loan or short sale this house!

Nevada legislature has made serious attempts to assist homeowners in foreclosure, by making it mandatory for a bank representative to meet for mediation with a homeowner who has received a notice of default and requests mediation. However, there is a catch. Mediation is only a discussion, and not binding. As of April 30, 7,915 homeowners who received notices of default have requested mediation, and 2,635 mediations have been conducted since mediations began Sept 14, 2009. According to one mediator, the disparity between the lender and the borrower in terms of information, resources, knowledge, and preparedness is so vast that it is almost a disservice to the mediation process, since homeowners are so ill equipped to negotiate with parity against their bank.

On April 5 the new Obama initiative HAFA took effect. This program is mandatory for banks which have accepted TARP money (of course quite a few have paid that all back). This program attempts to prohibit the banks from two practices which are derailing short sales; taking 6 months or more to reach a decision and approve a short sale and releasing the lien but not the promissory note, thus reserving the right to pursue a deficiency judgment against the borrower. As short sales are the majority of downward pressure on the market at this time any improvement in this process would be pivotal in stabilizing our housing market. In the third month of this program the banks seem to be able to initially process the request for the HAFA program, but are still not meeting program goals of 30 days for an answer on the price that the house can be sold for.

Bank owned (REO) properties and "short sales" overwhelmingly lead the market. As of this writing, there were 3390 homes for sale listed on multiple listing service, and 65% of them were bank owned or soon to be. 63% of all homes sold in April & May were either bank owned or pre-foreclosure sales. The inventory of REO (bank owned) single family homes has increased by 90 homes to 923 as of this writing. REO condo inventory has increased by 38 units and is now numbered at 866. Not only do REO properties depress sales prices for resale homes, but they also "remove" the opportunity for the seller to "move up" in the market, as there is no family selling one house to buy another.

The current real estate market is extremely mixed, with (foreclosed) homes below $150,000 seeing brisk activity, many with multiple offers, and sometimes selling for more than asking price. So called "move-up" homes in the $200,000 to $800,000 range are slower to move.

The brightest sector of the real estate market is rentals. With so many homes being foreclosed on in the area, many renters as well as homeowners are losing their homes, contributing to the rental market for moderately priced homes. Many homeowners are turning into semi-investors: renting their homes instead of selling in order to wait this downturn out. For those who have the money and the credit, this market is a great opportunity to pick up an income property. Many tenants are also interested in longer term leases. With the continued decline in family income, we are also seeing many tenants asking for rent concessions, or moving to less expensive homes.

509 homes were sold in April, and 445 in May. The median sales price has remained stable at $175,500. The average sales price has also stabilized at $219,467.

Sellers are also becoming very realistic about their home's value. The spread between initial asking price and sales price was about 10% above the final sales price, but when price reductions were factored in, that spread narrowed to under 3%.

The upper end of the market had a sluggish 2 months, as only 6 homes sold for $900K or above, and the highest priced home sale was $1.2M.

Condo sales warmed up with spring, and 122 resale condos changed hands. All of these units were either bank owned or short sales. From the assessor's recordings, it appears that 27 new condos were sold during April and May. These are a mix of new projects (remodeled older buildings) and resale. (It's difficult to obtain an accurate timely accounting as recordings trickle in)

New home sales rebounded in April and May. 122 homes were recorded sold. Some of these homes were standing inventory located within foreclosed projects picked up by other builders. (It's difficult to obtain an accurate timely accounting as recordings trickle in.)

Sellers are aggressively pricing their homes with increasing time on market. The final selling price on homes was less than 3% of the asking price. Days on multiple listing for sold homes in May averaged 136 days.

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