Poor folks (and flippers) who got suckered in (by the NAR) and bought at the top last year. They've already lost 10%+ and we're just getting warmed up.
If you bought in Reno last year for $500,000, you've already lost $50,000, plus say 8% selling costs or $40,000, so you're down $90,000 in a year just by making the stupid mistake of believing real estate always went up. Two years from now you'll have lost another $100,000, and you're well on your way to Chapter 11. Ah, the power of leverage...
Should have stayed at the craps table.
Morris estimates that the downturn will last about three years. Though he said this downturn is a typical market correction, and is not especially bad compared with historical downturns in the area.
"Prices are probably going to adjust across the board for the majority of houses a solid 20 percent," Morris said. "There will be a few that will adjust by the spring or summer of '07 by 30 percent, and a handful that will adjust worse than that."
Reno's median prices fell 4 percent in July, to $399,000, compared with the same month a year ago. Sparks fell 7 percent, to $315,000, and the North Valleys saw a 4 percent drop, to $278,500.
David Graham, Realtor for Ferrari-Lund Real Estate, said that because of the market shift, buyers have changed their behavior.
"Properties are being shown, but buyers are saying that it is too expensive," Graham said. "Buyers are being very selective today before they make an offer, and price is the determining factor.
"(The price) was much too aggressive to start with, and the market conditions are saying we can't support that price."
August 19, 2006
House gambling in Reno - you would have already lost 10%, and another 20% fall is on the way
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8 comments:
to think you scrimp and save all your life, then lose it all in a matter of months simply by signing your name to a mortgage
it only takes one mistake to lose everything
Reno's economy is completely dominated by the casinos who are viciously anti-union (unlike Vegas) and pay slave wages with no job security.
From the last week of October thru April's first week Reno has a freezing temperature as a morning low. High heating bills!
California retirees moving to Reno keep the local housing market artificially high and these same retirees vote against raising property taxes for building more schools.
"Then lose it all in amatter of months by signing your name to mortgage." Like you can't loose it in a month from hyperinflation? Rather hold a real asset than fiat paper. Inflation is the only way out of the quagmire.
Lost 10% and another 20% on the way? Well,that $40,000 isn't spent until you sell so isn't a loss until you establish the bottome line at the time you sell. Another 20% is speculation, could be 40% could see stagnation, could see a 3% rise.
If you are a flipper, bought and can't afford to subsidize the rent, you may get hurt, but then in most markets you would get hurt.
For 30 years I told my parent's to sell their over-priced home in Los Gatos,California. For 30 years I said, price has peaked and is going to go down and you'll loose x-dollars. My parent's said you can't loose what is only on paper. Prices went up, prices came down, prices went up higher, prices came down (but not below the previous high) and on and on for the past 30 years. Homes in the bay area have always been expensive once California became the place to live.
1962 my folks paid $18,000, in the 70s it was selling for low $100,000s, late 80s the high $400s before the quake lowered it $100,000 but still, $380,000 was alot of money in 1990 for their house. Now a mil, it's paid for so what do they care? They are 72 and retired with Prop 13 keeping their taxes low. You only loose if you have to sell. If you hold it you always make money, just like most stocks held long term.
How well did 30 years of housing do in Detroit, Michigan?
Or Newark, NJ?
Or Oklahoma City, OK?
Los Gatos, CA is not the norm.
When will Japanese property prices become double those of 1990?
To the guy who uses his parents in 1962 as an example..
I have to say your logic is flawed. In 1962, houses were priced within the grasp of the average (and then much more conservative and frugal) middle class buyer. Gas was 12c a gallon. Households could survive with a single income. Banks did not extend 110% mortgages with variable rates. 1962 was still within the peak years for american worker salaries, combined with a post depression era mentality which eschewed debt. Credit cards were a novelty. Most households had a single car, and college costs did not involve a lifetime of four figure a month payments.
The key is that you mention that your parents HELD their home.
My parents were from the same generation, and they always stressed to us the difference between being able to BUY something and being able to AFFORD it. Most people today, through the magic of delusional lending, can buy a home, but very few can afford the prices. Again, in the 1960s, lending standards were very strict, and most people did not wish to have their housing payments exceed 25% of the monthly budget.
Can you say the same of many home buyers today?
Today's family generally needs two salaries just to afford the minimum payments. Any change in family income, oil prices, or other unforseen circumstance could put into question their ability to afford their home, and thus hold it for 30 years.
:Today's family generally needs two salaries just to afford the minimum payments.
Yep, the median household income is like ~$45K/yr which I hate to say it, is the working poor for a nuclear family with today's expenses.
$45K/yr can only afford a single person (w/o kids), a middle class existence. That's a take home of $35K/yr or $2700 per month.
Let's say the single person lives in an urban location: ~$1K rent.
Car payments (Civic or Corolla, Insur, Tax): $350
Gas: $80
Groceries: $250
Telephone/Net: $150
Health insurance contribution: $50
Utilities: $100
That totals to nearly $2K of monthly expenses which gives this single person $700 to either save or blow on going out to places. Well... that's a bare middle class lifestyle for a person. Now, imagine a family and consider their budget? Most people are a paycheck or so from living on the streets.
"$700 to either save or blow on going out to places."
So by living like a hermit, a middle class single person saves only $8400 per year. That's pretty pathetic for a rich nation. At most, by going out and doing things, this person will only have a grand or two in the bank by year's end and that's really the best that a saver can hope for which would give him some $20K in a decade's time.
I think the average person should move into a trailer home and make his money go further. Why not move into that apartment at the end of one's career than at its beginning?
Reno's economy is NOT dominated by the small & shrinking casino scene.
Housing, retail and medium-sized businesses relocating from Northern California are the driving forces.
And all are about to get KILLED.
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