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Reno homes for sale; a vanishing act? Reno foreclosures, Reno REOs ticking up, High Reno BPOs, Caution, flash bubble! Lions Tigers and Bears (and Bulls), Oh my!

My assistant and I spent most of the day working on excel and crunching data sets to see if we can get a handle on this “flash bubble” which in some cases properties doubled in get this; 6 weeks last spring. After all, I am buying two homes and a rental myself right now, one of them a new home in Reno so I have to know these numbers well. As you may recall, I started warning people in 2004 to cool it: which at least in my roseadelic world gives me some credibility: http://tinyurl.com/Bell-2004-warning .

My two biggest concerns right now are the 30 to 50,000 foreclosures that are benched/shadow inventory in Nevada because of AB 284 which nearly halted foreclosures which is all over my blog in some of my older posts. There is a little bit of a Pavlov’s dog going on that rewards people for not paying their mortgages now and they tend to have a negotiating chip with the bank in a lot of scenarios.

My other concern is what is called BOMKT in MLS; it means back on the market. There is a real dichotomy in this current bubble we are in; the greedy banks are skimming comps for high sales and listings in their BPOs (Broker’s Price Opinion of value) in Reno and coming up with ridiculous counter offers-valuations. The poor little innocent 1st time buyer who may have waited a year + on a short sale and probably furniture shopped and picked out colors can no longer afford/qualify for the property or is so pissed from the high counter offer they bail.

When this trend first started (high BPOs/BOMKT) there were plenty of Californians and first time buyer’s to feed the pyramid and they would get bought up immediately. However, they are sitting more now as the investor’s are wising up and fear getting caught holding the bag and taking a hard look at the recent melt up.

The bludgeoned first time buyer’s in this blood soaked arena of a Seller’s market basically can’t get loans in most cases because the homes have gone up so fast the homes don’t appraise as an appraisal is more conservative than a BPO generally.

So where does this leave us? The bottom line is if you need a roof over your head, it is still around half the price to own a Reno home verses rent a Reno home and prices are around 50% off the top in many cases. This kind of over-thinking/analyzing chatter I blog about is probably irrelevant in this case.

It still makes perfect sense/pencil for an Investor to get rental income. However; there appears no relief from the 1% a month drop in rental rates in the last year in Reno so be sure you factor in decreasing rents and increasing rental inventory. Craig’s List and streets especially the outskirts are littered with for rent signs with crossed out prices only to be lowered. Many people who own “freeclosures” don’t have to pay mortgages so they can illegally equity skim renting their Reno homes in foreclosure at rock bottom prices.

If we can get our population back up and some real jobs/industry back, perhaps the hemorrhaging of rental rates will stop? As many of you know, I use fuzzy logic in my models, ie; I interview DMV employee’s, U Haul employee’s, Ag. Inspector’s at the borders, post office employees etc. asking the same question; are more people coming or going? In most of the 2000’s it was a unanimous “coming”, in this decade so far it is a unanimous “going”. I remember a DMV employee showing me a box a little smaller than a shoebox back in the day with California driver’s licenses turned in just in that day.

Now for the good news because I do need to sell houses lol:
The foreclosures may never return and people living in “freeclosures” may be able to do so for the rest of their lives or at least till that macho you know what Attorney General in Nevada leaves office and AB284 goes away or is diluted. If people continue to be rewarded for not paying their mortgages, it may keep inventory tight and prices rising as witnessed currently. There is approximately 20 million a month of cash saved from people not paying their mortgage in Washoe county alone. These are the people buying new cars, boats and eating out etc. Keep in mind, an auto credit score is different than residential. What better person to loan to than someone living free void of any mortgage payments, HOA dues, taxes, insurance (usually paid by bank even if payments not made). I would caution anyone thinking of getting in the restaurant business in Reno if and when this gig drys up. Remember there are only two kinds of restaurants in Reno…

Once AB284 gets diluted or goes away, it will probably result in more short sales than actual foreclosures as they may just think “hey we lived in this home for 5 years without paying mortgage, HOA dues or taxes, let’s just short sale instead and get greased by the bank”. The banks especially Chase are greasing homeowners to short sale to the tune of up to $100,000. However, some wait it out for cash for keys in Reno Nevada which can be lucrative also.

In regards to the back on the markets; this too may pass (was that Eckert Toole or George Harrison?). It could be seasonal and eventually as witnessed in 2003-2008, the appraisals do catch up if enough cash sales.

There are get this; 10,000 baby boomer’s retiring a day for the next 19 years and many of them are in California. The California market has picked up and they are coming this way as they are “sick and tired and not going to take it any more” in California. The Somersett Del Webb adult-retirement community in Reno near the Somersett golf course just had a 40% jump this summer alone. These boomer’s come in with cash!

There is rumor that those human right violators over at Apple may come to Reno also, hey when was Nevada ever one to judge right? With that said, it may just be one of those cloud computing warehouses and some office space. If they are anything like Microsoft and Intel in Reno, they tend to bring in their own Hipster’s with their scooters, coconut water, pabst and handlebar mustaches and Techies from the Valley, Seattle and Austin. These companies do hire lower level employees in any event though.

Also, don’t forget what I call the 7 M’s that drive this market;
1. Medical Reno and Carson are some of the newest/best health care facilities in the US and (their) wages are high for this area.
2. Mining; Elko doubled in value, Yerington and Virginia City may be the next in line to get their landscapes ravaged then abandoned.
3. Malpractice; Basically the legal business, they are killing it with construction defect scams in Reno, bankruptcies in Reno, foreclosure stalling schemes in Reno etc.
4. Move up buyer’s and “shadow buyer’s” (people who lost their homes 3 years ago and now qualify)
5. Mexicans/Hispanics; they have made out great in this economy and are the new “blue collar workers” and great saver’s.
6. Mergency Personnel; Yeah I forgot the E but you see what these Paramedic’s and Firemen are pulling down these days? 22 year old cops from Iraq do pretty well too.
7. And of course who can ever forget; My families money. Boomer’s parents and Boomer’s themselves are leaving fortunes for their heirs to fight over from when you could actually save money in this country before we Wal Mart-ed and China-ed our jobs away.

Wow, after all this I think I will just flip a coin to decide…it’s a secret, contact me and I will tell you the results. Happy house hunting!

This blog and any and all content on this site, social media, Internet distribution channels, printed publications or any other outreach outlet is not necessarily the opinion of any sponsor, employer or associate of Ron Bell. Comments are economic in nature and not intended to be financial or real estate advise.

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