RENO REAL ESTATE UPDATE: I THINK I MIGHT HAVE ACCIDENTALLY DISCOVERED RENO'S MARKET BOTTOM

Comment

Comment by Ian Mariano on May 13, 2008 at 12:14am

I think what will make chase nation great is we can have 'disagreements' like what we have in this post yet still focused on searching for the truth that will ultimately benefit all parties most esp. the people reading this.

If all people just agreed this would be a bore but if everybody disagreed without a foundation for the search for truth and market illumination this site will be dog pound.

Finding the balance is what will make Chase nation great.

Good thing we have the Matt Knesek's and the Smartens to spice things up. (just not too much ok boys?)

Comment by Matt Knesek on May 12, 2008 at 7:57pm

I enjoy your research Joe, and critics are the fuel and thirst to drive facts, and maintain great vibes and energies. Smarten is addicted to pessimism and has way too much time on his hands obviously, while the "parasites" are out doing work!! Things are turning around, and the days will return my friend. Life is not always this way as we all know, Joe thanks for stepping up to the plate, Smarten I will deliver a hug if you really need it too. It seems you live in Tahoe, take a long walk outside, breath deep, get away from the computer and love life dude!

Comment by Joe Salcedo on May 9, 2008 at 11:39am

What can I say Matt? =)

Comment by Joe Salcedo on May 8, 2008 at 4:08pm

Woe is the real estate agent who admits the he does not know everything about the market.

(Smarten: "A real estate professional requires assistance from lay people insofar as the meaning of residential sales numbers?")

These two give me comfort:

"We don't even begin to understand one percent of 99% of anything"- T. Edison

"We can observe and theorize but we can never know"- A. Einstein

But dare I leave your statements unchallenged?

Not in a million years.

Point 1: "what is the bottom? Do you really think the typical buyer gives a hoot about the number of unit sales?"

Why wouldn't they give a 'hoot' Smarten? They see more and more people wanting to get the same thing they want, wouldn't that be some kind of factor in their decision-making?

Don't you subscribe to the law of supply and demand?

Wouldn't they want to see what the pros and cons of waiting too long or going too early in the ballgame?

Not to mention that the lowest month of inventory in Reno for the past THIRTY months was in Feb'06 at 2,259 homes (site/stick built only) We currently have 2,749 homes. Not big of a difference at all.

Oh, demand is starting to go up. Supply is still down. But you think the people won't give a 'hoot'?

My definition of the bottom of the market is when prices of homes hold their values instigated by consistent higher demand.

Point 2: "how do median prices relate to unit sales?the pool isn't large enough to warrant far reaching conclusions."

Why isn't it not "large enough". The data encompasses all MLS areas in Reno,NV.

The second graph shows us how many homes were sold in the Reno market every week for the last six months.

What could be larger and clearer than that?

And doesn't the polynomial trend line tell you something?(see: second graph)

Jan '08 was the lowest number of home sales in Reno for the past twenty-nine months(107 homes sales).

Ever since that time the trend in demand has been going up( as seen in graph two).

It is worth mentioning that the last data I pulled for Reno was March 2008 at 158 homes SOLD. (a 50% increase from January 2008)

For the market to find a bottom you got to start somewhere right? and that's why January 2008 is very significant. That could be the market bottom for demand and consequently(hopefully very soon) the 'steadying' of home prices in Reno will follow.

Why? the numbers tell us that demand has been going up since January 21 and ultimately prices follow demand.

For your other question:

Unit sales will be the primary (though not the only one) cause that will effect median prices in Reno to stabilize or destabilize.

When unit sales are down it just means buyers are not confident about the market for a variety of reasons. If they are not buying how can median prices go up? And vice versa

Fortunately, demand in our real estate market have been steadily going up since January 21(see graph two)

Point 3:

How can this be 'your third problem'? When I never said anything in my post against the fact that there is a lag time for the price to catch up with the positive change in demand.

I even said:

"--It is a well known fact in economics that demand precedes price. If demand comes up prices will eventually follow and vice-versa. if this is true than is it fair to assume that we might be headed for a price bottom perhaps in a year? or earlier?"

Smarten: "if you carefully examine your historical data, you'll discover that once unit sales rebound from a low, the median sales price tends to come down"

You're right but you're making it complicated.

Homes Prices does not 'tend' go down when unit sales go up. It's just that it takes a while before people to realize:

"Oh! my low ball offers does not work anymore, maybe I should offer full price now" before I lose out and get skinned-alive by my sweet and loving wife.

Then home prices stop going down.

Point Four:

Again, I don't understand why this could be 'my problem four'

But you're right. I checked the $500K-$700K in Reno and sales are still in a downward trend. Though it is worth mentioning that median price has been stable for the past two years in the $500K-$700K range.

Comment by Joe Salcedo on May 8, 2008 at 4:06pm

Leslie,

You raised a very very interesting point.

Though I would add that I will still largely cling on to the market's opinion(history) simply because there is no better alternative as far as I know.

What we're going through right now is definitely bigger but not necessarily vastly different from what has happened in the past.

My simple formula in what we're going through right now is: Study what happened in the past,how long it took before we got up again etc..and then prepare a worst case scenario but hope for the best.

As Jim Stockdale, a prisoner of war in the Hanoi prison for seven and half years puts it:

"Confront the brutal facts but never lose hope that in the end you will prevail"

Comment by Matt Knesek on May 7, 2008 at 9:17pm

Joe, I never knew you had problems man? The hug wagon will be there for lunch tomorrow, first five are free!!

Comment by smarten on May 7, 2008 at 6:43pm

A real estate professional requires assistance from lay people insofar as the meaning of residential sales numbers?

We've been talking about these numbers for quite some time on Diane's renorealtyblog.com site so your "accidental find" is really nothing more to many of us than welcome to the party.

If you'd like to look at 42 comments on the meaning of last month's numbers, may I refer you/other readers to http://renorealtyblog.com/2008/05/april-median-prices-and-units-sold.html#comment-7102 ? I'm certain you'll discover many of the answers you seek.

A couple of observations:

Your first problem: what is the bottom? Although you never come out and say it, your definition looks at nothing more than unit sales numbers in a vacuum. Do you really think the typical buyer gives a hoot about the number of unit sales?

Your second problem: how do median prices relate to unit sales? Stated differently, when you have a small number of unit sales, the pool isn't large enough to warrant far reaching conclusions. So why do so many make far reaching market conclusions?

Your third problem: if you carefully examine your historical data, you'll discover that once unit sales rebound from a low, the median sales price tends to come down. The lag time is about 9 months - one year. Although that hasn't yet happened in Reno/Sparks, many of us believe that's exactly what's about to happen. That's why I'm looking to January of next year as being the "bottom" insofar as median sales prices are concerned.

Your fourth problem: look at sales over $500K. By and large listings above $500K are grossly overpriced, and unsurprisingly, they aren't selling. Until prices come down a good 25% or more in this segment of the market, there's no bottom[something your unit sales numbers don't reveal].

You wanted to know what I think - these are my two cents worth of off the cuff observations.