Reno Home Blog

Federal reserve lowers interest rate to 4.5%

The Past and the Present

Amazing. (amazingly good or bad depends on what side you're on) The Federal Reserve lowers the interest rates two consecutive times. Hmm.  I wonder what they are up to. There's a thin line between fighting inflation and recession (Fed's primary job description) and spoiling the Big Wall Street firms clamoring for rate cuts. I hope they're not doing that. Because that's not their job

We often hear about rates and Feds and what not.  What is the Federal Reserve anyway? what do they have to do with me?
learn more about it here: Federal Reserve System

What does it have to do with our Real Estate market? I found an article which I hope would give you a better idea on how it affects our industry, it was published on June 28,2006 by Reuters it talks about Real Estate Top Executives complaining about the rising interest rates : enough of Fed rate hikes,real estate execs say

Here is an excerpt from Bloomberg's post on today's rate changes:

'The Fed acknowledged that ``economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance.'' At the same time, ``the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction.'

here's the rest of the article: Bloomberg talks about rate cuts
I have studied stocks in depth for two years and still can't understand some of the things they say in this article.  I hope they can be clearer in explaining to the people. I'm not saying to make  it sound elementary but geez a little bit more clarity would sure be nice.

Here's a better article I found: Fed cuts rate to ease housing slump
 

If only Nostradamus was a Realtor in Reno

part 2 of hope or fear?

Making predictions have always been a controversial subject.  Few can rival the great predictions Nostradamus (wiki) has been known to make on numerous world events.  If only he was an agent here in Reno.  But fear not, there is an alternative (As you have probably noticed from our previous posts ) It's the history of the market. History will always be the better teacher of the future.

A wise, seventy two year old friend of mine commenting on my seemingly lack of passion in learning history(and I thought I was already a good student) , bluntly told me " Ian, you're at a big loss in your lack of knowledge of history, how can you see what the future holds if you don't study the past?" 

He hurt my feelings but I knew exactly what he meant.

When it comes to predicting our real estate market  it's either win big (joy)
or lose big (grief).   We may not be aware of it but deep inside we have our biases of
what the future holds-our little predictions.  There are many reasons for this, maybe we overheard a good friend telling us what they heard from the news that the market will rebound by 2008.   Or by  constantly being bombarded by our industry's (often times) blind faith advertising,' Now is the time to buy!' 

One prediction that I often hear is this...

Myth number two: After the real estate market reaches it's bottom, it will go up at the same or similar pace as it did from the incredible increase in the previous years, 'the happy years' of 2002-2005 (15-30% home appreciation every year).  It just isn't so.  Basing it from previous records of the market,  I don't think this is going to happen.

After the honeymoon years of 2002-2005 (15-30% home appreciation every year)

market drops to arguably the worst real estate market since the great depression(2006 to who knows? CNN said 2009; I think that's fairly accurate).  After that (once we reach the bottom),it is safe to conclude that for a number of years (my guess is 3-5 years or more) the real estate market will appreciate just like what it did before to a more conservative 4-7% per year.

What's your point Ian?: After the real estate market bottoms out,history tells us that the market tends to move sideways (4-7% home appreciation/year) for a good number of years before increasing to more than 7%.  This is the time where it really makes sense to keep your home for the long term.

I still believe that every family deserve a home but make sure that you're making the best possible,well-thought out decision.  Feel free to call us if you need more information.

Lessons in Reno real estate: Hope or fear?

Is it time to hope or time to fear?

Having been able to talk to dozens and dozens of people about the Reno-Sparks real estate market and often overhear from conversations from investors,agents and ordinary people regarding what's happening in the market.  I have concluded two major misconceptions/myths about the future of the market:

1) Myth one
"oh, the market is terrible I don't want to sell my house I'll just wait for next year"

Perfect example.  The summer that just passed  a client of ours listed their home for a price that we thought would catch the attention of buyers (I believe we were in the top three in the neighborhood).  And numerous buyers did show interest in the home.  For the first two weeks we had around six to seven showings.  Which I thought was really good in that kind of market environment.

For some personal reason our seller decided to withdraw their home in the market.  I felt at that time that they were making a grave mistake (the numbers was giving us clear signs that the bottom will not be coming to us soon,"sell now or lose later" it was clearly telling us), but as a Realtor there's not much you can do. 

Yesterday, Joe was with a buyer who was looking in the exact place where our seller's home was  (the one who withdrew).  The home that our buyer wanted to make an offer on was very similar if not exactly the same from our ex-seller's home; they were selling the listing $30,000 below our ex-seller's home. 

Meaning, if our seller was selling the house for $100,000 (early last summer) the home very very similar to it was selling for $70,000 as I write this. 

The lesson is very clear. Know when you should hope and when you should fear.  The mistake I see in many of us is we fear when we should hope and hope when we should fear.  Knowing what feelings to follow makes a world of difference, please please rigorously think out your decisions.  There's thousands and thousands of dollars at stake. 

Many times, the market will clearly tell you what you should be feeling (hope or fear) whether buying or selling.  The market is the most objective thing out there.

The second reason will be posted tomorrow...

Housing Sales Sparks,Washoe County NV: 3rd quarter 2007

freedigitalphotos.net

Sparks home sales is following Reno's footsteps basing it on number of sales from last quarter and the current one.  (3rd quarter 2007 VS 2nd quarter 2007)

New home sales is down -25.5% while existing home sales is down a more manageable -6.4%.  Like Reno, new home builders in Sparks have been cutting down prices on their inventory.  But is it really helping? number of sales is still going South.

If it's worth mentioning, I remember when the national board of Realtors were saying in 2006 and early 2007 that the market bottom could happen in late 2007 or early 2008.  I remember thinking that it seems too optimistic.  On the other hand CEO's of major home builders in the country were telling the media that no bottom is in sight and that they are expecting a longer real estate fall.  Were the builders protecting themselves from the unrealistic expectations of their shareholders? maybe. But at that time it wasn't hard to believe what they were saying.  Based on our own research they were telling the truth. As we can tell now. 

The lesson: when in a real estate market correction builders tend to be more honest.

Call Joe (775-338-7653) or Ian(775-338-7649) if you need more in depth analysis of the market.  We would be glad to supply you with information regarding the market.

source: Washoe County assessor

Housing Sales for Reno,Washoe County NV : 3rd quarter 2007

from www.freedigitalphotos.net

The clouds are still cloudy & stormy  for the Reno-Sparks real estate market.   

New homes  took a bigger beating compared to  existing homes-2nd quarter of 2007 VS 3rd quarter 2007.  New home sales are down  -31.2% while existing home sales dropped -17.4%. 

Builders are known to sell standing inventory at no profit or even at a loss if they really have to; cutting their losses short.  This is a strategy, in my opinion, should be adapted by home sellers who are directly competing with new homes.  Many times our pride & ego get in the way instead of learning to accept our mistakes-whether you bought at a bad time(top of the market) or made the mistake in 2006 or even early 2007 of saying to yourself that the market will bottom by the end of the year or 2008 at the most.

I am not saying that this strategy is for everybody. But it is certainly worth looking at if you no longer can afford paying the mortgage for the next one or two years.  Consider taking a  possible loss (pricing your home in the top 3 in the neighborhood and top 3 in overall condition) as early as now (study your finances rigorously) rather than leaning on the hope that everything will be alright in a year or two.

The market is fiercely objective regardless of how it will affect us.  Our job is to 'flow' with the market , let it tell you what to do.  Sure you may get some advice from friends and relatives (even agents like us) but ultimately it should be the market that's going to have the final say.  That's smart investing.

Call Joe (775-338-7653) or Ian(775-338-7649) if you need more in depth analysis of the market.  We would be glad to supply you with information regarding the market.

source: Washoe County assessor

Two Reno blogs that very well deserve a click or two

With the ever increasing and over saturated information in the web, sometimes it can be hard to find what you're looking for.  And if you 'google' it  chances are that thousands and thousands of pages will come up.  It can get pretty frustrating, especially if what you're searching for is pretty simple, say, 'best local restaurants in Reno'.

But don't fret; blogs are here to the rescue!  Well, not every time but definitely blogs have a more honest and transparent approach to 'reporting' things.

Here are some of local blogs that I find charmingly amusing and useful:

Reno and Its Discontents- (the most visited blog in Reno)

'Contributors are people who live here and care about the community' , posting on a variety of topics including downtown restaurants,nightspots,concerts,art exhibits, and other events and activities taking place in our neighborhoods'

Ann Onn Everything- Interesting perspectives from a local on just about everything happening in Reno (from the big Nevada-Boise game to the Mack trial to the freeway repair problems we never seem to run out of)

'I have lived in Reno since the early 1970s. As the title implies, I have an opinion on everything. I reserve the right to change my opinion as my information changes.'

And yes, if you are looking for some good local restaurant reviews you can find it here: RGJ.com restaurant reviews

What my dentist taught me about Real Estate

It's that time of the year again where the 'bad' guy checks your teeth and tells you what's wrong with it. And pain is sure to follow.

   Last November my dentist found a molar that needed some 'correcting'.  He said that the only way we could save it is if we do a root-canal.  Flashback, my last memory of a root-canal was not pleasant to say the least.  My dentist needed to stop  in the middle of  her slaughtering my nerves because I was weeping so hard ( I can't believe I'm divulging this) I was fourteen.  It was not fun at all.  Another root-canal?  had no choice. You have to do what you have to do right?  And so I went with my second root-canal.  Two hours and eight hundred dollars(and more than average dose of anesthesia) later,operation went perfect just as planned. Nice.  Dentist told me to come back after two weeks for the final touches.  I thought 'hmm.. ok. whatever ' Two weeks passed, I totally forgot about my appointment.  Plus, I didn't think it was important. " what for? nerves are dead."

    Last weekend (after a year) I go to my dentist for a regular check up.  Turns out that the tooth that was 'root-canaled' had a fracture and needed to be 'extracted' (no other way of saving it).  He told me that the reason why this happened was really simple, 'you missed your second appointment dummy'.  And extract they did.  One of the most painful moments in my life.  I wouldn't go into details, but extracting the tooth was especially hard because the tooth had become brittle.  He called it a 'surgery' after everything was done.

   I couldn't help but wonder (while sitting on the unforgiving dentist chair trying to divert my attention from the pain) when it comes to our real estate market, after everything has crashed and thousands have lost their homes and market is beginning to go up again. 

Will we do the same mistakes all over again? forsake the 'final appointment' or in  real estate take the 'study-before-investing-don't-follow-the-herd' formula for granted? because that will be a tragedy.  I am a romantic optimist at heart but something inside tells me history will repeat itself.  Because it already has. 'human nature rarely changes- Bill O'Neil. 

And it also got me into thinking about the purpose of this blog.  Joe and I need to remind ourselves constantly to make our goals realistic.  As much as we would love for everyone to benefit from the information and research in here.  We know this blog can't help everybody.  Not everybody want to be helped.  Most of us don't think we need help. Many of us just don't have the time. I can't really blame them, there are times that I am also part of that group.  But the sad reality we can't escape, all that's been happening in the market now, the foreclosures, the arguments and divorces from  couples entangled in  financial troubles, all this could happen again?. Maybe that's just the way life is. Or maybe just maybe, this blog can make a difference and more importantly be accessible to the people wanting to be helped.  It's a long shot. One that we will take.  It's going to be a fun journey.   

Why every Seller should see through Buyer's eyes

Ever since I started this blog I have had a big question hovering in my mind. 

Is our blog targeted to help sellers or buyers or both? and if it is for both, what are we doing to cater to the needs of these people? especially the sellers.  I don't think that buyers will have a hard time looking for useful information here.

But what about the sellers? should I talk about advantages of staging? maybe.. how about the top 10 things that sellers should do in a down market? thats a good idea. Or maybe talk about Feng-shui and how it can bring good 'energy' into your home. Yeah, could be.

But something strikes me.  Just being honest to myself,  We are in no way of  any credible position to give valuable advice in these aspects, Joe and I would be mediocre at best.  The best information we can come up with would surely be available in other well-informed sites in the first place.  Plain and simple, it isn't our strength.  Our strength lies in market knowledge.  This has always been our passion.   

Well, if you ask me " are you discounting on posting on these topics" Of course not.  A resounding no.  But will we focus on these topics to help sellers?  Highly unlikely.

So going back to my first point, How can we help the sellers?

I was on my way home last night when it occured to me a phrase that Dale Lawrence (creator of the Excellerator series) whispered to me a few months ago when he was here coaching us.  I was asking him for advice on how I can help my sellers with their listings.  This is what he told me,  "Every seller is a buyer, and every seller should think like a buyer" boom! then it hit me yesterday, that's it, there is the solution to my dilemma.  Because the information in this blog tend to be biased on helping the buyers (market stats etc.) therefore, basing it from Dale's advice, This is the perfect place for sellers to learn what's in the minds of their potential buyers!  And one thing that I hear over and over from agents is that the sellers still have not come to grips with the reality of the current down market. 

I have seen homes in the market stay for more than a year(even 2 years).  But I have also seen numerous homes sell for asking price in a matter of 3-4 months even less! how is that? what is the difference between the two? My guess is the homes that sell is in the top three in the neighborhood in terms of price and overall condition .  Price and condition- the two big things every seller should think about.  My hope is that through this blog sellers would be more in tuned with what's happening in the market, therefore a higher probability in selling their homes faster.

 

New Home Sales Report shows weak U.S real estate market

New home sales for the whole of United States is down -8.3%(comparing July to August), twice what was expected.  General market is still in a downward trend friends.

According to Briefing.com, 'Power came from the South and West.  Gains in the smaller Northeast and Midwest'  I am not sure what they mean when they say 'power' I am assuming that it's negative. 

Pardon me for the scattered presentation of market data in this blog (Both local and national) We are aware of this and are about to make some positive changes.  We are currently in the process of adapting a system where we can have a type of schedule where Readers can expect  when the new statistics will come out. Ex:  Reno-Sparks Existing home sales data to be released in Oct 30, 2007.

Our goal is to have more consistency in presentation of data and preparation of graphs.  I am deeply excited about the revisions.

Foreclosure Flipping in Reno Nevada and Beyond, all the Rage?

I am honored to have a guest author by the name of Mark Graham.  Joe and I have worked with a lot of mortgage specialists since we started selling Real Estate in 2004.  I could confidently say that Mark could easily be in the top 10 in his industry in terms of market knowledge here in Reno & Sparks NV.  His passion is learning based on market-driven statistics (instead of relying just on personal opinion) this makes him truly a rare bird in the mortgage business.

This article is direly needed for more and more people are getting mixed up with this whole foreclosure SALE deals.  Mark shares his interesting insight on this topic...

Foreclosure Flipping, all the Rage?

The question I get asked most by my clients, “Isn’t it a great time to pick up a foreclosure?” After all, the local and national news are continually reporting how Nevada leads the nation in foreclosures. And we hear everywhere how up side down home owners can no longer afford their rapidly depreciating home. So if the American Dream is to own a home, it only makes sense that the American Real Estate Investor’s Dream would be able to buy a foreclosed property at a ridiculously under value price, fix it up and then quickly resell it for an outrageous profit. Flipping Foreclosures for Fantastic Gains seems to be quite the rage for learning to how to turn real estate into a great investment stream.

Now don’t get me wrong, you can and will make a good return on investments with buying foreclosures and turning them into long term investments, but it’s the lure of great returns on quick foreclosure flips that everyone seems to be gravitating towards. I mean the airwaves are literally inundating us with 10 to 15 radio commercials a day, spouting how easy it is to make awesome money by ordering their foreclosure flipping get rich quick systems.

Well before you go running to your favorite mortgage broker, a.k.a. your modern day high limit ATM to see how you can possibly finance the answer to your investment prayers, you should probably know the rest of the story on foreclosure flipping in today’s real estate market.

Let’s look at a very typical foreclosure scenario in our Northern Nevada market that many anxious to stake their claim investors will find: foreclosed 3 bedroom 2 bath house around 1200 sq ft about 10 – 20 years old. I mean these are the ones that we all can really clean up on, right?

Well let’s do the math. The example property in today’s market is listed on the MLS around $200,000 - $220,000, but you are able to purchase this property at an amazingly low price of $132,000, that’s 40% below market! Wow, you just bought a home with almost $80,000 in equity, lots of room for profit, how could you go wrong!

Well let’s dig deeper with this scenario in today’s market. I mean your initial investment after all is only $132,000. In order to actually sell this steal of a home that had been previously listed for 6 months on the MLS without even a decent sniff from a buyer, you’ll need to rehab it. I mean your home has probably been around the block a few times, and I’m sure it wasn’t treated with the greatest respect by the recently court ordered to vacate the premises owners, right? Well better plan on putting in a little bit of window dressing in order to bring the property up to date. You’ll spend $15,000 before you blink on just new carpet, paint inside and out, landscaping, and repairing any small damage. Better budget $20,000 just to be safe and that’s just hoping that really the house was in pretty darn good shape to begin with. Your Investment is now up to $152,000.

Financing, you’ll pay 4-5 % on loan and transaction closing costs on the borrowed money, assuming you can get traditional financing in a very tough to qualify for investment loan market. If you can’t secure traditional financing don’t worry, you’re only looking at 6 - 8 Points from Private Financing Lender, budget 6% just to be safe. Investment now up to $161,120. You’ll likely need to set aside a minimum of 90 to 120 days of financing since not too many properties are selling under 90 days in this market. Now up to $165,145.

At last, now you’re ready to sell your “On the road to riches” fantastic foreclosure property find, but how do you price it out? In order to sell it fast, let’s start at a minimum of 10% under market value, which by the way is now at least 5% lower than Purchase Value due to 90 more days of lowering comps in the market. Price you can sell at $179,550.

Price formula as follows: Original median value of $210,000 for property x 5% Decline = $199,500 x 90% (for quick sell) = $179,550. And the final net back to you proceeds is $166,982. This is the amount, you the seller, receive after factoring out the real estate commissions and seller’s cost (7% to be safe), of course this is assuming that you are one of the incredibly lucky sellers that sold a property at your actual asking price, which doesn’t happen too often in today’s market. So after we minus your Total Investment of $165,145 from the Net Proceeds back to you of $166,982, you have an astounding profit of… $1,836.50…Astounding, No, but Ouch-Standing, Yes!

One last thing to consider if you still want to proceed with this high risk, low reward gamble in this current real estate market, if the above math didn’t already convince you. Let’s say the math is off by 10 – 15%, which it really isn’t, but let’s say for argument’s sake it is. Consider that you will be trying to resell your older foreclosed home in an older neighborhood at about $150 a square foot. Did you know that in today’s market you can find brand new, never lived in before, new neighborhoods homes and town homes going for as low as $135 to $140 a square foot. Yet you’re trying to sell a older not as nice foreclosed property at $150 / ft… So that just makes it much more difficult for the fortune hunting foreclosure flipper to find those fancy urban myth profits out in today’s market.

I don’t mean to come across that real estate isn’t a great way to become wealthy, in fact I believe that real estate is still one of the absolute best ways to build wealth, just not with the get rich quick schemes in today’s market. Only an educated well prepared property investor can make the proper decision. In the future I will cover some of safer ways to build wealth through real estate.

In regards to flipping foreclosures, I’ll pose the question once again, is Foreclosure Flipping becoming the rage or just simply outrageous?

Article submitted by

Mark Graham,

Investment Property & Equity Acceleration Specialist

Summit Funding, Inc

mgraham@summitfunding.net