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4 things to look for if the Reno real estate market has bottomed

Superb photo by: Novembre85

Wouldn't be great if we had a crystal ball to tell us what's going to happen in the future?

Yes, I'm talking about my grueling season in my fantasy football league--Ahhh, I'm officially a sports geek--"aficionado" as how my brother politically corrects me.  How it works is you win when the players you "bet" to have a good game end up having a good game. And so far, not so good.

In real estate we face a similar dilemma:  We don't know what will happen in the future?! I hear it ALL the time.  But I beg to disagree. 

If you want to know what's going to happen in the Reno real estate market (or whatever place you're in) you can have your own crystal ball by knowing these five things.

1.  Existing Home Sales

Home sales activity is the best leading indicator of real estate price trends.  This is because buyers create the demand for housing that is directly linked with price movement.

When the trend in existing home sales is increasing, more and more buyers come into the marketplace.  This increasing demand causes real estate prices to rise.

If you only track one vital sign indicator, pay close attention to the trends in existing home sales.

• Reno real estate: demand

• Realtor.com's existing home sales

2.  New Home Building Permits

New homebuilders are keenly aware of the demand for housing.  When demand is strong, and new home sales are increasing, builders react by "pulling" more and more building permits to build new homes to satisfy the demand.

New home building permits is one of the most accurate because historically, the trend in building permits starts to drop before the economy goes into recession, and the trend starts to rise before the economy starts to come out of recession.

• New home permits

3.  Foreclosure Sales

When foreclosures are rising , the demand for real estate is declining.  And when foreclosures are rising, real estate prices are likely to fall.

On the other side of the coin, when trends in foreclosure sales are decreasing, this is a good sign for the economy and the real estate market.

Be aware that foreclosure sales are likely to be lagging indicator at market peaks; however, they may be a coincidental indicator at market bottoms.  Because market bottoms tend to take more time to develop than market peaks.

• Reno foreclosures

4.  Interest Rates

Interest rates affect property values in a similar way that gravity acts on physical objects.  The higher rates climb, the greater the downward pressure on prices.  In contrast, falling interest rates have an uplifting effect on real estate prices.

• Interest rates
  

Where have all the leaders gone?

"AIG lavishes itself a $400,000 treat after government bailout"

This was the headline that greeted me when I opened the newspaper yesterday.  No I'm not going to rant about this inexcusable misuse of tax-payer's funds.  We have enough of that.

Rather, why report just now? 

"Everybody wants to ride,nobody wants to drive," my friend Dan Wyatt used to tell me.

The past two weeks have been the wildest financial ride of our generation.  Listening to the endless-sameness financial reporting from CNN,CNBC and FOX I couldn't help but wonder..what's in it for me?What value can I possibly get from what they are saying? I came to this conclusion--nada. 

This post almost sounds negative, I know, but this is not my intention. 

I want to challenge the powers that be, those whose job is to inform and influence.  Stop being notoriously tardy in reporting vital information that will help the people.  Be in the forefront!  Blaze new trails, even if it's uncomfortable.  Stop repeating news just because it will sell. 

Do your research beforehand--be it in real estate,stock market or companies that are betraying the public's trust. 

And if you have enough evidence then by all means be a hero and let us know about it. 

So we don't have to echo Lee Iococca's painfully true words

"Where have all the leaders gone?"

Watch out for the reno real estate market bottom!

superb photo by: nonac.

I know the title sounds out of touch. 

But I kid you not, I think we should pay close attention to the market.

Here's my theory:

When the Reno real estate market  topped in July 2005 the overwhelming mood was " invest, invest..it's a good time to buy."  There are many reasons for this sentiment, chief of which is when we are on to something good, like our real estate investments earning 25% a year, most of us would want to share this to the people around us. 

So even up to July 2005, unprecedented number of people were investing and flipping homes.  Everybody was happy.

Fast forward to the present.  Hearing good news about the Reno real estate market is as rare as the hope diamond.  Nobody would disagree that the general sentiment in our real estate market is dreary.

So if the market was topping when everybody was rejoicing could it be also true that as I write this when most are weeping about the state of the market, could the real estate market be closer to the bottom? 

Let us not run on blind faith friends.  Surely theories such as this should be supported by numbers-- and the number currently is as worst as can be.  But that's exactly my point in "watching out." 

History shows us that the bottoming of the market always happens when 90% + of the population still feels depressed.  Yes, it may take another year or two (my guesstimate) but as early as now watch out for clues, it could it be sooner than what we think. 

Watch how the numbers are improving.  And even in markets such as this there are price points holding up.

If people are Predictably irrational could this mean the end of this blog?

 Dan Ariely

I've been following the author Dan Ariely, he wrote the controversial book Predictably irrational:

"When we make decisions we think we're in control, making rational choices. But are we? Entertaining and surprising, Ariely unmasks the subtle but powerful tricks that our minds play on us."

I was greatly intrigued of the book when I read his background:

"As a teenager in Israel, the accidental explosion of a magnesium flare, used to illuminate battlefields, left him severely burned over 70% of his body, and doomed him to years of painful convalescence.

'I was taken out of the standard life,' he said in an interview yesterday. 'I started looking at everything as strange. Why do we hold glasses like this? Why do we give people compliments? Everything was all of a sudden strange. I felt as if I was like a little alien coming and looking at things in a new perspective, and not understanding.'

One of his experiments was on corporate corruption:

"Ariely had subjects solve a set of problems and then report how many they had completed successfully. Then they received money for each correctly answered problem. When given the opportunity to cheat, people lied — just a little.

Virtuous Thoughts

Later, when subjects were asked to recall as many of the Ten Commandments as they could before reporting on their correct answers — or, alternatively, to sign a code of honor — Ariely found they stopped cheating completely.

When the subjects were given tokens that were later exchanged for money — instead of getting cash outright — they were twice as likely to cheat.

'In a sense, nothing has changed, but the domain in which they cheated is a step removed from money,' Ariely said. 'It completely released people from their morality shackles and allowed them to cheat much more.'

'I am disturbed by this result because I think it’s related to why we see so much corporate cheating,' Ariely said, 'why it’s easy to backdate their stock options and why business expenses are easier to cheat on than cash.'

His book was in the top five New York times bestseller list and has received positive reviews.  But what made me take a closer look on his work is purely selfish reasons: if his findings are indeed true how can I apply it in this blog when the whole purpose of this site is towards rationality and truth? What's my chances of surviving? Will people listen to what I have to share?

Well I don't know the answer yet.  But so far so good.  I've just past the one year mark.  Maybe the first step to being rational is to see ourselves as capable of being irrational and once people realize this they go on a little bit of research before buying their dream home and find this blog. 

You can find his blog here 

                "If the facts don't fit the theory, change the facts. "
                                                                   -Albert Einstein 
 

How to avoid analysis paralysis in the Reno real estate market

Superb photo by: arkworld

Have you ever been in a predicament of too many choices?

It might have happened when you were at the gigantic store walking down the cereal aisle with 328 different kinds of breakfast grains staring at you!  Question: How did it affect your decision-making? Did the choices make it easier or harder?

Social psychologist Sheena Iyengar, PhD, a management professor at Columbia University Business School and Mark Lepper, PHD, a psychology professor at Stanford university conducted a study:

    "The team showed that when shoppers are given the option of choosing among        
    smaller and larger assortments of jam, they show more interest in the larger
    assortment. But when it comes time to pick just one, they're 10 times more likely to     make a purchase if they choose among six rather than among 24 flavors of jam."

The psychology behind buying and selling homes is not unlike this.  There are so many opinions masked as facts showered upon buyers and sellers about the market --what to do, what not to do etc etc. 

And this can be overwhelming to the consumer.  Moving to another home is one of the most stressful events in our lives and much as we'd love to do an in-depth market study of our dream home, more often than not time and patience are just not available at this crucial time.

Unfortunately, many people resign to the position of being passive-- not being actively involved in researching of locations and specific market conditions.  This in turn can cost you thousands of dollars in missed opportunities.

Let me be clear and say that the consumers ultimately knows what's best for them, my job as an agent is to give you the whole picture, the pros and cons.  Not to tell you what to do.  Take time to understand your options at the same time be careful of analysis paralysis.

You don't have to do all the research on your own.  Start with the basics like supply and demand. Armed with basic market knowledge, approach your trusted real estate agent and ask for more questions until you understand the whole picture.

It will be of great help.

              

What I learned dealing with people in family and business

Superb photo by: Keith Yeung


I'm learning a lot when it comes to dealing with people--client or family.

I am learning new things and need to unlearn even more.  I learned that most of the time I have to be extremely accommodating, patiently quiet and understanding towards people. But I also realized that there times when I have to use some..  what I call 'emotional force'.  Some call it 'tough love'.  Every person is unique, and putting people in boxed formulas simply does not work in improving our relationships with them.  Just ask my wife. 

"Life is a paradox," somebody once said and we can't stick to one single map for the rest of our lives.  Core values like respect for others' individuality and "treating others how we want to be treated" should never change.  But our ways and actions and how we do things--our strategy needs to adapt to our ever increasing changing times. 

We need new maps, new ways of thinking but doing so does not mean forgetting--"a person who does not learn from history's mistakes is bound to repeat it".  It's mixing the old with the new. 

For some reason while writing the last sentence I thought of the T.V show Iron Chef-it involves cooking and serving food but they do it in a way so amazing and entertaining that you'll never see chefs in the same light.  They create edible art!  My mother once told me after watching an episode, that now she considers herself as an artist.  Absolutely.

Number one secret in investing

Superb photo by: Lady-bug

I stumbled upon a blog post today that was entitled, "the secret of the web(hint: it's a virtue)."

If you haven't guessed it, it's patience.

Ever since the Olympics started this month I have been following the games obsessively.  

Indeed,there's something heroic about these athletes; Spending countless hours training, often times without a crowd to cheer them on, injuries plague most of them (at least) once in their careers and most of the lesser known athletes spend their own money just to do what they love.  And watching them in Beijing reap what they have sown for the past four years is simply breathtaking.  

For all of them, patience was their number one friend in getting where there are now.  It takes that and a ton of hard work to endure all that they have just to even qualify for the Olympics. 

I can't help but wonder if we use the same mindset in real estate how much more effective will we be? If we developed a mindset of a marathoner instead of a sprinter maybe we won't be as exhausted as many of us are now.

I love what Seth said, "It still takes ten years to become a success, web or no web."

Here's Seth Godin's article

Here's another article related to the subject (about Jerry Garcia)

One of the things I've Learned Since Starting This Blog

'Evidence of spring'
Amazing photo by: Sam's Place

"Evidence does not lie"

I was reading a book this morning that talks about consumers shunning old marketing ploys that so many companies (not to mention organizations too) are guilty of.

When I started this blog I had some apprehensions about the content that I will be sharing to the world.  I knew that if I was to start this site I needed to reveal the truth based on what the market was saying whether I agreed with it or not.  But are the people ready for this? Quite frankly, I wasn't sure. But I decided to jump nevertheless.  I'm glad I did.

It didn't take long for me to realize that people were starving for facts and evidence about the Reno market.  They wanted the truth.  Sure, not a few people disagreed with me but more often than not even if they didn't like me they appreciated the data. 

I also realized that people are inclined to do what they want and need to do and that they just wanted to know what they were getting into.  Rightfully so.

Truth based on evidence--when clearly presented for the benefit of the people--I realized, is one of the best marketing ploys one can use to gain more clients.  And real estate, for me, has never been this pleasurable.

Hopeful yet Realistic about Reno's Real estate market: is it possible?

amazing photo by: *drangonfly*

"The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function"      - F. Scott Fitzgerald

Since I started this blog I've often been labeled as a cynic of the Reno real estate market or worst, doom gloomer.  I used to feel compelled to air my side with my whole "Confront the brutal facts but never lose hope in the end" mantra. Though lately I just silent step back and hope they read what I research and write here.

If they read the blog long enough they would understand where I'm coming from--the market's opinion is superior than any expert's and we need to confront the brutal facts yet still remain hopeful that in the end the rainbow will still shine. 

I have lived long enough to see that if we want to live life to the fullest we need to embrace the paradoxical realities it often brings.  And few are more applicable than in our real estate market. 

And yes, there will be bright days ahead of us.

Reno and New Zealand's Real Estate Market: Eerily Similar

Dan Wyatt, a good friend of mine, asked me to meet his relatives from New Zealand to discuss their real estate situation.  New Zealand's current real estate market is eerily similar to our market back in 2006.  It was an intense yet fruitful meeting.  I learned a lot.  This is an insightful graph I found while scouring for more data about their market.

  By: 26econ.com
(click image for full-view)

The Beauty of Facts

Facts and graphs, especially when clearly presented, is like an X-ray report to a doctor.  The moment I laid my eyes on the above graph I felt a deep aching in my stomach.  The same feeling I had in 2006 when I found out that the market was already topping and on its way down.

I first asked Dan's relatives if I can be totally honest with them and express what I felt about their situation.

 I then shared what happened in our real estate market in the past three years.  The good, the bad, and the ugly.  Then I found an article by the economist reporting in detail about their country's current and potential turmoils.  After that I felt that it was safe for me to tell them that what happened in our country's real estate market will, in my opinion, happen to them(if not happening already).

The Solution

I told them that If I was in their situation I would do everything I can to sell my house and cut my losses short.  I knew this was going to be hard for them.  I can't blame them but I also told them that this was not foreign to me,that I was once in their place and I knew how tough it is to do what the market was telling them.  But regardless of what our feelings are, it is crucial to listen to the market.

But like most Hollywood movies, there is also a happy ending.  Knowing that the market is falling down and therefore cutting their losses short, they could well be on their way to getting a better value of a home a few years from now.  In short, they can choose to sit on the sidelines and wait. 

Patience is key.