Reno Sparks Real Estate Today

Homeowners Facing Financial Trouble Can Stay in Home as Tenants.

Fannie Mae has quietly announced a deed for lease program that enables homeowners who are in financial trouble and facing foreclosure to turn into tenants by leasing their home back from Fannie Mae and turning the property deed over to the lender, basically giving the house back. 

According to Fannie Mae anybody who is not eligible for loan modification can take advantage of this program. It will keep families in their homes during a transitional period, and helps to stabilize neighborhoods and communities.

The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. With the deed for lease program, borrowers transfer their property to the lender by way of a deed in lieu of foreclosure, and then lease back the house at a market rate.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens (2^nd mortgages, equity lines of credit) on the property. Tenants of borrowers in this circumstance may also be eligible for leases under the program. Borrowers or tenants interested in a lease must qualify and be able to document that the new market rental rate is no more than 31% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A Deed for lease property that is sold includes an assignment of the lease to the buyer.

Download Fannie Deed For Lease program flier. 

Housing Prices Will Go Up it is Not if but When

There are two major reasons why house prices are poised to go up over the next few years.

#1 - Increase in Population = Increase in Demand
The population of the United States has grown by an average of 1.27% every single year since 1900. At current population levels, this means that we are adding about 3 million people to our population every year. As our population grows, we have about 1.3 - 1.5 million new households that are formed each year. These can include people who graduate from college and enter the work force, and adults who are currently living with their parents that decide to move out on their own.

Over the last 30 years, the average growth in new households has been about 1.4 million each year. Of course, these people will need a place to live. In fact, the National Association of Realtors estimates that up to 40% of all home buyers in today's market are purchasing their first home - a perfect indication that this segment of the marketplace will continue to thrive even in the midst of an economic downturn.

The growth in population isn't the only thing that will increase demand for new housing. In fact, approximately 300,000 housing units are demolished each year. This is primarily due to functional obsolescence because buildings become old and outdated. This means that the demand for new housing is about 1.7 million new units each year in order to replace the demolished homes and house the new households that are formed. Okay; so now that we understand the demand for housing, what does the supply look like?

#2 - Less Building = Decrease in Supply
It's no secret that home builders are struggling in this economy. In fact, the number of new housing units being built went from a peak of 2.1 million in 2005 to less than one million in 2008. New housing starts for 2009 are also scheduled to come in below one million as the market continues to work off the excess supply of housing that was built during the last few years. In fact, here's an interesting breakdown of new housing starts since the year 2000:

• 2000 = 1.6 million new units
• 2001 = 1.7 million new units
• 2002 = 1.7 million new units
• 2003 = 1.9 million new units
• 2004 = 2.0 million new units
• 2005 = 2.1 million new units
• 2006 = 1.8 million new units
• 2007 = 1.3 million new units
• 2008 = less than one million new units
• 2009 forecast = less than one million units

As you can see, from 2000 - 2002, the supply of new housing units each year was just about right in order to meet the demand of 1.7 million as outlined above. However, things started to get a bit out of whack with some oversupply in the market between 2003 and 2006. Home values went into decline from 2007 - 2009 as the market started working through this over-supply.

However, sometime during the next 12-24 months, the oversupply of housing units will be completely absorbed due to the demand issues that we outlined above. In fact, if the trend continues, there could even be a housing shortage at some point in the next two years unless home builders start building new units at a much quicker pace! Do the math yourself:

Annual Demand for New Housing Units: approximately 1.7 million new units

Annual Supply of New Housing Units: less than one million

Bottom Line: Demand will become greater than the supply at some point in the near future, and house prices will go up.

Remember, there is no "national housing market" as all real estate markets are local. Therefore, a state like Michigan that is losing population may take longer to see house prices recover and go up; while a state that is gaining population, like Texas, may see house prices go up much sooner. In all cases, talk to your mortgage, financial, and real estate professionals for more details regarding your specific marketplace.

Jason Norris, MBA, CMPS, President MFG Mortgage Services, LLC 1.775.322.0496

Are Hummer Houses History in Reno Sparks?

We’ve all seen Hummer Houses around the Reno Sparks area and most parts of the country, some refer to them as McMansions. You know, the houses that are built in tracts and aren’t really mansions but are made to look like one. Start with large “tract” house, add a few colonial columns or a round castle looking turret out front, throw in some dramatic high ceilings, sprinkle in some granite counters and stainless steel appliances, put a gate out front to make it private,  and BAMM you have a McMansion.  It’s not really a mansion but kinda. Like a Hummer, it’s not really Hummer just throw some big tires and a Hummer looking shell on a full size truck and BAMM you have yourself a Hummer. Just like they use in the military. Ya right!

 

Hummers have become the poster child for waste inAmerica
and I believe Hummer houses are next. I understand Hummers have their use, but the vast majority of people use them to go back and forth to work and to go grocery shopping.  Some people need larger homes due to large families running a business out of their homes, etc.. The vast majority have much more space and than any family really needs or will use. Just like Hummer vehicles, hummer houses are tough to sell in today’s market.

 

Energy prices have fallen for the time being but we all know it is a matter of time before they go back up. Bottom line is people in Reno Sparks, like the rest of the country, are cutting back by choice or necessity. People are starting to realize they don’t need the hummer house. Hummer houses cost more to maintain, heat, cool, and property taxes are much higher.  I see the trend going back to more reasonably sized homes with practical uses. Less “great rooms” and more real rooms.  Less house and bit more yard.

ARM Yourself with Knowledge

While Adjustable Rate Mortgages (ARMs) have taken a beating recently in the media they are not always a bad alternative.  Depending on the index that your loan is tied to a homeowner will frequently save thousands of dollars in yearly interest expense over their counterparts that have fixed rate mortgages.  While the previous statement is true it is an individuals choice to be honest and accurate with their mortgage planner when originating a mortgage and pick the product available that best suits their individual needs.  The questions that need to be addressed prior to the initial consultation would include:

• How long will you be in the home?
• What is your financial outlook for the near future (1-5 years)...will it grow,shrink or remain stable?

• What are your investment strategies?  Will you utilize a side interest bearing account to capitalize on the arbitrage from the money you are saving by implementing an ARM strategy?

• Will there be upcoming expenses to consider:  college tuition, an elderly parent to care for, etc.? 

While ARMs are powerful tools if used properly there is also a certain level of risk to account for.  Risks include market volatility in regards to housing prices as well as rising interest rate environments.  A traditional fixed rate product would mitigate interest rate fluctuations while there is no loan product available that alleviates the risk associated with price deterioration.

If you currently have an ARM loan with rates that are below current fixed rate pricing, it is still important to seek mortgage planning advice to evaluate if you would benefit from a refinance prior to your current loans adjustment date by establishing a new fixed rate mortgage.  Remember that market volatility for pricing declines may make it impossible to perform a refinance at a later date without being forced to come to the closing table with money to close.  Below is a graph that illustrates upcoming reset dates for ARM (notice that we are currently in a trough with resets scheduled to peak through 2011):   

 

 Jason Norris, MBA, CMPS, President MFG Mortgage Services, LLC 1.775.322.0496   

Nevada Has Highest Percentage of Households that are Upside Down

Nevada leads the U.S. in the proportion of households whose mortgage debt exceeds the current estimated value of their homes, a condition known as being “upside down” or "under water," according to a new study by First American CoreLogic and reported by the Wall Street Journal on October 10, 2008.  According to this report it is estimated that 48% of owners of single-family homes with mortgages in Nevada are under water. That compares with 18% nationwide.

Many Americans are under water because they bought homes at or near the peak of the housing boom and put little or no money down. Others separated equity from their homes during this rapid moment of market appreciation to pay off consumer credit or general examples of consumer consumption.  Home values in the Las Vegas metro area have fallen 36% since peaking in early 2006, estimates Zillow.com.  Housing depreciation is similar but not as severe in Washoe County with the exception of a couple neighborhoods that were the hardest hit; these include Double Diamond in Reno and Wingfield Springs in Sparks.

Many underwater homeowners can wait for prices to recover. The problem arises for those who lose jobs or have to move. They will have trouble selling their homes for enough to pay off their mortgage and thus may face foreclosure, a short sale or would benefit from seeking a loan modification.  Consult with a local real estate or lending professional to seek advice in regards to which appropriate alternative best mitigates your current equity situation.

Jason Norris, MBA, CMPS, President MFG Mortgage Services, LLC 1.775.322.0496   

Understanding the Foreclosure Process- Legal Process, Short Sales and Financing Alternatives

Reno, NV--October 16, 2008— Nevada either leads the nation or is in second for the highest rate of foreclosures in the nation according to three major companies (RealtyTrac, First American Core Logic & Mortgage Bankers Assoc.)  So what affect does this have on the residents of the Reno/Sparks area?  It means that odds are one of your neighbors is experiencing trouble making their mortgage payment or a home in your neighborhood is already owned by the bank.  It also means that there are opportunities regardless of your circumstance and it is time to learn how to take advantage of the opportunity that best meets your needs.

Please join area experts for an educational class hosted by Stewart Title, MFG Mortgage Services, LLC and LDB Forclosure Data Services at Airports Gardens Suite 390 (1325 Airmotove Way Reno, NV 89502).  The class is from 0900-1200 and will discuss the following:

• The Who, What, When, Where and How of the foreclosure process in a manner easily understandable to the ordinary person
• The Short Sale Process:  buying and selling
• Buying a bank owned property (REO) and what to expect
• What are Loan Modifications....demystifying the process and who can facilitate
• Financing alternatives during this current Credit Crisis
• Understanding the implications of the 2008 Economic Recovery Act and the Government sponsored Bail Out

In the last three months Notice of Defaults in Washoe County have risen from 20 filings a day to currently 33 filings a day.  Now is the time to get answers to all of your questions.  Call 775.846.0091 to RSVP or write jason@mfgmortgageservice.com to express interest in attending a future class.

Jason Norris, MBA, CMPS, President MFG Mortgage Services, LLC 1.775.322.0496

Reno Sparks sales numbers for the first 6 months

So we’re half way through 08 and it’s hard to believe it is already July!  I wanted to see how the Reno Sparks real estate market is doing so far this year compared years past. I pulled sales numbers for January thru June from 1997-2008. Included are residential properties (condos, mobiles, stick built, etc..) in the greater Reno/Sparks area.  Once I pulled the sales numbers, I got curious about the inventory numbers. So I pulled the inventory numbers with the same criteria with the exception of the year. I could only pull inventory for 2000-2008.

Year                 Sales                Inventory

1997                1677                

1998                1825   

1999                2054   

2000                2650                6385

2001                2952                6063

2002                3096                6270

2003                3413                6666   

2004                4023                6866

2005                4694                9172

2006                3113                14065 

2007                2775                12333 

2008                1854                4821

The bad news is we are at ten year lows for sales. The good news is inventory is at least at a 8 year low. If you look at 06 and 07 you can see why prices were dropping. Sales dropped significantly and inventory skyrocketed. The gap was huge. While I hate to see sales down, I feel much better that inventory is dropping back to a reasonable level. The only stat I would love to see is new construction. Most builders do not put their homes in MLS so I will have to do some more research.

Data was collected from the Northern Nevada MLS. Disclaimer required by MLS: While data is deemed reliable, no warranty for accuracy is implied.  Data may not include all sales activity. Sales were made by all participants of MLS.

Reno Sparks Sales Numbers ...Have we touched bottom?

Below are charts with sales numbers broken down by price range for the Reno/Sparks area. I compared January-May 2007 with January-May 2008. In the coming weeks I will be breaking down different areas but I thought I would start with a general overview.  I am also going to go back and look at “pre-boom” numbers to find out how these numbers compare to a “normal” market.

As one would expect, prices are holding for homes under $200,000 and sales are strong – up 18%.The hardest hit price ranges for sales are those in the $300,000 plus range.   Prices have stabilized but the number of sales is still way down (over 48% on the average).

I believe this market is trying to find the bottom but we won’t know for sure for at least a couple more months.

Homes Sold Under $200,000 (current Active = 978: ¯22%)

SOLDS	January – May	Market Time	Average Sales Price
2007	265	119	$155,483
2008	314	120	$152,138
% change­¯	18% ­	1 more day	2% ¯

Solds Between $200,001  and $300,000 (current Active = 1542: ¯ 49%)

SOLDS	January – May	Market Time	Average Sales Price
2007	835	130	$257,758
2008	606	132	$249,519
% change­¯	27% ¯	2 more days	3% ¯

Solds Between $300,001  and $400,000 (current Active = 783: ¯ 66%)

SOLDS	January – May	Market Time	Average Sales Price
2007	460	129	$343,015
2008	264	165	$343,530
% change­¯	43% ¯	36 more days	0% ¯­

Solds Over $400,001  and $500,000 (current Active= 323: ¯ 73%)

SOLDS	January - May	Market Time	Average Selling Price
2007	175	124 days	$443,660
2008	75	177 days	$446,755
% change­¯	57% ¯	53 more days	1% ­

Solds Over $500,001  and over (current Active = 611: ¯ 68%)

SOLDS	January - May	Market Time	Average Selling Price
2007	231	168 days	$847,952
2008	130	190 days	$881,070
% change­¯	44% ¯	22 more days	4% ­

. 

Data was collected from the Northern Nevada MLS.  Parameters: Residential properties (Condos, Townhomes, Single Family Homes.  All areas except areas 138,176,177 and InclineVillage. Comparison periods are January 1 to May 31 for 2007 and 2008. Disclaimer required by MLS: While data is deemed reliable, no warranty for accuracy is implied.  Data may not include all sales activity. Sales were made by all participants of MLS.

Is the Reno/Sparks real estate market fair?

We could debate the fairness of the real estate market all day long. I think many would argue it is not fair at all. I guess it depends on your situation. If you are getting ready to buy a house, the market is fair and getting better. If you are a homeowner looking to sell, it is completely unfair. I’m reminded of something my dad used to say. Whenever I felt a situation was unfair I would say “but dad,that’s not fair.” His response was always “life isn’t always fair you got to deal with what you got.”  So what do we got?

One company, National City Bank, has come out with a Housing Valuation Analysis. They break down different markets and rate them as Under Valued, Fairly Valued, Moderately Overvalued, and Overvalued.   With the recent price declines, the Reno/Sparks area is now ranked as fairly valued.  This is good news because over the last 3-4 years we have been ranked as overvalued.  

So does this mean the market has hit bottom and turning around? Does it mean prices will quit falling? No one knows the real answer to that, all we can do is look at the numbers and make an educated guess. What I do know is the upside to falling prices is greater affordability for more people.  Greater affordability will increase demand.  Increase in demand should create more sales and reduce inventory. The wild card is the inventory, and I’ll address that is a later post.

For now this is small piece of good news and a step in the right direction for our market.

https://www.nationalcity.com/main/micro-site/economics/commentary-analysis/pages/housing-valuation-analysis.asp?WT.vanity=HouseValuation

 

Washoe home sales continue to climb

By Jason Hidalgo • jhidalgo@rgj.com • May 28, 2008

Sales of new and existing homes in Washoe County rose in April, the third straight month of sales gains.

Sales jumped 23 percent, according to the latest report from the University of Nevada, Reno's Center for Regional Studies. The report uses data from the Washoe County Assessor's Office.

Sales of new and existing condominiums saw an increase as well, up 8.8 percent from March to April. Sales for both single-family residences and condos remain down compared to the same period last year, however, with single-family residence sales down 41.6 percent and condos were down 9.4 percent from April last year.

The median sales price for new and existing single family homes in Washoe County for April was $299,000, the same price last month and down 8.9 percent from April 2007. New and existing condominiums saw median sales prices drop 22 percent from March to April.

"Prices are still trending down but it's a good sign to see month-to-month sales on the upswing," said Brian Kaiser, housing and real estate analyst for the Center for Regional Studies. "I don't think we'll truly be able to say we've found the bottom of this market until we see several consecutive months of data showing flat or increasing sales volume and flat or increasing transaction prices."

Existing homes

Existing home sales were responsible for the overall increase in single-family home sales in Washoe County, up 39.6 percent in April compared to March. In contrast, new home sales were down 0.9 percent in April from the previous month.

The decrease bucks the national trend for new single-family home sales, which saw an unexpected increase of 3.3 percent in April over March, according to a report released Tuesday by the Commerce Department.

Median prices for new single family homes also rose to $246,100 nationwide in April, a 9 percent increase from March and a 1.5 percent increase from the same period last year.

Sparks saw the biggest increase in single-family home sales in April, fueled by a 124 percent jump in sales of existing single-family residences as sales of new homes remained flat. Sales of new single-family residences in Reno dropped by 8.3 percent while existing single-family homes saw a sales increase of 17.5 percent. Condominium gains in April were also spurred by existing units, existing condo sales were up 100 percent compared to a 25.9 percent decline in new condo sales.

Overall, the numbers from the report are encouraging, said Wayne Capurro, president of the Reno/Sparks Association of Realtors. Median home prices will likely continue to see declines in the next couple of months as banks continue to unload foreclosed properties. But that will also increase affordability for housing, Capurro said. The continued month-to-month sales increases are a good sign as well, Capurro added.

"I'm not ready to say that this is the end (of the housing decline), but this sure looks to me like the beginning of the end," Capurro said. "With increasing sales numbers and decreasing median prices -- those two things can't continue very long."

Supply concerns

Inventory remains the key question, said Ken Wiseman, broker-owner of Reno Rancho Realty; the spring months typically bring more buyers into the market but they also bring more sellers who add to the inventory. With the housing crisis making it difficult for existing home owners to trade up, the market has to primarily rely on first-time home buyers, which limits the number of buyers available, Wiseman said.

Wiseman also pointed out that despite the month-to-month sales increases, inventory in the Reno-Sparks market rose from 4,411 in May 20 to 4,494 as of Tuesday, according to Multiple Listing Service data. Using the 354 home sales reported in April by the MLS, the existing inventory equates to a 12.7-month supply of homes, far higher than the normal three- to six-month supply. In contrast, inventory nationwide dropped from 11.1 months in March to 10.6 months in April, according to the Commerce Department.

"Everybody can say sales are up, sales are up, sales are up, but inventory's up, too, which brings you back to the basic economics of supply and demand," Wiseman said. "Sales need to come way up to eat into our inventory and I'm not seeing it. When you're dealing with 4,494 houses in the market, that's just insane. This spring is going to be our big test."

Patrick Cummings/Reno Gazette-Journal

Existing home sales were responsible for the overall increase in single-family home sales in Washoe County, up 39.6 percent in April compared to March. In contrast, new home sales were down 0.9 percent in April from the previous month.

Washoe county home sales

NEW AND EXISTING homes

·  March 2008: 261

·  April 2008: 321

·  April 2007: 550
NEW AND EXISTING CONDOS

·  March 2008: 80

·  April 2008: 87

·  April 2007: 96
MEDIAN PRICE (HOMES)

·  March 2008: $299,000

·  April 2008: $299,000

·  April 2007: $328,259
MEDIAN PRICE (CONDOS)

·  March 2008: $239,745

·  April 2008: $187,085

·  April 2007: $239,800
Source: RGJ research