Reno Foreclosure Blog

Most people now realize that home values in Reno and surrounding areas have had significant declines in last 3 years- but I am here today folks to tell you that current home values are now where they should be. Home values were significantly over inflated.

Home values in any location are historically based on the annual income for that area. Median home prices are normally about 3 times median annual income for any area. Median annual income in Reno and surrounding area in 2007 was approximately $52,000. Some areas higher, some areas lower. The median home price for the same period was $320,000, again some areas higher some areas lower. These are Median statistics - or close to average.

That means buyers were paying 6-7 time their annual income for housing, or 2 times normal prices. (during the 2005-2006 boom)

So now many people are upside down 2/1, mortgage to value ratio. Their mortgage is twice the value of their home.

So let me comment on what has happened in the last three years, what the current market is doing, and what I believe the future holds for residential real estate in Reno.

Home prices in Reno have declined 35% to 50% since 2006 and the majority of home sales in the last 2 years have been foreclosures and pre-foreclosures (Short sales).

This last summer, 2009, declining values appeared to stabilize in some neighborhoods and housing inventory levels appeared to be back to near normal levels. Realtors were getting multiple offers on some properties, mostly foreclosures and pre-forecloure properties (Short sales). Prices in some areas actually experienced a modest increase. BUT:

As stated previously, The majority of those sales were either foreclosure or pre-foreclosure. They were homes being purchased by investors (who believed we hit bottom) and 1^st time home buyers using the $8,000 tax credit offered to 1^st time buyers by the government.

OK, so what’s going on now?

Well, Reno is approaching the winter months, which historically results in a slow period of real estate purchasing. Reno is also experiencing one of the highest unemployment rates in the country. There are still thousands of foreclosed homes that are already on the market or will soon be on the market (shadow inventory, discussed in future blog) and mortgage bankers are predicting another wave of foreclosures in 2010.

I believe, based on numerous indicators, that home values in Reno have not quite reached bottom yet and will experience another 6-10% decline prior to Spring of 2010, at which time we will see declining values stabilize, and beginning in the 2^nd quarter of 2010, homes will start experiencing a slow to moderate increase in values. However, be aware; The inflated values of 2005 and 2006 will not return for many years.

I will be discussing some of the other issues previouly mentioned in future blogs or videos on my web site. Issues like shadow inventory, Investor mentality resulting in current high rental vacancy rates and past government/banking policies.

David Lysne,  Lysne Appraisal Service,  Reno, Nevada