Horror to the house flipper; praise to the patient
Nothing can illustrate the area housing market better than the tale of a newlywed couple with dreams of equity.
About a year ago, before Sara and Cory married, they had a dream of the perfect career swaddled in marital bliss – and house flipping.
Cory is the industrious worker who can build or fix anything you put in front of him. Sara can paint. Kind of. As she says, “Cory’s got the goods, and I’m using them.” They imagine extra income and some fun.
I attended their wedding on a beautiful-but-windy August day in Genoa.
After a five-year national housing boom the market had started to slow over the year into a hot pool of uncertainty. Sara still thinks it’s a good idea, but she’s cautious about house flipping here.
“The market here, it is too late. It’s too expensive, so if we moved out of the state we’d do it,” she says. They’re contemplating a move to Utah, where, in some places, the dust blows in both directions for hundreds of miles without hitting a subdivision.
House flippers in Carson City are in trouble, according to a forecast by Moody’s Economy.com, a private research firm. Its predictions are called “one of the starkest views yet of the housing slowdown,” according to a Tuesday AP story.
The West Chester, Pa., firm projects that the median sales price for an existing home will decline in 2007 by 3.6 percent, which would be the first decline for an entire year in home prices since the Great Depression, according to AP’s economics writer.
Boom areas of Nevada could have the most dismal price slump in the nation.
Pay attention, residents: Carson City is on the list of metropolitan areas projected to have the largest decline in median housing prices.
Coming in at No. 1 is Danville, Ill., with a decline of 18.7 percent.
No. 3 is the Reno-Sparks area, with a median housing price decline of 17.2 percent.
Las Vegas-Paradise is No. 9 with -12.9.
Carson City is No. 30 with -9.8.
One sign of a scare: seller incentives. Local real estate agent Bob Fredlund said sellers are getting competitive to sweeten the deal. They are giving higher commissions to the buyer’s agent, cash awards of $10,000, trips to Hawaii.
It may be working. Recently released numbers from the city assessor’s office report that the average sale of a single-family home in August was $347,860, which is 7.5 percent over July.
The forecasting report says the most vulnerable areas for price declines are those regions where hot markets attracted speculators know as “flippers,” a speculator who buys a house in order to sell it quickly with a profit.
“The people really in trouble are the speculators,” says Gil Yanuck, assistant state director for the AARP’s Tax-Aide program. “They went and refinanced their house to speculate and buy another piece of property that they thought they were going to hold on for two to three months and flip it.
“Now they have two mortgage payments to make.”
Hey says the flippers weren’t prepared for this buyer’s market. Some people took advantage of the increase in equity a few years ago, refinanced and paid off debt. Others are facing foreclosure on a speculative property, and they don’t know what to do. They are trying to rent in a competitive market.
Those sitting on their home as their retirement nest egg shouldn’t start flapping, says Yanuck. Housing prices will only go so low because people will always need a place to live.
“There is only so much land in Carson City. So, the people who have held on are going to do well. They just have to have patience.”
The house that was worth $400,000 is now worth $50,000 less, but, as Yanuck says, “it’s still a lot more than what they paid for it.”
You’ve read my entire column to get to this nugget of sharp financial advice, courtesy of an investment smartie: “Real estate is never a bad investment, provided you have the ability to wait.”
Cut that baby out.
• Contact reporter Becky Bosshart at firstname.lastname@example.org or 881-1212.