Before you get too excited about the 20% year over year increase in the median SFR price being reported by the Reno Sparks Association of Realtors (17% at RRB), there are some things to reconsider:
– The median price is being calculated base on sales of homes listed AND SOLD on the MLS. 50% of sales are higher, 50% lower.
– Homes sold at Trustee’s Sales are NOT included in the MLS data.
– As availability of homes at Trustee’s Sales continues to decline, the investor groups like RNES are increasingly purchasing REOs and short sales. These homes generally ARE listed on the MLS and baked in to the median numbers.
– When NRES buys a house as an REO and flips it for their typical 35-40% gross margiin, the sale is essentially a double dip and shows up TWICE on MLS based data. Real estates fees and commissions, and any improvements to the properties, are not factored in – just the gross difference in sales price. (as an aside, it appears that NRES owns Harcourt’s NV1 Realtors)
– Not only is the median price being skewed by this double dipping, so is the demand figures being quoted for MLS sales.
From 1 January to date, NRES has purchased approximately 192 homes at Trustee’s Sales, and 71 about equaly divided among REOs and short sales. For the same period last year, they had purchased 215 TDs, and only 11 REOs / shorts. I would wager that the other investors in the market have made similar shifts. For NRES year to date, here are their statistics. Notice the trends!
Month 2012 TDs REO/Short
Jan 26 2
Feb 22 0
Mar 22 3
April 21 4
May 27 10
June 21 8
July 18 7
Aug 18 9
Sept 5 14
Oct to date 10 14
I am not implying any evil intent by the RSAR to inflate the apparent gains in the median home price – their data says what it says (though I do think they have the means to present much more transparent and accurate data, if they wanted to). Nor am I implying any wrongdoing by the flipper class such as NRES (I single them out only because they are the big fish, accounting for 10-15% of all TDs). But I do want to point out that a large part of our run up in median price is due to the double counting of homes purchased by the investors and resold at much higher prices over a short time frame.
How much of our year over year increase in median price is due to this phenomenon? My gut says at least half of it. The median is a pretty easy figure to move, and the investors are concentrated in the lower end of the market. Anyone with MLS access want to help me prove it?