PART 1 – BEFORE THE RECESSION OF 2008
We are always discussing with our Somersett community neighbors about the practicalities of living in and maintaining an evolving community. We exchange experiences as how we all came to be living in Somersett and how we all have made beautiful homes here in what we like to call “Eastern California”! Many of our fellow residents are “refugees” from the vicissitudes of living in California, we are from the East coast. I did actually work for two years in San Francisco until finally retiring here. What we specially like is the sense of community and how all the people we meet and greet are very friendly and neighborly and like us, anxious to see Somersett thrive.
We first visited Reno in 2003 on a West Coast road trip, Hot August Nights was ongoing, the Truckee River was incongruously sparkling in the midst of desert landscape, Pyramid Lake and Tahoe have their natural beauty. It left us with a sense of wonder. We were looking for a place to retire to, and we had dismissed Texas (too hot), Florida (too humid} and Las Vegas (far too hot), the cool mountain desert climate of the Eastern Sierra seemed very appealing (the low humidity made hair care a breeze).
We re-visited Reno in 2005 looking for a place to buy a vacation/potential retirement home and came upon Somersett, which was just getting going. The entrance to Somersett was truly dramatic, through a man made gorge and then along a green parkway via a series of roundabouts to the impressive Town Center (it had just opened) with its fitness center, tennis courts, East Side Children’s Park, Par3 Canyon 9 and swimming center. Property was hot, each time a builder (in our case Ryder Homes) had a release, the prices were higher! All the pre-great 2008 recession dwellers will remember all too well! That is, assuming they survived the economic collapse that afflicted Reno. We bought a “Tahoe Golf Villa” in Talon Point in 2005, which was finished in 2006. At the end of 2007 we moved to Reno, putting our house in New Jersey up for sale. I took a job in San Francisco for two years working for an alternative energy startup company Solazyme. I retired in 2010 and we were now were living in Reno full time. So what happened to Somersett as a result of the Great Recession whilst we were living in California? Well, in 2006 we paid $750K for our house, we could have joined the golf club as an equity member for $40K (I don’t play golf, but love all sports and enjoy watching others play). Somersett, up until 2008, was a fabulous vision of taking dusty desert scrubland and ravines in the foothills of Mt Peavine and turning it in to a “paradise”. Just to put the roads and infra-structure in place, meticulously plan the community, encourage other developers (Toll, Pulte, Ryder, Homecrafters, Liberty Homes, N. Nevada Builders) to participate and invest was an organizational tour de force. Building the spectacular TCTC Welcome Center as the “community focal-point” made one believe that one was moving into a vibrant community that was a part of the master plan, envisioned by Blake Smith of Somersett Development. He won an award in 2007 for Somersett.
In 2008 the world was changing, the economy nose-dived into a deep hard recession, hard hit was the real estate industry, especially hard hit was Nevada. In April a moderate earthquake (centered in Mogul a mile from our house) damaged many of the existing Somersett Homes, people we had met here, packed up their things and walked away from their investment. The value of the real estate plummeted – it still has to recover.
PART 2 – AFTER THE RECESSION OF 2008
Taking Talon Point as an example, I surveyed the prices (assessor’s office) of all the houses built- the first in 2005 and the last this year. It makes interesting reading…
18th Hole Trail
- Original Owners (13) $590,460
- Resales (9) $265,155
- New Since 09 (16) $314,680 (last sale March 2012)
- Original Owners (11) $546,320
- Resales (9) $280,330
- New Since 09 (3) $325,300 (last sale July 2011)
Talon Point is now completed, our gates are working. Dues $231/month.
One can see how Ryder Homes must have felt the “pain” as a builder from the Great Recession (“GR”). Before the “GR” average selling price for a new house (42) was nearly $600K, after; they (19 houses) were sold for $316K (53% decrease).
The other interesting statistic is that before the “GR” a golf course lot carried a $50K premium (for most of the houses on 18th Hole Trail), over those on Lynrock (no golf course view). After the “GR” they were worth less as resales! It seems that in Talon Point, even though a premium was paid for a golf course lot, it does not really carry through for resale in today’s market.
Another Somersett wide statistic was the collapse of the custom lot homebuilding – before the “GR” a custom lot (0.5 acre plus) was sold for $325K, now they are available for less than $70K – the infrastructure (roads, sewers, water, power, landscaping) put in to support the development of these lots has to have cost at least $50K per site! We are all paying our SAD taxes to recompense Reno for their investment in developing the Western part of the City.
What happened to these? Many were owned by Somersett Development and were transferred to banks, causing the banks to write off $15,000,000 and hold onto assets valued at probably twice their current market value, pay assessments and taxes – a conservative estimate is about another $3 million will have to be written off when they finally liquidate their holdings.
Examples of Somersett Development Company Transfers:
A. Town Center Retail & Office Complex: Notice of Default (NOD) for $8,863,131 BB&T (Colonial Bank NA) Richmond VA 4/9/09 – Just sold TC Building A for $1,050,000 –
LOSS $7,813,131 (could be less if Building B is sold)
B. 24 lots (Woodcrest & Gypsy Hill): Deed in Lieu of Foreclosure (DIL) for $4,802,345 Nevada Security Bank* (Heritage Bank) 14/09/09 – Valued by NSB at $1,575,000
C. 34 lots (Eagle Bend and Chase): DIL for $6,421,500 Nevada Security Bank* 12/28/09 – Transfer Value to NSB $2,906,205
D. 17 lots (Painted River Trail area) : DIL for $1,959,759 1st Independent Bank 12/31/09 – Transfer Value to 1stIB $1,140,303
LOSS $ 819,456
Link through to the official documents
* Nevada Security Bank of Reno was closed by FDIC 06/18/10. The FDIC found a buyer, Umpqua, Roseburg, OR. Bank Holdings (prior owner of NSB) said that it was a victim of a major crash in real estate values.
So, the clock cannot be re-run, all we can say that by making some gross assumptions for our Somersett community that probably around Half a Billion Dollars in real estate value was wiped out by the Great Recession of 2008. Everyone; the banks, the developer, the builders, the homeowners, the homeowner associations in Somersett, Villages, Vue and Sierra Canyon (lost assessments, that were written off) has lost out!
PART 3 – THE FUTURE
We can only go forward; 2013 will see a homeowner controlled association, elections will be held for turnover to a resident controlled board in November. This change will allow Somersett to move out of the past, finally to set a course for the future with full community involvement. The Town Center has been sold by the bank to a local business (yes, they live in Somersett) and they will be opening a new Italian Style Restaurant. There are still 1700 new homes to be built, these will have to offer great value. The homeowners and the new SOA Board will have to help facilitate the creation of newer desirable living space that is not only competitive; but, far more desirable than houses found in the rest of Washoe County and the newer retirement communities being created in California.
We all have to look into, participate and contribute to the future, a new future for our Somersett community. We have to make it into a truly ‘green paradise’ by investing in green energy, adding solar panels, exploiting the geothermal energy in the ground beneath us (yes we live in a hot spot in the foothills of Mt. Peavine). This will allow us to have a community in harmony with nature and ahead of the challenges we can expect as we move through the 21st Century. We have to build up our amenities so that they are the envy of all who do not have the good fortune to live here. We need to encourage, improve and provide educational opportunities for all who live in Somersett. In order to offer the “perfect living place” and be competitive, we have to keep the assessments low, keep the reserves fully funded and invest our HOA monies wisely to provide services required by all Somersett residents. We are not just a golfing community, but a place where all of us can live, enjoy an active social life whether they be families, empty nesters or retirees. If we do this, make living in Somersett the “place” for community values in Reno, then our property values will return along with our lost wealth; the banks will prosper again as will the businesses: shops, restaurants, & builders which support our community. To return to the blog, click here