Las Vegas real estate market report

I  just completed the May 2007 video report on the U.S. real estate market conditions. You can watch the video by clicking on the picture to the left. If you prefer to read you can find the script below.
RealtyTrac  a foreclosure service reported that 430,000 foreclosure filings, default notices, auction sale notices and bank repossessions were reported nation wide during the first quarter of 2007. That is one in every 264 homes. According to Moody’s analyst Mark Zandi 2.87 % of the total U.S. housing market is in some sort of foreclosure. Mr. Zandi feels the problem will continue through 2007 as subprime loans rest to new higher interest rates through the rest of this year.
 This figure represents a dramatic increase in for closures up 35% from the same quarter in 2006 according to RealtyTrac. Viewers should keep in mind that the greatest part of the 430,000 foreclosure filings include the initial “default notices” which is a letter sent out to owners that are more than 30 days late on their payment.  Please note, that a property may have up to 3 foreclosures taking place at the same time if the owner has a first mortgage, second mortgage and home equity loan on the property.  Less than 5% of these “default notices” become actual foreclosures as most home owners will then makeup their payment and late fees.
 
 More Than 430,000 Foreclosure Filings Reported in Q1 According to RealtyTrac(TM) U.S. Foreclosure Market Report 

Mortgage Delinquencies Reach All-Time High

On April 24th, Countrywide Financial Corp. Chief Executive Angelo Mozilo speaking at a Milken Institute Conference said he expects the mortgage market to improve in 2008 and be “Very healthy” in 2009. He said that 5 to 6% of the nations riskiest subprime loans may face foreclosure. He went on to say that 94% of these loans will not go into foreclosure.

Currently more people own a home than in any time in the history of the United States.  Much of this is due to the subprime or exotic loan market. Although foreclosures are at an all time high so is home ownership.  For someone to rent in today’s real estate market and save tens-of-thousands of dollars for a down payment and closing costs is unrealistic for most people seeking the American dream.  Many home owners today got their opportunity through these exotic and subprime loan programs and 94% will make good on their dream of long term home ownership.
Concerning the subprime mortgage companies that have gone bankrupt or are severely damaged by the market change.  We need to keep in mind that we live in a free market society and these companies chose to loan money at higher rates to these people.  Investors bought stocks in these companies and purchased bonds that promised higher yields than other more conventional investment. The investors in these assets choose to take the risk to receive the higher return, it just didn’t work out for them.
So in the end we have 94 families that now own a peace of the American Dream and 6 families who didn’t make it happen, for what ever reason.  Maybe some of these 6 were investors risking their credit on the appreciating real estate market.
Are we to feel sorry for the short term real estate investor taking their risks?
Are we to feel sorry for the Exotic mortgage company taking their risks?
Are we to feel sorry for the stock and bond investor taking their risks?
Should we really be upset with the 100 people that took out subprime and exotic mortgages because they didn’t have a down payment?
Right now there is a movement in congress to change the laws on loans.  If successful this might block future 94 people from obtaining their American dream of home ownership.  Mortgage Companies have already tightened their restrictions on exotic or subprime loans we don’t need any new laws.

If no down payment exotic mortgage loans are such a bad thing, then why have we Americans allowed our Veterans to have them ever since World War II.  No Down loan programs are not a bad thing as long as it is reasonably balanced with risk.  Should investors have no down loan programs? Probably not. This alone may make a large dent in that 2.87% repossession rate that the mortgage companies are now crying about.

We need to preserve every opportunity for our youth to obtain home ownership weather the real estate markets take a small re-adjustment or not.
On April 24th the NAR reported that the number of homes sold in the U.S. decreased by 8.4% from the 2006 figures.  A part of this lower sold rate could be attributed to the severe weather that occurred in February when homes that closed in March would have been placed under contract.
A positive sign showed the National inventory of homes for sale fell to 3.75 million units which is a 1.6% decrease in inventory representing a 7.3 months supply in the market place.
The median sales price of a single family home is down 0.9% from 2006.  If this were stocks it would be considered a minor adjustment but to hear the national press trying to sell papers and air time it seems a crisis.
David Lereah, chief economist for the NAR “We’re still looking for existing home sales to gradually improve during the last half of 2007.”
Weather Hits March Existing-Home Sales After Three Monthly Gains

Finally, I want to tell you about a report that came out of Las Vegas about one of Carl Icahn’s companies.  Mr. Ican is a well know corporate investor that buys when the market is soft and sells when it is strong  producing billions of dollars in profits. This last week a deal was struck between his company, owner of the Las Vegas Stratospher and 3 other minor casinos, and a real estate holding company owned by Goldman, Sachs & Company.  The Stratosphere was purchased by Mr. Icahn’s company out of bankruptcy when the market was soft, a Buyers Market.  Mr. Icahn’s company is now under contract to sell the properties for $1.3 billion dollars.  They announced this would lead to a net gain of $1 billion dollars.
The moral to this story is buy when others aren’t and sell when everyone else is buying.
It’s a Buyers market in most of the United States and excellent investments with excellent terms abound.  Interest is low and selection is plentiful. Weather this is your first home, vacation home or retirement home, now is the time to make a great deal on a home.  Don’t wait until everyone else is buying or you may be paying a lot more.

American Real Estate Partners, L.P. Agrees To Sell Its Nevada Gaming Operations to Whitehall Street Real Estate Funds for $1.3 Billion

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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The 2007 Las Vegas perspective booklet was released yesterday. It announced that Clark County population grew by 97,000 people last year putting the population at 1.9 million. According to the perspective this was a 5.3% increase over the 2005 figures. That is almost 8,100 new residents per month. If we have that size of growth this year the in 2008 we will be over 2 million people in Clark County. Some estimates project Clark County at 4 million people by 2040.

The average household size in Las Vegas is 2.5 residents per home. This would mean we will have need for 38,000 homes, condos or apartments. Approximately 50% of the residents in Las Vegas own their own home which means we are probably going to have 19,000 additional home buyers in the Las Vegas real estate market this year.

According to the Greater Las Vegas Association of Realtors March showed an increase in sales over February and it appears the April market is heating up even more. Perhaps the Buyers who have been sitting on the sidelines are now entering the market and making their purchases.

According to the Comprehensive profile the average new home cost 14% more than the average resale home last year. This year new home building permits are a fraction of what they were last year. If you can get 14% more for your money by buying resale over buying new then this market swing is just common sense.

Clark County had an average turnover rate of 8.6% for home sales in the last year for a total sales volume of 45,321 homes or 3,776 units per month. According to Fidelity title the Clark County recorders office registered 3,717 sales for March. This is just 59 homes shy of the average for the last 12 months. All indicators point to increases in the number of homes sold.

The job market is anticipated to continue to grow in Clark County at about 5% this year.

The over all real estate market has dropped in average sale price by -0.5% but this looks like the bottom as many of the zip code areas in the Las Vegas Valley are still showing increases in appreciation according to the Las Vegas Review Journal with zip code 89030 in the City of North Las Vegas showing an 18% increase in value over a year ago. The areas that in general are showing depreciation are the in the farthest reaches of the Valley with longer commutes.

We will continue to see flipper style investors continuing to put their investment homes on the market. We will also see many over leveraged home buyers that made bad decisions concerning their mortgage continue to be foreclosed. One thing to keep in mind is that we all have freedom of choice. The investor-flippers and people that use exotic mortgages to purchase homes made bad choices. In a free economy we are all able to make our choices based on risk and reward. If the real estate markets had continued to appreciate another 20% then all these people who are loosing their money and homes now would be savvy investors, but the market changed to quickly for them and now they are paying for their decisions.

Likewise the bargains that they produce create opportunity for savvy investors who understand that buying when the market is down and then waiting for the market demand to heat up again results in the profits. They are the savvy investors. Investing in stock or real estate requires commitment and studying of all the variables.

I smiled to myself this week as a read about Carl Icahn and one of his companies that entered into an agreement to sell the Stratosphere Casino. They purchase this property out of bankruptcy several years ago when the casino market was soft. They are now selling it for $1.3 billion with an anticipated gain of $1 billion dollars. Do you think they made this profit because everybody was in the market to buy casinos when they bought this property? No, they bought this property when the market was down and few were buying. They are now selling because the market is up and everyone is trying to buy property on the Las Vegas Strip. The moral of the story is buy when things are down, not when everyone is buying. If you buy when everyone is buying you have a good chance of loosing because your to late, you should be selling. As my grandfather always said, “If your not the lead dog on the sled your view never changes and looking at someone else behind never make you the winner.”

By now while the market is soft and you have a good chance of making an excellent deal. That will make you a savvy investor.

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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