Las Vegas real estate market report

The current batch of wanna be investors are allowing their investment homes to be foreclosed here in Las Vegas driving up inventory and lowering the price of resale and new housing.  It might surprise you that due to this unloading of uneducated and un-savvy investors that the SAVY INVESTORS ARE BUYING! 

People who know how to make money in real estate know that the profit is made when you buy and because of all the Bank owned real estate here in the valley these investors know they can buy at an excellent price and hold until the market changes within the next 24 months.  So while the opportunist fails and looses his shirt on investing in Las Vegas real estate because they simply purchased when the market was too high.  The savvy investor is buying up the bank owned homes (REO’S) and going to make a mint when the market changes in the next 24 months.

This is something I have known and written about for the past year but finally some of the main stream investigative reporters are starting to break the news.  NuWireInvestor wrote an article on this yesterday.

How long do you think the opportunity will be here as new bigger newspapers start picking up the news of the growth about to happen in Las Vegas?  NOT LONG!

If your a home owner this is great news as the price of your home should rise back to a realistic level.  If you don’t have to sell right now, DON’T.  Yes, we will still see some more declining prices in our market for the next 6 months but then things will stabilize and by the end of 2008 prices will be on the rise and inventory will be around 15,000 which is a balanced market in Las Vegas.

I have been reading newspaper articles from all over the world the last few months talking about how (name your country) can buy U.S. real estate right now at fantastic prices because their currency is so much stronger against the U.S. dollar and because of the mortgage melt down prices have fallen below value.  They are flying into Vegas every day and buying second homes and investment property. 

You have to ask yourself why potential Buyers here in Las Vegas are waiting to purchase?  The most often answer to this question I get is that they think prices are going to fall further.  Unfortunately these Buyers may simply wait to long.  Real estate is not like the auto industry where a dealership announces that there is a clearance sale on all their inventory.  Sellers WILL NEVER all band together on a certain day and declare that they listed their properties to high and therefor they are going to cut their prices 5% on all homes in Las Vegas.  That is simply not physically possible or reasonable. 

So when will the market be low enough?  When the press announces that prices are heading back up?  I have a thought for all you Buyers concerning this.  Do you think that Sellers won’t read the same article and start raising their prices and being more firm on counter offers when the press announce the market is changing?  Do you really think a Seller is going to continue to discount when they know their values are headed back up?

The reality is NOW is a great time to buy.  Not because I say so but, because the deals are currently out there and because of what is happening with foreign Buyers,  Savvy investors and the 12% job increase we are about to start experiencing the market is going to change and when it does it will do so in a very short time.

Buyers, remember that the price on a resale home is the ASKING PRICE which requires that you make an offer.  Right now the SELLING PRICE is lower than the asking price which means you can negotiate a discount.  You can also by bank owned properties and short sale properties as well as discounted vacant retail seller homes at very attractive negotiable prices. 

Then Bottom Line: The market is at the bottom if you correctly negotiate right now.  The bottom of the market is NOT when the press says so as they will only report the bottom when things are going up and you will miss the best time to buy.  The savvy investors are in Las Vegas right now BUYING, shouldn’t you be buying too?

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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If you purchased your home in the years 2004 through 2007 and you live in Las Vegas you may be in an unfortunate group of people that now find themselves in the position of having more invested in their homes than they can currently sell it for.

Many of you may be in a position where your mortgage interest rates and payments are rising further putting the squeeze on your living expenses.  This cash crunch creates much real financial pain and may push you to the point of just giving the house up to the bank. Before you make such a life changing decision, that will affect your credit and financial security for many years to come, you may want to take a look at a little history.

BAD NEWS 

Edward Glaeser a professor of economics at Harvard University and a Manhattan Institute senior fellow has a different view on this housing adjustment when he wrote in an article for the The New York Sun.

Glaeser wrote that for every 10% rise in a boom cycle prices fell 5% historically. If we look at Las Vegas we had approximately a 50% increase in our last 4 year boom cycle.  But also if you take an average normal appreciation curve for Las Vegas you find that home prices over the last 20 years have averaged 5% appreciation in our market.  We refer to this 5% appreciation as a baseline. So if the boom increased prices 50% and the baseline would have normally increased prices by 20% (5 yrs. X 5%) our market is over inflated by 30%.

Using Professor Glaesers estimates of price adjustment we should see a drop in real estate prices of 15% but we have one more problem to throw into this mix.  One of the main reasons home prices boomed in Las Vegas was that we had investors from all over the planet buying on speculation, hoping to make some fast cash by buying homes and then reselling them almost immediately. This created a false market which caused more homes to be built than there were people to buy and live in them.  We find these homes now on the MLS as vacant homes.  For this example let’s use the current December 2007 figures when approximately 28,000 homes are listed on the Las Vegas MLS and approximately 40% were vacant.  The vacant homes indicate excess supply and that number is 11,200 now throw in New home inventory and repossession or REO inventory and you have about 15,000 homes that are unoccupied in the market place.  What you also need to know is that the repossession will continue to climb through the 4th quarter of 2008.  The number of vacant homes will probably not change very much as people give back their homes and then rent in Las Vegas.  People are not loosing their jobs so they must find housing even though they give back their home.

Now you need to know that the valley has about 740,000 homes in it right now according to the Clark County Assessor and that nationally a healthy real estate market has 2% of its housing stock for sale at any time.  This would mean that Las Vegas if it were healthy would have 14,800 homes for sale.  If we currently have 28,000 homes listed on the MLS and we have more new, REO and for sale by owner homes on the market it is safe to say we have twice as much inventory on the market as we should in a normal market.  That is why some economic forecaster are saying that the Las Vegas Market could loose as much as 30% of value before the market bottoms out and starts to climb once again.

Let’s use the worst case of a 30% drop in Las Vegas real estate values and take a look at what is ahead in the near future in Las Vegas.

 GOOD NEWS

Every economist in the United State understands that job growth (employment) is the biggest major factor in driving housing and its affordability.  If housing is tight then prices rise.

In Las Vegas employment experts can calculate the increase in employment by the number of hotel rooms added to the area.  Historically the ration is 6 new jobs per room in Las Vegas.

The good news is that we only have about 15,000 homes that are excess inventory and we are about to have major job growth in the Valley due to $36 Billion dollars of development on the “Strip.” Las Vegas is projected to bring on line approximately 12,000 rooms from December 2007 through December 2008. That will translate to 70,000 new jobs here in the Valley.  If we use the lowest housing to job ratios of 33.8% in 1995 when interest rates were 9.25% we find that this surge in employment will cause a conservative demand for over 23,000 homes.  So at the end of 2008 we should be short 8,000 homes that will need to be built to accommodate our new work force.  In 2009 an additional 16,000 hotel rooms will come on line creating another 96,000 jobs and the need for a conservative 32,000 more homes.

The builders in the valley have the available lots to build on to meet this demand but they developed these lots at 2005 prices and have to carry interest on them for an additional 2 to 3 years increasing their price.  This will mean the new homes will be built on lots that cost more than in 2005 and even if construction costs are lower will still require 2006 pricing in order to strengthen the week home builders after being plundered by this latest price adjustment.  Don’t look for the 2007 prices builders used to liquidate excess inventories in late 2008, they will have vanished.

Bottom Line 

Bottom line is that the surge in growth that we are about to get over the next 2 years should not only bring us back to within 5% of the high point in 2006 prices but might increase the cost of a single family home 5 to 10% over those highs.  This will not be a real estate boom but simply a recovery of values.

It is also projected by local economists that we will actually have a shortage of employable workers by 2010. This leads to more competition for experienced workers and results in higher paying jobs.  This should help ease that tight budget and give you a little more cash to enjoy life.

So if you can meet your mortgage payments for the next 12 months, do it.  Short of a national catastrophe it looks like you may be looking back in 2009 and saying “Wow, am I glad I kept my home.”

The two worst things you can have on your credit is a repossession or a bankruptcy.

Hang on things are going to get better.

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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