Las Vegas real estate market report

Not all Las Vegas real estate isbeing sold for the same price and it isn’t just the location or the size that dictates the price!  Investors are currently flooding into the market looking for the real deals and they are finding them.  Some Las Vegas home Buyers are finding real deals with prices that comparable homes were selling for at or near Las Vegas real estate boom prices.  My Banks and individuals are selling well below the current average in an effort to sell their property NOW.  This has resulted in some properties below the $250,000 mark receiving multiple bids.

With the increase in full and all material costs, these homes are selling for below what it would COST (without profit) to reproduce them.  What this means is that investors are buying at record lows and stand to reap the benefit as the real estate market in Las Vegas once again changes course with new employment opportunities that are scheduled to come on line as the massive $33 Billion dollars of casino expansions come on line in 2009.

Recently Ben Bernanke recently said that the Fed. would start increasing the prime rate. This will result in an increase in mortgage loans. NOW is the time to jump in and purchase homes in Las Vegas before interest rate increases and while these deals last.

The Greater Las Vegas Association of Realtors is reporting that there has been a substantial jump in homes under contract last month.  Buyers are now making their move. I believe this could spell the bottom of the market that everyone has been waiting for.

It’s time to get busy buying a home.

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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Although the real estate market in Las Vegas is still very week their are signs of life and the future is bright.  Las Vegas housing was simply over built in 2005 and 2006. This was due to heavy appreciation in the market place, easy credit in the mortgage markets, and heavy speculation by opportunity investors.

In order for the Las Vegas real estate market to get healthy again the following things must occur.

1) The existing excess inventory of new homes must drop.

This for the most part has already occurred .  Standing inventory of new homes have dropped to about 1,000 units (excluding age restricted neighborhoods that are not as affected by the down cycle).  Many builders have dropped their incentive programs of closing costs and upgrades and have replaced them with the lowest price and guarantees if the prices drop further between the contract signing and the delivery date of the completed home.  Building permits for the first 3 months of 2008 have dropped over 66% from 2007 levels. Of the 440 neighborhoods with new homes for sale in them 85 of these neighborhoods have 10 sites or less available translating into a drastic drop in available subdivisions in the next 6 months. All the above shows signs of shrinking the Las Vegas new home markets.

2) Repossession’s must slow.

Although Las Vegas home repossession’s have not slowed yet their are several signs that this may occur.  Many of the initial flood of repossession have been the inexperienced short term investor that bought homes at the height of the market in hopes of making a profit and got caught in the market turn around.  Most of these investors have now walked away from their properties and we are seening  these homes as REO repossession’s now in the market place.

One thing that the fed’s have done is to drastically cut the prime rates to banks.  Although the mortgage interest rates have not decreased as much as they have historically, a very little talked about result is about to show its self.  There is a huge number of ARM loans who’s interest rates are to reset over the next 6 months.  Most of these ARM loans are tied to prime rate so the lower the prime rate the lower the over all the percentage rate will be for the home owners that have these ARM’s.  This will result in more of these home owners being able  to make their payments and stay in their homes resulting in fewer repossession’s.  We will still have a flood of repossession’s over the next 9 months as the homes that are in default now will be cycled into the market place but look for repossession’s to slow by this time in 2009.

3) The mortgage markets must stabilize making money available to qualified buyers.

Once again the Fed’s have come to the rescue with new Fanny Mae and Freddie Mac guidelines allowing for them to enter the jumbo loan areas.  A more important change by the Fed’s have been the FHA programs which have been expanded allowing more flexibility in obtaining an FHA loan.  Lastly many conventional lenders that have repossession’s are making down payment concession to qualified first time home buyers allowing them to purchase one of their reposessed homes with as little as no money down.  The mortgage markets are showing slow signs of stabilizing although the conventional markets are still in an uproar.

4) Las Vegas existing real estate inventory levels must come down.

The Greater Las Vegas Association of Realtors reports that in the first 3 months of 2007 new listing totaled 29,905 units.  For the same period in 2008 new listings were 25,752 units showing a slight decrease in listings of approximately 14%.  This downward trend in monthly listings actually started in November of 2007.  Although this is not huge turn around it does show an emerging consistent pattern in the market place.  Even with the huge number of homes being repossessed and placed on the market the total number of homes for sale in Las Vegas is slowly shrinking. As the number of Buyers increase this number of available homes will decrease at an accelerated rate.

4) The price of Las Vegas homes for sale must come down.

According to GLVAR the average price of a Las Vegas resale home in 2007 was $303,497 in the first quarter of 2008 the average price of a home was $262,332.  That is a drop of approximately 14%.  If you prefer to use the median price of a Las Vegas home then in 2007 it was $300,626 and in the first quarter of 2008 it was $246,500. This calculates to approximately an 18% drop in prices. Much of this decrease is due to the sale of Las Vegas REO bank owned properties which have amounted to over 56% of all sales in the first quarter of 2008. It is clear to we Realtors that deal in the market every day that REO bank owned homes are leading the market in sales.  Not all prices on all homes will ever come down uniformly but the opportunity is currently available for many excellent purchases at fire sale prices.

5) The Buyers must come back into the market and purchase.

Yes here also their are signs of real movement in a positive way.  With the devaluation of the U.S. dollar and the drop in prices we Real Estate Agents are seeing a flood of foreign Buyers.  They see an opportunity in our market and they are purchasing.  Many Las Vegas prospective Buyers are waiting to see if prices will continue to fall.  What most people don’t realize is that their are many great opportunities now that may soon disappear.  The whole Las Vegas resale market will never drop its prices across the board as each property is owned by different people with different motivations to sell.  Currently their are many properties on the market at prices that they sold for in 2004.  We are approaching pricing in many communities that are below the cost to replace them.  In my opinion we are near the bottom in price depreciation and because we are seeing some movement in the Buyers coming back into the market we may start seeing a firmer pricing policy by the banks that control the REO’s.  If we look at the 2005 property closing numbers which was a banner year in Las Vegas real estate sales we can see a surprising trend in comparison with 2008.  The first quarter of 2005 had 9,582 homes sold while in 2008 their were 8,907 homes sold which is not a huge difference in sales. We may actually grow in over all sales in 2008 if this trend continues and their is no reason to see a change in this pattern. 

An interesting statistic is the supply of homes in the market place.  This supply is figured by dividing the number of sales in a month by the number of homes on the market the result is the number of months of supply in the market.  As the number of sales increase or the number of listings decrease the number of months of supply decreases.  A balance market is considered to be a 6 month supply of homes.  In Las Vegas our Supply of homes in the market place in the last 3 months is as follows: 

Single Family Resale home supply based on home for sales divided by sales.
Dec. 2007  24.53 months
Jan. 2008  22.49 months
Feb. 2008  20.49 months
Mar. 2008  15.40 months

My personal observation is that we are seeing more and more Buyers quickly coming back into the market place.  This will result in the inventory levels to continue to drop and prices will stabilize.  If this trend continues at this pace we will see a balanced market of 6 months supply with in the next 6 months and that means prices will stabilize. This also means that we may start to see prices on new homes once again begin to rise around October of this year.  If your a Buyer and wait another 3 months to buy you may have missed the bottom of the Las Vegas real estate market.  I am not forecasting a huge jump in prices for this year or 2009 but we may see prices rise from their current 2004 levels to a normal appreciation rate of 4% per year which will mean by the end of 2010 with the demand surge because of all the new massive property openings on the Las Vegas Strip (120,000 estimated job creation) we could see a 15% increase in value over the fire sale prices we are seeing now.

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 have been reading my blog you know I have been saying that the real estate market is going to come back strong in late 2009 and we should see prices climb to their previous highs by approximately 2012.  Job creation is going to spur this sudden resurgence in the market as the $33 Billion Dollars of development on “The Strip” finishes construction and will create new jobs by the tens of thousands.

Finally the press is seeing the potential of the Las Vegas real estate market again.  In the last few days alone two national news and information publishers have come forward naming Las Vegas as a great place to find a piece of real estate.

The first Entrepreneur dot com found Las Vegas to be the 4th Best Place for a real estate investment bargain.  They sited a 12% year-over-year population increase and a low unemployment rate. They FAILED to mention the employment growth rate which is the main reason investors are now buying property here in Las Vegas.

The Second article was in Business-week they describe Las Vegas a big city buying opportunity because of its average sales price reduction of -23.38% from last year. Once again they are describing Investors coming to Las Vegas to buy deeply discounted homes an renting them out.

If you will recall a few years ago when the national press focused on Las Vegas an its huge price gains.  The result is that we had Thousands of investors flood into the market and buy property.  It looks like once again the national press is beginning to shedding light on the Las Vegas real estate market as a place of opportunity.  Will history repeat it self? Are the days of deeply discounted homes here in Las Vegas about to change?

I know first had that many international Buyers are currently buying in our market.  I know this because I am dealing with several right now. I read several articles in the foreign news each week about how Las Vegas has become a real opportunity because of the devaluation of the U.S. Dollar coupled with the steep reduction in real estate values.

The bottom line is that in speaking with other real estate agents on the street here in Las Vegas we are all starting to see many more Buyers coming into the market place.  The Greater Las Vegas Board of Realtors is seeing an increase in Sales and properties being placed under contract.  We may be seeing the beginning of a change in the Las Vegas real estate market again. 

Historically the real estate markets in Las Vegas have changed much faster than in other areas of the country.  This would be normal in Las Vegas.

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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Yes, the world of finance is in a tail spin and some Las Vegas condo projects are in trouble but it seems that many Las Vegas projects are above the financing waste land that has swept over the U.S. real estate markets.

This last week I noticed another condominium project has bitten the dust due to the slow market and terrible financing availability.   Stephanie Village has completed an $8 million dollar club house and infrastructure improvements and is now closed for business.  This is the second project to shut down in Henderson in as many months with Vantage Lofts being the first.  One has to ask what will happen to these partially completed projects?

But not all in Las Vegas is doom and gloom.  Las Vegas City last week gave its approval to a non-binding agreement with Forrest City to 1) Acquire land for a casino in the new 61 acre development site the city owns.  2) Build Las Vegas City a new city hall and lease it back at a much reduced rate.  3) Develop a new public transit facility close to the new City Hall.

This would allow the City to assemble approximately 20 contiguous acres of land surrounding the old City hall which would be a very valuable asset for a possible casino project with frontage on Las Vegas Blvd.  This would also guarantee a new casino on the 61 acre development site.  Together two new casino projects with the renovation of the Lady Luck and the expansion and renovation of the Golden Nugget, the new Entertainment District could all make Downtown a must see for people visiting Las Vegas and revitalize the downtown areas.  Besides the new casino on the 61 acre site there will be a new fine arts center, a world class brain institute (under construction),  the world diamond center tower,  the World Furniture Market (3rd phase under construction) and many other buildings.

The City also has not given up on building a new major sports stadium off Main Street between the Stratosphere and Downtown.  Also this month the Streamline Towers Condominium project will start closing its units with their new owners.  Mean while to the south of the new Justice Center Juhl Condominiums continues work on its building complex.  The structure on this project has been fully erected and it is bustling with subcontractors of almost every trade.

Goldman Sachs completed its purchase of the Stratosphere in January and there are murmurings on the street that it will seek to expand and renovate its new purchase using the 12 acres of undeveloped lands it acquired in the purchase.

Just to the north of the 61 acres is the Moulin Rouge, an historic site of the first segregated Casino for people of color back when whites only could stay on the Strip.  This site has recently received preliminary approval from the City for a total new casino/hotel package with tower.

So it looks like old Las Vegas may become New Las Vegas in the next four to six years!

Looking at the County (Strip)  I remember when I was a child the rumors that Elvis Presley really didn’t die but secretly vanished in order to live his life outside the lime light.  Well it looks like Elvis may never die!  FX has announced plans to build a new casino based on the Kings persona on the corner of the Strip and Harmon.  This puts it across from City Center and Planet Hollywood and surrounded by the MGM Grand.  Not bad company Elvis!

Las Vegas Sands has its fingers in a three new projects.

Currently under construction is the new high end condo tower along with luxury retail right along Las Vegas Blvd.  They are also involved in a new major sports arena to be build with frontage along Koval which is the first road east of Las Vegas Blvd.  The third project just announced yesterday is a brand new 1.2 million sq. ft. convention center along with making room for an additional 7,000 new rooms.  This facility would be built on the east side of Koval. 

What I find interesting about all of this is that while the national press is busy saying how bad the residential real estate market currently is in Las Vegas they fail to see the $38 billion dollars of construction currently happening on the Strip which will completely dry up the residential real estate inventories as they finish construction and start hiring new workers.  Supply of homes in Las Vegas will be in short supply in 3 years, AGAIN.

Some Buyers and investors are beginning to see the future and coming back to purchase while prices are dirt cheap.  We are starting to see a lot more buying activity in the residential markets right now.  Many properties in the lower price ranges are beginning to once again receive multiple offers.  It looks like the market here may now be changing.  Historically the Las Vegas real estate market has made fast adjustments to market conditions and this market swing seems to be no different.

If you have any questions please give me a call, Max 702-334-2200

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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Forbes.com rate Las Vegas as a “Top Town for Empty Nesters” in an article published April 3, 2008.  It stated that Las Vegas has had a 156% increase in 55 to 64 year olds from 1990 to 2005.  This has been due to the excellent job market as well as wonderful recreation opportunities.

The State of Nevada recently published its findings concerning the in-migration of new residence for 2007.  It found that over 97,000 people moved to Nevada in 2007 which is over 8,000 new residence per month with the majority living in Clark County (Las Vegas) area.

In talking with other real estate agents on the street here in Las Vegas it appears the market is starting to pick up.  We are seeing more Buyers looking, possibly signifying that prices may be close to bottoming out.  With inventory levels shrinking and more sales pending we may be seeing signs of a bottoming of the market here in Las Vegas.  Keep in mind that we will see significant job growth in 2009 so many Buyers will try to beat the anticipated market appreciation bounce back by buying in 2008.

A major factor in the increase in Buyers is the new FHA purchasing guidelines which have started to allow Buyers to purchase a home.  The conventional mortgage market is still in shambles and has been hard for Buyers to obtain a mortgage.  FHA is allowing Buyers the security and assurance they need to complete their chosen purchase. 

Buyers looking in this market are finding wonderful properties that were well out of their financial reach just 2 years ago.  The selection of prime properties is plentiful and a Buyer can find excellent values for their money.

Now is the time to BUY in Las Vegas.  I am buying properties now.  Does that tell you anything?

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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Well the GLVAR came out with their February figures and it looks like there is a POSSIBILITY (rumor) that the market is showing signs of bottoming out.  Inventory levels are down (fact), numbers of homes under contract are up slightly (fact) and home sales are up slightly(fact).

However Standard & Poor’s/Case Shiller report still show prices falling in Las Vegas (rumor).  Why is this rumor rather than fact? Because approximately 40% of the current housing sales are REO bank auction properties.  These properties are sold as is, generally in need of major repairs and are substandard homes that will have to have renovation and redecorating done to them in order to bring them back to a standard in which they can be resold on the open market.  According to Case Shiller we are off 19% in price from January 2007 to January 2008 and this includes REO auction sales. So by the time these properties are renovated and put back on the market they may sell for 10 to 15% more than they sold at auction for.  Without knowing this the average Buyer thinks they can come along and buy a pristine home at 20% below a year ago which generally is not true.

The recovery in the Las Vegas real estate market will come in conjunction with the completion of $39 Billion dollars worth of improvements on the Las Vegas Strip (truth).  This will ad approximately 46,000 new hotel rooms (false) to the strip and create 276,000 new jobs (false) in Las Vegas.  The number of rooms to be completed between now and 2010 is more likely to be in the realm of 20,000 units creating 4 jobs per room or 80,000 new jobs (rumor).  These jobs are based on not only hotel workers but casino, convention, entertainment, right down to the added grocery bagers that will be needed to service all the new workers on the Strip. Approximately 50% (truth) of these workers will end up buying their home with 2 income workers per home this would mean approximately 20,000 will be absorbed which should be enough to dry up any excess inventories.  It is not enough to drive the huge building boom during the speculation era of just a few years ago.

Many future projects on the Strip may be put on hold or canceled (rumor and truth).  Because of tight financing it looks like old water park site has once again been put up for sale (fact).  This site was once proposed for the  tallest building in the western hemisphere.  The land is owned by Ausie James Packer. Mean while the old site of the New Frontier with recently Clark County project approval to built a expanded version of the New York Plaza Hotel (rumor) may postpone construction until the commercial financing markets settle down. Look for other projects to take longer to move forward as a more measured expansion of the Strip. 

The international tourism will be up over the next few years as foreign currencies buy more U.S. dollars (fact) and this should make Las Vegas a major world stop.  The Las Vegas Convention and Visitors Bureau has just launched a multi million dollar advertising campaign to attract these target travelers (truth). As the numbers on international travel start to show in the market reports and the financial markets settle look for development to once again resume on the Strip (rumor) this will be in about 2010.

Foreclosure on the major projects on the Strip will stop construction and leave empty partially completed mega Casino/hotels (false).  The financiers of these projects understand that if the project is not completed they may not have an asset to sell.  An unfinished project can result in much higher costs to restart and yield them a much lower selling price. A current example of this is the Cosmopolitan whose financier is Deutsch Bank (truth).  The Bank is currently foreclosing on the project but has guaranteed payment to the contractor to continue construction.  If the Bank takes it back, construction will still be completed. Failing to complete a project of this size is not a possibility.

Projects like City Center, Echelon, Fountainbleau, Aliante Station, Canery East, Encore and ”M” will all be brought to completion (truth).

All current under construction expansion to existing properties will also be completed including Ceasars, Palazzo, Planet Hollywood, South Point, and Hard Rock (truth).

As soon as the commercial financing is available the postponed projects will resume development (false).  Las Vegas has always been a city of “If we build it they will come.”  But with all the new rooms coming on line in the next few years there is a little nervousness on the street as to weather they can be filled and generate the needed revenue.  The industry wants a 90% or higher occupancy rate and if that is not reached you will see new development slow (rumor).  Some still appear to be moving forward such as FX’s project across the street from City Center with a planned Elvis themed property.

The Las Vegas housing market will boom in 2010 and prices will return to their 2005 levels (false).  Look for inventories to return to normal levels and prices to rise approximately 10% from their 2008 levels (rumor).  It will take until 2012 for prices to return to their 2005 levels (rumor).

If we have or are about to reach or residential real estate bottom in Las Vegas then it may be a good time to buy.  I bought a home last weekend to rent out.  I guess that lets you know where I stand.

If your interested in talking or have questions please give me a call. Max Schmidt 702-334-2200

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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I tend to spend a great deal of time looking at development on the Strip.  The reason for this is that this area provides such huge employment growth opportunity.  Employment growth is what drives residential real estate development and pricing.  With great positive employment growth of 4 to 5% you find an active appreciating residential real estate market.  With all the development going on down on the Strip this translates into many new jobs and people looking for housing.

This mourning I found out that the 6 billion dollar Plaza Project scheduled for the site that the New Frontier once stood has been rumored to be postponed.  This means that owners and guests at the Trump Hotel will be looking at a dirt lot with an unobstructed view of the Wynn property, a Trump luxury competitor. Trumps units have begun to close with its owners.

But on the same day Las Vegas County Commission gave final approval to the Plaza project. It may be true that construction could be postponed but give Elad Groups deep pockets it would be purly their decision to postpone and not due to commercial financing.

The number of Las Vegas visitors are off 10% in the last few months compared to the previous year.  With all the sky cranes hovering above the strip the possibility of the postponement of the the Plaza sends a clear message to many of us in Las Vegas. 

The Strip maybe over building in an economic downturn (recession) period in the U.S.  We all know that the dollars that flow into our city are discretionary.  The Las Vegas Visitors Bureau moved up an $11 million dollar advertising campaign to help boost visitor attendance.  The target audience is less on U.S. visitor but more on the international market because of the weak dollar and better economies of many foreign countries.

It is also notable that Bruce Eichner developer of the massive Cosmopolitan project has been unable to finalize his bailout deal with Hyatt.  Although Hyatt and another investor already have large capital investments in the project cost over runs may almost double its total from $2 billion to nearly $4 billion.

  In the mean time Deutsche Bank has continued to guarantee payment to the contractor on the project to insure no work stoppages.  Deutsche has also notified all involved that it is proceeding with foreclosure on the project. 

 This foreclosure notice is definitely a move to put pressure on all development Investors to decide if they will continue or loose their investment. 

In the mean time approximately 80% of the first tower condo units have been sold with a non-refundable 20% deposit.  If Deutsche repossess the project do they also take possession of the deposits? Are they required to honor the existing contracts with the condo Buyers? Can they keep the deposits and reset the sales price of the units to the Buyers?   All this is yet to be revealed, but it is clear to me that the project will be finished.  It is to far into the development to stop it even if it becomes an expensive white elephant.  If Deutsche does foreclose it is clear who the most likely Buyer would be as MGM surrounds it with the Belagio and Project City Center.  MGM will not overpay for the project and Deutsche will be picking up the difference.

In other happenings Goldman-Sachs finalized its purchase of the Stratospher, I would not be surprised if its plans may be a little slow in coming as its location will be affected more by slower tourism.  It may very well hunker down and wait out this recession before announcing expansion plans.

The Sahara has gained approval for a new tower and remodeling plans from the Clark County Commission.  Now it must find financing!

Fountainblue is well underway with erecting its steel and seems to be on schedule.

Echelon is quietly proceeding with construction of its $4 billion dollar complex on the old site of the Stardust.

Encore at the Wynn has topped of its project and its new sign is hung. It is scheduled to open in 2009.

Just west of the strip Palms recently opened its new Condo/Tel tower.

Planet Hollywood is under construction of its twin timeshare towers.

Caesars Palace is building an additional room tower on its project.

The newly opened Pallazo is building a condo/hotel tower on its site currently.

Further South on the strip the South Point Casino is building a new expansion on its resort.

The “M” at the extreme south end of the Strip is erecting steel for its new resort.

Also just off the Strip “Hard Rock” has begun its major expansion and remodel.

In other areas The Cannery East is finishing its steel erection on South Boulder Hwy.

The latest Stations Casino at Aliante is proceeding with its interior finishes.

On Fremont Street the Gold Nugget continues with its tower expansion.

The Moulin Rouge has gained approval from the City of Las Vegas for its new tower and casino on the old historic site. But now they must find financing!

It looks like for the most part if the project is not currently under construction it may be delayed until visitor numbers rise and financing becomes available.  This could mean that many projects may be looking at start dates of 3 to 5 years beyond what they had planned.  Some players in this mega game will not be able to hold the land that long while others will be eager to land bank anything that comes up especially at discounted prices.

All this translates into a more reasonable increase in new rooms on the Strip and a slowing of expansion for now.

So what does this mean for the guy buying a house in Las Vegas?

First off it means that job growth will not hit the unreasonable stratospheric heights of 6.5% or higher that some have predicted.  Slower job growth translates into slower absorption of residential inventory.  So if you are a Seller it could take longer to get to a point to sell your home.

In the past I have said that everything should turn around by 2010 and I still believe that to be true.  But I believe job growth in 2010 will be 4 to 5% which is still a large increase.  I still believe that prices will stabilize in late 2008 or early 2009 and start rising in late 2009.  I have never been in favor of short term investments in real estate but I feel for those willing to buy and hold we are in an excellent market to make that deal.  If your interested in buying a home here I have many tools that can help you determine if you are making the proper decision for your needs.  Just give me a call.

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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Almost everyone in the U.S. is familiar with the roller coaster at the New York New York here in Las Vegas.  Many people who purchased property here in Las Vegas were not aware that they were buying a ticket on a different roller coaster, the Las Vegas real estate roller coaster.  So let us all climb on board and see what this ride may look like.

From about 2003 through 2005 real estate in Las Vegas roared up a steep slope of appreciation powered by speculators, slowing as it crested at its peek in 2006 with an approximate increase of 50%. 

 Most of 2007 was slow decline as the depreciation momentum built pressured by the nations highest foreclosure rate, real estate auctions and people needing to sell no matter what.  With the news around the globe decrying the Las Vegas bubble is bursting it was inevitable that the coaster would accelerate in its downward plunge. The last quarter of 2007 the coaster quickly gained speed and the year ended with a 15.3% average home price depreciation in the Las Vegas real estate market.

In January 2008 repossessions actually exceeded all sales in the Valley and sales for the month were the lowest reported since the 1990’s.  Not surprising another large real estate auction was announced for Bank owned (Real Estate Owned) R.E.O. properties to take place in March.  It seems we are now in full speed free fall in our roller coaster ride.  But when does this coaster inevitably reach the bottom and when does it once again turn up?

With many variables in the market it is hard to say for certain but looking at the variable can give us some sense of what will key a change in our market.

1) If congress passes its second proposed economic relief act (it is an election year) and it includes either or both of the following provisions. This could vastly change the Las Vegas real estate landscape. a) A tax credit of up to $10,000 for first time home buyers to purchase a home. b) The ability of Bankruptcy Judges to modify the terms and conditions of a mortgage loan.  Keep in mind that the Mortgage Bankers Association will fight a bloody fight to stop Bankruptcy modification.  It is also note worthy to mention the the National Home Builders Association has suspended all political contributions to candidates because 1st time home purchase tax credit or the Bankruptcy modification was not in the first economic relief bill.

2) The price of resale home reaches below the $100 per square foot average it cost to build in Las Vegas.  This price includes the price of the lot and is an average price. Some areas such as Summerlin and Anthem are much more because of land costs but looking at the over all picture once the price of resale homes are 15% lower than the cost to replicate them without builders markup, you have a sure fire reason to jump right back into the market and buy.  Ultimately the existing housing stocks will dry up because of job growth and population growth.  It is only a matter of time until once again housing will be in demand and with even minimal inflation rates the cost of building will continue to rise. This will bring investors back to the market and will provide many more positive cash flows for landlords willing to purchase as long term investments.  This would be health investment for the market.

3) Employment growth is anticipated to take off in early 2010 but if some or the current major Strip building projects were to open early this may spur an early bottoming to the real estate market as demand for housing will increase.  There are incentives for the major properties to push their scheduled opening up early if possible.  a) The saving of interest costs on construction loans. b) The earlier addition of revenue streams to offset costs. c) The ability to hire workers before all the other properties open resulting in a better employment pool to choose from resulting in better quality workers.

4) A total turn about in the mortgage industry.  This is a little like suggesting that their will be total peace in the Middle East.  The financing world is all about who you eat, families with homes, smaller banks, hedge funds, and multi-national financial institutions.  The climate of the financing world is much more like a pack of lions praying on anything they can devour than doing the right thing. Greed is the definition of morals for most in this industry.  The motto seems to be win at any cost.  But the tower of cards this greed has built is falling apart.  It is estimated that looking beyond the $200 billion dollars the Mortgage Industry has already written off its books they may well need to write off another $1 trillion in bad debt.  My personal opinion is if they could look under the rock where they hid their morals 20 years ago, gain a little compassion for their fellow man, they may find they could actually help stop this free fall in real estate pricing. This could be accomplished through REAL loan modifications on a massive scale, not the public relations schemes they have dressed up and put in the window with the help of the current U.S. president.  But for this devouring lion pack to change its ways means it would have to put away its prides greed and this is NOT going to happen.

5) Less likely is that the government will buy the defaulting sub-prime and Alt “A” loans and rewrite them into modified loans. It is simply beyond governments function and ability to become the mortgage holder for this much risk and exposure to the average American Tax Payer.

 So when will the roller coaster stop its free fall?  I believe it will happen very soon in Las Vegas and I am putting my money on that bet. Call me if you need to know what is happening in the market.

Max Schmidt 702-334-2200

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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With the gaming industry posting record profits, record visitors and record construction it looks like there is no end to the possibilities and opportunities for this world class city.  For 2007 will go down in history as the year that Las Vegas hit the 2 million residents mark, the year that saw the implosions of the famous Stardust and New Frontier Casinos.  It was also the year that a record number of historic business and land deals took place that will forever impact and change this city in the future. 

Private equity firms

Several public gaming companies were bought out by private equity Companies this year including Harrah’s and Stations Casinos.  This allows these companies to ditch the need to report profits on a quarterly basis to their stock holders in favor of larger investments in the properties with short term losses in favor of much larger and longer term profits in the long term.  This will result in a better long term investment decisions in these properties resulting ultimately in more business and better income over the long haul.  This is good for Las Vegas and its future.

The “Sky Crane” has become the Las Vegas bird of choice recently.  At one point this year there were 45 cranes planted in the Las Vegas Tera fir-ma.  These cranes are mostly concentrate along the “Strip” and are flying construction materials to an estimated $33 billion dollars of improvements on the Las Vegas Strip.  If you added up every dollar EVER spent on construction on the Las Vegas Strip it would not add up to  the $33 billion dollars in construction that is currently transforming this playground. Las Vegas is being transformed from cheap hotels, trough buffets and tacky shows to the culinary capital of the world, one of the worlds best shopping stops, the new Broadway and center of world class entertainment, a world luxury getaway including posh hotel rooms, spas and retreats.  From the worlds finest night spots, its outstanding outdoor recreational opportunities Las Vegas is DOING what most cities only dream and talk about Las Vegas is transforming itself into the city of the future. The massive expansion on the Las Vegas Strip has caused some projects in the Valley to be placed on hold because of the lack of available commercial contractors and their work force.  Some areas of the valley are in desperate need of better shopping and professional business space but these will have to wait until possibly as late as 2010 while some of these massive Strip properties are completed. But their are approximately 5 more properties to start construction and others still to announce their development plans an the Strip.

If you haven’t been to Las Vegas in the past 5 years you might have trouble recognizing it and it will continue to change even more dramatically over the next 5 years.  There are currently 2 majors sports (20,000 to 22,000 seats) arena in the works for Las Vegas, the last major development project to expand the airport is underway which includes plans to extend the monorail to the terminals.  A new international airport to the south will have all approvals by that time and will start construction.  New water resources have been acquired under the Colorado River water pact and further resources are in the works to bring the needed water into the valley to support the needed growth.  Downtown their is a new gaslight district taking shape and of course the worlds biggest furniture mart construction continues. Right next door the Lou Rowe Brain Institute is under construction and this year will see a new Symphony and Preform Arts Center and the start of construction of the World Diamond Center. The first High Speed mag-lev train is under its EPA environmental study currently and will whisk passengers initially from Victor-ville California to Las Vegas at speed around 125 miles per hour.  A new high-speed transportation system will take residents from the far reaches of the valley to its core.  Close in desirable locations will continue to be redeveloped into high density medium and high rise communities with shopping and community amenities making them desirable places for local residents as well as second home owners to live, work and play.

The GREEN Las Vegas

Most of the world views Las Vegas as a city of excess and hardly the model city for conservation.  If you think this perhaps your right but consider the following.  Las Vegas this year opened the worlds 2 biggest electric solar generation facilities.  The State of Nevada has dictated that 5% of its total energy generation must come from solar in the next 5 years. It also saw the opening of the largest manufacturing facility for commercial thermal electric generation equipment in the United States. 

The Las Vegas Valley used less water last year than it did in 2000 even though it increased the total number of homes by more than 20% in the same period.  All those fountains and lakes down on the Strip use recycled and filtered water from their respective hotels.  And Las Vegas continues to forge ahead with smaller lot sizes for single family homes and a building requirement for no front yard grass on new homes as well as water saving plumbing fixtures to continue to conserve fresh water. The water district has the most successful “Cash for grass” programs in the country which pays residents to remove their grass and replace it with water tolerant plants.  Las Vegas is also zoning higher density projects which optimizes water use with less landscaping per residential unit further cutting water usage.

Project City Center under construction right now will be the largest “Certified Green Building Complex” in the world.  This project must not only be Green when completed but must use Green construction practices with recycling and material specifications. This project has required an investment by MGM-Mirage with local contractors to create Green contractor services and suppliers that previously did not exist in Las Vegas.

Getting guests out of their cars and on public transportation is a major effort to help the visitor enjoy themselves here in Las Vegas and to that end both the monorail and the new double deck-er buses have been operation on the Strip.  This means a fun novel ride with views and a clean safe faster experience for these riders.  The local transit authority has plans to expand the monorail on both sides of Las Vegas Blvd. and extend it from the Airport to Downtown Fremont Street.  Also in the works is a new ground based transit corridor system which is essentially a private road for a hybrid city bus/train (Max) system. This would allow the Max units to travel at speeds up to 60 miles per hour in gridlocked areas and pull up to platforms where passengers have already purchased their tickets allowing for much shorter stops and faster transit times.  This Max system is under planning development all over the Las Vegas Valley including the Strip and Downtown.

The Bad Stuff, or is it?

The Las Vegas Valley is running out of land.  I know it looks like the desert goes on for ever but this valley is surrounded by federally protected wild life preserves, Indian reservations, military and nuclear ranges, national monuments and parks.  The experts vary in their time tables from 7 to 12 years but they all agree that Las Vegas is going to run out of land and when it does any new development will require at least a 45 minute commute by car into the Valley.  For this reason land in Las Vegas has gone for premium prices over the last 5 years and the pressure will continue to build on this limited precious asset.  This is also the reason that the better locations in the valley will continue to tear out their older sections and redevelop into much more desirable areas. 

Las Vegas was the foreclosure capital of the U.S. this last year and will probably be again in 2008. In an investigative report delivered to the Senate Banking Committee it is estimated that more Sub-prime loans will reset in 2008 than reset in 2007 resulting in a higher number of foreclosures if the mortgage industry does nothing to curb the trend.  Since the announcement of the “HOPE NOW” program, a voluntary program by the mortgage industry it has reported that it has resulted in a resolution of 1% of the total number of applications it has received.  Further more with the tightening of lending requirements and the drop in property values here in the Valley (approx. 15%) it does not look like many of the people who need to refinance are going to be able too.  Add to this the passing of the Mortgage Relief Act which would absolve borrowers of any tax consequences of allowing their home to be repossessed. All this may result in even more foreclosures in this market.  We all need to keep in mind that much of the repossessed real estate available in the Las Vegas market today is a direct result of real estate speculation.  This speculation was fueled by a short term FLIP,  not a buy and hold investment strategy.  These speculators were not prepared for a market reversal that could have been foreseen in what was happening with the mortgage industry and watching the job growth projections for Las Vegas.  These what I call SHEEP flippers, because they follow the masses, and got fleeced (pun intended). They now owe more than their property is worth and have loans resetting that are raising their payments by as much as 60%.  Therefore we will continue to see allot of property being foreclosed and then sold at the new lower prices.

In 2007 employment growth here in Las Vegas was slightly lower than the national average.  Because of the loss in residential construction and closing of so many old casino properties unemployment was slightly higher than the national average.  In 2008 things will only change slightly, look for most everything on the employment front to only change slightly as the Palazzo Casino opens along with several other smaller properties and expansions. But hold on because in 2009 and 2010 things will really heat up in the employment growth sector as many new major properties open their doors.  It is estimated that conservatively this will require over 100,000 new employees to support these new facilities once again drying up available housing stocks and causing appreciation in the market place.

Right now we have approximately 28,000 homes for sale on the MLS (down from a 30,000 unit high). In a normal balanced market we should have approximately 15,000 units. On average over the  last 20 years Las Vegas real estate has averaged a 5% increase year over year.  If residential property drops in value a total of 18% from its high in 2006 it would normally take it 42 months to regain that value from the lowest value point.  If 2008 ends up being the lowest value (trough) and 2009 and 2010 bring the market back because of the huge need for housing (employment growth) we could easily see a 9% per year valuation gain for holding the property (leasing it out) for 24 months.  And this is just what the government requires as a minimum time period for long term capital gains or 1031 exchange.

This is a Soft Sellers Market

When the residential real estate market goes soft, people get interesting. Even though there is an abundance of opportunity most people won’t take action. Because by nature, most people follow the ‘herd’ mentality. They believe that for almost anything to be the ‘right’ thing to do, a great many people need to be doing it. This reasoning could not be further from the truth.   The secret that Savvy investors don’t want you to know is, when the markets are soft the playing field is being ‘reset.’ Short-term opportunities are removed for people such as the Flippers and an great opportunity gets created for the seasoned investors who know how things really work.

In my last article I urged my readers to start buying while the market was still favorable to the Buyer.  If you look in the right places you will find the deal NOW that you thought you would have to wait for.

This last week I received an email from one of my readers that I would like to share with you.  We will call him T.S. to respect his privacy.

“Max, You are right on.

We moved to Las Vegas at the end of 2006 and decided to rent and wait to see what the market would do.   We are currently in escrow on a 3,400 sf home the was originally purchased for $720,000 in 2006, foreclosed in June 2007 for $590,000.  Our Price is $420,000.  So your right, if you look around, deals are out there.  We have been looking for 12 months for the right home and the right price, I think we found it.”

The problem with waiting for the ‘herd.’

If you are the only Buyer making an offer, do you think you can negotiate a better price than if their are others making an offer on the same property?  Do you think you are the only person waiting for the Las Vegas market to bottom out?  What do you think will occur when the Greater Las Vegas Board of Realtors start reporting that sales are starting to jump way up? Do you think that all the other Buyers waiting in the wings will stay their waiting for you to find your perfect home or investment?  If you think that the Sellers attitudes will not immediately change then you are being naive.  Sellers want every dime they can get from the sale of their property and if they see the market is changing their attitudes will change just as fast.

The Bottom Line

Buy before the third quarter of this year or before the press starts announcing the heavy demand for employees at the new resorts and their opening dates.  This employment growth will make national news as it is projected at as high as 14% growth in job creation which is VERY unusual. If you haven’t secured your investment or home by then, your going to be paying more than you could have.

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 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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