Spooky Real Estate Predictions

Doomsday Real Estate

There is no shortage of national media data crunchers giving bad news about Las Vegas Real Estate. The problem is… they don’t actually practice real estate and they seem to interview agents that really are not involved in day to day Las Vegas real estate in the form of representing buyers and real sellers.

Take a Look at the Las Vegas Bank Owned Properties for Sale compared to January of 2009.

Notice of Trustees Sales in Clark County, NV through July of 2009

Quite a significant decrease in inventory despite all of the reports of how Nevada leads the country in foreclosures. We probably also lead the country in the amount of offers that come in on a Bank Owned home for sale. I’m certainly not going to venture out and say the foreclosure crisis is behind us because I’m still trying to figure out where all of those foreclosures that were supposed to be on the way in the form of bank owned homes for sale went. Remember this Post about the Number of Trustee’s Sales filed in Clark County, Nevada through July?

The Notice of Trustee Sale is the next to final step in the lender actually taking the home back. Generally… the homeowner has 30 days of ownership left before the lender officially owns the home so you would think with the huge numbers filed in June and July… that they would have hit the market by now.

But… for those of us with Real Estate Investors patiently waiting for a bunch of good deals to come up on the Las Vegas REO market… it’s just not materializing. When we do find something worth purchasing… chances are there are going to be multiple offers on the property and more likely than not… it’s going to sell for more than the list price that attracted us to it in the first place.

There are certainly plenty of theories out there of what is taking place (and I certainly agree with some of them) but nobody has been able to provide substantial proof of where the Disappearing Las Vegas Bank Owned Homes for sale went.

Do Spooky Predictions Matter with current

Las Vegas Home Values?

I came across this post over at Dr. Housing Bubble concerning the nasty Option Arms coming up to reset in the next couple of years. There has been quite a bit of speculation on what this is going to do to further decrease home values but when you look at the % numbers of where the majority of these types of loans exist… it’s primarily in Southern California. According to the pie chart below… only 3% of these types of loans exist in Nevada.

3% of Option Arm Loans are in Nevada

However… you certainly need to respect the fact that the Las Vegas economy is certainly dependent on the Southern California economy. So the big question is… what effect will this have on the Southern California market? From what I hear.. they have a shortage of homes priced right also.

Something else very interesting that popped up in the Dr. Housing Bubble blog post:

And for those looking at the Case-Shiller or other data showing a minor move up in price, remember that prices are still dropping but the way the data is calculated, it does show minor moves up because of the shift in market sales.  Lower priced homes, that subprime and foreclosure wave, made up a bulk of sales for the past year.  Now, we are seeing more expensive homes sell but for cheaper prices thus the mix is moving up.

Keep that in mind when you see marketing reports released by the Greater Las Vegas Association of Realtors®. I primarily specialize in areas of Las Vegas where the average prices are over $200,000 and there has certainly been an increase in sales activity from what I see… which raises the median home prices of all sales.

So.. Do the Spooky Predictions Really Matter for Las Vegas Real Estate?

Very tough to say. Las Vegas real estate prices have already been decimated in value and all of the current programs in place (that have to eventually end) are benefitting (artificially propping up values) other areas of the United States… for right now. Our prices are already decimated and throw in the low tax environment (while other states/cities are raising taxes), and I see no shortage in the interest of people wanting to relocate to Las Vegas.

Case in point… the newest offer I wrote for a Lady who just sold her $460,000 condo with a $600 a month association fee in Hawaii to buy something three times the size in Las Vegas for $340,000. Oh.. it’s also 15 years newer and the association fee is $520 cheaper a month. She’s one of the lucky ones that gets to travel all of the time and the convenience of all the flights coming in and out of Las Vegas is certainly more convenient for her to set up home base in Las Vegas. (From what I remember… the buyers of her Condo are taking advantage of the $8,000 tax credit. See a relationship here?)

The big unknown is what happens if and when all of the subsidies disappear? $8,000 first time homebuyer tax credit expiring, extending, expanding… whatever. Primarily a so called need fueled by special interest groups and since over 70% of all transactions for Las Vegas have been bank owned properties Year to Date… you have to wonder who is really benefitting. (I don’t think all of these cash buyers for Las Vegas Bank Owned Homes need or are buying because of the $8,000 tax credit.)

Would if the Bank Owned Homes Magically Re-Appear for Sale in Las Vegas?

Not so Scary after all

Just ask all of the Las Vegas Real Estate agents representing buyers trying to buy one. I have not come across one Las Vegas Realtor® in the past several months complaining about the inventory surplus. If anything… I’m hearing nothing but complaints about the lack of quality inventory available.

Las Vegas real estate prices have attracted people from all over the world. Despite some of the recent negative news concerning the Las Vegas economy and predictions by some economy experts (where were you three years ago? -or – old news) concerning inventory… the reality is that if it’s priced right… there is ABSOLUTELY no shortage of interest. Key words.. priced right.

High Prices created from cheap and easy credit, increased inventory from overbuilding and a return to traditional loan products are what eventually killed Las Vegas real estate values.

It was unsustainable and Las Vegas Real estate prices were starting to drop long before the unemployment came. Just think about all of the jobs created during all of that building and that helps explain why the unemployment rate in Las Vegas is so high. You can’t have explosive growth forever… it’s never happened in the entire history of the world for any city and Las Vegas is no exception.

Wells predicts the housing market will suffer through what he calls the “W” effect with prices going up, down and back up again. The concern is what happens with the Federal Reserve and need to raise interest rates to keep inflation under control. That will keep a lot of buyers from the market, he said.

A “W” shaped Recovery (or W effect… LOL!) is certainly something to be leary of with all of the unsustainable Government subsidies in place such as the $8,000 first time homebuyers tax credit and purchasing of mortgage backed securities to artificially lower interest rates. Yes.. the Federal Reserve will need to eventually raise interest rates to take back in all of that printed / borrowed money being used to pump up the economy back  to the la-la land years but you really have to wonder who that is going to hurt the most when it does happen.

Wells said that homebuilders can’t compete with existing homes selling for $70 a square foot and that the lack of job growth will hinder that recovery going forward.

I’ll refrain from posting all of the news reports from 2004 of developers paying obscene amounts for BLM land for now. Besides that, My area of specialty is averaging over $100 a square foot which says something about carefully planned development anyways. As for Commercial real estate.. just hop on down to Town Square and see what kind of business a well planned development does. In other words… just another strip mall going down in flames is more of a casualty from lack of creativity and high development costs based on unsustainable numbers to begin with.

Federal Spendulous Funds

Nevada has actually received a very small share of the pump it up money so when it ends… it’s going to hurt the big beneficiaries such as California more. (Do they slash their spending or raise their taxes?) Las Vegas casinos did not get bailed out and they are still open so that should be a positive sign.

Confused Yet?

Making Homes Disappear is a Great Magic Trick

Good… so is everybody else who has a clue of what is currently taking place and trying to make future real estate predictions with the consideration of the magically disappearing Las Vegas bank owned homes for sale.

Regardless, The reality is that current Las Vegas home values are very affordable considering what Las Vegas has to offer and further price declines from this point are not going to BK any current buyers unless they were heading down that road anyways. (A 10% decline of today’s current median price is certainly much different then a 10% decline from the 2006 median price.)

Las Vegas real estate was certainly a much spookier concept in 2006 then it is today if you look at things the right way. I’m pretty certain that it’s much cheaper to Live in Las Vegas then Honolulu, San Francisco, Los Angeles, Chicago, Boston, New York, Washington D.C. and several other cities and at a time when you have millions of baby boomers retiring… Las Vegas is certainly in a position to capitalize if we can just forget about the la-la years and focus on a new destination.

Happy Nevada Day and Happy Halloween. Be Safe at all of the Great Halloween Parties taking place in Las Vegas.

Paul Francis, CRS
Prudential Americana Group – Realtors®
Las Vegas Real Estate – Summerlin Homes
702.592.3058