Banks Manipulate Las Vegas Housing Floor

For the last two years, banks have been trying to force real estate markets nationwide to reach a "bottom." The wave of foreclosures that began in 2008 drove inventory through the roof in many metro areas, like Las Vegas. The credit crunch made it nearly impossible for the average buyer to qualify for a loan, and real estate sales everywhere slowed to a virtual standstill. This excess of supply and lack of demand caused real estate prices to take their largest tumble since the Great Depression. Dozens of large banks and mortgage companies closed their doors and those that survived tried desperately to cut their losses. After two years, they seem to have managed to do just that.


Many analysts (myself included) view this latest manipulation of the free market economy by the banks as just the latest abuse of power in a line of misguided liberties that brought us to this financial crisis to begin with. But regardless of whether you condone or condemn the lending institutions for their actions, you can't argue that it seems to be accomplishing exactly what they hoped for...stabilizing real estate prices by manipulating inventory.


Here's how it works: In 2009, record numbers of homeowners defaulted on their mortgages, resulting in a wave of foreclosures that flooded the Las Vegas real estate market with inventory. In June of 2009, there were 2283 available (not pending or contingent) bank owned single family homes on the Las Vegas MLS. This number represented 23% of the 10,278 total SFH listings. As foreclosures continued to process, prices continued to fall. In Las Vegas the median home price fell an average of $10,000 per month, every month, for over two years. The banks felt that they had to do something to stop the bleeding and stabilize the market. So they stopped foreclosing on homes. With encouragement and incentives from the Obama administration, banks began shifting employees from their REO departments to their short sale departments. The previously elusive short sale became more and more common through the end of 2009 and into the beginning of 2010 as banks tried to keep homeowners in their properties and avoid injecting more inventory into the Las Vegas real estate market.


Their strategy worked. From June 2009, the percentage of available listings that were post-foreclosure REO properties began to fall. In January, 2010, there were just over 1000 single family REOs on the Las Vegas MLS. In February there were 1050 REOs out of a total 8001 available single family homes...a drop in market share from 23% to 13%. These 1000 homes represented only around 10 days worth of supply.


As the available inventory of bargain priced REO properties continued to shrink, demand for these properties began to outpace supply. Rick Shelton, Greater Las Vegas Association of Realtors (GLVAR) President noted recently that the average median price of a home in Las Vegas rose in April of 2010 to $142,000. Home prices were up 4.4% over March, 2010 and up .2% year over year from April of 2009. This is the first median price increase we have seen in Las Vegas since February of 2007.


So does this single the beginning of an upswing? To answer simply...absolutely not.


From December, 2009 through February, 2010 banks foreclosed on only about 900 homes per month in the Las Vegas valley. In March of this year, we started to see a dramatic change. The banks foreclosed on just over 1500 homes in March and then really turned up the heat by foreclosing on over 2300 homes in April. This huge increase in foreclosures is starting to create an increase in the number of available bank owned properties on the MLS. As of the writing of this article, we now have 1266 available SFH REOs. This represents 16% of all the available (7996) listings. Because banks are beginning, once again, to push foreclosure, there will naturally be more inventory moving into the Las Vegas real estate market. The banks have achieved their goal of shrinking inventory, and now the goal is to match the number of sales with the number of homes being foreclosed upon. I believe the banks will keep the number of foreclosures per month around the 3000 mark, as the numbers of sales have averaged around 3000 per month rather consistently. The goal is to keep inventory low and consistent. Any raise in inventory would cause prices to go down again, creating more dramatic losses for the banks. I don't believe they will allow this to happen.


The result of all this market manipulation is a matter of ongoing debate. Many experts believe that had the banks and the government simply allowed the market to naturally run its course, that the decline may have been steeper, but that the recovery would be quicker. Regardless of your opinion, one thing seems clear. With continuing low inventory, prices below historic trend levels, prices below builders' replacement costs, and investment properties that cash flow...this is a great time to buy real estate in Las Vegas.


If you are interested in learning more about investing in the Las Vegas real estate market, please contact me: Glenn Plantone, 702-769-9872, gsplantone@gmail.com.

AOL Provides Great Resource for Las Vegas Foreclosures, Short Sales and Real Estate Trends

As many of you know, I use a lot of different tools to help me stay up to date on the latest trends and reports regarding Las Vegas foreclosures, short sales and general real estate trends. One of my favorites has always been the Google Alerts system. By simply going to your Google account page and entering your desired search terms, you will be automatically sent once a day, a list of the top five articles and blog posts relating directly to your search criteria. I, for example, have a Google Alert set up for "Las Vegas foreclosures." This alert constantly sends me the latest information on Las Vegas foreclosure trends, and helps me to better understand the Las Vegas real estate market, thereby being able to offer the best possible, most informed advice to my investor clients.

Another useful tool that I/we use is the AOL local real estate pages. These pages do a great job of consolidating lots of timely key information on local real estate markets, in one easy to access format. For example, if you go to http://realestate.aol.com/Las_Vegas-NV-real-estate you will find a wide variety of statistics such as: total inventory of Las Vegas homes for sale broken down by new builds, existing homes and foreclosures; percentage of Las Vegas properties that are owned, rented or vacant; median values of homes in Las Vegas and average monthly rent. You can also find graphs that compare average estimated value of Las Vegas homes to values from one month ago, one year ago, or any user defined time table. You can do the same thing for average sales price, total number of sales, household size and several other factors.

Whether you are an investor looking to research a potential purchase in the Las Vegas valley or a Realtor trying to develop your own niche, this is a valuable website for increasing your knowledge and expertise on the Las Vegas housing market. For more information on investing in Las Vegas, please visit my blog: www.vegasforeclosures.blogspot.com

Glenn Plantone
(702) 769-9872
gsplantone@gmail.com

Regent Short Sales

I'd like to take a few minutes in this article, and discuss what is happening in the Las Vegas real estate market in general and with units at the Regent in North Las Vegas specifically. I’d also like to briefly discuss some of the options that are available to any current owners or investors in the Regent Las Vegas.


We all know that the last few years have been very difficult for all of us who own real estate in Las Vegas. The market has fallen as much at 80% in some areas of the Las Vegas valley. Here at the Regent, prices have dropped to around 27 cents on the dollar from original pricing and as low as 19 cents on the dollar from the highs of 2007.


I have been involved with the Regent since 2003 and have seen both the highs and the lows. My wife and I own three units here, I was on the board from 2007-2010, and served as its president for most of 2009. I have been on site since 2007 and currently work in the Re/max office in the front of the complex. As a licensed real estate agent and an investor myself, my clients are primarily other real estate investors. Last year I sold over 30 of the 67 units that closed here at the Regent…so nearly half of all the sales in the entire development. I am well versed in understanding the complex as a whole.


Over the last year we have seen rental rates drop about $200 per unit. This is having an effect on the quality of the tenants, the vacancy rates, and, of course, the bottom line cash flow on Regent investment units.


The news is not all bad as this northwest area of Las Vegas is continuing to develop nicely. A new Lowes home improvement store and Walgreens are due to open within a couple of months, a new bus station opened at the end of March and the Community College of Southern Nevada has announced they will be building a campus about 1/4 mile north of the Regent.


In 2009, foreclosure properties dominated the Las Vegas real estate market, and the Regent was no exception. 75% of all sales in Las Vegas in 2009 were foreclosures, and the percentage was even higher here in our complex. 67 units changed hands at the Regent in 2009, and almost all of them were foreclosures. With 274 total residential units in the complex, this means that 1 in 4 property owners lost their unit to foreclosure last year alone. Of the 22 one bedroom units sold through foreclosure, the lowest price was $29,900. There were 36 two bedroom units sold, and the lowest was at $44,000 (2 of them). Of the 9 three bedroom units sold last year the lowest priced unit was $55,000.


I believe that foreclosures will slow down this year, but only because of a dramatic increase in short sales. This is a trend that is occurring throughout the Las Vegas valley. Because of the government’s push to get short sales approved and accepted, they have picked up dramatically in the Las Vegas market. Last year short sales amounted to 8% of all sales while REOs accounted for about 75%. Already this year, short sales have risen to 25% of all sales while REOs have dropped to 50%. At this rate, I project that we will see a total switch of REOs and short sales by the end of the year.


As of this writing, there are only two bank owned REO foreclosures listed for sale in the entire project, but there are a total of 21 units listed for short sale. Of these 21 units, only two are actually available… the other 19 are already under contract in a pending or contingent status.


There is a huge advantage to having your unit go through a short sale vs. a foreclosure. Credit experts tell me that a foreclosure will generate a 200 point hit to your credit report as opposed to an average of near 50 points with a short sale. Also, if you work with a seasoned Realtor and they are able to successfully negotiate a short sale that eliminates a deficiency judgment, you do not have to worry about the bank coming after you for the difference between what you owe and what the property fetches at the foreclosure auction.


Most analysts feel that we are in for a long ride before property values are anywhere close to the levels of 2007. At the April meeting of the Real Estate Insiders Club here in Las Vegas, Mary Riddel, Associate Professor of Economics at UNLV, made it clear that she believes we are in for about 8-12 years before we see any substantial appreciation in real estate values in the Las Vegas Market.


So what are your options at this time?


Keep in mind that I am not an Attorney, CPA, or Investment Advisor and I do suggest that you seek legal, professional counsel before deciding how to proceed. My goal here is to give you some general outlines and to summarize your present options.


Hang On: If you can, this will preserve your credit. In considering this option though, you need to determine if you can afford negative cash flow from your unit over the next 10 years or longer until values rise to more than the amount that you owe and/or cash flow becomes greater than your costs of ownership.


Foreclosure: Most likely your worst option of the bunch. If you stop making payments on your unit, the bank will eventually auction off the property and take it away. This will hurt your credit tremendously and stay on your credit report for up to 7 years. You will also be vulnerable to a deficiency judgment.


Deed in Lieu of Foreclosure: Just turn the keys into the bank and be done with it. This will immediately release you from most of your personal indebtedness associated with the defaulted loan, however you will still be vulnerable to a deficiency judgment. A deed in lieu will hurt your credit a little less than an actual foreclosure but far more than a short sale.


Short Sale: More and more property owners are now looking at this option. With an experienced Realtor, you have a good chance of being able to successfully navigate the short sale process and sell your property to the new investors now coming in. However, if you inadvertently hire an inexperienced representative, you may very well find your unit foreclosed upon before you are able to get a short sale approved by the bank and sold to a buyer.


If you are considering short selling your Regent unit, I would love to discuss your options with you. I specialize in both the Regent and short sales. I am currently successfully negotiating 5-7 short sales per month and we are seeing bank approvals coming in at a much faster clip in the last few months.


Please feel free to contact me should you have any questions at all about the market, and/or the process for properly handling your unit.


Glenn Plantone

(702) 769-9872 or gsplantone@gmail.com