Las Vegas Retains One Negative Housing Title

Las Vegas reigned as the foreclosure capital of the nation for four years in a row after the real estate bubble burst in 2007, but that title no longer belongs to the desert town.  Las Vegas was able to shake the dubious moniker of “Foreclosure Capital USA”, but it still retains an equally troubling title: “Underwater Epicenter.”  At the close of 2012, Zillow released a survey showing that 59% of Las Vegas homeowners are still upside down in their mortgages.  This number is enough to place Las Vegas firmly ahead of runner-up Atlanta, which reports just under 48% of its homes underwater as of the end of last year.

Dismal as this statistic is for Las Vegas, it is a vast improvement from one year ago.  In fact, underwater homes in Las Vegas are actually down 70% from 2011.  This improvement is projected to continue through 2013, but at a much slower pace.  And, regardless of next year’s gains, analysts project that Las Vegas will retain the title of “Underwater Epicenter” for the foreseeable future.

Nationally, just under 28% of homeowners report that they owe more than their home is worth.  This is down from 31% at the close of 2011.  Zillow attributed much of this gain to the 5.9% average increase in U.S. home values last year.  Las Vegas’ rise in median home value far outpaced the national average last year, coming in at 14%.

Wet N' Wild Returns to Las Vegas

After an absence of several years, Wet N’ Wild is now returning to Las Vegas.  Unlike the original water park, which was located on the north end of the Strip, the new location is on the south side of the city by the 215 beltway and Fort Apache.  The largest water park in Nevada will feature 25 attractions including water slides, tube rides, a wave pool, a lazy river, and a children’s area.  

Although the scorching summers would appear to make Las Vegas the perfect location for a water park, the city has not had a full-scale public water attraction since the first Wet N’ Wild closed its door in 2004 after 20 years in business.  The delay in developing a new park to take its place appears to lie mainly with the difficulty in obtaining water rights in the Las Vegas valley.  In the harsh Las Vegas desert, water rights are one of the most coveted, and expensive, commodities.

Ultimately, a joint venture featuring funding from notable sources like Andre Agassi and Steffi Graf, Dr. Steven and Karen Thomas of the Thomas and Mack family, and Australian entertainment conglomerate Village Roadshow Ltd. were able to raise the more than $50 million needed to develop the park.  The Howard Hughes Corporation will provide the lease for the land on which the park is strategically placed.

We certainly view this new major development as another sign that business as usual is returning to normal in  the Las Vegas area.  Las Vegas has historically boasted a high growth rate because of its diverse employment opportunities generated by the ever-increasing numbers of tourists visiting the town each year.  Rental housing continues to be a great investment in Las Vegas with historically high cash flow spreads.

Wet N’ Wild is scheduled to open Memorial Weekend 2013.

Helping the Housing Recovery in Three Steps - Part Three

Today I present part three in my colleague Tamara Lemmon's series on helping the Housing Recovery as published first on foreclosure.com:

"The final step needed to insure financial recovery for the real estate markets is the reduction of the national debt. In the real estate markets, as in life, the forest must not be neglected on behalf of the trees. While a compelling argument can be made drawing connections between the increase in the national debt, and the overall decline of the economy on many levels, it is particularly interesting to note the direct correlation between the rising national debt and the availability of capital within the housing sector. As the national debt has grown exponentially (in the literal sense) over the last several years, several other key economic indicators have plummeted. Indicators such as employment, productivity of debt in the U.S. economy, institutional money funds, and real estate loans at commercial banks have declined sharply. In fact, real estate loan creation is negative for the first time since the Great Depression.

In order for the housing market to recover, the general economy must lead the way and money must flow again into real estate loans. This will only be accomplished, when institutional lenders return to a bullish view of the U.S. economy, and regard the United States government as a secure borrower. To accomplish this, the president as well as Congress, must work together to lower the national debt and balance the budget. Many experts believe that we have crossed the line of debt saturation within our economy. Debt saturation occurs within the macro-economy when total income can no longer support total debt. At this point, every dollar borrowed actually subtracts from the GDP instead of adding to it. According to many economists, we have reached such a

stage. Lowering our national debt, increasing GDP, and balancing the budget is the most important stimulus package the United States government can provide to the struggling housing market. These steps will help to lower unemployment, resulting in higher household incomes, and increased ability to pay existing mortgages or qualify for new ones. These are all factors that will undoubtedly lead to a reduction in foreclosures, and a boost for the real estate market.

Abraham Lincoln made famous the quote, ““You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time”. Leading a country requires making difficult decisions, decisions that aren’t always popular. Allowing foreclosures to proceed, results in heartache for the families losing their homes. Incentivizing banks is likely to be received critically versus incentivizing individuals. And, reducing the national debt may require sacrifices in government spending and programs that impact many deserving Americans. In the final assessment, however, policies should be judged based on what they accomplish. Strong economic policies such as reducing the debt, providing incentives to lenders to write new home loans, and allowing foreclosures to reset the housing market will bring the change needed to lift the U.S. housing market out of its slide and prevent the recession from dragging on."

Helping the Housing Recovery in Three Steps - Part Two

Today I present part two in my colleague Tamara Lemmon's series on helping the Housing Recovery as published first on foreclosure.com:

"The second point of progress needed for recovery involves an influx of available capital. If the result of a moratorium on foreclosures is to stimulate the traditional real estate market by stabilizing prices, then we would expect to see new home buyers entering the market. What is occurring, in fact, is exactly the opposite. 80% of all property closings in Las Vegas this year were sold to investors, with 60% being cash deals. A better solution for stimulating property sales would involve providing incentives to lending institutions who agree to allocate a certain mandatory amount of cash to home loans.

This should not be confused with a suggestion to incentivize new homebuyers. Many government incentive programs initiated since the real estate bubble burst have focused on providing down payment assistance, and other subsidies, to potential new homeowners. This seems counter-intuitive to protecting the housing market against another decline. One of the factors contributing to the housing market collapse in 2007 was the large number of zero down payment loans granted to individuals with questionable credit worthiness. Providing down payment assistance to potential home buyers, who could not otherwise provide their own down payment, could effectively short circuit this important qualification measure that ensures the stability of those entering into mortgage contracts.

Instead, it would be helpful to provide incentives to banks who are willing to loan money to potential home buyers with reasonable credit. Basic laws of supply and demand dictate that an increase in demand will raise prices in any market. An artificial lack of demand in the housing market has been created by the inability of the majority of potential homebuyers to obtain a home loan. According to a survey released by the Federal Reserve, 43 out of 52 banks surveyed said they were less likely to provide a mortgage to a borrower with 620 credit score and 10% down then they were in 2006. Even when the borrower’s score was raised to 680, again with a 10% down payment, 36 banks were still less likely to make the loan. This credit crunch has hampered the housing recovery significantly, as many worthy, potential home buyers have been turned into renters by the lack of available funding. The Wall Street Journal noted that, “The tighter underwriting standards have helped to limit any price or transaction recovery in the housing market.” Rather than directing government stimulus money towards incentivizing lending institutions to negotiate loan modifications and short sales, the incentive money would be better spent encouraging banks to write new loans, thereby increasing demand, leading to sustainably higher home prices.

An interesting side note to this discussion is the fact that, as the availability of mortgage debt for the typical American has declined, the demand and ready supply of consumer debt has increased. The same survey of senior loan officers showed that as banks were tightening standards for mortgages they were loosening lending requirements for credit cards and other consumer loans. Since mortgage debt is one of the few debt items that can be considered a long term positive for borrowers, and the use of consumer debt is always negative for the individual, the increase in consumer debt at the expense of mortgage credit cannot be seen as a positive indicator for the health of the economy."

Helping the Housing Recovery in Three Steps - Part One

My colleague Tamara Lemmon recently brought to my attention a piece she wrote for foreclosure.com outlining what must be done to accelerate the housing recovery.  She has allowed me to share the article with you here on my blog:

"Warren Buffet, in his annual letter to shareholders of Berkshire Hathaway, said, “Last year, I told you that ‘a housing recovery will probably begin within a year or so.’ I was dead wrong.” While Buffet remains bullish on a housing recovery near term, he acknowledges that how long that recovery is in the making will depend on a variety of diverse factors. It is the responsibility of any president or political leader seeking or holding office to help stimulate the recovery of the housing market and to lead the United States out of the current recession. Although this process is complex and dynamic, there are three key steps that can help steer the macro-economy as well as the housing sector in the right direction: a decrease in the amount of red tape currently stifling foreclosure proceedings, incentives to lenders for making home loans, and a decrease in the national debt via a balanced budget.

After the real estate bubble burst at the end of 2007, the United States housing market endured foreclosure rates that quadrupled from their baseline in 2005 to the peak of the housing collapse in mid-2009. Since 2009, foreclosures have steadily declined nationally, and have broken off sharply in certain regions due to the influence of outside forces. Las Vegas is an excellent local market to consider as an example. Las Vegas retained the dubious title of “foreclosure capital of the U.S.” for five straight years from 2007-2011. In late 2011, foreclosures suddenly and dramatically ground nearly to a halt. In August of 2011, there were 4,063 notices of default issued in Clark County, NV. In October 2011, just 2 months later, there were only 43, a decrease of almost 99%! Most experts believe that this drop was due to the passage of Nevada Assembly Bill 284 which placed extensive new regulations into effect for any banks seeking to process foreclosures in the state of Nevada.

It is incumbent upon any leader seeking office, to determine if the decline in foreclosures that has resulted from these and similar measures nation wide, is helping the housing recovery and the economy at large or hurting them. Again, Las Vegas can be used as a test market. The median home price in Las Vegas has risen steadily for the past nine months, for a gain of as much as 30% in some submarkets of the valley. On the surface, this would seem to be nothing but good news for beleaguered Las Vegas homeowners. The problem is, even with all of this upward movement in price, 70% of Las Vegas homeowners are still upside down on their mortgage, with 36% owing more than double what their home is worth. In other words, the upward pressure being exerted on the median home price in Las Vegas is due to the artificial lack of inventory created by the abrupt halt in foreclosures. The majority of homeowners still cannot sell their home for what is owed, so those homes are essentially “frozen” within the market. They cannot be resold or refinanced. This drives the prices of the relatively few homes that are available to unreasonable levels, and sets the stage for a potential second real estate bubble in cities like Las Vegas. Nathan Martin, blogger for Economic Edge, puts it this way, “Each new up cycle produces more debt, recession follows, clears out the debt and allows growth to resume. But when you interrupt the debt clearing process, real growth cannot resume as incomes cannot support more debt.”

In order to prevent this, we must loosen regulations prohibiting foreclosures and allow banks around the country to re-initiate the normal foreclosure process for delinquent borrowers. This is not cruelty; it is practicality. Foreclosure stops the bleeding. Foreclosure provides a reset button for home values in hard hit communities. Once a home has been foreclosed upon, it can re-enter the market at the correct value. Eventually, if the needed foreclosures are allowed to proceed, home prices will finish correcting, inventory will “thaw”, banks can clear their books of non-performing assets freeing up capital to lend, and the real estate market can finally return to normal. Halting foreclosures not only delays this recovery, it creates a paradigm that is ripe for a second housing bubble and a second housing collapse. While it is likely that banks will find their own way around bills like AB284, and resolve issues such as those surrounding MERS, the continued submission of legislation aimed at slowing or blocking foreclosures should be viewed as counter-productive to the economy. The first step to any viable economic and housing market recovery plan must be to legislate the resumption of the normal foreclosure process in all states, free of unnecessary red tape."

If you are interested in learning more about the opportunities that are available for investors in the current Las Vegas real estate market, contact Glenn at VIP Realty.

Chinese New Year Brings Prosperity for Real Estate Investing

This Sunday, February 10th marked the beginning of the Chinese New Year. This Year of the Snake is looking to be a BIG year for real estate, as the water fire element brings prosperity to earth and metal industries like property and hotel.

The yin to last year's Dragon yang, snakes are wise, dynamic, alert to new opportunities and potential for adventure. With water on top and fire below, this year is one of positive changes, movement and progress.

At Vegas International Properties, we cater to overseas investors and have had the privilege of working with many Chinese buyers over the last three years. One of the greatest concerns of international investors is how to manage their investment properties in the U.S. We offer a full service property management division and we know what it takes to keep renters happy and landlords care free. Because we work directly with investor buyers to find and purchase their investment properties, we know what investors are looking for and we know how important property management is to the process. That’s why we keep our property management division in house. We are able to directly supervise all aspects of the management process, from rent collection to maintenance, and make sure that everything flows smoothly for our investor clients.

The Year of the Snake will be a busy travelling year for many wealthy Chinese and an auspicious time to move and relocate. If you are looking for a second home or vacation home in Las Vegas, we would love to provide you with a suite at the MGM Signature Hotel and Condos while you tour the city with one of our knowledgeable agents. We extend the same offer to our international guests who are coming to Las Vegas to search for potential real estate investments.

Contact Glenn Plantone directly at Team Plantone - VIP Realty if you are interested in learning more.