Las Vegas Real Estate - Four Years Later

On the eve of this election day 2012, I thought it fitting to look back on the last four years of activity in the Las Vegas Real Estate market.  Romney fears that we are in worse shape and heading down the wrong path.  In the interest of full disclosure, I should note that I agree with him.  Obama says that his incentives are working.  I would argue that the rise in prices we have observed in the Las Vegas real estate market are a “false recovery” that has more to do with artificially low inventory brought on by a decrease in foreclosures than a strengthening of the local or national economy.

2008 marked the first year where it was safe to start dipping a toe back into the Las Vegas real estate market.  Prices careened downward for 18 straight months from Jan 2007 through late 2008 sending the average home price in Las Vegas plummeting from over $300K to around $120K.  As the free fall began to slow, I started advising my investor clients that Las Vegas was becoming the perfect location for property investors.  Over the next four years, Las Vegas consistently led the nation in foreclosures with over 100,000 foreclosures being completed in those 48 months.

What is interesting to note is what has happened in Las Vegas in the last year.  Although over 150,000 homeowners are still upside down on their mortgagees, foreclosure proceedings have ground to almost a halt.  In 2008, foreclosures accounted for 75% of all sales.  This year (2012) they account for only 15%.  Part of this is due to the difficulty banks are facing carrying out the foreclosure process in the wake of AB284, but some of it is also due to an increased willingness on the part of the banks to negotiate short sales or loan modifications rather than foreclosing.  Unfortunately, this slow down in foreclosures has caused home prices to artificially inflate in the Las Vegas valley with median prices up almost 20% just this year.

Another interesting statistic shows that even as foreclosures ease, the majority of homes are still being purchased by investors.  80% of all closings in Las Vegas this year were sales to investors and 60% were cash deals.  This graphically illustrates how difficult it is currently for homeowners to obtain financing to purchase a home.  I have personally observed this trend within my own business model.  Over the last four years, I have sold over 450 homes, more than 300 were foreclosures, over 100 were short sales, and 150 were flips.  I have also brokered two bulk deals; one a 9 home package at near $1M and the other a 15 home package at around $5M.  Of these, only about 10% were sold to owner occupied buyers.  The rest were sold to investors, and approximately 85% were cash deals.

As this election plays out, it will be interesting to see how things change in Las Vegas over the next four years.  One thing, however, is certain: the opportunities right now, at election day 2012, are tremendous for real estate investors in Las Vegas and even better for those owner occupants that can buy in this market.  Things are a little rockier for the 150,000 homeowners who are still hoping for relief from their upside down mortgages.  Only time will tell if the next president can help these folks and whether or not a full recovery is in Las Vegas’ immediate future.