New Construction May Provide Insight for the Future of Las Vegas Real Estate

 

 

Many of my articles in the past months have been devoted to discussing the abnormal and unpredictable market conditions prevailing in Las Vegas real estate today. From the collapse of the real estate bubble in 2007, to the passage of AB284 in 2012, real estate in Las Vegas has been anything but a smooth ride.  Recently, experts have wondered whether the sharp gains in median home price over the past year will hold, will continue, or will be lost.  There are several uncertain factors overshadowing these possibilities and these factors have made predicting the near term moves of the Las Vegas real estate market an even more difficult task than normal.

One indicator that might be fairly solid, however, is the data surrounding new construction.  New construction ground to a virtual halt after the real estate bubble burst in Las Vegas in 2007-2008.

Shortly thereafter, a huge glut of foreclosures flooded the market driving home prices down well below builders’ replacement costs.  This made it impossible for builders to turn a profit on new construction.  In 2012, foreclosures ground to a halt of their own with the passage of AB284, and home builders scrambled to pull permits to help fill the demand for homes to buy.  Currently, banks have resumed foreclosing in Las Vegas, but are still only filing less than half the NODs they were before AB284 passed.  Several possible amendments to AB284 is in the works and it is uncertain how those amendments might affect inventory and pricing.

One potential key indicator in all of this confusion can be found in the sales data from new construction.  The number of new construction units sold is on pace to be up for the third straight year and demand continues to be very strong.  What is interesting to note, however, is that builders are largely not replacing the inventory that they are selling.  According to the Las Vegas Review Journal, “Fifteen percent of the market’s 131 subdivisions have fewer than 100 lots left, and another 44 percent have fewer than 50. Sure, builders are buying raw land, but those parcels are a year or more away from construction.”  This means that if changes are not forthcoming to AB284 allowing more foreclosures to fill the gap in demand, prices could escalate even more dramatically in the next couple of years.  As I’ve outlined before, this isn’t necessarily good news.

If you are considering buying or selling in this volatile Las Vegas housing market, contact me for unbiased advice or visit my website to learn more: www.teamplantone.com

Real Recovery for Las Vegas Real Estate?

 

 

The sales numbers for Las Vegas real estate have been extremely promising over the last year and a half.  But does this mean that a real recovery is underway?  It might be too soon to tell.  One thing we can be sure of, however, is that Las Vegas, previously known as the foreclosure capital of the nation, has now become one of the hottest housing markets in the U.S.

As I discussed with my co-host Brad Henderson on the Las Vegas Real Estate Realty Hour show of February 9th, Las Vegas real estate appreciated between 15% and 24% last year alone.  This leads all other major metropolitan markets other than Phoenix.  

My personal experience in the Las Vegas marketplace bears out this trend.  Two years ago, it was relatively easy for me to find investment properties for my clients at $50/sq. ft. or even less.  Now it is difficult to find properties listed under $100/sq. ft.  This recovery seems to be extending to new construction as well.  New construction ground almost to a halt in the Las Vegas valley for over four years after the real estate bubble burst, but now new builds are back in full swing and selling at a brisk pace.

If you are looking for timely updates on the Las Vegas real estate market along with different viewpoints from fascinating guest speakers, tune into my weekly radio show or visit teamplantone.com to listen to all the back episodes.

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.

Prices Continue to Rise in Las Vegas as Foreclosure Freeze Drags On

For several years, Las Vegas made headlines nationwide as the foreclosure capital of the United States.  Now the big news coming out of Las Vegas is the complete lack of foreclosures.  In September of 2012 less than 300 homes were foreclosed upon in the Las Vegas valley.  There are only 375 foreclosures listed for sale on the MLS as of November 15, 2012.  There are 876 short sales listed.  A year ago today, there were approximately 12,000 short sales listed on the MLS!  Great news for homeowners right?  Not really.

At the moment, real estate in Las Vegas is very clearly divided into two groups.  In group #1 are the few foreclosures that are available, short sales, new construction, and certain other properties that can be priced, for one reason or another, at current market value.  These properties are selling...and selling quickly.  United Press recently quoted real estate agent Keith Lynam who said that the problem in Las Vegas is, "There is just zero inventory."  But why?

The answer to this question lies in group #2.  Group #2 is composed of all the homes in Las Vegas that are still “under water.”  With all of the talk of a recovery in the Las Vegas real estate market, it is interesting to note that according to the Las Vegas Sun, 70% of Las Vegas homeowners are still underwater.  In fact, 36% owe more than double what their homes are worth.  These are homes that cannot be sold.  But, because the median sale price of homes in the Las Vegas area has risen almost 20% in the last year, many of these homeowners are holding on...hoping that this small recovery will blossom into a return to the prices of 2007.  Unfortunately, this is extremely unlikely.

During the real estate boom in Las Vegas in the early 2000’s, prices soared to highs well above the steady 3-4% annual growth that real estate typically generates.  As far as prices have fallen since then, surveys show that they’ve really only just about returned to the trend line.  Prices aren’t supposed to be any higher than they are right now.  This point is illustrated by the return of new construction to the Las Vegas housing market.  For several years, new housing starts were virtually non-existent in Las Vegas because foreclosures were selling for less than their replacement value...that is, less than what it would cost to build the same house from scratch.  As prices have risen, new home starts have rebounded because it is now possible for home builders to compete with foreclosures.

The combination of these factors have created a very odd dichotomy in the Las Vegas real estate market.  We have homeowners that are months (or even years) behind in payments but are not being foreclosed upon because of the halt in foreclosures brought on by AB 284 and other factors.  We have homeowners who are buried in debt holding out a desperate hope that the market will once again soar and their homes will no longer be upside down.  We have new homes being built and sold to fill the vacuum of demand created by the fact that 70% of potential Las Vegas real estate is essentially frozen.   It is an interesting paralysis.  

In the midst of this mess, Las Vegas remains very attractive as an investment destination.  For those investors who can secure affordable properties in Las Vegas, these properties are generating great returns and very strong cash flow.  If you are interested in purchasing Las Vegas investment real estate, contact me.  There are ways to beat the crowd using non-traditional buying methods and we specialize in those methods.

Glenn Plantone Featured Again in CNN Money

Once again, Glenn Plantone has been featured as an expert commentator in a recent article from CNN Money. This piece by Les Christie was featured in CNN Money on Nov. 11, 2011 and is titled "Is Las Vegas' Housing Market Ready to Make a Comeback?" Excerpts from the article follow:

"NEW YORK (CNNMoney) -- Las Vegas has suffered through the housing bust like few other places and still has further to fall. But these days many real estate investors and home buyers are betting that it's poised to stage a comeback.

Sin City's metro area led the nation in mortgage defaults for 22 straight months through August and home prices plunged a whopping 60% from their 2006 peak, according to RealtyTrac. And prices still have further to fall. Financial analytics company, Fiserv, projects home prices in Las Vegas could fall another 16% by next June.

But to investors and home builders, there are enough positive signs to start betting on Vegas now.

Home sales, especially of bank repossessions, have picked up signi cantly. Nearly 36,000 homes have been sold so far this year through September 30, an 11% increase compared with the same period in 2010, according to Lawrence Yun, chief economist for the National Association of Realtors.

Glenn Plantone, a Vegas-based broker and investor who deals mostly in foreclosed properties these days, said he's seen an infl ux of foreign buyers, especially from Canada and China. Last year, he brokered 25 sales but this year he's already up to 65.

"I'll triple my business this year," he said.

According to CoreLogic data, 63.3% of homeowners there are underwater on their mortgages. As a group, Las Vegas mortgage borrowers owe about 20% more on their mortgages than the value of their homes. Many will lose their homes to foreclosure.

But for all of those who lose their homes, there are others who see it as an opportunity. More than 50% of all sales in town are foreclosures, said Plantone.

Recently, he had a client who made bids on 40 diff erent bank-owned properties. He was outbid each time. The investor wound up buying four new 1,400 square-foot homes in North Las Vegas for $140,000 each instead. He rents them out for $1,495 a month apiece, which give him immediate returns on his investment.

Once the housing market recovers he could sell the properties for a healthy return, too. It's hard to beat those kinds of odds."