Save this article
Use this article for free on your own website
Republish this article for free on your own website or blog. Or search or browse for more articles that your audience will appreciate. Huge choice available. Ideal for finding quality, free content. Read our publishers guide.
The Bottom Of The Las Vegas Housing Market Is Here
Looking at the data at hand it appears as though the bottom of the real estate market in here. Anyone looking to take advantage of homes as low as 35 cents on the dollar should be seriously looking at this time. Las Vegas has not only lead the nation in foreclosures but it may also lead the turnaround in real estate.
During most of 2007 home owners and investors in the Las Vegas market not wishing to face reality left their homes on the market but very few of them actually sold and most were unwilling to lower their listing prices. So, inventory continued to grow. From median price highs of around $300,000 at the end of 2007 the median price has been falling nearly $10,000 a month to levels of near $184,000 today.
Because of foreclosures the opportunities to buy great homes at low prices are everywhere. But Las Vegas is truly leading the pack as 1 in 76 homes in the Las Vegas market is in some stage of foreclosure. (RealtyTrac) That is more than double the amount of its nearest rival Florida at only 1 in 173 homes. Arizona, California, and Michigan round out the top 5. Of the sales in October 86% of them are foreclosures or short sales.
Analysts like Steve Bottfeld of Marketing Solutions have been very bullish on the Las Vegas housing market over the years. Bottfeld talks about his 3 legged stool theory of how to gauge the bottom of the market. First, he looks at the inventory of homes listed on the multiple listing service (MLS). Second, he looks at the volume of business or simply the number of homes being sold in the marketplace. Lastly he looks at the third leg of the stool, the average median price of the home. As Bottfeld states, once the inventory stops increasing, the volume starts upward and the price stops going down you have found the true bottom of the market. From the data that we now have available to us it appears as though that elusive bottom is right around the corner if not sitting right in front of us.
Stool Leg Number 1: Inventory Stops Increasing
Rick Shelton or ReMax and Associates and 2010 president –elect of the Greater Las Vegas Association of Realtors (GLVAR), which happens to be the 5th largest MLS in the country recently spoke at the Real Estate Insider Club of Las Vegas. Rick discussed how the inventory of homes in the MLS has been running very steadily for several months in a row in the range of around 22,000 total units available for sale. After a dramatic increase over the last year or so the inventory appears to have finally peaked. And so the first leg of the stool appears to be taking shape towards recovery.
Stool Leg Number 2: Volume of Sales Picks Up Dramatically
The sales volume or number of homes that are now selling has been increasing all year from lows of late 2007. Sales volume in November 2008 was nearly double that of November 2007. Of course it helps that home prices are in some cases only 35% of where they were from their inflated highs of late 2006. I just put an offer in on a home for one of my investor clients for $96,000. The home sold in July of 2006 for $300,000 as it is listed for only $109,000. At a full price offer of $109,000 this represents a value of only 37% off of its high value in 2006. Although you will read in the paper about a 30% drop in values I am telling you that we are, in some cases, looking at a 70% decrease in home values in Las Vegas in certain areas. With prices adjusting this low it is no wonder that the volume is starting to pick up.
Stool Leg Number 3: Median Sales Price Slows to a Crawl
After dropping nearly $10,000 a month for the last year home prices fell only about $2800 last month to a level that puts us at near $184,000 for the average median price. From this point it appears as though the bottom is in site and possibly only a couple of thousand dollars away. As the third leg of the stool takes shape the savvy investor realizes that the bottom is here or near and now is the time to start buying these low priced homes before the national media gets wind of it.
Investors that have been sitting on the sidelines are now stepping back into the market to grab up these low priced 2-year-old foreclosed homes lost by other less savvy investors and owner occupants that could not afford the homes they purchased at those inflated levels. Many of these investors are buying homes for cash and forgoing the whole credit crunch and lending fiasco entirely. These investors reentered the market as homes once again began to cash flow. Cash flow can be simply defined as the point at which the income (rent) from the property exceeds the costs of ownership (mortgage, taxes, insurance, property management, and maintenance etc)
Anyone that is looking to buy a home in Las Vegas should note that the timing may not get better than this. Interest rates are at historic lows in the 5.5% range. Even the national builders are getting into the game to compete against the foreclosures. New home manager for Richmond American Homes in Las Vegas Melissa Schmidtberger is promoting a 4.5%.5% 30-year fixed mortgage special at homes starting from $139,000. I never thought we would see national builders building at levels under $100 a square foot again but they are.
As of November 2008 over 18 builders both local and national now have prices starting at under $100 a square foot. With the government aiding first time buyers with tax credits up to $7500 and mortgages under 5% it is actually cheaper to own than to rent. It also appears as though new home prices are at the bottom as only 399 building permits for new homes were issued in October. This is the lowest level in decades.
I am actually very surprised that more owner occupants, second home buyers, vacation home buyers, and baby boomers looking to retire are not already in this market buying homes at 35 cents on the dollar. We all knew we were in a recession for the last year but it took the government a full year to realize it and report it to us. The same will be true on the bottom of this real estate market. If we wait until the news reports that the bottom of the market was a year ago we will be paying a lot more for that cheap foreclosure and we will be kicking ourselves saying, I wish I would have bought that home a year ago when it was a lot cheaper than it is now.