Las Vegas Real Estate Market Discussion

[Robert Adams]

I am interested to hear what everyone's thoughts are in regards to the Las Vegas real estate market for 2014. I have my own opinions that I will share later. I just want to hear others' opinions before I state mine. I just don't want to sway anyone's opinion by stating mine first. Thanks in advance for your time and participation.

[Tiger M.]

In one word-CANCELLATION.

Here comes a 2014 reality check. Cancellation or rejection of short sales that have been in escrow for months. Residential values have increased, peaked and are now starting to soften. This creates a tight spot for short sellers.This is an actual scenario with the names changed to protect the guilty. Owner of rental property lists home for sale January 2013. Market price offer of $80,000 accepted by owner January 2013. Short sale process started January 2013. Final approval pending October 2013. Loan sells to new bank November 2013. New bank revalues property at $140,000. New bank does not counter existing buyer and puts the property up for bid on hubzu.com December 2013, opening bid $108,000, reserve $140,000. No offers are received on Hubzu.com after 3 consecutive auctions. Current market value February 2014, $105,000 due to physical condition and required rehab. The original buyer has walked away and buyers using FHA cannot purchase the property because repairs cannot be completed to meet appraisal condition. Seller now being controlled by bank and unable to sell.A second scenario was listed June 2013 at $160,000. Investor put the property in escrow July 2013. Short sale in process when note sold in December 2013. New bank provided short sale approval at $180,000. Buyer cancelled. Foreclosure sale is February 14, 2014, property back on market, cash only at approved short sale price of $180,000. Current value February 2014, $165,000. Chances are it will go to foreclosure sale after the Seller has played by the banks rules. So I’m sure you see the problem from these two examples. Banks aren’t taking physical condition into consideration or adjusting to a softening market and discounting appropriately. They must not be reading the news like this article about US homes sales down 8.7%. Or the comments by the National Association of Realtor’s Economist about how home prices are growing quicker than incomes are causing buyers to hold off on purchases,See Here.

A quick look into MLS activity today has 55 properties "back on" the market(meaning the previous contract failed to close) and an additional 17 revisions to financing. Many of these are short sale approved and/or no longer accept FHA and VA loans. The above scenarios are becoming a trend. Adding additional pressure on owner occupant buyers are the new limits FHA put into effect lowering the maximum loan amount in Las Vegas by 31%. Story here. That is downward pressure on even the new home builders. Speaking of builders, if we watch their moves, it shows what will happen in the resale market like a crystal ball. Currently we are getting offers from builders at 4-5% commissions instead of 3%. In addition, they are offering buyers many incentives like zero cost loans (about a 3% concession), $14,999 down payment assistance, link here and upgrade packages. Feels like 2006 all over again. Effective incentives/discounts are 10-15%. That is the same as a price reduction but papered over to help hold higher appraisals in the subdivisions.Our investors for new homes closed up the last purchases in 2012. Rented for 12 months and then resold. We did several in the same Providence master plan area. 6 months ago the sales were averaging $245,000. The last property, pictured above, is going on the market now and the price has dropped about 10%.

Just like every market, there are deals to be found. The process can be long and drawn out though. As prices continue to soften, there will be better conditions for buyers and more sellers will wish they had been able to dispose of the property in 2013.

There was an auction held recently where the Seller walked away with a loss over $3 Million amerikana dollars on 3 high end properties. He was cutting his loss after buying in 2010 when the market had already collapsed and he got discounted buys. Now there is a guy that is taking serious steps to exit a market.

There was a story from Realtytrac on the state of flipping homes that may interest some of you, Here. Most Tradewind clients that flipped waited approximately one year, putting a tenant in the property for one term and then selling like the new home pictured above. That is not a flip technically and it moved them from high rate dealer income tax status to capital gains.

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