From all of us at The Adams Team at Rothwell Gornt Companies, HAPPY THANKSGIVING!
Interest rates have been on the climb lately, so is good to read an article like the link below about seeing rates decrease last week. The article explains why they think rates will remain low for the very near future.
READ THE ARTICLE HERE: "Yellen's Likely Confirmation Puts the Brakes on Rising Interest Rates"
"With inventory rising and the market setting itself up to soften in 2014, brand new homes are looking to take it on the chin again. If you are going to buy right now, BUY SMART!" ~ Robert Adams Broker/Salesman and Team Leader of The Adams Team at Rothwell Gornt Companies
Supply Side of the Las Vegas Real Estate Market
New homes are only being built right now because the market had an artificially low amount of homes for sale (available inventory). Over the past 2 years now you have heard people talking about their homes appreciating 30% a year! These are crazy numbers we have not heard since the bubble era. This artificial shortage was caused by AB284 which is an assembly bill that went into affect Oct 1, 2011. Prior to Oct 1, 2011 we were still in a buyer's market and we had about 14,000 homes for sale with about 5,000 REO's (foreclosures) hitting the market each month. After Oct 1, 2011 we started seeing a major decrease in foreclosures with only about 500 REO's hitting the market each month. With more regulations and potential fines hanging over the bank/lien holders' heads they opt to stop foreclosing. This changed the market and the inventory began to decrease month after month. In early 2013 we reach the 3,000 mark of available homes for sale and were in a HOT seller's market. With homes becoming so hard to find and bidding wars running up prices, new home builders began to jump in and slap up new neighborhoods again. The problem here is that they are adding to the supply side of the market because the inventory is so low, BUT the inventory is not low because of a free market with free supply and demand. It is ARTIFICIALLY low because of laws like AB284. Legislators amended AB284 by changing the "personal knowledge" clause in AB300. This should have allowed banks to start foreclosing again but at the same time they amended AB300 they amended SB321 "The Homeowner Bill of Rights". This change that went into affect Oct 1, 2013 (a
few weeks ago). This SB321 set up new hurdles for banks to jump over in order to foreclose on the property so we are not expecting foreclosures to really increase in Vegas until later in the year in 2014. However, Sept 2013 had
a spike of NOD's (Notice of Defaults which is the beginning of the foreclosure process) filed prior to the Oct 1st deadline.
SB321 also has a big change in regards to short sales. Before Oct 1st, 2013 banks would require the short
seller and buyer to sign an "Arm's Length Transaction" disclosure. This was to ensure the bank that the seller was not short selling the home to a friend or family member that was going to let them rent it back or buy it back. SB321 has now made it illegal to require an "Arm's Length Transaction" disclosure, so now people can short sell their home to a family member or friend. (the bank still has to "Approve" the short sale though). Hopefully, this helps some of the default homeowners.
Another notable statistic is that even though the REO's stopped hitting the market after AB284, it doesn't
mean that the home owners are not in default. We have over 80,000+ home owners in default that are not paying their mortgage and we have about 40,000 homes that are vacant. Eventually, these homes will hit the market one way or another. And when they do it will drastically increase the supply side of the market.
Since April of 2013 inventory has been on the rise week after week because of the decrease in demand explained below. We are now around 8,000 available homes for sale and we are on track to hit 10,000 by the end of the year. If this happens (which I am fully confident it will) we will then see the market shift from a seller's market to a buyer's market in 2014.
Demand Side of the Las Vegas Real Estate Market
Demand at that time was also VERY high due to hedge funds that moved into Vegas and started buying up
everything they could get there hands on with cash. Often times paying above appraisal value and out bidding the little investors and owner occupant buyers. Hedge funds were interested in the great CAP rates these rental properties would provide. You could easily get 12% on your money annually AFTER expenses. Now that prices have risen and these CAP rates have dropped to around 5% the hedge funds are either holding the rentals they have for long term cash flow and no longer buying new rentals or they are realizing their properties have gone up around 30+% and are cashing out their profits and adding to the supply side of the market. This has in turn caused demand to decrease and at the same time added to the supply side.
In 2014, if the market shifts to a buyer's market you will see more homes than buyers and at that time buyers will begin to low ball again. When that happens you will see desperate sellers accepting these low offers which will in turn lower home values. Since you can buy more sqft for your money in a resale right now vs a new home, when the resale values drops it will force the new home prices to drop in order to remain competitive. For example if you pay $200k for a resale, that same home brand new will be priced around $220k. If the resale values drop to $180k no one will buy the new home for $220k so the builder must drop their prices to compete. AND the buyers that bought the home for $220k can now only resell for $180k. You can already start to see the home builders
beginning to squirm as they are now offering -$15k towards down payment - Builder will pay your closing costs -Special low rates if you use their lender etc. Keep any eye out for price reductions on new home communities soon! People are not going to be very happy when their neighbor buys the same home for thousands less. It happened before when the market crashed and it will happen again. I am not saying the market is going to crash but it is going to soften.
What should I do if I want to buy NOW?
BUY SMART! This is the best advise we can give any buyers right now. I am not saying you should not buy right now. In fact, I have a SFR in escrow right now that I am buying. BUT you have to buy smart. Account for the market to soften. DO NOT be a buyer that is saying to themselves, "Prices went up 30% last year. It will go up 30% in 2014 too." Because it won't. Do not over pay for a property. If you can find a good deal under appraisal value then jump on it! But don't pay over appraisal value and then regret it next year. If you can be patient there are good deals to be had still. As you wait better deals will present themselves as the market softens. I would go after resales that do not have any offers on them and offer less than the comparables. Most people do not realize the market is softening yet so you will have to submit several offers to get one accepted below appraisal value but some listings are sitting and dropping their list price. Those are the properties you
want to go after.
Thank you for taking time to read our October 17, 2013 market update. We hope it was helpful and informative.
If you would like The Adams Team at Rothwell Gornt Companies to help navigate you through this ever changing market please fill out our Buyer's Form HERE or our Seller's Form HERE.
YOU CAN READ OTHER PEOPLE'S COMMENTS FROM WHEN THIS ARTICLE WAS POSTED ORIGINALLY HERE: http://lvrealestatehelp.weebly.com/1/post/2013/10/you-really-want-a-brand-new-home-in-las-vegasrobert-adamswouldnt-recommend-it.html
4261 Tarkin Ave Las Vegas, NV 89120 For Sale Price $169,900
For Sale By Agent/Broker
Type: Single Family House
Square Feet 1,895
Lot Size 7,405
Number of Floors: 2
Year Built 1979
2 Car Garage
Laundry In Property
4BR/2BA Single Family House - Las Vegas
***BY APPOINTMENT ONLY WITH LISTING AGENT. DO NOT SHOW WITHOUT APPOINTMENT**** NO HOA, TRADITIONAL SALE!! THE OWNER SPENT $6K ON BATHROOM REMODEL, $5K ON REPLACING WINDOWS WITH ARGON CHARGED DUAL PAIN WINDOWS. 2 STORY, 4BD W/MASTER BD AND BATH DOWNSTAIRS, 2 BATH, 2 CAR GARAGE, FIREPLACE IN THE FAMILY ROOM. RV PARKING, PATIO COVER, NEAR SCHOOLS AND SHOPPING! All appliances included.
The links below will allow you to check recent crimes around any address you plug in.
If you are thinking about purchase property in the Greater Las Vegas area, please see the following links to check crimes that have occurred recently. Type in the address of the property and it will give you a detailed view of recent crimes in the area, please see the following links to check crimes that have occurred recently.
You can see the links for he various areas of the Vegas Valley below:
The Las Vegas Metropolitan Police website covering Clark County and the City of Las Vegas, has a page where you can search crime statistics. We've included the link below. http://www.crimemapping.com/map/nv/lasvegas
For areas covered by North Las Vegas police: http://crimeview.cityofnorthlasvegas.com
For the City of Henderson: http://www.cityofhenderson.com/police/crime_search.php
If you want to see what school ratings and zonings are in those areas you can visit the Clark County School District website here: http://ccsd.net/schools/zoning/search/
If you would like The Adams Team at Rothwell Gornt Companies to assist you with buying or selling a home please visit our Buyer's Form HERE OR our Seller's Form HERE.
You need to get with a lender asap and let them collect all your financial documents and process it. From there they can tell you what your financing options are. A lot of lenders do not like to do the loans on the lower priced properties. I have lenders that will do it for us as a courtesy for the other business we bring them. If you are interested in speaking to them shoot me an email and I will reply with their contact info.
Secondly, I would not waste my time nor my agents time going out house hunting until your financing is in order. Reason being even if you do find the perfect home and deal you will not be able to submit an offer until you have a preapproval letter accompanying it. No competent listing agent will take a property off the market for an unqualified buyer. Sometimes agents will take you out to see homes if you are not preapproved as a courtesy to educate you on the market etc but you will not be ready buy if you do see something you like. Here are some tips I recommend BEFORE coming to Vegas to house hunt:
-Speak with a lender and get your financing in order. Get your preapproval letter in hand.
-Get with your agent and create an "investment strategy". This should include but, not limited to, a formula that includes a required:
1. purchase price
2. rental rates
4. figure out your minimum CAP rate needed
5. create an exit strategy, (if your buying to hold make sure there are no rental restrictions, if you are flipping make sure there are no deed restrictions)
-Once you have these 2 items in place you will be ready to begin to look for properties that fit your model.
It has been my experience that you will stick to your formula more often if you go house hunting with a plan already in place. Otherwise, people tend to create a plan after you find a home you like and people try to make the formula fit the home in order to do the deal vs making the home fit the formula.
Be patient and don't get emotional. If the deal doesn't fit your formula move on. Vegas is headed towards a buyer's market so more deals will begin to present themselves. You can read more about the market moving towards a buyer's market HERE.
If you would like our team to help you create an investment strategy and show you how to successfully execute it please visit our Buyer's page HERE. Good luck with your investments!
Rothwell Gornt Companies