Las Vegas Homes, Condos, Land and Commercial Real Estate Blog

AB_284 is blamed for the tight inventory in Las Vegas real estate market. Even though it has had a big effect on Las Vegas housing market, it did not affect Arizona, and Phoenix is experiencing the same inventory shortage and prices have gone up more than Las Vegas.

I truly believe that it is the policy of United States Federal government, executed by Fannie Mae, Freddie Mac and HUD to keep inventory low and raise home prices in order to revive the biggest industry in US which is construction business and it is working like a charm.
The bill to modify AB-284 or (AB-666 the devil’s bill) according to one Las Vegas Realtor was finally introduced to Nevada Legislation on March, 15^th.

Nevada AB-300 was introduced to Nevada Legislation on March, 15th. This bill modifies AB-284 which is blamed for lack of inventory of Las Vegas homes and condos for sale by making it easier for banks to foreclose on distressed properties. You can read it for yourself.
This is very significant; however I could not find any articles about it. So you are the first to read it, and that is because I had nothing better to do at 9:25pm on a Saturday night. I need to get me a life, really.

I wrote about it immediately in my Las Vegas real estate Facebook page

Although I am not an attorney I have read a lot of bills however I could not make any sense of the following bill, best of luck to you.

Nevada AB-300

Title: AN ACT relating to real property; revising provisions governing the affidavit of authority to exercise the power of sale under a deed of trust which must be included with a notice of default and election to sell; and providing other matters properly relating thereto.
Introduction Date: Friday, March 15, 2013

Summary: Revises provisions governing real property. (BDR 9-961)

Fiscal Notes: Effect on Local Government: No.
Effect on the State: No.

Digest: Existing law requires a notice of default and election to sell real property subject to a deed of trust to include an affidavit based on the personal knowledge of the affiant setting forth certain information concerning the deed of trust, the amounts due, the possession of the note secured by the deed of trust and the authority to foreclose.

(NRS 107.080) This bill provides that certain information provided in the affidavit may be based on:

(1) the information obtained by the affiant’s review of the business records of the beneficiary of the deed of trust; and

(2) the information contained in the records of the recorder of the county in which the property is located or the title guaranty or title insurance issued by a title insurer or title agent authorized to do business in this State.

This bill also revises the information required to be stated in the affidavit.

Primary Sponsor(s): Assemblyman Jason Frierson. Source: Nevada Assembly

This bill will be discussed in Assembly Judiciary Committee early next week and we will know more by then.

Even though it is widely believed that changes to AB-284 will increase Las Vegas foreclosures greatly, I do not think so. Instead I believe that increasing notices of default (that scares no one) and consequently notices of Trustee Sale (that scares the Jesus) out of the borrower will result in delinquent borrowers who have been living in their home or condo mortgage free (in some cases totally free) for average of 28 months become serious about short selling their property, thus increasing inventory, and maybe, just may be slow down rocketing prices in the next few month.

Our inventory of Las Vegas residential real estate is the worst I have ever seen and it cannot last.

Lastly, investors have no more than 2-3 of years to invest in Las Vegas real estate since at that time investors will NOT be able to get positive cash flow after expenses. I will repeat what I have been writing for the past couple of years. Those who invest in Las Vegas real estate now will look like a genius in 5 years, just like investors who bought in 2010-2011.

88 offers in 7 days for Las Vegas home for sale. Feb, 2013

Las Vegas homes and condos for sale are still very inexpensive due to very deep discounts that ended in March, 2012 and low interest rates. If all homes in Las Vegas were sold to owner occupiers, we would have room for another 30%-40% in price hikes from the current market prices to make mortgage payments on a home more in line to rent paid for the same home. At that point Las Vegas real estate investors will get an estimated (negative-0%) net return on their money after expenses, just like buying a home in San Francisco. However, keep in mind that more than 50% of homes in Las Vegas are sold to real estate investors and losing these buyers will severely affect residential real estate prices.

Las Vegas homes values have greatly risen in 2012, especially in the last 6 months. However, if price hikes are calculated as a percentage, then cheaper homes have had the highest price hikes, for example homes purchased in 2011 for $70K are selling for about $110K-$120K which is 57%-71% higher than a year ago. Same has NOT happened for $200,000 homes as they are not selling for $300K or more. So cheaper homes are no longer the way to go as more expensive homes (say $200K home) have more room to appreciate than a home listed for $125K.

Another reason to buy more expensive homes ($200K or higher) is fierce competition to buy cheaper homes and below are examples.

I was going to advise making a $110,000 offer for a home with the asking price of $100,000 with estimated cash on cash return of 7.8% after property tax and HOA fee based on MLS rental comps. When I called the listing agent I was told that I can make any offer that I want but may want to save me and my client some time if my offer is not over $140K cash. This is totally crazy and awfully disheartening in the current Las Vegas real estate market as I would never ever offer $140K for this home now.

I check out all home listings below $250K in about 50% of the Las Vegas Valley and have many investors who want to buy now and in the last 2 weeks I have only e-mailed 2 listings because there is nothing priced right for our investors. While we have been and are currently needing inventory HUD is selling notes at very significant discounts to very, very rich people. Following is from an article in theStreet web-site about who is going to get homes at prices that an average investor in NOT even allowed to dream about:

“You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction.”

And more from my good friend the President of Greater Las Vegas association of Realtors Dave Tina:

“Home buyers and real estate professionals here and in other parts of the country have been complaining for months that Fannie Mae has been responding to their offers to buy a home by asking upward of $40,000 more for the home than an appraiser said it is worth. This situation generally involves short sales, which occur when a lender agrees to sell a property for less than what the borrower owes on the mortgage.

This is significant in Southern Nevada, where the housing supply is very tight and short sales now make up nearly half of all existing home sales.” Source Las Vegas RJ, 2/13/13

Today (actually a few days ago as I added to the article) I saw a listing for a foreclosure or bank owned Las Vegas home that had 88 offers in 7 days, this listing is currently under contract.

Please click the link below to see listing.

04-SFR Brochure (Medium) View

There is nothing special about this home except that it is priced a little below our current market and not 30% over it as the majority of current listings are priced at. However, the winning offer will be at least $20K over listing price. This home rents for about $1200 for an estimated cash on cash return of  9%  after HOA fee and property tax if sold at listing price and will go for at least $20,000-30,000 more which kills the heck out of cash on cash return.

In another instance a bank is pre-approving a Las Vegas short sale home at $93 per square foot while 3 out of 4 comparables with accepted offers in July and August are at $62-$67 per square foot and the highest comp is at $76 per square foot.

Given that Fannie Mae and Freddie Mac have insured and have a say in millions of all homes that have been financed and are listed as short sales, they are trying to raise prices through brute force while creating severe inventory shortage. If this is not market manipulation (highly illegal) I don’t know what the heck is and I am not a lawyer.

Given that more than 50% of homes in Las Vegas are purchased by buyers who want to invest in Las Vegas real estate, additional 20%-30% price hikes will eliminate any positive return on investment after expenses and that will result in Las  Vegas real estate investors finding other investments and that time Las Vegas residential real estate will lose more than 50% of its buyers which will be the start of wild price fluctuations that no one wants and will be bad for Las Vegas. But these highly paid, darn cowboys (bankers) are too stupid to see it. These are the same geniuses that caused the recent great recession, but they will never learn.

Las Vegas real estate market, 2013 prediction part 1

Las Vegas real estate market, 2013 prediction part 2

I have discussed the current Las Vegas real estate market and why there is such a feeding frenzy on Las Vegas homes and condos by Las Vegas real estate investors. I also stated that we have thousands of severely under water homes that have to be disposed of. How these homes are disposed of will decide the Las Vegas real estate market in 2013. The other factor is resistance to price hikes on the part of buyers who want to invest in Las Vegas real estate and there is no sign of it at this time.

News organizations are reporting that we have 70,000 homes and condos that are severely under water which have to change owners (I didn’t say get foreclosed on), let’s give it to them and say we have 70,000 homes that are good candidates for foreclosure and due to free market forces; this will force price cuts next year. What free market forces? We ain’t got any!!

Las Vegas residential real estate market in 2013 depends on how these highly distressed homes will be disposed of and at what price point.

Las Vegas real estate market is tightly controlled by 5-6 banks, Fannie Mae and Bank of America by far the biggest and then Freddie Mac, Chase, Wells Fargo and HUD homes. They control what happens to these properties. More importantly, it is these banks that decide Las Vegas short sales homes and condos pricing also, and banks are pricing pre-approved short sales at the top of the comparables or higher, including non-distressed sales that usually command 15%-20% higher prices than distressed properties. Keeping that in mind, let’s take a closer look

Of 70,000 or so highly distressed Las Vegas homes many will not make it to the retail market (retailed through being listed and sold on the Las Vegas MLS).

A significant portion of these highly distressed homes will be sold as short sales as is happening right now. Let’s pick a very low number and say only 20%-35% will be sold as short sales and I think this number will be much higher, probably 50% or more. Anyway, if 35% of 70,000 homes are sold as short sales, that leaves 45,000 homes.

Of these at least 10,000-15,000 will be sold through Las Vegas real estate note sales (which I have discussed in detail for commercial real estate) to big investors who could turn around and cut the principal for the borrower without the constraints that banks have to deal with. This is happening right now and our good Government has turned this matter over to a private company which has cut off real estate agents such as me from the process, while there is no one better to valuate these properties.

Trustee sale auction in Las Vegas is offering note sales on single family homes and condos lately, however do NOT try this on your own as it is even more complicated than buying foreclosed homes at that auction. I can help serious investors.

Banks have started renting back the home they took back from borrower through deed in lieu (borrower turn in the deed to the property to the bank in return for the bank giving home owner $3,000-$30,000 in “relocation” fee and forgiving special performance which means that the lender will forgive difference between the loan amount and net proceeds from the sale.

Let’s say 10,000 homes will be sold through note sales and that leaves us with 35,000 homes and condos that could be sold in the Trustee sale auction where the act of foreclosure takes place. At least 30% of 35,000 will be sold to the third parties ( at the moment it is 50%), who then either flip them at much higher prices or rent them so we are left with about 25,000 that will be sold back to the banks and eventually be marketed in Las Vegas MLS where they can directly affect home prices.

The future of Las Vegas home pricing depends on how quickly banks sell these homes through Las Vegas MLS and more importantly how they price them. Do you really think that banks will be listing 3000 homes in the Las Vegas MLS each month? I don’t, as doing so will lead to 15%-20% price cuts in a year and banks know it. I truly think that it will be more like 1000 homes per month and in the Las Vegas hot real estate market; this should have very little to no adverse effect on pricing. However, I see no sign of 1000 homes that are going to be listed in Las Vegas MLS.

Additionally, it is forecasted that we will not see any significant increase in Las Vegas foreclosure numbers until spring 2013. If prices are up by another 10% by that time and given asking prices, especially pricing for bank owned Las Vegas homes, it is NOT improbable, then a 10% price cut for the remainder of 2013 will get you back to where we are today. Fannie Mae foreclosures which dominate our foreclosure listings right now are priced $15,000-$30,000 higher than the crazy prices in November and December 2012. HUD homes which are priced based on FHA appraisal are up sharply and I see this repeating with the few new bank owned listings by Bank of America and Wells Fargo.

However, I have published 4 videos on Youtube which explain my system for picking the best residential investment properties that is very effective and took me 3 years to perfect. Watch and you will learn about important factors that you never even thought about

Picking the best Las Vegas investment properties part 1

Picking the best Las Vegas investment properties part 2

Picking the best Las Vegas investment properties part 3

Picking the best Las Vegas investment properties part 4

Conclusion:

In the last 3 blog posts about Las Vegas real estate market for this year I have explained in detail what I think will happen to Las Vegas real estate market, I do not have a crystal ball and all these are highly educated guesses and I may be wrong. If nothing changes we will be looking at least at 15%-20% price appreciation. If things change, I have no idea what will happen after March, 2013.

Lastly, I know that these blog posts are popular, in some conferences people I have never met or heard of come and say hello and tell me how much they appreciate these articles. Many are Las Vegas real estate agents and appraisers, yet they are not willing to click on the Facebook LIKE or Google+ for them. If you benefit from these articles, do the right thing and help me back.

Las Vegas real estate market is manipulated by outside factors to a degree that free market forces have very little influence on the current Las Vegas housing market as I have explained in the last article. Las Vegas homes for sale prices have been appreciating rapidly in the last 6 months and there is no end in sight unless one of 2 things happens.

1: We need a few thousand homes listed in the Las Vegas MLS that are priced right to stop the spiraling up prices let alone decrease prices and I see no sign that this will be done in the next 3 months and have no idea what will happen after March, 2013.

2: Las Vegas home buyers, especially investors resist higher prices and I see no sign of this in the next 3 months either. Homes that are priced at today’s market pricing go under contract within 2-3 days with many offers, usually above (sometimes way above) list price and more importantly direct sold comps.

There are 2 reasons for the feeding frenzy on Las Vegas residential real estate by investors who want to invest in Las Vegas real estate.

A: Quickly rising prices which have accelerated in the last few months. Investors who know nothing about cash flow or rent-ability factor buy Las Vegas homes, condos and town homes in hopes of further appreciation, some of these investors have paid abnormally high prices for their home and will be losers. For example in a sub-division all comparables are in $50-$60 per square foot range and then one was sold for $90 per square foot. Las Vegas MLS is full of such deals.

2: Even at current prices I am finding good homes, in great investment locations that provide the investor with estimated 7.5%-9% cash on cash return on investment after HOA fee and property tax based MLS rental comps. One can deduct 2%-3% from this number to arrive at an estimation of net cash on cash return after vacancy, repairs, insurance and other expenses. A Las Vegas real estate investor can buy a home; get 4%-6% estimated net cash on cash return on the money with the possibility of additional double digit gain in 3-5 years and many investors cannot do any better worldwide. This is the reason for the feeding frenzy and why we have had clients from 6 continents who have invested in Las Vegas real estate. At the moment I do not see this ending soon.

There is no such a thing as a median priced Las Vegas home that rents for the median rental price and has median vacancy before being rented and makes median cash on cash return on investment.

In any market condition there are good deals and bad deals. For example if good deals and bad deals had a median price, those investors who purchased a home in June and July, 2012 at 50%-60% or higher prices from 2011 prices lose, regardless of Las Vegas real estate market conditions and those who got a great deal in January-late April, 2012 or before are winners, that is that.

I had a long talk with a prospective Las Vegas real estate investor about the Las Vegas real estate market and he along with many others was trying to time the market. We are currently way past the bottom of the market but even though I was the first to tell you about our appreciating market, last year, I did not know the magnitude of price hikes for a couple months until after they happened.

However, I have written that we have thousands of severely under water homes that have to change hands unless lenders cut the principal by more than 50%. The big question is how these homes will affect the future Las Vegas real estate market.

I will discuss this in the next blog post.

It must be made abundantly clear that Las Vegas real estate market has nothing to do with free market or free market forces. Our current real estate market is artificial, man made and as such it is impossible to do a prediction on Las Vegas real estate market in 2013.

If nothing changes we may be looking at 20% or more appreciation for homes priced below $250,000 in 2013 as price appreciation for Las Vegas homes have accelerated in the third and fourth quarter of 2012. Las Vegas home prices will not stabilize until there is resistance to rising prices on the buyer’s side and there is no sign of it as of now. Las Vegas residential real estate that are priced low, or at current market prices sell for much more than asking price with many offers.

If things change, depending on how they change we may be looking at same, stabilized pricing or price cut from current levels.

Las Vegas has thousands of homes with delinquent mortgages where  home owners who have been living mortgage free in their home for more than 2 years, have no motive to short sale their severely under water homes. In a normal market threat of foreclosure would motivate these home owners to seriously market their home as Las Vegas short sales, right now Las Vegas MLS is full of no show, highly over priced short sales that are marketed just to prevent foreclosure. A good example is an agent who has put his own no-show home in Las Vegas MLS at twice the price of comparables; he knows that his home has zero chance of selling.

All I know is that something has got to give as this situation is not sustainable, but who am I to talk, even though I was the only one predicting more than 10% appreciation for 2012 ( all others said 10% depreciation) in my wildest dreams could I see today’s real estate market. But what drives today’s market is that good deals can still be found, and we are finding them. I can still find good homes in very good rental sub-divisions that offer cash on cash returns of 7.5%-9.5% or more after HOA fee and property tax based on Las Vegas rental comps with very good upside.

But these homes are hard to find and harder to get our offers accepted since we offer current market prices and lose to unreasonable offers made on other buyer’s behalf. Majority of current asking price are highly speculative ($20K higher than current market prices) and I am not comfortable with these speculative prices.

I can tell you what will happen until March, 2013 and Median prices published in news organizations will keep rising until March, 2012 as sales prices for homes that are currently going under contract will show up in the median numbers for February and March, 2013. I have explained why in previous blog post. Additionally, this December has been exceptionally competitive and that leads me to think that January and February will be worst as they always are.

What happens after March, 2013 is unclear as Nevada Legislature will meet again and what they do about AB 284 will greatly influence Las Vegas real estate market. There is no hard news about our legislature going to do anything about this matter, but I have heard rumors that they may change “lenders have personal knowledge of mortgage” to “personally review mortgage” or something like that, thereby enabling banks to foreclose without fear of committing a felony.

Notice of trustee sales which is the last step before foreclosing on a property is too low to produce more than 300-450 bank owned homes per month and this number will not be enough to stop our increasing prices let alone decrease prices as the last few months have proved.

Keeping in mind that prices for homes priced below $150,000-$200,000 have increased by 35%-40% or more (I see homes that sold for $55 per square foot in December, 2011 selling for more than $85 per square foot) this has removed many homes from under water status and good deals in 2010 or later are no longer under water. Additional price hikes will remove more homes from under water status.

But imagine that banks start foreclosing in mass, then what will happen to 70,000 or so severely under water homes in Las Vegas and how will it affect Las Vegas real estate market.

I will discuss this in a future blog post

This is the 5^th article in the Las Vegas real estate market series. What is going on in the Las Vegas housing market in May-June, 2012? Asking prices for single family homes are a going up like a rocket and this is NOT good.

Asking prices for recent listings of Las Vegas bank owned (foreclosure) homes sold by Fannie Mae during the first look period are $15,000-40,000 higher than the highest COMPS (similar home in the same common interest community or close vicinity of subject home that sold recently) which are usually non-distressed homes in excellent shape. Non-distressed Las Vegas homes usually sell for 15% more than short sales and foreclosures due to excellent shape and ease of transaction. Needless to say, other banks and short sale agents are following the Fannie Mae and Freddie Mac lead.

Before I get into the Las Vegas housing statistics, I will show you examples of 3 Las Vegas homes for sale that currently are listed in the Las Vegas MLS in order to show you what is going on in our real estate market in real time.

The first listing is a Fannie Mae foreclosure that was listed for 151,200 on 5/16/2012 and for 30 days only owner occupied buyers can make an offer on it. The highest COMP for this listing is a private non-distressed home in excellent shape that was sold for 111,500 only 3 three months ago. To my amazement it went under contract within 2 weeks and don’t let the 2 weeks fool you, the buyer had received the acceptance sooner; however it took two weeks to get the executed contract from the bank in order to open escrow.

This home will NOT appraise, however cash buyers or buyers who finance through HomePath (financed by Fannie Mae) do not need appraisals and this is how Fannie Mae gets away with their unrealistic pricing. I do not believe, or at least I hope, that this home did not get a full price offer but have no way of knowing how much it sold for until it records.

The next listing is another Fannie Mae bank owned home in the first look period.  This home had gone under contract as a short sale with the asking price of 169,000 in 2010 which failed to close. Again the highest COMP for this home is again is a non-distressed and highly upgraded home that sold about a month and a half ago for $148,000. This home is not under contract due to higher price as competition gets much stiffer as the price goes down.

The last listing is an unapproved  Las Vegas short sale with one picture that is priced at $53,500 over the highest COMP  or about 150% higher than the highest COMP which again was a non-distressed home and in excellent shape. To tell you the truth this listing makes my blood boil a bit as the poor short sale seller probably doesn’t know that he/she doesn’t have any chance of short selling his/her home and if things stay the same, this home will be foreclosed upon. The listing agent’s job is to prevent this outcome, not to guarantee it.

Sometimes my brain fails to compute, and over priced short sales is one of those instances. Given that in a short sale situation the owner/seller doesn’t have any equity in the home and the lender has to take all the losses, why would a short sale agent price his/her listing at 150% of the highest COMP and fail to take adequate pictures of the home as pictures sell home. I have NEVER had a client contact me about a listing with one or no pictures. If you don’t think that the Realtor has a big effect on selling your home, think again.

I will go over the Las Vegas housing statistics and what is on the way in the next blog post.

Despite the so called real estate experts prediction of a 10% price drop in housing prices, which is blown out of water by now, I have been telling my clients last year that if they didn’t buy they will be sorry this year, I repeat it again, if you don’t buy this year, you will be REALLY sorry next year.

Lastly those who think that Las Vegas homes, condos and townhome prices will revert back to 2011 pricing know nothing about how we calculate offer prices which is through COMPS. Right now the latest comps are much higher than those 3-6 months ago, however we do look at the older, lower priced COMPS and include them in our offer price calculations. In 6 month, ALL our comps will be at current prices.

Those Las Vegas real estate experts who based their predictions on employment numbers and the number of underwater homes have already proven wrong, and Masoud right.  Right?

Due to a very good response for my video series about picking the best Las Vegas investment homes, I will repeat the links below and highly recommend that you watch them.  If nothing else you will get a good approximate real cash on cash return on your investment and the concept of rentability factor which I have developed myself.

Picking the best Las Vegas investment properties part 1

Picking the best Las Vegas investment properties part 2

Picking the best Las Vegas investment properties part 3

Picking the best Las Vegas investment properties part 4

The one and only Masoud Saberzadeh