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StumbleReport: Investors buying up Las Vegas foreclosure homes
First-time buyers also among those purchasing local homes in October
Bloomberg News
A foreclosed home is shown in the Silverado neighborhood of Las Vegas, which leads the nation in foreclosures.
Wednesday, Dec. 2, 2009 | 10:17 a.m.
Sun Coverage
Investors made their biggest push yet to buy foreclosure homes in Las Vegas.
San Diego-based MDA DataQuick, a real estate information service, reported investors bought 41.2 percent of Las Vegas area homes in October, the highest amount for any month this decade. Buyers who used cash to purchase their homes accounted for 47.1 percent of sales, said DataQuick spokesman Andrew LePage.
In addition to investors, first-time buyers continue to make up a large segment of the market, LePage said. Government-insured FHA loans, which are popular with those buyers, accounted for 53 percent of all purchases, he said.
DataQuick reported 5,068 sales of single-family homes, condos and new homes in October. That’s a 22 percent increase over October 2008 and the highest October since October 2006 when 5,693 homes were sold.
It marked the 14th consecutive month that sales have risen on a year-over-year basis, LePage said.
What’s unusual is that October sales were up 1 percent from September because traditionally sales fall between those two months, LePage said.
The demand for homes remains strong because of the increased affordability and low mortgage rates, LePage said. In addition, some buyers moved up their purchases to take advantage of the federal tax credit for first-time buyers that was set to expire Nov. 30. It has since been extended and expanded to include more buyers.
The existing home market remained the strongest with 3,612 sales, 24 percent higher than October 2008. Buyers acquired 971 resale condos, a 92 percent increase over October 2008. That’s the highest number of October sales since 2004, LePage said.
The new home market remained weak with 485 sales, down 34 percent from 737 sales in October 2008. That’s a record low for the month since the firm began keeping statistics in 2004, LePage said.
New homes can’t compete with foreclosures on prices, he said. The median price for new homes was $204,910 in October. Resale homes, in contrast, sold for a median price of $135,000 in October, according to DataQuick.
Overall, the price of new homes and existing homes and condos was $130,000 in October, a 34 percent decline from October 2008, the firm reported. That marks the lowest price in the region since it was $129,000 in April 1999, LePage said.
The overall median sales price has fallen on a year-over-year basis for 30 consecutive months, and in October stood at 58.3 percent below the peak of $312,000 in November 2006, the firm reported.
The price per square foot for resale existing-family homes fell to $76 in October, down 27 percent from October 2008 when it was $104. The market peaked at $190 per square foot in June 2006, meaning it has declined 60 percent.
By DataQuick’s count, the number of homes and condos lost to foreclosure in October was 3,491, up 10.4 percent from September and 14 percent from October 2008. The market peaked at 3,718 foreclosures in February.
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"Investors made their biggest push yet to buy foreclosure homes in Las Vegas."
The only thing new in the world is the history you have not learned yet.
Looks like they're still being born every minute, and they still don't get an even break.
Too many homes in Vegas to support the eventual population when the economy recovers. 50% of the homes need bulldozing to reduce the oversupply. this is the only way prices will recover.
If these investors plan on renting these homes: to whom are they going to rent to? My guess the population has gone down, maybe not enough to make a dent in anything but I'm curious as to how many people actually have left Vegas.
Second - do these investors think that the market is going to go so high again that they will make nice tidy profits on these houses? Who are they going to sell to since there are so many houses to choose from, there must be a 20 year inventory of homes in Vegas.
And yes, I agree with scouser - way too many homes.
PS Also, MOST house renters don't care about the house or property. They don't realize that they have to "maintain" the property which most won't do. It's easier living in an apartment.
whoopie,an investor bought the home next door to me and its been a string of renters over the past few years,i'd luv to c an owner/occupant in there
Actually, there's only about 6-8 months of inventory on the market. Investors who are buying now are probably not the same investors who got duped by the bubble. In addition, someone who pays straight cash for a house probably isn't too concerned with whether they can't find someone to rent for a couple of months. In addition, many renters do actually care about the properties they live in, and have many different valid reasons for renting rather than owning. If care is taken in selecting a renter then many problems can be avoided. In addition, even if the prices don't go up very much, there are additional tax benefits to owning rental properties, including writing of depreciation and 1031 exchanges. Finally, what difference does it make to any of you who happens to be buying these homes? It's better to have them selling than just sitting vacant.
it would be interesting to know how many properties the reporter owns, as this article is trying to ramp a market up for no good reason..
the market won't boom anytime soon, especially as many countries in the world are still on verge of bankruptcy and many investors have lost money in Dubai, Spain, Eastern Europe, etc Vegas is overbuilt, reliant on one source of income with no real plan, people are leaving Vegas to find jobs elsewhere, either this article is from BS figures or people are incredibly stupid with money!!
Prices will still drop at least another 15-20%
I fell renter have to many rights.They rent the home for one year and do not pay rent until you have to go to Court and get them out,time and money. In the time they are in the house (rent free) and they are tearing everthing up.
One way of thinking is remodling the rental home will skyrocket, more jobs.
At least the writer is using dataquick info and not getting spin from used house salesman (realtors) or the NAR (national assoc. of realtors)or the NAR economists that can't be trusted in my opinion.
I got two homes rented. Bought them feb of this year, and August of this year. Had plenty of interest in both properties. I never purchased a home between 04-07. Way to expensive, no way to make a profit. I don't care about the appriciation because I am positive cash flowing on both properties. You couldn't positive cash flow if you bought three years ago. Now you can. House prices have gone down big time, however, rent has gone down as well, not as quick as house prices. I am happy with the results I am seeing from my properties, any appriciation is extra.
didn't an influx of investors and speculators cause the problem to begin with? Because they kept buying stuff, the home companies just kept building.
Too many investors is a problem. They are all needing to rent. With no jobs, there will be a decrease of people in LV, or people who will make use of section 9 to rent a home. In the end, bulldozing the excess homes will be good for homeowners and investors.
Too many investor means too often, too many 'slum-lords'. I personally know how these 'lords' operate; they find out if the renter is on welfare; disability, eligible for unemployment or some kind of 'regular low income', and they put the rent just low enough to get them into the home or apartment. Then they do nothing to keep the home decent; it declines in quality - they roll them in and out every 3 to 6 months (or go month to month), and the neighborhood suffers, as does the surrounding area where others might be honest and competent home-owners.
Also if 41% were able to pay CASH, then it might not be a single individual who is buying the home or condo, but a corporation who can afford to hold these properties even during a down-turn or with vacancies because they have other investments.
Everyone knows the land underneath the homes has a value; if the land is worth enough, you can even hold the properties and bull-doze it all down in the future, for a parking lot or a new business that might want to build on that property.
The fact that anyone with money to spend (or save) is not getting anything on saving it in CD's or a savings account (interest rates are less than 1% in many cases - CD's have dropped to nothing), means it would behoove them to spend that money on real estate - given land values; given write-offs to land-lords and IRS tax advantages, they might end up making a better return on their money, than plopping it into savings.
Remember, those with the big dollars have access to future planning programs - expansion programs, and knowledge of any new businesses or industry that might be planning on coming into the area - 10 years from now, but soon enough for the investor to know what their chances of making a profit will be.
Ordinary folk don't keep up on that kind of data or have that kind of money, so we only tend to think 'short-term' and not dig deep into the bowels of city and state planning.
These " investors " are probably development companies buying up everything they can get their hands on for the day that the economy recovers. This is probably a good thing to keep the squatters, and decay at a minimum. My neighborhood got ruined because of it.
"...It's better to have them selling than just sitting vacant...."
This is a page out of the Real Estate spin book. What a fool.
These "investors" are out-of-LV-area money-crunchers who don't give a rat's ash WHO can afford to live there or not, OR if THEY will even take care of the property.
Keep Section 8 AND Section 42 in mind. It's all about the bucks. That's what these "investors" are being told how they can make money from from this wrecked market.
In reality we are being pimped by these huckster Real Estate sales people.
Basically these "investor homes" will be used for practically nothing other than GOVERNMENT subsidized rents and discounted tax programs designed to "help" people who earn less than the people who actually lost the house in the first place.
This is really a CONTRIVED "free" market. TENS OF THOUSANDS of properties that are "off the bank repo-books" are sitting and purposefully not brought to market.
This is just shy of major scam in all it's glory.
And just who pays for this, WE do. With taxes paid to subsidize ALL THE BAD MARKET JUDGMENT of the fools idiotic enough to "invest" and create these subsidized housing warehouses.
Wait until the "paid-for" Politicos start getting involved when these "investor" deals go south. It'll be wah-wah-wah all the way home.
GET YOUR CHECKBOOK READY, 'CUZ YOU GONNA PAY FOR IT ALL (again)...
Read it (Section 42) for yourself here:
http://en.wikipedia.org/wiki/Low-Income_...
Read (Section 8) here:
http://portal.hud.gov/portal/page/portal...
And here to check to see where the properties are located (in case you need one):
http://www.gosection8.com/section_8_affo...
Wizard: You are spot on. The links are interesting, especially where the section 8 houses are located. There are more of them in Las Vegas than Los Angeles which I found astonishing. I have some rental property in L.A. County - Pasadena, Glendale, etc. and the surrounding area and there are only a few listed which is what I would expect because the areas are upscale. I had the county approach me once several years ago about becoming a section 8 landlord and I said NO WAY. They were willing to give me $400.00 more than the going rate, I guess this is to entice landlords into falling into this trap. I am sure that their are a few good, deserving folks on section 8 out there, but I am not willing to take the chance on finding the few needles in the haystack.
Many of the programs that have been reviled as bailouts and welfare were necessary to keep the financial system from collapsing. Except for the hard core let em fail economists we know that now. Now that the system has been stabilized time to end the programs. Yes it will bring a double dip recession but bring it on. For their own good Americans need to be taught a lesson about living beyond their means. I'm all for three hots and a cot, but the other handouts need to stop. As it is we are teaching people that haven't had the chance to screw up their lives that doing the right thing is the wrong thing.
Many of the investors snapping up properties are average joes with savings or a retirement account they can tap for cash. Makes you wonder how many took out home equity loans on their house to speculate in real estate. If we were to double dip how many of these "investors" will have to cut and run? Same with the investment pools. They may have paid cash but it doesn't mean it was mad money.
"47% of buyers were investors and 57% of first time home-owners used government backed loans." Are they saying that is 100% of the buyers?
I bought a home in LV, was not an investor and as a first time homeowner, DID NOT use a government backed loan. Where do I fall in this percentage?
managment101,
you're part of the 6%.
Mgmt 101 is no math wizzard, LV has some of the least educated people on the planet. Scarey.
I bought this year and paid cash. I do not expect appreciation for some time but the cash flow is sweet. As someone here said the banks are paying nect to nothing in interest and leaving too much in the bank now makes no sense.
environprotector - just curious... which neighborhood? Ive been hearing that from a few of my friends around town as well... Parts of Southern Highlands even - that one surprised me the most
Shecky: we are buying and renting them with cash flow. That is how they should have been sold from the beginning. The idea food servers and car parkers should own two story homes is insane.
I've got four, all rented with good tenants and positive cash flow. Trying for a 5th but running out of cash.
heck, i am just another of those that is losing a condo due to the tremendous drop in value, and lack of income due to recession. B of A hasnt filed a notice of default yet after 6 months of non-payment!! How many more properties are out there that haven't hit the statistics?
Values are down for awhile, no doubt. Someday, the investors will turn their profit, unless the world is forever different. I prefer to believe the world will survive and we will once again prosper...worldwide money printing should lead to hard asset inflation, of which real estate will once again participate. Of course, if the value of the $ keeps declining, our perceived wealth from inflated real estate won't mean very much.
The first investors in the door will be able to rent their homes. But what happens to the investors who are late to the game and have no takers? They'll most likely lower their rates to lure renters. If there are enough of these investors trying to rent homes, that will have an impact on the going rental rate overall. That might possible mean that the early investors losing their tenants if they can get a better deal. With high unemployment, there is a limited number of worthy investors. Perhaps section 9 renters will absorb the unrented homes and as a result prevent the drop in rental rates.
the thing nobody seems to realize is that i would say 30% - 40% of the housing built in las vegas from 2000 - 2005 was to house people building the homes for the other 60% - 70%.
when jeff from ohio came to build panorama towers, mark from indiana came to build the house for jeff. and then bill from arizona came to build the gas station for jeff and mark.
we'll probably never, ever, need the amount of people in this town like we did during the boom years so there will always be a ton of homes sitting empty, which means rent prices will probably not rise for years and years.
and sadly, i do think a lot of renters can hurt a neighborhood. just look at that area around jones / warm springs. it was one of the last places you could pick up a nice little home close to the strip. now...ghetto.
Well stated Sergio. I have a friend who works in the title/escrow business. For the last year chinese investors have been paying cash for homes that, I think will be rented out as section 8. So the govt(us taxpayers) will be paying these chinese investors to rent homes to anyone who qualifies for assistance. Since the owners live far away I don't think they will care what it does to the neigborhoods.
If Chinese investors are indeed a big part of home purchasers in LV that does pose a problem eith regards to the quality of renters as well as whether or not there will be proper maintenance on the homes. The other variable for foreign investors is the devaluation of the dollar. Currently, the Chinese are deliberately tying their currency to the U.S. dollar but the eventual decoupling of the two currencies will most likely mean a loss on the home as well as a smaller income rental income stream.
Actually, there is an apparent business opportunity to manage the homes on behalf of the absentee homeowners. Start your engines.