Real estate:

With cash in hand, home investors reemerge in Las Vegas

By Brian Wargo (contact), In Business reporter

Fri, Mar 27, 2009 (2 a.m.)

Real Estate in Crisis

KB Home reports increase in orders for new homes (3-27-2009)
O Canada: Want a Vegas home, eh? (3-27-2009)
Report: Las Vegas home values fall 28 percent in year (3-24-2009)

Cash is king in the Las Vegas housing market.

With lending guidelines tightened, especially for investors looking to purchase homes at bargain prices, cash buyers have increased dramatically.

Windermere Prestige Properties reports that cash purchases accounted for 27 percent of closings in February and that the use of cash has increased 10 percent over the past six months.

Investors have been looking to gobble up foreclosure properties and rent them out with the expectation that monthly rents would pay for their mortgages. Whenever the housing market improved and prices appreciated, some of those investors would sell the homes.

Steve Bottfeld, executive vice president of Marketing Solutions, says the increased use of cash means many banks aren’t lending money, which is a crucial component of any housing market recovery. It also speaks not only of the investors in the market but the second-home buyers looking at Las Vegas as well.

“They are looking at it as a good play,” Bottfeld says. “It gives you hope for the future, seeing people pump cash into real estate instead of leveraging it. It means they have great belief in the future of the market. That is a positive sign.”

Robyn Yates, broker-owner of Windermere, says she’s seen a lot more investors purchasing properties and cited how it’s difficult for people to get loans if they don’t have perfect credit. Cash buyers are able to negotiate better deals, she says.

The investments are paying for themselves, Yates adds. A one-bedroom condominium in Green Valley can be purchased for $50,000. The mortgage and insurance comes to about $650 a month, and it can be rented for $850 — a 15 percent return on investment, she says.

Southern Nevada economic news

The local economy declined again in February, based on the performance of four indicators tracked by Restrepo Consulting Group.

Principal John Restrepo, an economist, says downturns in total job growth, job growth by industry, initial unemployment claim filings and median home prices are his reasons for saying the Las Vegas recession is worsening, echoing what UNLV economists have said.

“Our economy continues to be economically and fiscally assailed,” Restrepo says. “The daily flood of bad news from all over the world is very debilitating.”

Restrepo says it is anybody’s guess on whether the federal stimulus package will be the antidote that helps the economy. He says there appears to be a “Keystone Kops” quality about politicians’ strategy to solve the crisis.

The indicators show Clark County shed 38,600 establishment-based jobs compared with a year ago and that 43,400 jobs were lost in seven of 11 major employment sectors, he says

Restrepo was also concerned about the 94,000 initial unemployment claim filings in Clark County during a 12-month period that ended in January. The January number was 70 percent higher than the year before, and until that number declines for six months, the recession will continue, he says.

Restrepo also points to a 34 percent drop in prices of existing homes over the past year and 14 percent price drop in new homes.

Among his predictions, Restrepo says federal lawmakers will announce a second stimulus package by spring or summer 2010. Deflation more than inflation is a concern because of the economic slowdown, he adds.

Nevada is likely to see higher taxes, further spending cuts, reduced public services and tax exemptions eliminated or lowered this legislative session.

Home listings report

The number of homes listed with Realtors has declined each week since the beginning of the year, barring one reporting period in mid-February, Applied Analysis reports.

Since the start of the year, inventories are down 2,317 units or 10.1 percent of total availability. Compared with the same period a year ago, inventories are down 3,192 units, or 13.4 percent, the firm reports.

The decline is because of a reduction in the number of vacant properties, a much different dynamic than reported during much of 2008, when home sellers who occupied their properties were reporting the bulk of the decline, the firm reports.

The shift is largely because of rising sales volumes, especially in vacant homes as more than two-thirds of the properties sold were bank-owned units. Currently, 61.6 percent of units are vacant, 9.3 percent are tenant-occupied and the remaining 29.1 percent are occupied by their owners.

The number of contingent and pending units increased by 302 homes during the past week, reaching a total of 8,431 units. The number of contracted units is the highest reported level since market corrections began two years ago. Forty-six percent of the 5,037 contingent units are identified as short sales and eight percent of pending units are classified as short sales. Pending units are waiting for customary closing procedures to be completed, according to Applied Analysis.

During the past three months, 8.6 percent of units closed were identified as short sales, and 8 percent of sales during the past month were short sales.

In other news:

• Land acquisition will be the topic of a commercial real estate certification program’s 2009 series sponsored by the Lied Institute for Real Estate Studies in conjunction with the Southern Nevada chapter of the National Association of Industrial and Office Properties and the Greater Las Vegas Association of Realtors. The course will be from 8:30 a.m. to 3:30 p.m. March 28 at the Realtors’ group, 1750 E. Sahara Ave. For more information, call 895-4492.

• Allure Las Vegas cited a Deutsche Bank report that the 427-unit residential condominium tower has been the most active with 12 closings over the past two months. Since the report was issued, Allure has had another seven come under contract in the last two weeks, says Sarah Prinsloo, Allure’s executive vice president of sales and marketing.

• Crisci Builders has begun construction on a commercial building, Crisci Properties LLC, at 8845 W. Flamingo Road in Las Vegas. The two-story, 17,450-square-foot project will house Crisci Builders’ headquarters as well as two other tenants. The general contractor is completing construction on its professional building, which will include a 48-foot-high rotunda with a dual spiral staircase. Completion of the building is scheduled for June. DAH Designs is the architect. The project is valued at $2.3 million.

• The Nevada Real Estate Commission has suspended the license of American Executive Realty real estate broker Elvis Nargi for an additional 10 years to bring the total to 25. He was also fined $250,000 as part of a case accusing him of renting out foreclosed properties to unsuspecting tenants. Nargi had originally been suspended 10 years, but it was extended to 25 because he failed to attend his hearing, says Gail Anderson, administrator of the Nevada Real Estate Division.

• Jose Troncoso, a former U.S. marshal, North Las Vegas police chief and security chief at Stations Casinos, has sold his 4,578-square-foot home at 2747 Turtle Head Peak Drive to Kenneth and Amy Wiles for $875,000.

Brian Wargo covers real estate and development for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4011 or at wargo@lasvegassun.com.

Discussion: 7 comments so far…

By summerlin

3/27/09 at 3:06 a.m.

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Hello Brian, great article about the condition of the market in Las Vegas. I sold my house in 03 and walked away with a 20% gain only to see it double, now it is back to almost where I sold it (according to zillow). Similar gain/loss as Mr Troncoso, buying his prop for $1,275,000 in 12/04 to sell it 2/09 at $875,000, (from assessor records) what a crazy market this is.
By judgesmales

3/28/09 at 7:51 a.m.

Suggest removal

I've got an idea, Brian. Take your Rolodex of real estate/housing "consultants," toss it in the garbage and get a new one that doesn't include Steve Bottfeld.

Bottfeld denied the existence of a housing bubble in Las Vegas, then denied the obvious bursting of the bubble two years after it had already begun. He hasn't been correct about a housing issue in any story I've seen here.

Why would you continue to weaken your premise in every story by using compromised or totally discredited sources like Steve Bottfeld?
By markp

3/28/09 at 10:20 a.m.

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it seems really odd the only people talking the market up are those with a vested interest in it, the recession is getting worse, I doubt prices will rise for some years, as the market is still in decline, usually a top-bottom-top takes around 13-15 years, this one is much worse it took longer to reach the top and will take much longer to reach the bottom, don't be fooled by these BS statements from builders or real estate agents, now is not the time to buy unless you fancy losing at least another 15% on your money... I have seen crashes like this before and seen so called investors caught out in the same situation many lived to regret it for some years..
By UNLV4Life

3/28/09 at 2:22 p.m.

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I just hope the investors don't screw the market up again for people who actually want to own a home here.
By stevem

3/28/09 at 3:26 p.m.

Suggest removal

bottfeld must drop off a bag of money to the greenspuns every month. how else could the SAME guy, over and over again get quoted in these stories and say "we're close to the bottom" every month...for the last 8 months, and be wrong each time.

if you're buying a house to live in and don't want any equity for 10 - 15 years, go buy a house TODAY, but i would not go NEAR a house in vegas until those visitor numbers at the airport show 3 or 4 months of increases.

tourism drives this town and it has yet to see a rebound.
By peaceful

3/28/09 at 3:33 p.m.

Suggest removal

We tried to sell our house for over 2 years, coming down in price over 200K, and still had no offers. I was told that, at the end, because we were trying to short sale, this was scaring off buyers. People would rather buy a bank owned home because they'll get an answer on their offer sooner and it's an easier process. I have to agree with stevem. There is NO WAY we're at the bottom yet, and won't be for a long time. As long as the foreclosures continue to flood the market, the prices will continue to drop. Ask anyone who's actually trying to sell a house, not someone paid to paint a rosy picture.
By JustMe

3/29/09 at 8:03 a.m.

Suggest removal

Although I did have to accept an offer $120,000 less than a broken deal that never closed last August, I did sell recently at almost $200/sq foot, to a cash buyer. Certainly disappointing from the $300/sq foot the property could have easily commanded in mid 2007. Having many houses nearby listed at ridiculously low prices "subject to short sale," without any real intention of selling, has done considerable harm to home values, if only in the minds of prospective buyers seeing the lower priced properties listed and questioning why pay up.

One thing not mentioned about all the short sales listed is that many of them are not really for sale. What I mean is that the homes are not being made accessible to agents or buyers and are listed as "subject to short sale" in an attempt to make it appear to the lenders as there is no interest in the property so the owners can attempt to modify their existing mortgage or bring in a straw buyer to reduce the principle owed and put the property in a position where it can be rented cash flow positive. In my opinion, many properties listed as subject to short sale are part of an ongoing fraud by some realtors and mortgage mod firms and are helping to acerbate the problem of declining values. These subject to short sale listings create an illusion of unrealistically low prices and have a negative effect on surrounding existing home values. They also leave legitimate sellers with one more hurdle that can be difficult to clear when dealing with perspective buyers.

Unless the owner is capable and willing to pay the difference between the sale price and what is owed, listing properties for less than the amount of all liens should be banned. This would bring greater transparency to the housing market and lenders wouldn't be hoodwinked into making modifications or short sales and would give prospective buyers a clearer picture of the actual for sale market and possibly help stabilize home values for everyone.