With cash in hand, home investors reemerge in Las Vegas

By Buck Wargo

Friday, March 27, 2009 | 2 a.m.

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 [email protected].