Nevada Real Estate >> Las Vegas Real Estate Specialist: April 2008

Here it comes, the avalanche of lawsuits because owners are claiming that they bought because they were promised one thing and then they delivered another.

Here is what I wrote in November 2006:

Las Vegas Condotels - Sizzle or Fizzle? Losing Bet on Immediate Cash Flow, Placing Your Wager on a Long Term Investment: What Joe Doesn't Know!

Here is what is going on now:

• InBusiness Las Vegas April 18, 2008 issue:  Luster Fades for Condo Hotels
• RealEstateJournal.com, April 8, 2008:  Condo-Hotel Buyers See Investments Sour
• Las Vegas Review Journal February 10, 2008:  Condo-Hotel Project Faces Class Action Lawsuit

Apparently the condotel owners are not seeing the returns they are promised and are trying to do something about it.  Just a little trip to the Las Vegas Convention & Visitor Authority's website could have saved a ton of money and heart ache for people who didn't understand that the amount of rooms (%wise) does not add up to the increase in visitor volume (%wise).

A good long term investment, the verdict is still out.  An immediate return on your buck, HECK NO!  Seriously, you probably would have received a better return buying a regular high rise condo on or near the strip, buy some cheap furniture from Ikea and straight out rent it out yourself.

Economic Conditions for the Las Vegas Valley March 2008

Housing Conditions:

• Foreclosure/Short Sale Listings (4/29/2008): Total Listings 21,669; Short Sales: 5270, 24% of all listings; Bank Owned Listings: 3859, 17% of all listings.
• New Home Sales (March 2008, units sold): 869 Year Change -29.3% (excl condo conversions, highrises)
• New Home Sales (March 2008, median price): $259,940 Year Change -18.1% (excl condo conversions, highrises)
• Existing Home Sales (March 2008, units sold): 1899 Year Change -30.7%
• Existing Home Sales (March 2008, median price): $230,000 Year Change: -19.3%
• New Home Permits (March 2008): 391 Year Change -79.9%
• Rental Rate (MLS Monthly Average March 2008): $1342/month 

My analysis: Resale listings are down and pendings are up sharply, absorption rate is turning healthy.  REO listings are in a seller's market.  The Rental Market is turning.  Fire sale prices remain attractive to both long term investors and buyers tired of paying rent.  Distressed listings (foreclosures and short sales) are 42% of total listings.

New Residents/Employment Conditions:

• New Residents (March 2008): 5,378, Year Change -19.4%
• Total Employment (March 2008): 925,500, Year Change -0.3%
• Unemployment Rate (March 2008) 5.6%, Year Change +30.2%

My analysis: The rising unemployment rate concerns me.  Availability of jobs will not keep new residents streaming in to town.  Could be tied to construction jobs lost and lack of home equity money for home improvement services

Tourism/Gaming Conditions:

• McCarran Airport Total Passengers (March 2008): 4,120,158 Year Change -1.7%
• Gaming Revenue (February 2008): $865,968,262, Year Change -4.0%
• Visitor Volume (February 2008): 3,495,465, Year Change+2.6%
• Convention Attendance (February 2008): 893,982, Year Change  +15.8%
• Hotel/Motel Occupancy (February2008): 89.4% Year Change -1.0%

My analysis: YAY for rising convention attendance!  All other indicators are fairly stable.  Gaming revenue down 4% should be a slight concern!

Sources: Salestraq, Home Builder's Research, Greater Las Vegas Association of Realtors, Nevada State Gaming Control Board, Nevada Department of Motor Vehicles, McCarran International Airport, Las Vegas Convention & Visitor's Authority, Nevada Department of Employment, Training and Rehabilitation

Inventory has dipped and demand is very high in January traditionally.  Supply will be an issue throughout spring.  Rental Homes with pools are in very large demand.  Absorption has decreased tremendously and with the mortgage credit crisis and valley demand for housing, it is not surprising at all!

Units Leased:

• March 2008:  1531 
• February 2008:  1632 
• January 2008:  1500 
• December 2007:  1156 
  November 2007:  1452
  October 2007:  1501
  December 2006:  1052
• January 2007:  1262 

Average Monthly Rental Rates:

• March 2008:  1342 
• February 2008:  2788 
• January 2008:  $1500 
• December 2007:  $1531 
• November 2007:  $1493
• October 2007:  $1511
• January 2007:  $1295

Median Monthly Rental Rates:

• March 2008:  1200
• February 2008:  1200 
• January 2008:  $1200 
• December 2007:  $1295 
• November 2007:  $1200

Last Month's Report 

This is a primer (not intended legal advice, just my astute market observations as a real estate licensee in the state of Nevada) for anyone who is looking to Purchase or Sell using one of these types of financing.  This post was prompted by Jeff Turner's most excellent post in response to a FSBO.  This is a MUST READ.

Definitions:

• Owner Will Carry:  Commonly referred to as "OWC".  This means the seller will hold the note.  Buyer usually must come up with a 10-20% down payment.  Interest rates are usually higher than normal mortgages, depending on usury laws in your state.
• Lease Option to Purchase:  Commonly referred to as "Lease Option".  This means that the house is currently being rented out with an option to purchase at the end of the term.  Terms can be flexible.  Option deposits  range generally from 3-5%.  Option deposits are generally:  a)forfeited at the end of the option term if the option to purchase isn't exercised or b)applied towards closing costs or down payment if purchase option is exercised.  This MUST be written in the contract!!!  Monthly rental rates are generally higher than market rates and sometimes a portion of that rent gets applied towards down payment or closing costs.

For Sellers:

• OWC:  Base the down payment and interest rate (per your state's usury laws) on credit.  SEEK THE ADVICE OF AN ATTORNEY and have the attorney write the note.  As a Realtor, I would NEVER write a note myself or use a canned form you buy at a local office store!  Treat this type of purchase as a souped up lease option.  You also run the risk when changing title of new liens being added to the property.  Make sure property use is clearly defined.
• Lease Option:  Make sure the option period is short and cannot be reassigned.  Make sure price is clear.  Make sure what happens to the lease option deposit is CLEARLY DEFINED in the contract.  These should be treated like a LEASE and like a PURCHASE.  There should be a leasing contract and there should be a purchase contract.

Thoughts and reflections on both of these financing types: 

If you don't know what you are doing you will be preyed on by what I call "the unrentable".  The "unrentable" usually have extremely poor credit and are living on (what I call) Noah's Ark.  Noah's Ark means they have a plethora of animals and more than likely one or more of them are on "banned breed" insurance lists.  Your insurance could be dropped and your home may become uninsurable on the C.L.U.E. report if your insurance company has banned an animal breed and they find out.  Generally if these types of people were to do a normal lease or rental home, they would be required to double or triple their security deposits and their monthly rent could skyrocket.  So their thoughts are "why not a lease option or OWC."  They pretty much have to come up with the same $$$.

These types of transactions can be done with success.  You just need the correct purchasers.  The real reason behind a lease option would be someone who is speculating and doesn't want to risk in a declining market or they are new to the area and just want to test drive.

Lastly, make sure you DO NOT HAVE A MORTGAGE ACCELERATION CLAUSE in your note.  Most lenders do NOT lend to allow this type of financing and you could possibly have your mortgage accelerated if they find out you are doing this!

For Buyers/Renters:

• Get a lawyer and protect yourself from scams!  I was bumping around on a major auction site (starts with an e) last week and was AMAZED at the amount of scams out there.  I even checked title on some of them and what I found was atrocious!
• Escrow the funds that are held as down payments and lease option deposits.  Many homes in the Las Vegas area are getting foreclosed on and I would say a majority of people getting foreclosed on are renters.  The best way to protect your deposits and down payments would be to have a licensed and bonded escrow company HOLD those funds and even make the monthly payments in regards to anyone who can put a lien and foreclose on the property.  (Mortgages, HOAs, Taxes, Liens, Sewer, Garbage, etc etc etc)

Now if you still haven't read Jeff's posting, go read it now and I will wait.  tap, tap, tap, tap.

You are back, great!  I am simply amazed by how many people called replied with advice that this person needs a Realtor.   You can do this type of transaction WITHOUT a Realtor, and rather easily if you understand and do your due diligence (either buyer or seller!)  What you do need to do one of these transactions is AN ATTORNEY who SPECIALIZES in these types of transactions.  There are scams on both sides, folks!  When I do these types of transactions an attorney is a MUST once I procure the buyer for a seller or vice versa.

It is easy to procure a potential buyer for ANY of these types of financing.  What isn't easy is qualifying and making sure they are doing it for the right reasons!

NOT!  Tropical Paradise of Omaha, that is!  It was a most wonderful trip however aside from the two days of APRIL SNOW!!  I went out to meet my new sweet niece, Evelyn Patricia.

LOL (my nickname for my brother-in-law) has four brothers, no sisters so he is a bit beside himself with what to do with a lil girl.  He sure seems to be in love and taking it in stride though!  What's not to love?  She is a little 5 lb female version of him!

My sister Nic-Nic was put on bedrest the day my grandfather died due to high blood pressure.  She was induced a month early due to the baby not growing quick enough.  Evie just weighed a little over 5 lbs and is still only 5 lbs-ish.  My daughter was 5 lbs so it brought back some incredible memories. My sister and I are also 11 years apart so I was kind of a mom/sister hybrid.  Does this make me a grandma/aunt hybrid now?  YIKES!!

In five amazing days I went to all my favorite Omaha restaurants (Godfather's, Genji, Maria's, Runza and Petrow's.)  I also threw a baby shower (since she came early!)  My brother and his wife had a birthday party for my other niece and that was great to attend!

The best times and the times I am sitting here with a broken heart days after returning were when I held sweet Evie, gave her bottles, changed her diapers and washed my sister's dishes. Oh yea, maybe it ranks up there with putting the baby's new shower dresses on the cat.

I miss Evie's little grunting noises, her cry and her little baby smell!

Congratulations to my sister and her husband!  I wish them many years of joy and wish I could spare them of the heartache that little babies who grow up to be kids seem to be good at. 

I won't get to see her for another 2 months (when my other baby sister gets married.)  I can't wait!!

Pictures:  black and white pictures courtesy of Amber Durr Photography

(yes I have permission from Amber herself and if you live in the Omaha, NE area, you need to check out her prices!) 

Evelyn and I exhausted after the shower

Precious fingers that grow way too fast! 

ABSORPTION IS DOWN over 4.5 months in less than a month!  Current absorption is hovering between 12-13 months of inventory.  There has been a dip in average prices in the rental market.  I think the renters are turning into buyers and when we should be seeing a seasonal rise in rentals, we saw a pretty good dip in units rented!  Are the renters buying?

Here is a snapshot of valley listings:

(Nov/Dec 2007)  All SFR, Townhome, Condo Listings:

• Listings (12/9/2007):  25691
• Under Contract (12/9/2007):  2304
• Sold November:  1137
• Month's Inventory:  22.5

(Jan/Feb 2008)  All SFR, Townhome, Condo Listings:

• Listings (2/10/2008):  23665
• Under Contract (2/10/2008):  3107
• Sold January 2008:  1164
• Month's Inventory:  20.3

(Feb/Mar 2008)  All SFR, Townhome, Condo Listings:

• Listings (3/20/2008):  22,644
• Under Contract (3/20/2008):  4516
• Sold February 2008:  1318
• Month's Inventory:  17.2

(Mar/April 2008)  All SFR, Townhome, Condo Listings:

• Listings (4/16/2008):  21983
• Under Contract (4/16/2008):  5390   
• Sold March 2008:  1747
• Month's Inventory:  12.6 

In a Little Under One Month:  Listings are down 661 units, pendings are up 874 units, closings are up 439 units and absorption is down 4.5 months.  I was thinking that our pendings were leveling off when I wrote last month's report but we are still seeing an amazing rise, plus the closings! This is amazing to watch the market turn in front of our eyes.  No doubt the FHA limits rising + prices dropping has helped stimilate our market and the pent up demand!

Bank Owned Las Vegas Listings (AKA Foreclosures, REOs) are seeing some absorption!  Inventory has risen slightly (+161 units), Pendings have fallen slightly -77 units. Closing data is unavailable due to MLS changes (SORRY!)  ALSO~ since these numbers were pulled (13 days ago) inventory has risen by 1000 units.

I would say with the current frenzy this is officially a seller's market.

Current Listed Bank Owned Statistics:

• Listings (4/3/2007): 2377
• Under Contract (4/3/2007): 1033
• Closed:  no data available until May Report
  
• Absorption Rate:  No Data Available Until May Report

View Last Month's Report Here  

If you are considering buying in this submarket, beware that it is moving! 

The absorption rate for Las Vegas Short Sales has dropped by 1 year from February - March 2008.  Inventory has risen dramatically (+402 units).  Pending units has also risen dramatically by +348 units.  This is because the MLS board is REQUIRING agents to change status with an offer and make it contingent on bank approval.  Many under contract are no where near bank approval.  Solds have increased nicely by +23 units.  Maybe the banks are finally getting their act together to get these approved!

There are many reasons for the lack of closings in this market and it is outlined in this post. 

Short Sale Synopsis:

• Listings 4/3/2008: 4720
• Pending 4/3/2008: 768
• Closed 2/22-3/22/2008: 90
• Month's Inventory: 56.9 (=4.7 Years Inventory.)
  

One thing you really need to consider when buying or selling short is to make sure the list agent is EXPERIENCED in this niche.  These deals are hard to pull whether it is or is not an experienced agent.  

We have seen the Las Vegas, NV high rise real estate market have a phenomenal (and scary) jump in inventory in the last several months.  For several reasons:

• Too many speculators in that market.  They want to close n flip.  They are not interested in holding, renting or living in them.  Each time a building closes, we see an increase of inventory.
• Mortgage market madness has reduced the amount of loan products available to jumbo, second, vacation or investor type property owners. The ones who have very little money down and marginal credit, that is.  So the buyer pool for both resales and new went kaput.  Loud and hard too.

Here are the high rise stats:

Rentals:

• 325 Listed 4/3/2008
• 13 Under Contract 4/3/2008
• 55 Leased 2/22-3/22/2008
• 5.9 Months Inventory

Resales:

• 788 Listed 4/3/2008
• 79 Under Contract 4/3/2008
• 18 Closed 2/22-3/22/2008
• 43.7 Months Inventory (=3.6 years)
  

Resale and rental inventory is down significantly.  More towers are opening which means more inventory will be on the market soon.  This is definitely a sub market that bears a watchful eye.

There has been a noticed rise in foreclosures & bank owned listings at Manhattan South.  List prices for those are about 50-65% of what the original owners paid for them!  Manhattan South is located on Las Vegas Blvd South across the street from South Point Hotel & Casino but off strip and is a mid rise community.  We are also seeing a noticeable rise in foreclosures in Soho as adjustable loans adjust.  Soho is located in the Arts district between the strip and downtown.

This Rhodes Ranch Area resale market report was generated on April 16, 2008 (graph on bottom):

• Active Listings: 430
• Under Contract: 162
• Sold 3/10-4/10/2008:  49
• Months Inventory: 8.8
• Low:  $94,900; High:  $3,490,000; Median:  239,990(listing prices only)

Rental Market Report generated on April 16, 2008 (graph on top):

• Active Listings:  77
• Under Contract: 11
• Leased 3/10-4/10/2008:  54
• Months Inventory:  1.4

Median List Price for an area rental:  $1250/month, Low:  $750, High:  $3500

Information from GLVAR is deemed reliable but not guaranteed.

Last Market Report Generated March 31, 2008

Click here to view past market report graphs and active rental, resale and new construction listings in the Rhodes Ranch Area 

 Includes: Apache Hills, Apache Springs (The Falls), Astoria Homes at Rhodes Ranch
(Independence), Canyon Trail, Huntington, Liberty @ Warm Springs, Maplewood, Rhodes
Ranch, Richmond@ Rhodes Ranch, Sierra Madre, Venezia, Vistana.

www.LivingAtRhodesRanch.com

Inventory has dipped and demand is very high in January traditionally.  Supply will be an issue throughout spring.  Rental Homes with pools are in very large demand.  Absorption has decreased tremendously and with the mortgage credit crisis and valley demand for housing, it is not surprising at all!

Units Leased:

• February 2008:  1632 
• January 2008:  1500 
• December 2007:  1156 
  November 2007:  1452
  October 2007:  1501
  December 2006:  1052
• January 2007:  1262 

Average Monthly Rental Rates:

• February 2008:  2788 
• January 2008:  $1500 
• December 2007:  $1531 
• November 2007:  $1493
• October 2007:  $1511
• January 2007:  $1295

Median Monthly Rental Rates:

• February 2008:  1200 
• January 2008:  $1200 
• December 2007:  $1295 
• November 2007:  $1200

Last Month's Report