Inside the Las Vegas real estate market, buyers, agents and other real estate professionals have come to know a reality that stands in stark contrast to the national perception of our local real estate market. Nationally, Las Vegas is in a nuclear winter, tons of foreclosures and it’s a buyers’ market. The truth is recent events have turned our market into a frenzied sellers’ market.
According to a stat I pulled off the Greater Las Vegas Association of REALTORS website, the number of single family homes in the Las Vega Valley dropped 15% from March 2012 to April of 2012. Yes, you read that correctly, not 2011 but 2012! Overall, the residential market has been reduced a whopping 60% from this time in 2011. Currently, we have about 4,600 homes not under contract available in MLS.
Although the bulk of my business is working with sellers, I do also work with buyers as well, and in January of this year I saw the pipeline of homes had been turned off and desperately prodded them to get into the market fast and lock down their deal. I got them all in but one deal fell apart upon the discovery of plumbing issues during the home inspection. We had to let that deal go but then the buyers had to re-enter the market and being FHA buyers have been turned down on every offer despite offering at or above list price on each offer.
The two events that shut down the flow of homes to the market in my opinion is the ability of banks to hold non-performing assets on their books indefinitely at future values and a recent Nevada Law called AB284.
Banks are incentivized to hold on to homes and are not penalized until they take the loss, I.E. foreclosing on the home, taking it back via a Deed-in-Lieu of Foreclosure or short sale. Banks are not being motivated to foreclose and their stocks prices aren’t adversely affected since they can continue to hold these homes as assets.
The Nevada Law 284 was a classic overreach in response to the robo-signing actions which allowed foreclosures to be improperly conducted. This law makes banks have to sign an affidavit that they have all the paperwork and authority to foreclose. While sounding good in theory, its effects have stopped the flow of underwater homes which need to be liquidated as part of a natural recovery from coming to market, cold. We have nearly 70% of homes in the valley underwater yet have less than 600 foreclosures currently for sale. This is not healthy. It is delaying the inevitable. Delay is not recovery.
The issue in many cases is the banks do not have the correct paperwork to foreclose and they never will. That does not mean that someone who has defaulted should not be foreclosed. Should they be allowed to stay in this welfare condition of not paying on a mortgage indefinitely?
Homes are now appreciated through the false and artificial effect created by this law. The complete lack of inventory has prices going up rather dramatically in many cases: Especially, if you just purchased a newly built home. Those home are selling 15-20% higher than comparable existing homes. Many of those homeowners will likely be again underwater in a couple of years when the backlog of foreclosures again re-enter the market.
The last time we saw a price increase in Las Vegas was 2009-10 when the infamous $8,000 take credit caused short term demand for existing homes to rise sharply, buyers overbid for these homes, mostly foreclosures. Once the credit ended in the 2nd quarter of 2010, prices again dropped sharply.
The spring of 2012 has once again brought us multiple offers on almost every home, listing agents keeping an inventory of “pocket-listings” that they can offer to preferred agents or their own buyers, and artificial price increases. The only thing missing is the tents. We saw people actually camp out in anticipation of new home releases during the boom of 2004-2006. Little did they know what they were actually buying at the time. This market is for sellers. They have been presented a window to sell that they may not see again for years.
If you are thinking of entering the market as a buyer, call Shelter Realty and get placed in our market tracking system. You’ll be able to monitor the market with confidence and get the information you need until that time when you are ready to buy. Call Shelter Realty for details at 702-376-7379 or email us at info @ shelterrealty.com.
Sellers: let us put our experience as listing agents to work for you, whether short selling or cashing out in this market in a traditional equity sale.