Best Real Estate Agency

Find Your Ideal Home in Las Vegas

Will Las Vegas Home Values ever bottom out?

Fiserv Chief Economist David Stiff said the largest declines will come in those markets that had strong spring and summer price gains.

“This is because the home buyer tax credit delayed the correction in home prices that is necessary to return housing affordability to its pre-bubble levels,” Stiff said.

Las Vegas Real Estate still has it’s issues

No doubt you’ve heard that Las Vegas is the foreclosure capital of the United States as homeowners give up on seeing any hope of home values returning to the peak levels seen in 2006. The latest estimates are that 80% of the homeowners with a mortgage now owe more then their Las Vegas is worth.

Now keep the quote from the FISERV Chief Economist in mind as I try to explain everything as simple as possible:

“This is because the home buyer tax credit delayed the correction in home prices that is necessary to return housing affordability to its pre-bubble levels,” Stiff said.

A little timeline of what happened to Las Vegas Real Estate:

Las Vegas real estate was inflated due to lax lending standards that helped enable so called real estate investors from around the world to speculate on Las Vegas homes. New Home Builders played it like a fiddle and sold out complete neighborhoods at insane prices before even pouring a foundation which added even more inventory to the Las Vegas Valley to meet the artificial demand for housing. The writing was actually on the wall as far back as October 2004 when Pulte Homes dropped new home prices in several neighborhoods of over $100,000.

When exotic loans dried up in 2007 and people could not get a home loan for just signing their name to loan documents…. the correction officially started. What started out as a free fall in home values was slowed down after Help for Homeowners Program after Program started and then tax credits to buy.

In late 2009 to Mid 2010, Las Vegas home values pretty much held stable primarily due to just how cheap Las Vegas Real Estate had become and because of the first time homebuyers tax credit.

Unfortunately…. nothing much was accomplished with a Help for Homeowners program that did not work for Las Vegas homeowners already buried with a mortgage 30%+ more then their Las Vegas home was worth, nor did a Tax Credit help home values go up enough to raise Las Vegas home values to levels that would help these same Las Vegas home owners.

Throw in the highest Unemployment rate in the nation and basically what you have is a slew of Las Vegas homeowners that need to get rid of their homes with mortgages on them far more then what they are worth.

The first time homebuyers tax credit ends, the correction continues. Everybody who rushed to buy to beat the tax credit deadline were fighting over what was available at the time… after a foreclosure moratorium had taken place and Bank Owned Inventory had dwindled down. Unfortunately, the amount of Las Vegas homes going through the foreclosure process was still taking place meaning more distressed homes were on the way.

Inventory is going up… prices in Las Vegas are still going down. Granted, nowhere near the rate they were falling in 2008 but still falling. Estimates of the amount of Las Vegas homeowners that have a mortgage worth more then their Las Vegas home is worth put the number at around 80%.

HOWEVER… for the past year, the amount of people who paid cash to buy homes in Las Vegas has been hovering around 40%. According to the Las Vegas MLS, there were approximately 42,589 sales and 18,605 of these properties were cash purchases or 44% of all sales.

That’s a staggering Percentage and in 10 years of practicing real estate in Las Vegas, I’ve never seen a home go to foreclosure where the owner paid cash for their home.

In other words… that is real stability.

Of course… we still have plenty of Las Vegas homeowners just now entering the correction process and getting rid of their overpriced mortgages that have held out for whatever reason. Until that is accomplished, don’t look for Las Vegas home values to go up anytime soon unless lending goes back to the lax days and people can get a mortgage for just signing their name. Even then, Las Vegas has the unemployment issue of 15% and people moving out of Las Vegas. And believe it or not, new homebuilders are still building homes in Las Vegas adding even more inventory.

Will Las Vegas Home Values Drop another 12% in value?

According to the article, FISERV is predicting home values in Nevada to drop another 12%. Keep in mind it says Nevada so who knows what their predictions are for Las Vegas Home values, Henderson and North Las Vegas collectively known as the Las Vegas Valley.

“This is because the home buyer tax credit delayed the correction in home prices that is necessary to return housing affordability to its pre-bubble levels,” Stiff said.

Las Vegas Home Values are Already BELOW Pre-Bubble levels.

Case in point. I just sold and closed on a Henderson Home at the current market value of $125,000. This same home was built and sold brand new for $115,950 in 1990. It was then sold in 2005 for $300,000.

Five years later and $175,000 lower (58% loss in value from 2005) it is back to $125,000. Will it go down in value another 12%? Don’t know and it’s nothing to really stress over as the distressed properties are cleaned up and turned over to new owners.

Comparable homes in the same area are leasing out for around $1,200 a month. These are VERY recent rentals showing current demand/rental values which have gone down in the past year, however with a mortgage of less then $700 a month which incudes Taxes and Insurance, I don’t see the new owners walking away from it anytime soon even if the value of the home drops another 50%. (Not suggesting that a 50% drop in value is even possible..)

They have plenty of room to play with if they lease it out to cover their mortgage, property taxes and HOA dues… plenty. Instead of sitting around pondering if the value is going to drop another 12% and they could have gotten an even cheaper mortgage.. they decided to improve their cash flow now. It makes much more sense then the previous owner who was coming out of pocket over $700 a month AFTER collecting rent.

Regardless… at this point of the game for Las Vegas Real Estate, rent values in relationship to mortgage payments or cash on cash returns are FAR more important then predictions as distressed homes with overpriced mortgages are worked through the system.

How long it’s gong to take to work through all of the homes with overpriced mortgages far higher then renting something comparable and the impact it has dropping home values even further is anybody’s guess. Worrying about it and keeping you from saving or making money is starting to become frivolous.