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It is always interesting to compare this month to the previous month as well as the same month a year ago.
Last month, an amazing 51.5% of the listed houses sold. A year ago that number was still a strong 27.1%. This year, however, during April over 70% of the listings sold! The last time we saw that kind of absorption rate was during the boom of 2003 - 2004.
In April of 2011, there were almost 14,000 homes for sale in the Las Vegas area. Last month there were less than half that number (6,788). Now there are only 5,501.
Today, short sales account for only one third of the available listings and 27.3% of the sales. Last year, almost half of the listings and a quarter of all sales were short sales.
A year ago, foreclosures were 20% of the listings and almost half of all the sales. Today these bank-owned homes only represent 15.5% of the listings and almost 40% of the sales.
Equity sales are homes where the owner owes less than the home is worth. They are neither short sales nor foreclosures. In an equity sale, the owner, rather than the mortgage company, negotiates the price and terms with a buyer. In April of 2011, under 30% of all sales were equity sales. Last month that number was up to 31% and this month it is at 33%. Equity sales may be the best way to measure the strength and health of real estate.
All these statistics add up to an emerging healthy Las Vegas real estate market. Inventory shortages will drive prices. Hopefully we will not see the irrational exuberance of eight years ago. Hopefully, price will not surge too quickly and hopefully interest rates will remain at these near-historic low levels at least until the end of the year.
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The Las Vegas real estate market is showing major signs of rebounding, but without a strong national (and international) economic picture, any local recovery will not be sustainable. The good news (and it's almost all good news) is that the broader economy beyond Las Vegas is coming back strong.
Yes, there is still a lingering concern over various European problems, but most economists are now saying the effects will be minimal.
From employment to the Gross National Product, housing starts to resale inventory, the economic news is consistently good for the last several months. A recent report featured the fact that nationally there are only 2.43 million homes available for sale. Housing inventory is, therefore, at a 45 year low.
The Federal Reserve Bank tells us that the Gross Domestic Product (GDP) has been rising consistently since the beginning of last year. They also indicate that the unemployment rate continues to fall, matched by the increasing Payroll Employment figures.
Historically, interest rates tend to stay fairly low in the months leading up to a Presidential Election. Despite the uncertainty regarding who will head the administration and how policies might change, economic growth is strengthening. Once we are past the November election, it is reasonable to expect that, with more clarity on economic policies, we will see hiring and production increase significantly.
It is safe to say that we have turned the corner!
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There are not enough homes for sale in Las Vegas. The last time there were so few homes available was in the middle of 2004. Today, with about 5,500 homes for sale, we are seeing multiple offers and bidding wars across the entire price range.
No one wants to get into a bidding war, but lately they seem inevitable. With so many buyers chasing so few houses, it seems the best houses are attracting everyone's attention. A bidding war happens when the seller receives more than one offer on the property they are selling. At that point, the seller instructs the agent to issue a multiple counter offer which advises all the potential buyers to submit their "highest and best" offer. Often that is as far as it goes, but in some cases the buyers and sellers just keep going back and forth until one of the buyers decide that it has grown too pricey.
This is a good thing for the renewed health of the Las Vegas area real estate market, but it is frustrating for the buyers. Even the buyers who succeed in buying a house are left feeling a vague sense of discomfort and distrust. And the buyers who fail to get a property are often annoyed and even angry. They question how they can offer full price or more and still not get the property.
There is no easy way around this. It will continue as long as there are too few houses and too many buyers. This situation is putting a huge upward pressure on home prices throughout the Las Vegas area. ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |
With the bidding wars, when will prices go up?
This is a complex question and to understand the answer, we need to look at the purchase process. When a person buys a home to live in, they usually need to get a mortgage. The bank or mortgage company requires an appraisal and will not loan more than a pre-determined percentage of the appraised price. This is where the problems start. Appraisers look at similar home sales to determine what a home is worth. The appraiser has seen the market falling and, therefore, believes that what has been happening will continue to happen. A house that sold for $100,000 three months ago, is adjusted down to $97,000 because of that negative expectation. The assumption that prices will continue falling results in falling appraisals and that can hold prices down.
Breaking this cycle is very difficult. It requires cash buyers who don't need appraisals or highly motivated buyers (with extra cash) willing to pay more than the appraised value. With the shortages of homes for sale, we are seeing both these situations more frequently. During the last month, 54% of all sales were cash transactions and the bidding wars are resulting in many over-appraisal sales.
This makes it tough for buyers with limited cash. Financing with only 3.5% down (an FHA loan) is becoming quite a challenge since buyers with extra cash are being favored by sellers. Some buyers are still being told that Las Vegas is a "Buyer's Market" so they are offering less than list price. Sadly, that strategy never works in an over-heated market like we are currently experiencing. These misguided buyers are making many offers and they end up with nothing more than extreme frustration.
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For anyone considering a short sale, there is a rapidly growing urgency to act now.
Mortgage companies will always issue a 1099 for the amount they write off in a short sale or foreclosure. IRS considers debt forgiveness to be the same as regular income and taxes it as such. The Mortgage Debt Relief Act of 2007 instructed IRS to not tax people who have received a 1099 because of a foreclosure or a short sale. This was part of the so-called Bush Era Tax Cuts. The current administration and Congress have been discussing extending some or all of these but so far have failed to agree.
If these tax cuts are not extended, anyone completing a short sale or foreclosure after December 31, 2012, will pay taxes on the entire write-down taken by the mortgage company.
For example, if a person pays tax at a rate of 25% and the mortgage company writes off only $100,000 (very common in Las Vegas), the extra tax could be $25,000 or more! (This is NOT tax advice. A person needs to consult their tax professional for tax advice)
A tax bill of this magnitude is a compelling reason to consider a short sale as soon as possible. Most short sales take several months to complete and we are only eight months away from this looming deadline. If you know anyone who might be considering a short sale or foreclosure, have them call me as soon as possible at 702-256-6714.
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Imagine a person with a $200,000 mortgage and their house is only worth $100,000. The only choices are to keep paying, foreclose, or a short sale. For people who owe more than their home is worth (and there are many in Las Vegas), now may be the best possible time to consider a short sale. In addition to the powerful financial reason explained in the previous article, mortgage companies are more open than ever to short sales. Another great reason is the housing shortages discussed in the article titled: "The Bidding War."
In a short sale, the mortgage company agrees to accept less than they are owed upon a sale. I am often asked: "Why would they do that?" Usually it is because they would prefer to accept a reduced payoff rather than go through the expense and time involved in a foreclosure. The problem is short sales can be tedious and time-consuming. They can also affect a person's credit score. There are, however, advantages as well.
The credit score impact can be less than a foreclosure and a good agent may be able to negotiate total forgiveness of the mortgage debt.
Patty Hylander 702-256-6714
702-376-4924
 
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