Las Vegas Real Estate: Cash Is King

On this site I have been writing about the recent signs of recovery for the Las Vegas and Sacramento real estate markets. These two regions were among the hottest during the real estate run up and hardest hit when the bubble burst. The article (ReviewJournal.com - Business - Speculators come back) from the Las Vegas Review Journal gives a highly anecdotal account of investors coming back into the Vegas market. I think the best way to get a feel of the article is selected quotes:

As a poker dealer at The Orleans, John Hill talks to players almost every day who have come to Las Vegas from faraway states and foreign countries. They’re not all here for the card game. That’s just something to pass time when they’re not out scouring Las Vegas for a good investment home.

Many of them are cash buyers, Realtor Robin Camacho of Top10Real EstateValues.com said…..“I’m working with so many buyers, it’s unbelievable,” Camacho said. “It’s been tough getting offers accepted lately, even offers for well over list price. Right now, I’m working with at least seven or eight serious, well-qualified buyers — some strictly cash — at the same time, which is incredible, even in a good market.”

A report from Credit Suisse on the Las Vegas housing market said buyers are back and looking for deals.

Local resident Wendy Reese was able to snag a foreclosure home in northwest Las Vegas….“I had been doing my research and every time I found a home and ran to it, it was like, ‘We have 12 offers.’ Some were cash deals. It’s definitely a buyer’s market.”

Most of the loans that Patrick McNaught sees as president of Greystone Financial Group in Las Vegas are primary residents who’ve been “sitting on the sidelines,” priced out of the housing market and renting in the meantime. They’re buying with Federal Housing Administration financing and 3 percent down, he said.

I repeat, this is primarily anecdotal evidence and prices have not yet stabilized, but it appears that the large number of properties that have been taken from imprudent mortgagees are being sucked up by buyers sensing a bottom of the market. Primary home buyers are starting to come off the sidelines and get into a well priced home with 3% down and FHA mortgages. These will be buyers who have steady jobs, fixed mortgage payments and in for the long term.

The investment side comes from buyers who can pay cash or put down a large cash down payment. I would define cash buyers as “smart money” at this point in the cycle just from the fact they have the cash to make these types of investments. Las Vegas especially has a long term appeal to investors with a net inflow of 5,000 to 6,000 new residents per month.

Comments

[cfish:]

i think he lied.

2008 Sep 23 04:52 AM

[nobull:]

smart money leaving a dumb investor

2008 Sep 23 08:50 AM

[MichaelSchm...:]

I have to agree with nobull -- if it's smart money, it's leaving a dumb investor. These investors seem to be buying on the basis of dated underlying demographics without taking into account how those demographics were driven by the real estate boom itself (and have since changed). For example, how many of the 5,000 to 6,000 people per month moving to Vegas were moving there because of boom time economics (from jobs as realtors, construction workers, teachers at schools being built to educate the children who were supposed to be living in the oceans of houses being built, industry workers who grew accustomed to equity rich Californians spending free money, etc.). The factors driving the rush to Vegas are gone. People who think they can buy a home in Vegas and rent it to decent tenants are out of their mind -- there are more homes than people, and it is going to be that way for a while.

2008 Sep 23 10:31 AM

[pokernut:]

Prices in Las Vegas will fall 50% off the top, maybe more. I don't think we are really there yet.

2008 Sep 23 10:43 AM

[Fabien Hug:]

Who the hell would like to buy a house in the middle of nowhere?

2008 Sep 23 01:50 PM

[Responsibility:]

To encourage people to be responsible, we should have tax penalty and special points for future loans on load defaulters and tax incentive to people who keep their mortgages, to those who take on new mortgages, and to those who increase their mortgages, similar to tax on big cars and incentives for small/hybrid cars. Please spread this if you agree so that the politicians will do something.

2008 Sep 23 02:28 PM

[carey_jim:]

Las Vegas is a place where people gamble against insuperable odds.

2008 Sep 23 03:55 PM

[seabassbanker:]

this guy is a retard...check out his TMA articles and his "where are the bank failures article"

pay no attention to the clown

2008 Sep 26 02:26 PM

[lasvegasrea...:]

Interesting article and just some thoughts about what I see in the field since I'm doing this every day:

I'm getting buyers that have been looking at real estate in Las Vegas for a couple of years but never purchased before because the prices did not make sense to them... now they look at the same homes two years later and are in disbelief how low they are priced.

We also get buyers that are reading articles on how great of a deal Las Vegas real estate is, how much it's gone down from the highs and everybody is here to buy.

Something they all seem to have in common is chasing the same foreclosures that have been underpriced from current market value (my use of that term is just from what actual recent sales prices are) which is being skillfully accomplished by the people in charge of this to get everybody bidding the property up in price...

It's not uncommon to come across a bank owned property priced below market value in a desirable area and have 30 offers on it within a week. You would think that we are running out of land and homes for sale when you see the prices get bid up over market value. :)

It's also very common to hear the "Top Ten Values" being used and using the speculated prices of yesteryear being compared to today's asking prices like this is supposed to be the reason to buy.

Kind of like using the statistic of how many people are moving here every month that is based on how many out of state drivers licenses are turned into the DMV... which does not take into account how many people are leaving and turning their Nevada drivers licenses into other states DMV's. (In other words... the use of "net inflow" of 5,000 to 6,000 people moving into Las Vegas a month may be misleading -- as it was several years ago.)

Something else that everybody seems to fail to mention is how many more foreclosures are in the works and not yet available for sale. I've been tracking foreclosures for sale on just the Las Vegas MLS and it just keeps growing... despite quotes from a Poker Dealer that everybody is here buying everything up.

There are certainly some good deals going on here... but don't get irrational and think that everything is a good deal from sources that may not be entirely thoughtful to begin with.

Just a couple of thoughts because speculators did their damage to Las Vegas once already. We primarily do short sales and actually experience first hand what actual owners feel right now.... many of whom bought for the wrong reasons in the first place.

Please buy everything in Las Vegas that you can... just buy for the right reasons.

2008 Sep 28 08:51 PM