Vegasagent’s Weblog

Just when the Las Vegas homes market was starting to come out of the doldrums, Fannie Mae has put another roadblock in front of many would be Las Vegas homeowners. We had been experiencing a lot more activity over the past month and at the auctions almost every property had actually been put under contract.

Last week Fannie Mae announced a new guideline relating to insuring loans in declining or soft markets. In Clark County, the new guideline requires a 5% reduction in the form of an additional down payment by the buyer on the maximum loan allowed on a residence. This new guideline officially started last week on January 15, 2008 and applies to all loans already in process.

Many banks are enforcing this guideline on all loans, not just conforming Fannie Mae loans of less than $417,000, but also on jumbo loans over $417,000 as well. This guideline does not apply on government loans like FHA and VA.

There is a box on the standard appraisal form called the URAR (Uniform Residential Appraisal Report) that asks the appraiser if the market is “stable,” “declining” or “increasing.” If the appraiser checks the box on the appraisal report that says the market is “declining,” the buyer’s down payment on the selected loan program has to be increased by 5%, even if the appraisal comes in at or over the negotiated purchase price.

For example, the purchase price is $200,000 and you need 100% financing. The appraisal actually comes in at $220,000. Even though the appraisal came in higher, if the declining market box is checked, you still have to put 5% down on the $200,000 purchase price. If your loan program originally called for a 5% down payment, now you will need 10% instead.

Although many lenders are looking at reconciling these types of challenges, today the appraisal of the home means nothing compared to whether or not the community has been stigmatized as “declining.”

Fannie Mae and some national lenders have declared many areas around the country as declining markets. It doesn’t matter what the value of the appraisal is. It’s whether or not the county has been declared as declining that determines how much you can actually borrow. The maximum loan allowed is automatically reduced by 5%-10% in these areas, depending on the loan product.

This means that many more buyers will be revisiting the idea of getting FHA and VA loans in the near future. (Many mortgage brokers don’t even have FHA or VA approvals yet as these were not popular programs during the past five years.) FHA currently requires 3% down, but the seller is also allowed to pay that down payment on behalf of a buyer using their Nehemiah program. And VA still allows eligible veterans to obtain a loan on 100% finanacing. For more information on Las Vegas mortgages please contact us at 702-985-7654 and we will be happy to help you find the lender that has the best program and rate for your particular circumstances.

The year 2007 was a rude awakening for owners of Las Vegas homes who found their properties steadily decreasing in value. Prices between November 2006 and November 2007 declined an estimated 10% and many of those who bought real estate during 2005 and 2006 found themselves owing more than their properties were worth. Las Vegas foreclosures led the nation and auctions had hundreds of properties to bid on.

But already in the last few weeks of December and the first new hours of 2008, we can feel the scared-to-death-by-the-media buyers of 2007 coming out of hibernation, shaking off their fears and getting ready to cautiously dive into the real estate pool again. Experts have estimated that the worst is over, and that by the end of March 2008 prices will stabilize and actually start to slowly appreciate in value again as inventory decreases. One think tank already is predicting a housing shortage by late 2009, assuming workers flock to the state to fill jobs created by billions of dollars of new construction on the Las Vegas Strip.

“We’re merely at the bottom of one cycle and heading back up on another one,” said Jeremy Aguero, one of Applied Analysis’ principals. He points to the stream of Strip mega-resorts planned to go up over the next few years, from Las Vegas Sands Corp.’s $1.8 billion Palazzo, opening this month, to Boyd Gaming Corp.’s $4.8 billion Echelon in 2010.

In all, the surge is estimated to add more than 40,000 hotel rooms by 2012 and create around 100,000 direct and indirect jobs, according to Deutsche Bank. “Typically, people read the papers,” said economist Jim Shabi of Nevada’s employment department. “They know when Vegas is building casinos and they come to town to find jobs.”

G. William Barnett II, author of “Are You Dumb Enough to Be Rich?” says “These are the times smart real estate investors live for. There’s more money to be made in chaos than at any other time, and no other investment strategy has created more millionaires than real estate.” As for the housing markets Barnett likes best right now, he says number one is Las Vegas, which currently has $10 billion worth of commercial construction going on and will soon have a demand for thousands of new employees.

So, like it said in one of my favorite all time movies, Field of Dreams: “If you build it, they will come.” And they will have to find housing! Now is definitely the best time to buy Las Vegas real estate, BEFORE the next boom comes and you are left standing on the wrong side of the wave.