Las Vegas Real Estate More Affordable

Uplifting quarter in home market

National price index shows ‘impressive’ 2.4 percent increase

By HUBBLE SMITH
LAS VEGAS REVIEW-JOURNAL

Housing in Southern Nevada

The worst may be over for the U.S. real estate market, a report issued Tuesday suggests. Nationally, prices in the second quarter posted their first quarterly increase in three years, up 2.4 percent, according to the Standard & Poor’s/Case-Shiller’s U.S. National Home Price Index. “This is an impressive turnaround,” Robert Shiller, creator of the index, said on CNBC. But he warned that the continuing wave of foreclosures could depress prices again. The monthly index of 20 major cities also rose 1.4 percent from May to June, with Dallas and Denver clocking their fourth straight increase.

Only Detroit and Las Vegas saw prices fall in June. Las Vegas’ index reading fell to 107.31 in June from 109.49 in May. Detroit’s fell to 69.49 from 70.05. Las Vegas has now dipped below the Case-Shiller basis line. But that is a good thing, said Dennis Smith, president of Las Vegas-based Home Builders Research. It means homes are undervalued here.”That’s why we’re selling (homes). Affordable housing was always one of the descriptions of Las Vegas before 2002 and 2003. When houses were no longer affordable, that’s when the market took a dump,” Smith said.

The Las Vegas real estate market is due to rise in the Case-Shiller index, but Smith wouldn’t predict when. Unemployment, running at 13.1 percent in Las Vegas, is a key factor. Some local economists are predicting it will be 2012 before things turn around, he said. The Case-Shiller data reflects changes from May to June. But new, local data seem to corroborate the trend. SalesTraq, another Las Vegas market research firm, reported a 0.7 percent increase in July resale median prices to $124,900 from $124,000 in June. The price has been hovering around $125,000 since May. New home prices edged up $1,000 to $210,000.

Home Builders Research reported Las Vegas, with the nation’s highest foreclosure rate, saw a slight increase in median new home prices in July to $206,549, up $1,059 from the previous month. Median resale prices stayed the same at $125,000. “The sharp free fall in prices is over,” said Michelle Meyer, an economist at Barclays Capital Inc. in New York. Jeff Canarelli, vice president of sales for Las Vegas-based home builder American West, said the Case-Shiller report is “very positive.” Canarelli is seeing more sales to first-time Las Vegas new home buyers at subdivisions such as Lexington at Highlands Ranch. “We’ve known we’re near the bottom,” he said. “I think Las Vegas gets an A-plus for affordability. People want a good home as opposed to a foreclosure, as long as it fits in their affordability range.”

Smith said he is getting a feel from talking to industry insiders that the Las Vegas homes for sale market has stabilized but will probably bounce up and down from month to month. One analyst offers a warning. Anyone expecting a rebound in home prices and consumer sales or a sharp V-shaped recovery is in “fantasyland,” said Mike Shedlock, investment adviser for SitkaPacific Capital Management.

Nevada has $149 billion in mortgage debt, and 65.6 percent of the properties have negative equity, according to a report from Core Logic First American. Nationwide, there is $10.1 trillion in mortgage debt, 32.2 percent of the properties have negative equity and another 5.4 percent are nearly “underwater.” Steve Hawks of Platinum Real Estate Professionals in Henderson said Case-Shiller is an accurate barometer for home prices nationwide, but the index rose only because of a shortage of Las Vegas foreclosures that should be on the market. “At least it’s good news,” he said. “People don’t mind overbidding, because the payment’s not that much different with interest rates so low. Once you go above $250,000, sales get slower.”

The Case-Shiller 20-city index tracks repeat sales on the same properties over time, but it closely tracks only 20 cities, not the whole country. The national index tracks more regions, but not every metropolitan area.

The Associated Press, Bloomberg News and McClatchy News Service contributed to this report.

Financing for Foreign Nationals Discontinued – Easy Come, Easy Go

Once again the mortgage lending guidelines have changed with the wind. For a brief period there was a window for foreign nationals to obtain mortgage financing on investment and second homes in the United States with down payments as low as 25%, but now that window has been slammed shut along with a host of other “make sense” loan programs. (Don’t even get me started on condo hotels that can’t be financed by anyone with even 50% down!) 

Many of the foreign nationals who contacted us in recent weeks were willing to put down as much as 30% to 40% or even 50% on Las Vegas foreclosures. With the current housing market crunch, what are the big banks thinking? Here are people with real money, good credit and big down payments that would love to take advantage of lower prices and they can’t get financed?!!! Some of these investors were already under contract on projects in development, and they may have to walk away from substantial deposits unless alternative financing is brought online. (Just as a side note, permanent resident aliens are still able to obtain financing on the same terms as US citizens. If you are a permanent resident alien and need a Las Vegas mortgage, please contact us at 702-985-7654 so we can put you in touch with the right lender.) 

On top of all this, with the stock market dives globally, even those foreign investors who didn’t need financing and were planning on paying all cash are now stepping back as they watch the value of their portfolios diminish. The Euro is back down to 2005 levels and the British pound has plummeted even below that level. 

Canadians, who saw their dollar rise to all an all time high against US currency at $1.10, have watched it tumble in just the past few days to 79 cents versus the US dollar. Literally thousands of Canadians were looking for winter getaways in the US, but have had to put their plans on hold. Again, many of these were all cash buyers looking for modest Las Vegas condos under $100k, but with the devaluation of their dollar they have once again been priced out of the market without financing. 

And even US citizens are being crunched/punished in the mortgage marketplace. The latest is that anyone who has three or more properties with any kind of mortgage on them cannot get financing for a fourth property. Again, even if they are willing to put 50% down and have low loan to value ratios on their existing properties and excellent credit and income, they still can’t get a fourth loan. Not even if you’re Donald Trump. 

With all the resale Las Vegas homes and condos for sale, not to mention the hundreds of thousands nationwide, and all the opportunities to pick up great deals on foreclosures, our banks are not willing to lend to these impeccable buyers who want to buy and have money. Certainly I am not suggesting we should go back to no or low money down programs with no income or asset verifications. But why not create some solid loan programs to entice these good buyers, whether or not they are citizens of the US? The banks would be able to lower their inventories of properties substantially, which would in turn stimulate the economy and gradually raise prices again in a controlled manner.  

All I know is that in the months to come, those with cash who are willing to take a chance on the market now are probably going to come up looking like geniuses in couple of years. My other prediction is that while Las Vegas real estate was one of the first to fall, it will also be one of the first to recover, and I am personally putting my money where my mouth is.

Foreign Investors Scramble for Financing on Las Vegas Real Estate

With the dollar expected to rise against foreign currencies later this year (that trend has already started), foreign investors are hurrying to purchase real estate in the US while their dollar goes further. Most of these investors are targeting the Las Vegas real estate market in particular, where the sharp decline in prices (due to the high amount of Las Vegas foreclosures) and the world class amenities have made it an attractive get-away destination. In particular, Canadian buyers are looking to Las Vegas homes as a vacation retreat from their harsh winter climate.

Most banks will not loan on real estate outside of their own country. With all the recent shifts in the credit markets, the qualifying criteria has changed for mortgage loans in the United States across the board, including those to foreign purchasers. Prior to this year, a foreign national could obtain financing from US banks as long as they had 35% to put down with no or limited documentation. Now US mortgage lenders are requiring full documentation of income and assets on all mortgage loans without exception, though the down payment requirements have dropped.

A citizen of a country other than the US can obtain a loan for property in the US based on what classification they fall under. A permanent resident alien is a foreign national who has been granted the right to work in the US permanently and who has been given a US social security number. A permanent resident alien can purchase property under the same guidelines as a US citizen. They can get a loan with as little as 5% down payment for a primary residence, either on a fixed rate or adjustable rate mortgage at the current interest rates available to US citizens.

All other foreign nationals, including those with temporary work visas, are required to put down a minimum of 25% for properties under $650,000 or 35% for properties over $650,000, whether the property is a primary residence or a rental property. Lenders will also require the equivalent of a US TRW rating as well as full documentation of their employment income and assets. In addition, the down payment money must be “seasoned” in a US bank for at least 60 days prior to the close of escrow.

These loans to foreign nationals are only currently available as adjustable rate mortgages or ARMS. The fixed rate terms can be for 3, 5, 7 or 10 years and interest rates are currently running between 7.5% and 8.5% with approximately 5 loan discount points prepaid for the amount of the loan (points can vary on a day to day basis just like interest rates). Each point is the equivalent of 1% of the loan amount, so on a $100,000 loan 5 points would be $5,000.

Another alternative is for the foreign national to obtain an equity credit line on their property in their home country and come to the US with cash in hand. Cash offers are very strong, and enable the buyer’s agent to negotiate the best possible price on behalf of their client.

For more information on getting qualified for a Las Vegas mortgage and to receive the latest listings on great deals in Las Vegas new homes, high rise condos or MLS listings, please contact our office at 702-985-7654 or email us at sold@greatlasvegashomes.com.

Las Vegas Home Inspectors

I really must begin by thanking Diann Tonnesen for offering to allow me to blog on her site. In case you’re not aware Diann is somewhat of an icon in the Las Vegas real estate community. To be offered to provide input for her web site is truly an honor. Thank you, Diann.

Diann told me that I could write about anything I wanted to write so I chose something that has been needling me for quite some time now; the way people shop for a Las Vegas home inspector. Do you realize how most people shop for a home inspector? They gain a list of inspectors, usually from their real estate agent, and call three or four inspectors asking what they charge for the inspection. They generally do this without knowing what they are buying. Especially with all the Las Vegas foreclosures on the market being sold “as is, where is” this truly boggles the mind.

Can you imagine people shopping for a car they same way they shop for a home inspector? It would look something like this:

Ring, ring.
“Hello, Lamborghini, Mazarati, Rolls Royce, Bentley dealership, can I help you?”
“Yeah, hi. You guys sell cars, right?”
“Yes ma’am, we do.”
“What do you charge for them?”
“Excuse me?
“Yeah, you know, how much do they cost?”
“Well are you aware of what kind of cars we sell?”
“Naw, I’m really not interested in hearing about that, I’m just calling around getting prices.”
“Well we have a beautifully reconditioned Bentley on sale this week that is valued at $35,000 that we are selling as a lost leader for $22,000.
“That’s great. Twenty-two thousand hunh? Okay, I may call you back. Thanks for your time.”
Ring, ring.
“Yeah, Arties Autos. What do you want?”
“Yeah, hi. You guys sell cars, right?”
“Why sure we do. What cha lookin for toots?”
“How much do you charge?”
“Well I can put you in this sweet little Yugo that was towed in, I mean, that came in last night for say… $15,000.”
“Fifteen thousand hunh? Okay. Sweet. I’ll take it.”

Sound absurd? Well sure it does. But many, many people who are about to make what is often the single largest purchase they’ll make in their entire life shop for their home inspector and their Las Vegas mortgage loans the same exact way.

So here is where I am coming from: I retired from the Navy in 1998 after spending nearly my entire adult life as an engineering inspector. I wasn’t just an “engineering inspector,” I was an engineering inspector and instructor where I was one of eight members of an elite team that earned the distinction as the most successful engineering inspection team in the history of the United States Navy. The distinction still stands today where our success record has never been matched.

When I retired from the Navy I transitioned into the civilian world as a Las Vegas real estate agent. After several years as a modestly successful real estate agent I became very frustrated with the quality and depth of home inspections available for my clients. There simply weren’t any good inspections available. The inspectors were more interested in protecting their own liability through the use of complicated and legalistic inspection agreements than they were in protecting my clients. I couldn’t even find an inspector who would walk on a concrete tile roof. They mostly used binoculars to review the roofing.

I thought the public deserved better. I thought people wouldn’t mind paying a little more for a true quality inspection where the inspector spent hours really investigating the home rather than hiring an inspector that spent several minutes walking through the home filling out a worthless checklist that contained no actual useful information.

I set out to create such a service. Now, after nearly eleven years performing thousands of home inspections, continually refining our procedures, attending thousands of hours of training, holding hundreds of training seminars, and developing an organization that is truly unique and first class I can truly state that there is no better inspection service available in the entire Las Vegas Valley, regardless of the price. It is not an opinion; it is a fact. We have inspecting Las Vegas homes down to an art. We don’t do cheap inspections, and our service is nothing like the inspections that the cheap guys perform.

Nowadays, the most common comment I hear is that we don’t charge enough for our inspections (compared to what we provide). I once had a home buyer say that he didn’t think we charged half of what we should charge for our service. I promptly quipped, “That’s not a problem. You’re more than welcome to pay double.” To my astonishment he did exactly that.

It is a statistical fact that the average home inspector ends up in litigation an average of three times each year because of issues the inspector did not discover and disclose in the course of his inspection. In eleven years that my company has been in existence neither I nor any of the inspectors who work for me has ever been named in any litigation in conjunction with a home we inspected. We have never gone to arbitration; we have never gone to mediation; and we were recently named on the Honor Roll for the Better Business Bureau of Southern Nevada, once again, for maintaining a complaint-free status.

For the consumer who swallows the paradigm that all home inspections are pretty much the same and selects their home inspector based solely upon the price of the inspection, they often get exactly what they are looking for: a cheap inspection. But for the consumer who shops for their home inspector based upon the quality of the service provided and who is able to discount the paradigm that all home inspections are the same: these are people who draw outside the lines and when they stumble across our firm we reward them with a Picasso every time. I can only hope that when it is time for you to get a home inspection you are able to discern the difference between “Art” and “Artie.” Have a great day!

Paul J. Donohue, RHI, RREI, CREI
President / Senior InspectorSpectrum Inspection Group Inc.
8345 Coyado Street
Las Vegas, NV 89123

Email: pdonohue@INSPECTLV.com
Web: http://www.inspectlv.com/
Scheduling: (702) 269-6716

Las Vegas housing market update

Today’s blog is bits and pieces of things that are currently going on in the Las Vegas real estate market.

Clark County commissioners have given final approval to plans for the $6 billion Las Vegas Plaza Hotel and Casino Resort (modeled after The Plaza Hotel in New York) to be built on the site of the former Frontier Hotel and Casino. Despite earlier rumors that the project was stalling due to a shaky credit market, Elad chief Miki Naftali said the project was “forging ahead as planned.” Elad also owns The Plaza in New York and a Las Vegas spokesman for the group says groundbreaking could take place later this year on the 3,500-room Las Vegas Strip project which is slated to open in 2011.

Deutsche Bank announced that it was going to be commencing foreclosure proceedings on the Cosmopolitan Resort Hotel and Casino on the Las Vegas Strip. According to Deutsche Bank, they have made arrangements with the contractor to continue with construction. And sales are still being made out of the sales center in anticipation that developer Bruce Eichner will either find additional financing or will be bought out of the project. The Las Vegas luxury condos are already more than 80% sold out and the Cosmopolitan’s location is the best on the Strip, making it desirable to potential purchasers or partners, and Eichner expects to reach an agreement before long.

Two major Las Vegas residential projects, Inspirada and Kyle Canyon Gateway, are having difficulties meeting their mortgage obligations. Inspirada, a 2,000-acre project, was supposed to give rise to as many as 13,500 homes. There have been about only about 162 homes sold so far, according to Focus Group, master developer. And some of the smaller partners that are joint venturing in the project are unable to meet their commitments, leaving the larger partners to either take on their portion of the debt and put more money in, or decide to walk away entirely. With existing Las Vegas new homes builders getting low on inventory, putting these two large projects on indefinite hold would certainly help stabilize prices.

The FBI is currently carrying out a number of investigations in the Las Vegas area, uncovering fraudulent schemes involving 14 financial institutions. Some of the schemes under scrutiny include artificially inflating home values and placing low income buyers and/or beginner investors into adjustable rate mortgages that they can’t afford when the rates reset and forcing them into foreclosure.

Currently Las Vegas foreclosures are among the highest in the nation and foreclosed inventory on the market has driven down prices in the city substantially from all time highs in 2005. Investment buyers are returning to the city to pick up great buys and benefit from the strong local rental market, while first time buyers are taking advantage of affordable housing. Lower priced single family homes under $250k are even receiving multiple offers, lending strength to the belief that the price decline may have bottomed out.

Deadbeat Landlords Leave Tenants in Bad Situations

It is happening all over the country – unsuspecting tenants are returning home from work to find an eviction notice on the front door. The bank has aquired the property through foreclosure and the tenant has to get out of their current home within 30 days. The tenant almost never is able to recoup any of the rent money paid or get the security deposit back.

And in a market rife with vacant homes for sale, Las Vegas has more than its fair share of deadbeat landlords and unscrupulous property managers. Almost half of the 19,000 homes currently listed are Las Vegas foreclosures and many of them are Las Vegas new homes that were purchased by investors and have never been lived in.

One recent incident came to our attention:

A real estate agent who was renting a luxury 4500 square foot Las Vegas homes, came back to find the eviction notice on the front door. Immediately he called the property manager whose phone was all of a sudden disconnected. Doing some detective work he was able to track down the home’s owner who lived in South America and contact him by phone. Turns out that the “property manager” was an unlicensed friend of the owner. The owner had had half a dozen properties his “friend” was “managing,” and the “friend” was supposed to be paying the mortgages on them from the rental proceeds. (In Nevada, by law you must have a property management license to manage rentals that belong to someone other than yourself.)

Unfortunately, the “friend” never made a mortgage payment and absconded with the hefty security deposits and monthly rental fees being paid by the tenants. It also turned out that the owner had never even signed the rental agreement on this particular property. His signature had been forged and the “friend” had told him that this property had remained unrented.

The real estate agent’s chances of recouping his $4500 security deposit is almost nil. He has to find another home to rent and move his wife, three kids and brother plus assorted pets in a very short time. The owner’s home is already foreclosed upon and he lost all his equity to the bank.

How can tenants protect themselves from this happening to them?In Las Vegas, Noble Title Company is offering a $200 service for tenants called a “Request for Notice.” The service identifies the legal owner of the property and whether or not the property is currently in foreclosure. If the landlord is not in foreclosure, the Request for Notice requires the bank to notify the renter should the home go into foreclosure, which would give the tenant at least four months to pack up and move before the bank repossesses the home.

At least with this service, if the tenant receives a notice that the property is in foreclosure, they could opt NOT to pay rent to recoup some of their expenses and their potentially lost security deposit. And they wouldn’t be quite so jammed for time to find a new place to live. (The real estate agent mentioned above had a real problem. He already had his kids in specific Las Vegas schools, and there were no other large properties in that area for rent. He was not only forced to move his family to a different home, his kids had to move schools as well.)

So tenants beware! Even though you are only renting a home, you still need to do your due diligence to make sure you aren’t unexpectedly out on the street and out of pocket as well.

National Foreclosure Crisis Not as Bad as it Seems

I just read this great article by Scott Burns, and thought I would like to share it with my readers! Makes great sense amid all the media hullaballoo. And for those with savvy, right now is a terrific time to buy Las Vegas real estate!

Sure, there are pockets of pain around the US, but it’s not as if most Americans are losing their homes. More than 99% of homes aren’t in foreclosure. By Scott Burns scott@scottburns.com

A recent list of year-end mortgage foreclosure rates in 100 top metropolitan areas drew a lot of attention. Released by RealtyTrac, a company that compiles data on home foreclosures, the list showed the number of foreclosure filings in each metro area, the percentage of homes being foreclosed and the percentage change from the previous year. Though the report had some dismal news — such as the nearly 4.9% foreclosure rate in the Stockton, Calif., area — a close look at the data also provides some reassuring information. It tells me, for instance, that the foreclosure crisis is a regional problem, not a systemic one. It could become a systemic problem, of course, but we’re a long way from that now.

This news will disappoint the gloom-and-doom crew and all those seeking the excitement of financial upheaval. But it may be time to temper our worry and take a closer look at some of the year-over-year foreclosure statistics: Though the national rate of foreclosure increased by a whopping 79% between December 2006 and December 2007, the rate was still only 1.033%. Because about 30% of all homes are owned mortgage-free, this means that for all the noise about a crisis, only seven-tenths of 1% of all homes were in foreclosure.

In the top 100 housing markets, the average foreclosure rate was somewhat higher — 1.38% — and it was up 78% over the previous year. (Even in the Valley, where the Las Vegas foreclosures at at 4.23%, most of those are investment properties bought in the heat of the boom.) But if you rank-ordered the list of the top 100 areas, only 34 had foreclosure rates above the group average. Fifty-one areas had rates of 1% or less. Foreclosure rates actually fell in 14 of the 100 areas. More important, many of the areas with the highest increases in foreclosure rates were rising off rates that were tiny. The Bethesda, Md., area, to offer the most extreme case, saw foreclosures rise 1,288% — to a rate of 0.682%. In other words, foreclosures there were virtually nonexistent the year before. Today they are still well below the national average. The same can be said for the Albany, N.Y., area (up 638% to 0.25%), the Baltimore area (up 544% to 0.73%) and the Providence, R.I., area (up 354% to 0.41%).

Another pattern emerges if you cross the foreclosure rates with the Office of Federal Housing Enterprise Oversight (OFHEO) index of home prices. It shows that the top 10 foreclosure areas in America are areas of extreme price change — changes far from the national average of 46.92% over the past five years. Seven of the top 10 foreclosure areas had experienced major price spikes in the past five years. Three of the top 10 foreclosure areas had experienced price increases that were dramatically lower than the national average.

That pattern continues when you examine the top 25 foreclosure areas. The seven areas with the top price appreciation for the past five years averaged a stunning 91.6% increase, nearly double the national average. The national average, in turn, was about triple the inflation rate for the period. (Las Vegas homes increased 88.3% over the past five years.) Small wonder the foreclosure rate is booming as well. Anyone who bought in the past few years with a 5% or 10% down payment has a good chance of being upside down as froth comes off the market. In those areas the problem is about irrational price spikes and the hazards they bring to homeownership.

Some would call this “a Cadillac problem” — a great problem to have, like having more boats than you have water-skiers. Though 5% of the homeowners may be losing their homes, most of the other 95% probably feel significantly richer.

Las Vegas new homes builders are running out of inventory and lower priced housing is starting to get multiple offers again. 2008 is going to be a better year for the Las Vegas market, for sure!

Las Vegas Broker Defaults on 118 Properties

It never fails, there is always someone who figures out a brilliant scheme to beat the system. But instead of leaving while the going is good, they get too greedy and end up with their hand caught in the cookie jar. Some of these schemes are so brilliant and simple, you wonder why the perpetrators are not CEOs of major companies – or maybe some of them are!

Several years ago one such enterprising soul went around town and broke into over 40 HUD repos. These are Las Vegas foreclosures that are usually vacant, and it may take HUD a while to get around to processing them through the system. He then proceeded to replace the HUD sign with a “for rent” sign, rented out the properties and collected hefty security deposits as well as the first month’s rent.

But not content to take the money and run, this guy stuck around for over six months amassing additional rent. Until one day HUD wised up and the Feds showed up to arrest him as he was making his monthly collections. A couple who later became one of our clients was a tenant of this fellow who they said could not have been nicer. The had chosen the home because it was near the Las Vegas schools they wanted their children to attend.

Now a Las Vegas real estate broker and her husband are facing federal charges they made millions of dollars orchestrating a mortgage fraud scheme during the crazy days of sub prime lending.

U.S. Attorney for Nevada Gregory Brower says Eve Mazzarella, 30, and her husband, Steven Grimm, 45, were indicted Wednesday on bank fraud, money laundering and aiding and abetting charges.

According to the report, Mazzarella and her husband have been charged in connection with a scheme in which they fraudulently obtained mortgages on hundreds of Las Vegas homes here in the Valley. The feds say the couple submitted or arranged to have straw buyers submit loan applications which they knew contained false information and kept most if not all of the money for themselves.

“These schemers have contributed significantly to the demise of the real estate market in Las Vegas,” FBI Special Agent Steven Martinez said. “This type of fraud scheme impacts the real estate market generally. It’s like credit card fraud. We all pay a little bit more in terms of our credit card bills because of fraud. The same thing is true with mortgage fraud. We’re all victims

Grimm was arrested Thursday in Las Vegas and is due to appear Friday in U.S. District Court in Las Vegas. Brower says Mazzarella is being sought. If convicted, each could face decades in prison and millions of dollars in fines.

The government alleges Mazzarella and Grimm bought more than 200 properties at inflated values using limited liability companies and more than 400 straw buyers to make purchase offers.

The couple allegedly controlled transactions worth more than $100 million.

They allegedly defaulted on mortgage payments on many of the loans, causing at least 118 properties to be sold in foreclosure.