Following The Market Down In Las Vegas
The Review Journal has this slightly mixed- up report on the housing bubble in Las Vegas. “The opportunity to become a homeowner in Las Vegas has widened greatly, observers say, as investors bail out of a cooling market, leaving inventory at a record high and forcing sellers to lower prices by as much as $50,000 in some neighborhoods.”
“It’s a new game in a changing market, and old rules no longer apply, said Jason Braford, district director for ZIP Realty in Las Vegas. ‘Just because you’re seeing stories about homes sitting on the market for months or years, if the house you like is..a special property, all the old rules still apply,’ he said. ‘In other words, multiple offers and the need to move fast.’”
“First-time buyer Alaina Brox, 26, recognizes that Las Vegas has become a buyer’s market but thinks prices will continue to rise. She was looking at a four-bedroom, 1,230-square-foot home near Lorenzi Park listed at $235,000. ‘I’ve got two kids, so I need something big. I like the big yard. I don’t know if I have enough money to fix it up,’ she said.”
“(Researcher) Dennis Smith said Las Vegas is very much a buyer’s market for long-term investment. Smith is traveling to Boston and New York later this week to meet with hedge fund investors and analysts. With home builders’ stocks taking a beating, they want to know what’s on the horizon for housing, he said.”
“Based on Thursday’s closing prices, KB Homes stock is down 40.4 percent for 2006; Pulte Homes stock is down 31.4 percent; MDC Holdings, which does business as Richmond American Homes, is down 19.7 percent; and D.R. Horton is down 32.6 percent.”
“‘Most of the large institutional investors all think the long-term outlook for Las Vegas is excellent,’ Smith said. ‘It’s going to take a year or two for the inventory to shake out from all the investors.’”
“With rising inflation and interest rates, the pin that could pop the hyped real estate bubble is the poor credit of potential buyers, said (mortgage broker) Tom Piecenski in Columbus, Ohio. A consumer survey by the mortgage company showed that 63 percent of renters in Las Vegas plan to buy a home within the next few years, but they’re hesitant about buying because of credit and financing concerns, Piecenski said.”
“A majority of those surveyed in Las Vegas said they lack the financial knowledge to take the plunge into home ownership, Piecenski said. More than one-fourth admit to having little or no understanding of mortgage fees, and almost 40 percent don’t understand how points affect mortgage and closing costs.”
“On the other side, sellers need to update their thinking, Braford of ZIP Realty said. Many of them are setting their list price based on information six months to nine months old. They tend to underprice their home in a rising market and overprice in a falling one.”
“‘Owners typically don’t seriously consider a wide enough range of potential housing market outcomes, including the possibility of a steep decline. That leads people to take more risks than they should,’ he said. ‘Don’t follow the market down. If you follow the market down, you may never manage to sell because the price is always just a little too high. Price your home according to the changing market.’”
“Braford said it really comes down to what a buyer is trying to accomplish. ‘Do what’s best for you, not your neighbor,’ he said. ‘Potential buyers sometimes feel safety in numbers and think that millions of buyers can’t all be wrong. This herd behavior is what lured a lot of people into overpriced houses in the first place.’”