Record Inventory And ‘Investor Hangover’: Las Vegas
The Las Vegas Review Journal found some housing skeptics. “Las Vegas housing expert Dennis Smith is seeing mixed signals in the local market, which seems to be cooling like the national market. Smith, president of Home Builders Research, counted 3,632 new home sales in March, bringing the first-quarter total to 9,366, an 18.6 percent increase from the same period a year ago.”
“Activity was also strong in March with 3,022 building permits pulled. The year-to-date total of 7,773 represents a 16.6 percent increase from last year. Pretty impressive, Smith said, but those numbers don’t tell the whole story.”
“‘To suggest this translates into a wonderful, booming housing market is wrong,’ he said. ‘Ask any builder. There’s been slowdowns for a lot of builders in getting new projects started,’ he said. ‘Some of the permits that have been pulled this year should have been processed three to six months earlier.’”
“The resale market is also showing declining numbers. There were 10,914 existing homes sold through the first three months of the year, down 14 percent from the same quarter a year ago. The Greater Las Vegas Association of Realtors reported a 10.4 percent decline in home sales in January, a 12.3 percent decline in February and a 19.4 percent decline in March.”
“Realtors reported more than 17,000 listings on the MLS in March, a record, though they’re saying 64 percent of the houses are selling within 60 days.”
“Smith has his doubts. ‘We can drive through many neighborhoods and see listing signs that haven’t changed for months,’ he said. ‘One statistic we haven’t seen in print anywhere is how many of the active listings are vacant. Care to guess? Let’s just say it is probably more than you think.’”
“He calls it ‘investor hangover’ from the last couple of years.”
“Resale prices have been stagnant since August. The March median of $285,000 is 10.9 percent more than a year ago and will probably show double-digit increases for the next four months. After that, homeowners can expect gains of 2 percent to 4 percent, Smith said.”
“The slowdown in the housing market is showing up in other areas. Fewer home loans are being approved in the ’slam dunk’ category as lenders tighten the screws in a real estate market with narrowing margins of error, said Mike Ela. Slam-dunk loans are those provided with a minimum of underwriting fuss when applications are subjected to collateral review.”
“‘As appreciation rates come down, fewer mistakes will be submerged by a rapid rise in home values,’ Ela said. ‘There may be some added caution because federal regulators have told the lending industry to be more careful, especially when it comes to loans in the so-called sub-prime category.’”
Thanks to the reader who sent this in. The rising new home sales and falling resales is consistent with the other markets. And what would the median be if the builder incentives were subtracted? Just how many new LV houses are vacant?
The irony that Vegas was built on the backs of losers is not lost on me.
OT: Story from Fort Myers about increased traffic at pawn shops, so people can put gas in their cars.
http://tinyurl.com/rngqe
Looks like there are a number of folks who are teetering on the edge of disaster in SW FLA. You’d think you’d tap the equity ATM (if you can) before you started pawning stuff - especially if it’s to gas up the SUV.
This has been true for the last few years. I know here we have a ton of “payday advance” places.
forgot this quote:
“The biggest thing right now is gas and real estate taxes,” said Tim Velasco, owner of Gold & Pawn, 2811 Cleveland Ave., Fort Myers. “They’re pawning TVs, VCRs, DVDs to get from Fort Myers to Naples.”
Idea: drive less.
Plan B:
1. Sell house, eliminate RE taxes.
2. Sell car, eliminate gas expense. Use bus, train, or (gasp!) walk when needed.
Bicycle?
A bicycle would cost money. If they are that hard up to be pawning to pay for gas, they probably won’t have the money available for a bicycle.
Watch out riding a bike down there. My husband rented one on vacation and was creamed by an 80 something that didn’t even realize she hit him.
More like she PRETENDED she didn’t realize she hit him.
So after the tv, dvd, and stereo are pawned what will they do next week?
The ipod, the Blackberry, the spare cell phone, the beeper. There’s no end to the de-humanizing electronic bull$hit people have today…
Hummer?
I had an interesting conversation with one of my colleagues today. He owns a rental property in Denver and a short time ago his tenants suddenly left and took everything that wasn’t nailed down and trashed most everything else. He had to make a trip to small claims court today to file an action. He said that being a landlord sucks and he’s going to sell the property as soon as he repairs the damage.
Owning a rental property is often called an “investment.” It is not in the sense of a passive investment like stocks and bonds. When you own a rental you are a small businessman with all the work and headaches that implies.
Yep, no one ever said being a landlord would be easy.
You never have to re-paint a stock or bond.
Yeah, if one would not put down 300K in a single stock, then why would they lock that much money up in something that can not be liquidated in seconds. With stocks, you can sell all your shares in seconds if the market starts tanking.
Before one buys RE, think to yourself, would I put that much money into ONE company? I bet the answer would be no.
Say single family residence. I put 300k in a piece of RE and it out performs any stock or bond you can name hands down and I let the management company handle the rest makes it easier when I get pissed off to yell at one person.
“I put 300k in a piece of RE and it out performs any stock or bond you can name hands down and I let the management company handle the rest makes it easier when I get pissed off to yell at one person.”
Really? That must one unusually special piece of real estate.
http://news.morningstar.com/QuarterEnd/Q22004BestWorstStocks.html
I should use more up-to-date info.
http://news.morningstar.com/QuarterEnd/Q12006BestWorstStocks.html
So, I take it that your 300k piece of real estate is now worth a couple of million.
It is I bought it from a lender during the last downturn. At that time it had a 25% cash on cash return with 50% of it not rented. With rental rates going up and elimnating all the deadbeats and filling it up. My return is great. I’m sure it beats anything on that list you sent me if I bothered to calculate it.
Mr. Incomestream, you make a solid point. Any investment can be great if you buy it for the right price.
If you can find me real estate with cash on cash return of 25% today, I’ll be happy to invest a few hundred in it.
hedgefundanalyst-
Bwwwahhhhaaa, Stop it your making my side hurt from laughter. I know you know there hasn’t been anything like that for a few years. By my estimates at least 4-5 yrs.
But as you know if your patient there will be more opportunites like that in the future probably more than you and I and a few like us can absorb. I bought that property when apartment ownsership was considered the plague. I had bought a few others but this one was the big kahuna for me. I put everything I had at that time into that property and in all honesty when I first bought it I was scared shitless because I thought I was going to loose everything the day it closed and I found out the bank had screwed me and didn’t disclose that some of the tenants hadn’t paid rent for months it took a lot of work to get that property running right.
To me a house or single family home is and should be about shelter. In my eyes anyone buying it for an investment is a fool. Especially at the prices of the last few years. But as far as commercial grade Real Estate. I’ll buy that all day long for the right price before I would even consider buying a stock. As a matter of fact if I’m buying a stock you can best believe it’s tied into a REIT or a CMBS the rest they can have. I personally wouldn’t touch a microsoft, cisco, or any other companies stock with a ten foot pole.
hedgefundanalyst
Bwwwahhhhaaa, Stop it your making my side hurt from laughter. I know you know there hasn’t been anything like that for a few years. By my estimates at least 4-5 yrs.
But as you know if your patient there will be more opportunites like that in the future probably more than you and I and a few like us can absorb. I bought that property when apartment ownsership was considered the plague. I had bought a few others but this one was the big kahuna for me. I put everything I had at that time into that property and in all honesty when I first bought it I was scared shitless because I thought I was going to loose everything the day it closed and I found out the bank had screwed me and didn’t disclose that some of the tenants hadn’t paid rent for months it took a lot of work to get that property running right.
To me a house or single family home is and should be about shelter. In my eyes anyone buying it for an investment is a fool. Especially at the prices of the last few years. But as far as commercial grade Real Estate. I’ll buy that all day long for the right price before I would even consider buying a stock. As a matter of fact if I’m buying a stock you can best believe it’s tied into a REIT or a CMBS the rest they can have. I personally wouldn’t touch a microsoft, cisco, or any other companies stock with a ten foot pole.
mrincomestream,
Uh, right now many REIT’s are highly leveraged and one that I track lost over 26% of it’s value in under a month. MBS are also highly leveraged and have seen similar sell offs. Why would anyone that already makes RE the cornerstone (or sole holding) in their portfolio buy MORE RE based investments. The “with a ten foot pole” comment leaves me with no choice other than to call you what you are. A BRICK KICKER! One who’s faith in RE is so single mindedly focused they would prefer to buy RE under any circumstances before they could be bothered to learn a new game. It’s O.K really. Some of us have modest levels of success in one asset class and can’t be bothered to learn new steps. That’s O.K too. Do us all a favor and stick with your undiversified “income stream”. What people like you fail to realize is that we can not have any kind of vibrant economy flipping houses to one another. RE can’t be exported. Huge, multi-national firms create, refine, sell and export REAL products and make real money! Learn some new steps will ya?
mrincomestream,
Right now REIT’s are highly leveraged. One I track lost 26% of it’s value in under a month. MBS are also highly leveraged and have seen similar sell offs. Everybody who is anybody has been talking about just how vulnerable MBS are right now. As for the “ten foot pole” comment the only thing I can say is that definitely labels you as a “brick kicker”. One that only understands RE. And that’s fine. Some of us have modest success in one asset class and can’t be bothered to learn new steps. The truth is that we can’t have a vibrant economy flipping houses to one another. RE can’t be exported! Huge, multi-national firms create, refine and sell profitable products that can be exported. Do us a favor with your undiversifed “income stream” and stay out of the market O.K?
Another idea. Dont waste money on depreciating assets (which will soon include RE) if you can’t afford gas.
lv_landlord, bless her heart, predicted hyper-appreciation:
Comment by LVLandlord
2006-04-28 07:26:22
Which area will get hurt least? Las Vegas, of course. I’m predicting another wave of hyper appreciation. Not yet, but… soon.
She must be at nickel slot tournament right now….
Need to get LV to define what “soon” means chronologically….
One to two years. In real estate, that’s “soon”.
Wait and see.
Now that the momentum has turned, you’re looking at a decade of high inventory and price declines.
Wait and see, card shark.
I think LV landlord and Va investor are the same troll. Either that or they were both hatched from the same dodo bird.
LMAO
Yes TX I’m very stupid. There are probably lots of people (millions) wishing that they were as dumb.
I don’t think most people would wish to be in your position. A simple test to see how smart you are is - Would you buy your current investment at todays market value? If yes then there are a lot of equivalent properties for sale, if No then why are you going to hold a money losing positon - including income taxes from appreciation?
Hyper appreciation…great, maybe those recently cancelled towers will get built after all…someone call Clooney.
But who’s going to invest all this hyper-inflated RE? Where are the plane-loads of fabulously wealthy and inexplicably stupid foreigners going to come from?
Perhaps Vegas flippers can form their own cargo cult.
http://en.wikipedia.org/wiki/Cargo_cult
Well there are about a dozen Mega Million winners every year. You know they are going to move to their favorite location which has to be LV; no question. All you have to do is wear a bulletproof vest to feel safe near the strip. That’s no big deal. There is no water problem either; they have importing for a reason.
Since they are lottery winners, they will also buy vacation homes in LV. What better to have both your primary residence and vacation home all in the same place? It saves on gas — everyone hates paying those prices.
Soon there will be a mad rush from the lottery winners which will drive LV into hyper inflation! Hang on for the wild ride!
I really like that George C. Looney’s movies.
Hard to have hyper appreciation when so few of the people can actually buy the houses. Creative financing let people making 50K buy 500K homes, but when that is gone and interest rates are high, how is that 500K home going to 750K? It isn’t.
According to Sam Zell who has financed research to show there is no bubble last week stated;
The Las Vegas Luxury Condo market is one of three Areas overbuilt
“I don’t think there’s bubble or any area with oversupply,” he said, before hedging by naming a few markets — Las Vegas, San Diego, and Phoenix — where he thought high-end condos were overbuilt.
http://tinyurl.com/ngsng
These big investors know what is going to happen but they are going to tell the public and why would they? Zell probably knows there is a bubble but doesn’t want to say so.
Hey Dennis Smith.
Did you leave the planet recently or are you this out of touch.
^60 day sales per the MLS….Sure that’s why the guy (an R.E. Broker) in Aliente has 6 properties in preforeclosure and has had 4 properties for sale over 430+ days…Maybe he’s asking to much being in desparate straits from the bank pressure, etal?
You can fool the gullable public with those renewal listings every sixty days…but we have blogger@ http://www.bubbletracking.blogspot.com that compares monthly listings of these “extreme floppers” ..
The new truth in real estate and media !!!
Wish I had time to stick around and contribute to this thread, but I have to go drive over to some of my properties and pick up rent checks. Some of my tenants seem to have trouble with the concept of “mail it before the first”. A personal visit gets the money, though.
Maybe I can share my opinions on this in a few hours…
Waiting to hear them. That’s horrible that you have to pay a visit to collect the rent.
My landlord does that every month. Well just about every month. Or we take it to him. We call and say, “come get the rent”. The water bill goes to his house, and we pay that anyway so…We live in a small town. Not much difference between taking it to the post office & droping it off at his house.
I adore my tenants. I like to visit my properties occasionally to make sure everything is okay-fine. And sometimes I can help people. One tenant needs a roommate, another tenant is going to post a notice at work, that kind of thing. I actually enjoy this part of the job.
Sounds like a lot of unnecessary work to me. I would save gas and time and have them mail it to my PO box instead. Vegas can get rough– You may see the business end of a gun instead of a rent check someday.
I’d have to agree for the properties I do manage myself it’s stricly voicemail and P.O. Box. I have no inclination to pick up a rent check. That’s usually a sign of someone who has razor then profits. I value my life far more than what I’m paying a mangement company
I just get my bank to mail the mail checks automatically to my landlord. Always have.
Ugh - I really don’t want to be friends with my landlord. I like to pretend he doesn’t exist and have him leave us completely alone. We’ve owned up until this year and I find him to be inexperienced and irritating. Oh well.
Check out this math:
“Realtors reported more than 17,000 listings on the MLS in March, a record, though they’re saying 64 percent of the houses are selling within 60 days.”
64% of 17,000 is 10,880 or 5,440 per month.
“10,914 existing homes sold through the first three months of the year”
Or 3,600 per month. These guys are one ugly steaming pile of Realtor®.
haha… good job robert.
Hey, so now we know 64% of the houses are selling within 90 days. What is the true DOM???
Some people have the mind set to rent property and some don’t. I’m one of those that don’t want to be bothered by things as late rent checks, repairs, etc. For the rest of us all we had to do was buy REITS as the market went up, gas stocks when gas started up, Walmart and other retail stocks and we’d just be contributing to our savings….and best of all when things start to turn around we can turn around with them without paying a broker, loan company, waiting for a buyer, worried about changes in the climate, etc.
Salinasron, FANTASTIC points.
Everybody is always villafying the corporations.
“Exxon makes too much money.”
“Wal Mart rules the country”
“Credit card company is ripping me off”
I came to realize along time ago that if you can’t beat them, invest in them.
You got that right. Energy and metals have been very good for me these past few years. No new paint and carpets required!
“I came to realize along time ago that if you can’t beat them, invest in them.”
Just like many housing investors, I’m thinking. The difference being that some people are smart enough to run their own numbers and understand their market, and some just rely on gossip/media du jour. Hence, sheeple.
Agree with you Upstater 100%.
so you all are in agreement…buy buy buy…sounds like a majority, ill take the other side!
I’ve owned since 2003 and for long term I think it’s the best thing. When you are 80 and can’t work you can either get a tax break for the locality for your 100% paid off home or evicted for not paying the rent.
But you shouldn’t stretch yourself to buy. between the wife and I housing is around 15% of our gross. I live in NYC and if you really want to make money in RE you have to buy in up and coming areas that haven’t shot up in value yet. Bunch of neighborhoods in Brooklyn that were untouchable in the 1990’s and now people are paying a lot of money to live there.
“Investor Hangovers” for everyone!
Hey Ben, a bit OT but…..
Ya gotta love this……..
http://www.zwire.com/site/news.cfm?newsid=16578070&BRD=1134&PAG=461&dept_id=150857&rfi=6
It’s called moving the deck chairs on the “Titanic”
Thanks for the Morningstar links. What I like about stocks is that if I want out, I just hit sell at market and the stock is gone in a few seconds.
Don’t miss out on the news out of small home builder OHB, released after 8:30 p.m. last night …
http://biz.yahoo.com/prnews/060503/nyw197.html?.v=21
The key takeaway: New orders plunged 25% YOY in the March quarter for the company as a whole. And in some regions, they imploded. NJ and PA orders dropped 63% YOY. FL orders tanked a stunning 71%. Nothing like a “soft landing” eh?
“The biggest thing right now is gas and real estate taxes,” said Tim Velasco, owner of Gold & Pawn, 2811 Cleveland Ave., Fort Myers. “They’re pawning TVs, VCRs, DVDs to get from Fort Myers to Naples.”
Its hard to believe so many people are so close to the edge already. What would happen if things in this economy became worse. Sobering to think about.
Simmsays…
http://www.Americaninventorspot.com
“Its hard to believe so many people are so close to the edge already.”
Simmsays, did you check out that FDIC report where the speaker said about 30% of our country isn’t even eligible for credit because their income is so low? I was stunned. When she said there is only 10% of the population subject to feel the recession, I wondered if she was too low. I think my reaction is influenced by all the stories of fraud and over-leverage reports we’ve heard here on the blog.
Please forgive me my ignorance…I must have missed the article about Suzanne…I feel really left out…Can someone summarize it
in a quick paragraph?…TIA
Hi Economist,
“Suzanne” is a reference to a Century 21 television commercial where a “30 something” Dad is clearly worried about purchasing a particular home the wife has fallen in love with. At first we see his wife arguing about all the characteristics of the home including the good schools. But the children are one and three! the husband counters.
Suzanne, their realtor has been listening via speakerphone to the whole thing and tells them she’s run the numbers and they can do it. At which point the husband caves.
http://russellarch.com/2006/04/century21-video-debate.html
Thanks Upstater!!…Sounds like the typical scenerio.
I’ve been unable to contribute anything useful to this thread, because I still don’t see the point of it. I read the original article 3 times, and I’m still not sure what it says.
It’s not worth getting bogged down in short-term numbers for inventory or prices or sales or “housing starts” (whatever that is). They go up and down week by week and month by month and it isn’t really important. What is important is to have a plan and stick with it over the long run.
The plan for most people here seems to be “I missed the last opportunity so now I will wait for the next opportunity and meanwhile hope the market crashes so everyone who didn’t miss the last opportunity gets burned”. As a long-term investment strategy, that one leaves a lot to be desired.
A better plan would be along the lines of “I have been saving for a couple years now, and I have a down payment, but I want to get the most for my money so I am going to look for slightly distressed properties that are selling under market and see if I can maximize my returns”. That is a plan I have used frequently in the past.
Good luck to all. I’m off to work at my “day job” now. Rent checks to be deposited at lunch time. All’s well for LVLandlord.
LV Landloard …Your suggesting that people buy at a high . If your a smart investor you buy at a low ,which isn’t going to come around in Vegas for 5 to 7 years . Maybe some good foreclosures might be coming down the pipeline , but its stupid to buy in inflated markets .You bought when the prices were lower so you can’t really compare that to the boom fever run up as of late prices of the flippers .
There’s no way you could buy anything in a market like Vegas right now and hope that rent even comes close to covering your expenses. There’s too many people involved with flipping, interest rates have gone up, values have shot up too quickly, and too many people are living on the edge with financing that will soon reset and force them out the door and their houses on the market.
Unless you can afford a place where you want to live for the next 10 years and are absolutely confident that you will have your same income in the same area for that time period, a person will get burned if the time comes when they have to sell. I just can’t help thinking about the poor saps that buy in 1989 in California and upside down until the latter half of the 1990s. And the runup in prices until the 1989 is child’s play compared to what’s happened the last few years.
Housing prices must be tied to fundamentals. The price of ownership cannot be too out of whack with incomes and rents. If you can rent for 75% or less the cost of ownership (roughly), then you’d be an idiot to buy something in this market when things are just beginning to slide to levels that reflect the historical trends and a true balance with incomes and rents.
There’s no way you could buy anything in a market like Vegas right now and hope that rent even comes close to covering your expenses.
Of course, I agree with you. That’s why I haven’t bought anything since last summer, even though I have the money to do so. I don’t like the prices or the interest rates right now.
HOWEVER, if I were renting and had the downpayment, I would try to become a homeowner. There are bargains available if you look for them. Sometimes you have to put in a little sweat equity to make a place comfortable. But it is still a better deal than renting for another 5-7 years.
If I were looking for a home right now, I’d probably buy this one:
http://www.realtor.com/Prop/1057599365
“I missed the last opportunity so now I will wait for the next opportunity and meanwhile hope the market crashes so everyone who didn’t miss the last opportunity gets burned”
Yes, we’re all just bitter non-investors. We also hope the stock market crashes, so we can buy Google at IPO prices. Sheesh.
The fact that you’re doing well is due to your previous good fortune, but it suggests nothing about the current health of the market - which is the subject of our discussion here.
“I’ve been unable to contribute anything useful to this thread, because I still don’t see the point of it. I read the original article 3 times, and I’m still not sure what it says.”
Nice to know you are so astute.