Sharp Jump in Vegas Units Under Contract

May 27, 2008

20 Day Snapshot:

The number of condominiums and single family homes under contract in Las Vegas (GLVAR type CON and SFR units in status P or C) jumped sharply from May 7, 2008 levels of 5,885 to 6,456 on May, 27, 2008. This is a 10% increase in less than three weeks.

Furthermore:

1120 homes closed in that same time period, meaning that out of the 5,885 units in P or C status on May 7th, 19% closed in the last 20 days, and an additional 1691 new units went into contract.


Foreign Interest Growing

May 27, 2008

Foreign buying interest continues to grow:

For many foreign buyers, property in the U.S. is cheap. Foreign buyers also seem more optimistic about the long-term health of the U.S. market, says David Michonski, a certified international property specialist and chief executive of Coldwell Banker Hunt Kennedy in New York. “The foreign buyer has an unbridled confidence in the U.S. market that is lacking in the domestic purchaser today,” he notes. “They view this as the bargain of a lifetime and are terribly excited about it.”

Full article here.


Monday Statistic: Vegas Sales Up 30%

May 27, 2008

The Wall Street Journal is starting to get the word. This is one of the first national articles that highlights Las Vegas recovery strength:

Home sales are rising in some U.S. metropolitan areas where lenders have slashed prices on foreclosed properties.

In the Las Vegas area, sales of single-family homes in April were up 30% from a year earlier.

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Full article here.


It’s Now Cheaper To Buy Than To Rent, In Some Parts of Vegas

May 23, 2008

Down at Manhattan Condominiums, one of the valley’s nicest communities (Frothing Developer should know, having developed it), it is now less expensive to own than to rent.

That’s the first time in the history of the community that it has been the case, and it’s not likely to last.

Average rent at Manhattan is $1400 per month for 2 bedroom condominiums.

Suppose you wanted to purchase, instead?

The MLS lists three 2 bedroom models for $240k. Assume:

  • 15% down
    6.5% mortgage, fully amortizing
    Homeowner Dues: $260 per month
    Property Taxes: $160 per month
    Insurance/Maintenance: $40 per month

From this, we calculate:

Monthly Mortgage Payment: $1289
Monthly tax savings from interest deduction:-$295
Net Cash Cost: $1454 per month.

But out of that $1454, $197 is paydown on principal.

So, the true cost of owning a condominium under these conditions is $1454-197 = $1257. Get a 10% down mortgage, and it’s $1306.

There are plenty of places in the valley that can’t generate $1400 per month in rent. In those places, it’s not true that it’s now cheaper to buy than to rent. What’s happening here is that location quality is starting to make a difference. All of the prices are getting beaten down, but the rents are NOT getting beaten down. These Manhattan Condominiums, because of their amenities, social life, location, newness, etc… are generating twice as much rent as lots of other Las Vegas condominums and apartments.

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This is Too Easy….

May 23, 2008

Sometimes the anti-Vegas spin of the media is so blatant, it’s laughable. Here’s a big ol’ nasty article prompted by a NAR release. Says sales dipped 1 percent last month:

Sales of previously owned homes, which make up the bulk of the housing market, dipped 1 percent last month to a annual rate of 4.89 million. That figure, which was slightly more than expected, represents yet another record low, although the report, put out by the private National Association of Realtors, only dates to 1999.

Only one problem: this number is an average across the country. What does the NAR have to say about the West?

The report divides sales figures into four general regions of the country. According to the Realtors, April sales dropped 6 percent in the Midwest and 4.4 percent in the Northeast, but rose 6.4 percent in the West. Sales stayed steady in the South.

Special Tip O’The Hat to the Times for managing to bury the good news in the second to last sentence in the entire article.

Full Article Here.


RJ’s Spin on Mortgage Insurance Ignores Key Facts

May 23, 2008

A recent article in the LVRJ starts off promising:

You can’t take one more story about falling home prices in Las Vegas.

You’ve heard it all, from the forecasters at Forbes and Money magazines to those economists at UCLA and National City Corp. The Standard & Poor’s/Case-Shiller Home Price Indices, numbers from the Office of Federal Housing Enterprise Oversight, the parade of bleak stats from local firms such as SalesTraq and Home Builders Research — what else can anyone possibly say about the local real estate market? Prices fell a lot… Yada, yada, yada.

But just before you think that the RJ has turned over a new leaf and written something worthy of a a guest post here at FrothingDeveloper, they hit you with the hook:

…But try to sit still for just one more report. This one’s especially important because it comes from a major national mortgage insurer, a company that protects banks from default losses. Keying in on what mortgage insurers think of the local market can reveal just how hard a time consumers might face in obtaining home loans, and it can help predict whether a cold borrowing climate might heat up anytime soon.

The article jumps quickly to the dark side, and makes an argument that stricter guidelines for private mortgage insurance, which lower maximum loan-to-value ratios from 97% to 90%, mean that housing conditions are worsening. Private mortgage insurance (PMI) is required for most loans when a borrower puts down less than 20%.

Before diving into the details, the argument is flawed on it’s face. The requirements for private mortgage insurance have historically followed the lead of the mortgage industry, and have typically lagged credit trends by several months. According to the RJ, underwriters PMI and MGIC didn’t start to deny protection on riskier loans until 2007, when they had already taken a significant hit. The argument that the market must now worsen because PMI requirements are currently strict is no more valid than an argument that the market was in good shape at the top when PMI requirements were looser.

Those of you following the markets or this site closely known that Fannie Mae is removing their declining markets requirements for LTV ratios effective June 1, taking minimum down payments back to 3-5% across the country, including Las Vegas. Yes, these loans will still require insurance, but private mortgage insurers will feel significant pressure to follow Fannie Mae by lowering their restrictions, and the smart money is betting that they will do so within the next few months.

But let’s take a worst case scenario, and assume that PMI underwriters don’t follow Fannie Mae’s lead. Are we in for another wave of housing doom spurred by the inability of people putting down less than 10% to get loans? The answer, fortunately, is a resounding no.

One key reason, which the RJ piece completely ignores, is the ready availability of FHA loans. These loans allow as little as 3% down, have increased limits to $417,000, and don’t even require private mortgage insurance. Buyers who aren’t able to put down the 10% required for PMI have an excellent option in FHA loans. Those who need a lower down payment option or have less than perfect credit are turning to FHA loans for their borrowing needs, not just walking away from the housing market as the article suggests.

The article goes on to say:

Las Vegas, with its nation-leading foreclosure rate, its 20.2 percents decline in home prices in the first quarter, and a 22,000 home stockpile of resales on the market is raising more red flags than the Gulf Coast in hurricane season.

Let’s start with foreclosures. It’s no secret that Las Vegas has a high number of foreclosures. But what is a secret if you aren’t watching the trends carefully is that homes going into foreclosure and being put on the market at “foreclosure” prices are garnering multiple offers, sometimes as many as 12-15 for one property.

So while housing prices may have declined 20.2%, there is ample evidence that prices, at least those set by an efficient market, are stabilizing.

Inventory is the final piece of the puzzle, and the RJ cites Las Vegas’ 22,000 available homes as an indicator that the market still has a long way to go towards recovery. Yet the piece fails to mention that inventory is down by 7,000 units — more than 20% from its high of 29,051 in September, 2007. That’s the largest drop in inventory Las Vegas has ever experienced. It speaks volumes about the speed with which prices have adjusted to market levels, and the pent-up demand from buyers waiting to purchase until prices reached those levels.

So while the tougher requirements for PMI aren’t necessarily positive, they’re already old news and certainly won’t have anywhere the impact the RJ thinks they will.

Read the full RJ story here.


Big Loosening of Vegas Down Payment Requirements

May 22, 2008

This is big news, and it’s good news, and like most big good news about Las Vegas real estate, it got buried and is not being reported.

In December of 2007, Fannie Mae increased the down payment requirement on all Las Vegas mortgages by (I believe) 5%. This was a BIG deal. It dramatically increases the amount of cash that must be brought to the closing table. Fannie Mae did this because they felt Las Vegas was a “declining market”, which it was.

Last Friday, however, Fannie Mae repealed that requirement, creating a single national  LTV standard for all mortgages.

As another part of our ‘Keys to RecoveryTM‘ initiative, we are today announcing that we will be equalizing the down payment requirements for borrowers in all parts of the country, regardless of local market conditions,” Marianne Sullivan, Senior Vice President, Single-Family Credit Policy and Risk Management, said.

For single family, primary occupancy, Fannie Mae is accepting 3% down payments in Las Vegas if the application qualifies for their automated process, and 5% down payments otherwise.

It sounds like big political pressure was brought to bear on Fannie Mae, but any way you cut it, this is a huge piece of positive news. It kicks in on June 1.

Full press release here.