Southwest

Las Vegas Is A Great Bet Today

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Ken Perlman

August 10, 2012
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In Las Vegas today, home sales are strong and prices are appreciating.

  • Strong Sales: In our proprietary Housing From the Frontlines™ builder survey, every builder sold at least four homes per community in a recent month.
 
  • Rising Prices: In our Burns Home Value Index™ (a measure that values every home in the market based on prices that were negotiated in July), home values rose 1.5% in the last year.
 
  • Improving Fundamentals: In our Housing Cycle Risk Index™, the fundamentals have risen to a C+ and are quickly heading into “B” territory as job growth has returned, new and resale supply has fallen dramatically, and affordability is the best since Bugsy Siegel built the Flamingo in 1946.
 

State Legislation Playing a Huge Role

State legislation has played a huge role in the quick recovery. AB284, which was passed by the Nevada State Legislature in October 2011, requires that a lender provide proof through a notarized affidavit that it actually owns the loan before it can foreclose. Failure to comply with AB 284 brings with it the potential risk of felony charges! How can a bank ask an employee to take that risk, especially since the mortgage industry has become so complex? As one of our clients told us:

AB284 has virtually stopped the NOD to foreclosure market. The buying public is now feeling it. The news has started to catch on. We are building new product as quickly as we can to accommodate and capture sales.

According to RealtyTrac, foreclosure activity in Las Vegas dropped 26% between the fourth quarter 2011 and the first quarter 2012. The number of foreclosure filings fell 61% compared to last year.

The Future

The bears believe that Las Vegas home prices will crash again because of the overwhelming number of underwater homeowners, many of whom have not made a mortgage payment in a long time. They claim that AB284 will simply delay another downturn in Las Vegas. However, we don’t believe this will occur because:

  • Foreclosure Process Will Take Years: As lenders figure out how to complete their paperwork and reinitiate the REO process, it will take years to process them all.
 
  • Investor Interest Puts a Floor on Home Prices: We identified 16 investor groups that have purchased more than 30 distressed homes in Las Vegas in the last 18 months, and the dollars devoted to this industry have increased substantially in the last few months.
 
  • Tremendous Affordability: We do not believe that mortgage payments will permanently stay below rental rates. As long as rates remain this low, prices should rise.
 

Las Vegas housing can be a risky bet, but we think the odds are stacked in your favor today. If you are interested in learning more opportunities in the Las Vegas market, please fill out this form.

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About The Author

Ken Perlman Headshot
Ken Perlman
Managing Principal
Ken works with real estate executives to help them make appropriate strategic decisions regarding their residential communities, including for-sale and rental of all types. He has a particular specialty in large-scale master-planned communities.

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