The current Las Vegas Scene
What's the plan for the future of Las Vegas real estate? What do the landlords do to survive the Mother of All Land Crashes? What's a good real estate investor to do?
These are the questions we face daily in our role as Vegas property managers. We live here and we should have some answers to these questions.
Here are some of our observations.
Home prices are down and falling further.
Home prices have not seen the bottom of the market yet. There will be further losses because the current sales prices are not based on any previously known logic. Homes are being sold simply to get them off the lenders books. Prices are set based on what will sell, no matter the price. These sales prices are reckless, thoughtless and based on no economic prinicple. The homes are simply priced to sell. The reasons are as follows:
Banks want the foreclosures off of their books because they received a bailout.
Banks and lenders have need to sell at reasonable prices because they have received their compensation. They only need to clear their books. They have been paid off! Paid with taxpayers money! And yet they are allowed to write off all the bad debts in a method that destroys the property values in the U.S.
Banks continue to allow prices to fall.
Banks have no interest in preserving property values. They are not interested because they have too many foreclosures coming in the future to deal with problems today. These same banks make profits on the sale of the bad loans of the past and they get bailed out of the current situation to ensure further profits. The small investor who put their after tax dollars to work get destroyed by the bankers greed.
There are currently 13,000 more foreclosures in the works in Las Vegas and more coming.
There are lots of foreclosures yet to come. This new round of foreclosed properties will flood the already lousy market with more cheap properties that the banks need to clear out. This round of ever-lower priced houses will continue to drive the market downward. The prices continue to slide as banks, lenders and owners race to sell these discarded houses intensifies.
Short Sales are killing the market.
Short sales are current owners trying to sell property at whatever price to save their credit rating. These owners have already lost any equity and are now trying to save their skins. They try to get a buyer to buy at any price. If the banks approves the sale the bank saves on the legal and maintenance costs of foreclosure. The was inevitable because the owner of the house stopped making mortgage payments. Banks accept the short sales at a considerable loss of loan principle because the losses were coming anyway.
Homeowners save their credit ratings from foreclosure if the home is sold in a short sale. There is no foreclosure on their record. The homeowner wants the short sale to save his credit rating, nothing more.
If the homeowner has no interest in the property and the banks have no interest in the property, the sales price can be set ANYWHERE!! The price is where there is a willing buyer, without regard to sales comps or holding the current values. Values drop tens of thousands of dollars monthly without reason except to be the lowest price available.
Quitters declare bankruptcy and go into foreclosure.
Homeowners who can afford to continue to make their mortgage payments stop doing so because they give up! They quit! Equity is gone, they're making payments on a home that can be purchased down the street for half the price. In some cases, entire subdivisions will foreclose and will resell for a fraction of the original price.
Massive discounts on thousands of homes are driving the home prices into the ground. These new lower prices discourage otherwise good paying owners and they throw in the towel and quit too. All these quitters add to the huge pile of discarded homes. So now the pile includes foreclosures, short sales, and quitters. Who's next? Credit card indulgers?
Make your payments, be good, get screwed
Landlords are good investors and honor their commitments. Most landlord/investors are progressive thinkers who are trying to invest for the future. They are trying to create some properity through hard work, saving money, and putting the money to work.
The landlord makes his mortgage payment because he has rental income to assist him. But at some point he begins to wonder if its a futile effort. Is he shoveling against the tide of never-ending foreclosures?
Option ARMs loans keep adjusting upwards, values plunge downwards, no relief from lenders. Option ARMs are the creation of greedy lenders who just wanted more performing loans. Now that the loans are crashing everywhere, do they assist by stopping the upward adjusting of the interest rates? No. Never. "If the suckers keep paying we will keep taking" the lenders say.
What happens to landlords who make their payments?
Landlords who make their payments, honor their commitments, fulfill their contractual obligations, should be PRAISED! In the morass of this financial debauchery, the investors who stays steady should be recognized as a beacon of shining light.
Do you keep making payments on properties waiting for values to bring you back to even?
Some bright spots include the fact that home sales in Las Vegas have reached record highs. In October home sales recorded the highest sales volume for this month ever in the history of the city! There has never been so many homes sold in the month of October ever! There has been a steady increase of homes sold since January '08. Vegas is on our way back Baby!!
However, just selling lots of homes has not driven prices higher. Yet. We still need to wade through the mass of coming foreclosures and clear those out. What happens after that we can't predict.
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