Condos for Sale in Las Vegas Present Financing Challenges

Take a peek at prices of condos for sale in Las Vegas.  It is no wonder not a week goes by the last several years that I get multiple inquiries from buyers who see $20K, $30K, $40K condos for sale in Las Vegas online.  These buyers are first time buyers, owner occupied buyers, investor buyers, second home buyers, vacation home buyers etc.

A very large percentage of these potential Las Vegas condo buyers also want to leverage these incredible bargains via financing.  This is a problem here in our valley.  It doesn’t matter what your credit score or income is.  It doesn’t matter if these buyers are highly qualified to purchase a $500K condo home and only want to spend $40K.  What matters to the lender or underwriter is the condominium certification.

There are several items in that condominium certification that could upset the apple cart and blow up financing on a condominium home sale.

The lender is looking for certain things in the Condo Certification that will determine if they will lend money on that specific condo property:

• Lenders want to see low investor concentration (rentals)
• Low HOA delinquencies
• No construction defect or other litigation against HOA or community

Of course there are ways to work around this such as through private money financing or Fannie Mae HomePath® financing.  Of course not every buyer or condo fits the underwriting mold for those either.

The moral of the story is if you are eyeballing a condo for sale in Las Vegas, you may want to make sure the cash is in the bank.

Click Here to See the Newest>>>> Condos for Sale in Las Vegas

Las Vegas Area Real Estate Median Price Trends 2002-2010

I found it rather interesting to pull these Las Vegas residential resale home sale statistics & trends from 2002-2010.  Obviously we are sub year 2002 pricing – which is the earliest I could go!  I have actually seen some areas (mostly in the east part of the valley) that were sub 1985 prices!

Notice how the increased demand for housing (through very relaxed mortgage underwriting standards) pushed the prices up in 2004 & 2005.  Notice how the lack of demand pushed prices down and subsequent increases of default took those “we can finance a ham sandwich” mortgages away creating sharp declines.  Even with high amounts of units purchased the last several years shows that we continue to defy basic economic laws of supply and demand through continued depreciation.

I have been working an “I could tell you but then I would have to kill you” job doing fraud reports for an investor since the beginning of the year.  Something I have noticed in that time frame – doing that special job – is that we haven’t even pushed through 3/4 of the underwater inventory.  Oddly enough before I started doing this I thought we had already worked through 3/4 of the inventory and gave it another 2-5 years of living in the depths of ground zero foreclosure hell.  One of my favorite marketing chicks for a title company sent me a report this week that confirmed that number – 70 some odd percent of homes are still underwater in the valley.

Knowing what I know today, living & working the foreclosure nightmare, I have to adjust that number upwards from 2-5 years to 8-10 years of working through all of this mess.  Unless they start financing ham sandwiches again – which I doubt!

I will do these again in January after we close out 2011.  So far YTD (Nov 18, 2011) we have 41,706 units closed with a median price of $109,900.

• Foreclosure/Short Sale Listings (10/15/2011): Total Listings 12590; Short Sales: 5911, 47% of all listings; Bank Owned Listings: 2725, 22% of all listings. Short sale and REO listings consume 69% of total listings
• New Home Sales (September 2011, units sold): 396 Year Change +1.3% (excl condo conversions, highrises)
• New Home Sales (September 2011, median price): $205,281 Year Change +1.5% (excl condo conversions, highrises)
• Existing Home Sales (September 2011, units sold): 4281 Year Change +20.9%
• Existing Home Sales (September 2011, median price): $108,100 Year Change: -12.1%
• New Home Permits (September 2011): 252 Year Change +9.6%
• Rental Rate (MLS Monthly Average September 2011): $1279/month

My analysis: Distressed listings (foreclosures and short sales) are 69% of total listings. Units of homes sold is impressive. Credit markets must be watched as underwriting guidelines continue to tighten. Condos are barely financeable. Inventory stopped it's slow increase in December and now spring time buyers are gobbling up inventory through the summer and this trend seems to be continuing through fall. The rental market is softening due to all the investor/first time buyer combination of activity. This adds more supply and creates less demand. I do believe the rental prices being pressured downward is also causing the resale prices to be pressured downward.  Las Vegas is an anomoly to the law of supply & demand, we barely have any inventory yet prices are declining!

New Residents/Employment Conditions:

• New Residents (September 2011): 5368, Year Change +18.4%
• Total Employment (September 2011): 742,182 Year Change +1.3%
• Unemployment Rate (September 2011) 13.6%, Year Change -2.0%

My analysis: This sector is FINALLY seeing stabilization thus improvement. It is VERY encouraging to seem these numbers improve - even if slightly! Unemployment rate is still painful however the total employed numbers have remained close to stable for a year. Slight increase with unemployment rate the last two months.

Tourism/Gaming Conditions:

• McCarran Airport Total Passengers (September 2011): 3,553,307 Year Change +8.7%
• Gaming Revenue (August 2011): $752,242,062, Year Change -6.7%
• Visitor Volume (August 2011): 3,563,585, Year Change +2.1%
• Convention Attendance (August 2011): 412,902, Year Change +19.6%
• Hotel/Motel Occupancy (August 2011): 84.1% Year Change +2.1%

My analysis: This sector (tourism) needs to see some serious price corrections before we see a comeback. Corporate credit is not coming back any time soon. It will be hard to get convention attendance back up without corporate credit. Glad to see regular tourists are making their way here with the imbalance of the other numbers to replace the convention attendee numbers. Visitor Volume, Gaming Revenue & Convention Attendance are encouraging and hopefully sustainable.

Sources: Salestraq, Home Builder's Research, Greater Las Vegas Association of Realtors, Nevada State Gaming Control Board, Nevada Department of Motor Vehicles, McCarran International Airport, Las Vegas Convention & Visitor's Authority, Nevada Department of Employment, Training and Rehabilitation. Information deemed reliable but not guaranteed. My analysis is my humble opinion

While prices for Las Vegas homeowners are NOT NOT NOT!

Inventory continues to decline (still a seller’s market for 2+ years) YET Las Vegas property values CONTINUE to decline.

Congratulations Las Vegas – pat yourself on the back for defying all basic economic laws of supply and demand!

Here is the fuel that is feeding the fire:

• Unemployment rate near 15% in The Las Vegas Valley
• Extremely high amount of distressed inventory
• Extremely high amount o finvestor activity
• Continued strategic defaults (right, wrong or indifferent)

A while back I wrote about how rents are declining in the valley.  Last weekend I had three investors contact me asking me if this is going away.  The big answer is not until the employment situation improves in the valley, investor activity slows and distressed inventory declines.

I don’t expect Las Vegas property values and rental values go UP until the above picture gets a little bit more rosy.  Las Vegas rents are not declining rapidly, they are declining very slowly.  What I see (since I work Las Vegas area rentals,) is that new investor purchases are willing to UNDERCUT their competition when they go on the market.  No investor wants a vacant home.  Home insurance can drop them and vacant homes increase the possibility of theft and damage.  Might as well take a couple bucks less on the monthly rent than risk theft.

When will the picture for Las Vegas property improve?  Not until everything above does.  I don’t see it happening any time soon.  It isn’t the president or the government (Las Vegas was on the “out’s” before the election in 2008.)  No government program can stave off the natural cycle.  No government program can wash away the mindset of strategic default.  Las Vegas property values have deflated 8.6% year over year (Sept 2010/2011) so that pretty much shows that the $8K tax credit for first time buyers artificially inflated our prices for a while (ave home price in low $100K’s.)

It’s just the economy, stupid!  Let’s encourage small business to rise and find some jobs for the valley and the rest will take care of itself!

• Foreclosure/Short Sale Listings (8/15/2011): Total Listings 13073; Short Sales: 6021, 46% of all listings; Bank Owned Listings: 3060, 23% of all listings. Short sale and REO listings consume 69% of total listings
• New Home Sales (August 2011, units sold): 366 Year Change -+9.9% (excl condo conversions, highrises)
• New Home Sales (August 2011, median price): $197,490 Year Change -1.9% (excl condo conversions, highrises)
• Existing Home Sales (August 2011, units sold): 4363 Year Change +49%
• Existing Home Sales (August 2011, median price): $107,000 Year Change: -12.3%
• New Home Permits (August 2011): 331 Year Change -14.2%
• Rental Rate (MLS Monthly Average July 2011): $1434/month

My analysis: Distressed listings (foreclosures and short sales) are 69% of total listings. Units of homes sold is impressive. Credit markets must be watched as underwriting guidelines continue to tighten. Condos are barely financeable. Inventory stopped it's slow increase in December and now spring time buyers are gobbling up inventory through the summer. The rental market is softening due to all the investor/first time buyer combination of activity. This adds more supply and creates less demand. I do believe the rental prices being pressured downward is also causing the resale prices to be pressured downward.

New Residents/Employment Conditions:

• New Residents (August 2011): 5884, Year Change +9.2%
• Total Employment (August 2011): 797,300 Year Change -0.0%
• Unemployment Rate (August 2011) 14.2%, Year Change -1.3%

My analysis: This sector is FINALLY seeing stabilization thus improvement. It is VERY encouraging to seem these numbers improve - even if slightly! Unemployment rate is still painful however the total employed numbers have remained close to stable for a year. Slight increase with unemployment rate since last month.

Tourism/Gaming Conditions:

• McCarran Airport Total Passengers (July 2011): 3,692,055 Year Change +4.9%
• Gaming Revenue (July 2011): $715,533,451, Year Change +3.2%
• Visitor Volume (July 2011): 3,776,958, Year Change +3.7%
• Convention Attendance (July 2011): 263,441, Year Change -17.9%
• Hotel/Motel Occupancy (July 2011): 88.3% Year Change +4.3%

My analysis: This sector (tourism) needs to see some serious price corrections before we see a comeback. Corporate credit is not coming back any time soon. It will be hard to get convention attendance back up without corporate credit. Glad to see regular tourists are making their way here with the imbalance of the other numbers to replace the convention attendee numbers. Visitor Volume, Gaming Revenue & Convention Attendance are encouraging and hopefully sustainable.

Sources: Salestraq, Home Builder's Research, Greater Las Vegas Association of Realtors, Nevada State Gaming Control Board, Nevada Department of Motor Vehicles, McCarran International Airport, Las Vegas Convention & Visitor's Authority, Nevada Department of Employment, Training and Rehabilitation. Information deemed reliable but not guaranteed. My analysis is my humble opinion

Las Vegas Real Estate Inventory is seeing an unusually large amount of units closed for late summer.  August almost broke records!

Las Vegas Area Market Activity (Includes North Las Vegas, Henderson and Las Vegas)

• Listings (9/15/2011): 13073
• Under Contract (9/15/2011): 13333
• Sold Aug 2011: 4563

Short Sales:

• 46% of Listings
• 22% of Sales

REO (Foreclosures, Bank Owned:)

• 23% of Listings
• 53% of Sales

In One Month: Listings are DOWN -324 units, Contracted Listings DOWN -156 units, Sales are UP +635 units. Close ratios are going lower because much of the pending inventory is short sales which requires LONGER close times.

DOWN PAYMENT ASSISTANCE HAS NOT ENDED FOR FIRST TIME BUYERS, HOWEVER!!

Last Month's Pending Report

For Most Current Las Vegas Real Estate Inventory Market Report Click Here.

What Areas Do You Cover for your Las Vegas Area Real Estate Market Reports?

General Las Vegas Area Real Estate Market Reports are for MLS Areas 101-606 (the average consumer probably asks, what’s that?) It means that I cover the cities of Las Vegas, Henderson, North Las Vegas including unincorporated Clark County Townships of Whitney, Paradise, Winchester, Enterprise, Sunrise Manor & Spring Valley. They do NOT cover the areas of Boulder City, Pahrump, Laughlin, Moapa or Mesquite.

View More FAQ About My Las Vegas Area Real Estate Market Reports.

A little over a year ago I wrote about the Las Vegas real estate market and the media buzz of the double dip in Las Vegas real estate prices.  

Well here is some follow up:  yes Las Vegas experienced a double dip.  The serving was not as big as 2008 however it was larger than I had expected.  I was only expecting single digits but we slipped into the double digits again.  What’s crazy with my predictions last September 2010 is that I predicted we would move to a stable market from a seller’s market.  The market flirted with stable market territory but never slipped into a stable market.

Las Vegas continues to defy odds makers with this rather odd real estate market.  I don’t think we will pull out of distressed territory (less than 50% short sale or REO listings & sales) for at least the next five years.  With that being said, as long as banks continue to drive pricing on homes for sale in the Las Vegas market with REO (bank owned) inventory – we could stay in a declining pattern for quite some time.

Most of our defaults are – no doubt – strategic.  Our economy is pitiful however many that can afford or are just “hanging on” decide to cut their losses and move on in life.  Right, wrong or indifferent:  I am not one to judge.

Here are the stats from our board GLVAR:

Sold August 2011:

• SFR Units Sold UP +31.5% Year over Year
• SFR Median Price DOWN -14.3% Year over Year
• SFR Average Price DOWN -12.8% Year over Year
• Condo/TH Units Sold UP +20.5% Year over Year
• Condo/TH Median Price DOWN -16.4% Year over Year
• Condo/TH Average Price DOWN -16.9% Year over Year

As you can see we are defying the law of supply and demand.  Buyers are rushing in to purchase our fire sale priced cheap home inventory.  HOWEVER (don’t you love “buts”?) The distressed inventory keeps coming in larger chunks even though buyers are gobbling it up!

**Sales UP UP UP in August!!!**

We are still squeezed for inventory. Multiple offers on well priced homes are widespread. Everyone from first time buyers to investors are taking advantage of "opportunity".

Read more about Las Vegas Real Estate Inventory Analysis here and consumers may comment on this post.

Las Vegas Area Real Estate Market Watch was created for informational purposes only.

This is for all the buyers wondering "where is the inventory"? The inventory is here, this graph shows that buyer interest is extremely high and gobbling up all that new inventory coming online!

This is also for people saying "shadow inventory exists"! Well I believe it exists but it also exists in Las Vegas short sales which has tripled to quadrupled it's formerly stagnant close ratio since late spring.

These are Listing/Under Contract & Pending/Sold Trends from December 2007-August 2011.

Contracted closings are stalled because of the large amount of Las Vegas short sales that are contracted.

The absorption rate for Las Vegas Valley Area Short Sales appears to be swinging from a neutral market back to a buyer's market as fall approaches. Inventory has DECREASED by -182 units. Under Contract has INCREASED by +143 units. Sold units have INCREASED by +46 units.

There are many reasons for the lack of closings in this market and it is outlined in this post.

Short Sale Synopsis:

• Listings 9/15/2011: 6021
• Pending 9/15/2011: 8434
• Closed August 2011: 1014

Short Sales Currently Account for:

• 46% of All Las Vegas Valley Listings
• 22% of All Las Vegas Valley Sales

Read here for last month's report on Las Vegas Area Short Sales.

Most Current Market Report For Short Sales

Information About the Short Sale Process for Las Vegas Area Short Sale Buyers & Sellers

What Areas Do You Cover for your Las Vegas Area Real Estate Market Reports?

General Las Vegas Area Real Estate Market Reports are for MLS Areas 101-606 (the average consumer probably asks, what’s that?) It means that I cover the cities of Las Vegas, Henderson, North Las Vegas including unincorporated Clark County Townships of Whitney, Paradise, Winchester, Enterprise, Sunrise Manor & Spring Valley. They do NOT cover the areas of Boulder City, Pahrump, Laughlin, Moapa or Mesquite.

View More FAQ About My Las Vegas Area Real Estate Market Reports.

Cash REMAINS KING in the Las Vegas Area Real Estate Market!!! It is important for every buyer in the Las Vegas Area Real Estate Market to understand who their buyer competition is in this currently competitive seller's market LV is enjoying! It is important to understand how a seller looks at each financing type:

Cash Offers: Generally have less contingencies and quicker close times. A cash offer may be accepted even if it is lower than a financed offer.

Conventional Financing: Less strict with lender required repairs but larger down payments and more strict credit guidelines.

FHA/VA Financing: Requires more scrutiny with lender required repairs via appraisal. In general these take longer to underwrite and close so a cash or conventional offer looks more enticing to the seller. FHA Requires the deed to be seasoned for several months so some flips bought at trustee's sales are generally out as options when competing with multiple offers!

Other: Less common and creative financing types such as Lease Options, OWC (Owner Will Carry), etc. The "other" category INCLUDES auction terms!!

Last Month's Report

Most Current Las Vegas Sold Terms and Trends Report

What Areas Do You Cover for your Las Vegas Area Real Estate Market Reports?

General Las Vegas Area Real Estate Market Reports are for MLS Areas 101-606 (the average consumer probably asks, what’s that?) It means that I cover the cities of Las Vegas, Henderson, North Las Vegas including unincorporated Clark County Townships of Whitney, Paradise, Winchester, Enterprise, Sunrise Manor & Spring Valley. They do NOT cover the areas of Boulder City, Pahrump, Laughlin, Moapa or Mesquite.

View More FAQ About My Las Vegas Area Real Estate Market Reports.