Current Update on the LV Real Estate Market -- Part II (Las Vegas: construction jobs, malls)
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Rising interest rates won't reduce investors since they usually pay cash. There are people who say they can't buy a house in Las Vegas under $120K because they are all quickly bought up by cash investors.
You utterly and completely missed the point.
Quote:
Originally Posted by tony soprano
I think it almost a certainty that rising interest rates will reduce the investor pool. There is a portion of investment money that rotated into RE due to the lack of alternative investments perceived as safe. Who wants to park cash in a savings or money market account that's not keeping up with inflation? Once fixed-income yields start increasing you'll start to lose some investors at the margins.
^^^^^^^^^^^ This.
Quote:
Originally Posted by olecapt
It makes little difference if it goes down a bit more...it just about has to come back as soon as the foreclosure thing runs its course.
YOu simply cannot maintain resales selling 25 and 30% below new build.
The cost of new build is only partially set by local parameters. Land is local but is already pretty cheap and can't fall below zero. Developed land has to maintain at least the cost to develop it...which is about where it is now. The cost of actually building a home is pretty much the same across any given region of the US.
So you have a value from the new build that needs to be met. That implies a reasonably substantial recovery once the foreclosure thing runs its course.
When is that? Well back of the envelope analysis say we are past half way. So another 3 years or so.
I would think the existing thing is good for another two or three years and then we see...
Note that any strong upturn in the local economy and all that goes away...Heaven knows what happens in that case but it would be fun to find out.
How would you possibly know whether advice is good or bad John?
What I do know is that Las Vegas is far more likely to descend into the pits of despair and overwhelmed with hoards of flesh eating zombies than for the real estate market there to recover in the time frame you lay out.
What I do know is that Las Vegas is far more likely to descend into the pits of despair and overwhelmed with hoards of flesh eating zombies than for the real estate market there to recover in the time frame you lay out.
LOL, they're already here, look in the bingo parlours,
There is no law that says you have to buy a home in Las Vegas. I'd definately look elsewhere, in another state if I were you. That way, you'd be assured of your home value rising and your angst about the Las Vegas real state market values going up, down and all around will be a non-issue for you
LOL, they're already here, look in the bingo parlours,
There is no law that says you have to buy a home in Las Vegas. I'd definately look elsewhere, in another state if I were you. That way, you'd be assured of your home value rising and your angst about the Las Vegas real state market values going up, down and all around will be a non-issue for you
Oh, I have no stake in things whatsoever. No angst on my part. And FWIW, I think its a great time to buy in Las Vegas for some people who want a home there, as well as for a handful of bright investors seeking properties to rent out cash flow positive, with minimal regard for potential price appreciation. However, 50%+ of the market is now cash investors...so....
My feelings of schadenfreude in regards to investments often go quite unfulfilled, leaving me horribly unsatisfied. It seems that people that in hindsight made bad investments are typically unwilling to disclose such information after the fact. This makes me sad and leaves me with an empty feeling. People that do dumb things really should have to be accountable for the resulting misery that accompanies doing dumb things.
I did find that watching people begin the ascent up the hill, warning them of the impending doom, and watching them continue on anyway, does in fact fullfill me...there apparently is no need to actually witness the proverbial tumbling off the cliff....so hence my postings.
You are making me think that buying a house in LV is a lot like buying a bond on the bond market, because if interest rates start to rise, then the bond prices start to decrease, meaning you would have to sell the bond for a lower price than you bought it, just to give the buyer of the bond the same interest rate competitive with what market interest rates are offering (as they start to rise).
So then like with a LV house bought and then rented out. The rent might be cashflow positive but if rents do not increase because of local economic problems yet interest rates rise in general, then money sitting in rental house investments would be earning lower yields than money put back into other non-RE investments. And if that be the case, then an investor currently owning a rental in LV and who could not realistically raise the rent any higher, would have to account for a few months sitting vacant every so often between leases, costs of upkeep and between tenant fix-up - then the yield on that would start being less than on money-market and other non-RE investments - and, as money fled from LV rental RE back into other higher yielding investments, then that means a new glut of rental RE on the market in LV - but like with bonds (with fixed nominal interest rates) having to be priced lower to compete with higher interest rates on other investments - then like with the LV rental houses (with non-increasing rental returns), they would have to be priced lower - thus the market would take longer instead of shorter time to recover.
Is that what you are saying? That the cash buyers now rushing in, when interest rates increase, then there is reason for some of them to sell but will have to sell lower if rents do not increase in that same time period - which given the job market, rents might not increase - thus a new glut of investors selling off holds the RE market back on top of any remaining bank owned properties in the market a few years out?
Glad to see some folks who have been predicting the bottom of the market for years are now moving that possibility out several years. At least it is a start. I am still saying, as I have for years, Vegas has not hit bottom except in the lower end markets below around 120,000 dollars but only if in reasonable neighborhoods. Gutter neighborhoods are just plain tough as well as the high end areas. Until Vegas can get an increase in reasonably paying jobs Vegas is just in for a tough go in the majority of the market for a very long time to come.
By the way, my predication of losing the home owners mortgage deduction is not far away and will have a murderous effect on Vegas Pricing as well as elsewhere around the Nation. We already are seeing Investor line up to purchase inventory which means the owner/user pool of voters is going down. Vegas needs anything and everything imaginable to prop up home values but I do not see that happening for a very long time rather I still see the opposite. So far everything is happening the way I have noted it would. No reason to think differently now.
Oh, I have no stake in things whatsoever. No angst on my part. And FWIW, I think its a great time to buy in Las Vegas for some people who want a home there, as well as for a handful of bright investors seeking properties to rent out cash flow positive, with minimal regard for potential price appreciation. However, 50%+ of the market is now cash investors...so....
My feelings of schadenfreude in regards to investments often go quite unfulfilled, leaving me horribly unsatisfied. It seems that people that in hindsight made bad investments are typically unwilling to disclose such information after the fact. This makes me sad and leaves me with an empty feeling. People that do dumb things really should have to be accountable for the resulting misery that accompanies doing dumb things.
I did find that watching people begin the ascent up the hill, warning them of the impending doom, and watching them continue on anyway, does in fact fullfill me...there apparently is no need to actually witness the proverbial tumbling off the cliff....so hence my postings.
You can predict and say "I told you so" all you want, the investors are still buying up homes here for as long as they can I guess. You should write a blog about how bad that idea is, maybe you could teach those investors (and especially the foreign ones) a thing or two. They know something about the Las Vegas real estate market everybody else doesn't, lol.
So, if people did dumb things in their investments here in town in the past, don't worry about it if they won't disclose it to you. Just think how lucky you are that YOU didn't
If you don't have disposable cash to buy a home here in LV, with the idea of tying up that money with meager rental income and waiting the market out till home values increase so you can flip it, then don't do it. The days of quick home appreciation is over.
But, if you're buying a home to live in it, well, now's a pretty good time to do it. But you might want to wait a bit longer on that and keep an eye on the market long term, if you're really that worried about near-future home appreciation values. IMO, we're looking at a 10-15 year recovery period for real estate here in town.
By the way, my predication of losing the home owners mortgage deduction is not far away and will have a murderous effect on Vegas Pricing as well as elsewhere around the Nation.
First of all, I think that your "predication" is something that has less of a chance of happening than the enactment of Rep. Ryan's budget (which, btw, is DOA).
But, let's give you the benefit of the doubt and stipulate that it will happen. Okay, then. Exactly how will this have a murderous effect on Vegas pricing?
As you may or may not know, even if mortgage interest was no longer deductible for individuals on Schedule A, it still would be deductible for investors on Schedule E as a business expense. Therefore, the change would not impact them at all.
Now let's turn to individuals. Let's assume a family buys a house with a mortgage of $150,000 at 5% (This would be for a higher-valued house than the LV median and a higher mortgage rate than is currently available just to skew the results more in your favor). They would pay $7,500 in interest the first year. Add in property tax of approximately $1,500 and we're up to a total deduction of $9,000. Given that the standard deduction currently is $11,400, unless they have some major, major, health expenses that exceed 7.5% of their AGI, they're not using the mortgage interest deduction now anyway.
So exactly why would the loss of something that many people don't use now have a murderous effect on pricing?
So exactly why would the loss of something that many people don't use now have a murderous effect on pricing?
Umm, because higher-income people with larger mortgages actually do itemize. I'm not sure what the percentage is that do, but I'd be willing to bet it's well over 50% of home owners.
Also, when and if they ever get enough votes to eliminate the MI deduction, they would do it in phases over years starting with jumbo mortgages and working their way down. In other words, I'm not loosing any sleep over it.
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