[SportyandMisty]

One of the fundamental tenets of an efficient market is that it is not possible to determine a bubble is occurring until after the bubble has popped and you can see it in hindsight. During the bubble, prices reflect all publicly available information. It is only afterwards that you can see just how bad that information was.

[Kevin_nlv]

Originally Posted by SportyandMisty

One of the fundamental tenets of an efficient market is that it is not possible to determine a bubble is occurring until after the bubble has popped and you can see it in hindsight. During the bubble, prices reflect all publicly available information. It is only afterwards that you can see just how bad that information was.

Very true Sport and Misty. This market has become the most manipulated real estate market in history and is nothing more then musical chairs and the music has begun to slow down.
Look for the hot money to exit and play next rotation, gold and silver maybe now that it's beaten to death.
Perception is changing and latecomers to the party will be left without a chair.

[SportyandMisty]

Originally Posted by Kevin_nlv

...

-Hedge Funds are leaving Las Vegas.... Here is one interesting video for you:

Hedge funds dump housing
Hedge Funds Dump Housing | Fox Business Video

And there you have it.

It may be a bit off topic, but hedge funds don't operate by investing in an asset such as housing. They operate by speculating on a spread between one asset class and another. Once that spread disappears, they stop.

A trivial example: the price of gold. Let's say the price of gold in Las Vegas is $1293/oz. Let's say the price is $1300/oz in London. A hedge fund operates by simultaneously buying one asset (Las Vegas gold) and selling another (London Gold). The hedge fund makes its money on the spread. It does not want to own the asset (gold). Obviously, in this trivial example, hedge funds that focus on this strategy (price arbitrage for a specific asset between exchanges) pounce on the pricing discrepancy like piranha on a calf in the Amazon, and rapidly bid up the price of gold in Las Vegas and sell down the price of gold in London until the discrepancy disappears (just like the flesh on the calf in the amazon disappears as a result of the piranha feeding frenzy).

So, to say Hedge Funds are no longer buying an asset such as houses in Las Vegas says NOTHING about the market for housing in Las Vegas. All it says is that the spread has disappeared. What was the spread? Well, hedge funds guard this information as secret. They might be long Las Vegas housing while simultaneously selling short housing via credit default swaps covering the same.

Why would the be both long and short at the same time? That's what hedge funds actually do - just like the trivial gold example where they are long gold in Las Vegas and short gold in London.

[lvoc]

Originally Posted by Kevin_nlv

I actually adjusted my post above, people paid higher interest rates in early 80's because prices were LOW and they weren't inflated due to artificially low interest rates.

Many investors will bail out and disappear quckly once they see flipping homes for higher price due to low interest rates is not profitable anymore, because guess what interest rates are not only rising today......they are EXPLODING!!!!

Actually interest rates went down a week a go. They are up this week likely do to the fed news. There is certainly no indication at this point of a rate explosion.

The market at the moment is heavily biased against the financed owner occupant. Has nothing to do with interest rates.

The difficulty is that prices are increasing so fast one can't get an appraisal that will allow a low down payment mortgage. In fact even conventional mortgage buyers are having to waive the appraisal contingency..

Most of the investor buyers in Las Vegas bought a ways back when the properties actually provided a nice return. If the present price trend continues they may well begin to sell. I would consider that a good thing as it may lower the rate of price appreciation and starting turning many tracts to owner occupied.

[lvoc]

Originally Posted by SportyandMisty

It may be a bit off topic, but hedge funds don't operate by investing in an asset such as housing. They operate by speculating on a spread between one asset class and another. Once that spread disappears, they stop.

A trivial example: the price of gold. Let's say the price of gold in Las Vegas is $1293/oz. Let's say the price is $1300/oz in London. A hedge fund operates by simultaneously buying one asset (Las Vegas gold) and selling another (London Gold). The hedge fund makes its money on the spread. It does not want to own the asset (gold). Obviously, in this trivial example, hedge funds that focus on this strategy (price arbitrage for a specific asset between exchanges) pounce on the pricing discrepancy like piranha on a calf in the Amazon, and rapidly bid up the price of gold in Las Vegas and sell down the price of gold in London until the discrepancy disappears (just like the flesh on the calf in the amazon disappears as a result of the piranha feeding frenzy).

So, to say Hedge Funds are no longer buying an asset such as houses in Las Vegas says NOTHING about the market for housing in Las Vegas. All it says is that the spread has disappeared. What was the spread? Well, hedge funds guard this information as secret. They might be long Las Vegas housing while simultaneously selling short housing via credit default swaps covering the same.

Why would the be both long and short at the same time? That's what hedge funds actually do - just like the trivial gold example where they are long gold in Las Vegas and short gold in London.

Don't see any "hedge" activity here...more investment trust. Mostly small operators with small holdings. I would think many of the older buys have 50% or more gain and may be tempted to bail out.

[Kevin_nlv]

Originally Posted by SportyandMisty

It may be a bit off topic, but hedge funds don't operate by investing in an asset such as housing. They operate by speculating on a spread between one asset class and another. Once that spread disappears, they stop.

A trivial example: the price of gold. Let's say the price of gold in Las Vegas is $1293/oz. Let's say the price is $1300/oz in London. A hedge fund operates by simultaneously buying one asset (Las Vegas gold) and selling another (London Gold). The hedge fund makes its money on the spread. It does not want to own the asset (gold). Obviously, in this trivial example, hedge funds that focus on this strategy (price arbitrage for a specific asset between exchanges) pounce on the pricing discrepancy like piranha on a calf in the Amazon, and rapidly bid up the price of gold in Las Vegas and sell down the price of gold in London until the discrepancy disappears (just like the flesh on the calf in the amazon disappears as a result of the piranha feeding frenzy).

So, to say Hedge Funds are no longer buying an asset such as houses in Las Vegas says NOTHING about the market for housing in Las Vegas. All it says is that the spread has disappeared. What was the spread? Well, hedge funds guard this information as secret. They might be long Las Vegas housing while simultaneously selling short housing via credit default swaps covering the same.

Why would the be both long and short at the same time? That's what hedge funds actually do - just like the trivial gold example where they are long gold in Las Vegas and short gold in London.

Hedge funds understand the real estate risk.
Although some individuals may still be interested in buying a property, institutional investors have already started to back off and some of them are strongly reconsidering their real estate holdings.
Hedge funds are paid based on performance. They have purposefully kept those purchased properties off the market until now, but that can change overnight.
Starting almost immediately, the hedge funds which determine that Interest Rates have indeed bottomed and yield are indeed going to increase will be faced with the unenviable task of selling those properties. They will do this to prevent loss and they know bonuses will not come unless they record a gain.

Expect a flood of inventory as a result, and expect a larger then expected price decline in real estate in the year ahead.

[Kevin_nlv]

Originally Posted by lvoc

Actually interest rates went down a week a go. They are up this week likely do to the fed news. There is certainly no indication at this point of a rate explosion.

The market at the moment is heavily biased against the financed owner occupant. Has nothing to do with interest rates.

The difficulty is that prices are increasing so fast one can't get an appraisal that will allow a low down payment mortgage. In fact even conventional mortgage buyers are having to waive the appraisal contingency..

Most of the investor buyers in Las Vegas bought a ways back when the properties actually provided a nice return. If the present price trend continues they may well begin to sell. I would consider that a good thing as it may lower the rate of price appreciation and starting turning many tracts to owner occupied.

I really don't won't to insult you but do me a favor and call a couple of mortgage brokers around town or cross country. They are all freaking out!!!!!
Last week was a worst week for a mortgage rates on record and for you to come out here and say otherwise is ridiculous.

[BBMW]

Other then the massive disruption of the 2007-8 collapse and its aftermath, which had lots of other issues besides interest rates, it looks like it holds pretty well.

Originally Posted by logline

Kevin's thesis of higher interest rates = lower house prices is woefully flawed. There is a no automatic inverse correlation... history proves it:

[lvoc]

Originally Posted by Kevin_nlv

I really don't won't to insult you but do me a favor and call a couple of mortgage brokers around town or cross country. They are all freaking out!!!!!
Last week was a worst week for a mortgage rates on record and for you to come out here and say otherwise is ridiculous.

Nonsense. You don't seem to remember that i am in the business. Have talked to and gotten pre-qual commitments for 3 clients in the last 5 days. One homepath, one FHA and one conventional. The mortgage brokers are not in panic mode. One rate was 4.25% the others under 4.

[von949]

Originally Posted by lvoc

Nonsense. You don't seem to remember that i am in the business. Have talked to and gotten pre-qual commitments for 3 clients in the last 5 days. One homepath, one FHA and one conventional. The mortgage brokers are not in panic mode. One rate was 4.25% the others under 4.

Any of those 3 happen to be stationed at Nellis? I got two new coworkers that are actively looking. They got similar rates also.


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