[jfkIII]

I know 20/20 is hindsight...but how nice would it have been to have unloaded in that 48-96 month range! Thanks for the persepctive, olecapt.

[olecapt]

Originally Posted by ClarkGrisowld

Expect the market (and Vegas, it seems) to lead the general economy by about 6 months. Since many economists (and I don't disagree) think things bottom after about 6 months, that means we are close to a bottom in Vegas. There will be some lags and frictions, but I would tend to agree the Vegas housing market finds a bottom in 3-6 months.

If that doesn't make much sense it's because when the economy hits bottom, I expect it to muck around there for maybe 6-12 months. The recovery will be very slow and gradual.

Yup...The Admiral and I were kicking it around over dinner. Finally decided the bottom lasts from a couple of months to a couple of years...almost entirely dependent on the supply of REPOs. And we don't know how to tell what that is. Are all the AltAs going to go south? Will the feds step in and mod many mortgages? Those two alone probably have a two year range in probablility.

Note that the bottom will likely spark a solid rally...Us RE guys love those things.

[tortoise]

Originally Posted by olecapt

Are all the AltAs going to go south?

Related 60 Minutes report . . A Second Mortgage Disaster On The Horizon?

[dmilll]

Originally Posted by olecapt

Yup...The Admiral and I were kicking it around over dinner. Finally decided the bottom lasts from a couple of months to a couple of years...almost entirely dependent on the supply of REPOs. And we don't know how to tell what that is. Are all the AltAs going to go south? Will the feds step in and mod many mortgages? Those two alone probably have a two year range in probablility.

Note that the bottom will likely spark a solid rally...Us RE guys love those things.

Interesting take. In this particular cycle, there are other factors at work (not mentioned above) putting downward stress on prices. The number of REPO's is important but IMHO "the bottom" is not nearly as dependant on this as you make it out to be. Some of these other factors include:

Tighter Lending Standards & Reduced Credit Lines
Fewer qualified buyers are going to make it more difficult for sellers to get what they think their home is worth. In Vegas this is especially key considering the number of jobs largely dependant on tips. While someone may have enough to afford a particular home, on paper they don't. Unless lending standards are relaxed, I just don't see a significant increase in buyers anytime soon. If anything, the reduced lines of credit and available financing options will only speed this trend.

Bear Market
Considering the beating Wall Street has taken this year, I don't see retirees or investors buying homes in numbers that would offset the tighter lending standards. Yes, Nevada is a tax friendly state that will draw people but it's going to take years to recoup what many have lost in a short period of time.

Historical Income to Median Price Ratio
Home prices rose a lot faster than incomes during the run-up. Because incomes remained flat for the most part, it was only a matter of time before home prices fell back to levels the locals could start to afford. Granted Vegas has fallen more sharply than other areas such as NY/SF but with ever increasing taxes and high cost of living, their time will come.

I do agree that the housing market will rebound eventually but it could be a lot longer than people think. When the eventual inflation from the TRILLIONS in bailouts/loans sets in, prices will go back up. Unfortunately that 250-350K two years from now will probably buy a lot less then it did in 2004-06.

[SHEPNYC]

Interesting update on the Real Estate market, both the positive and negative scenarios:


ReviewJournal.com - Business - Experts say it's plain: Housing pain to remain

[WOHR]

10 worst real-estate markets for 2009 - Los Angeles (1) - FORTUNE

[ParkTwain]

Originally Posted by SHEPNYC

Interesting update on the Real Estate market, both the positive and negative scenarios:


ReviewJournal.com - Business - Experts say it's plain: Housing pain to remain

Unfortunately, that article is yet another bogus article about the market coming out of the local RE industry, now a couple of years after the fact. The idea that at the peak the buyers were "stealing demand from the future" is clearly a bogus notion. That is assuming that most of the buyers at that time were buying to be residents and were not investors, and that is a dubious assessment. During the peak years the demand was being ridiculously inflated by a surplus of the less intelligent (that is, nonprofessional) "get rich quick" investors. (Why is it that the local RE industry never mentions the role of Section 1031 Exchange marketplace at that time?) It was great case of "what wise men do in the beginning (invest in homes) only fools do at the end (keep buying too late in the boom)". The numbers of persons moving to Vegas at that time didn't "go parabolic" but the home prices did. So it was investors doing the lion's share of the bidding up, and the stupid mortgage originators fueled the flames because there apparently was a ready market on Wall Street for selling (to institutional investors) securities constructed from bundled-together mortgage notes.

[olecapt]

Originally Posted by ParkTwain

Unfortunately, that article is yet another bogus article about the market coming out of the local RE industry, now a couple of years after the fact. The idea that at the peak the buyers were "stealing demand from the future" is clearly a bogus notion. That is assuming that most of the buyers at that time were buying to be residents and were not investors, and that is a dubious assessment. During the peak years the demand was being ridiculously inflated by a surplus of the less intelligent (that is, nonprofessional) "get rich quick" investors. (Why is it that the local RE industry never mentions the role of Section 1031 Exchange marketplace at that time?) It was great case of "what wise men do in the beginning (invest in homes) only fools do at the end (keep buying too late in the boom)". The numbers of persons moving to Vegas at that time didn't "go parabolic" but the home prices did. So it was investors doing the lion's share of the bidding up, and the stupid mortgage originators fueled the flames because there apparently was a ready market on Wall Street for selling (to institutional investors) securities constructed from bundled-together mortgage notes.

It was actually a little different. The initial runup had a lot of CA money...but it was not 1031s...it was HELOCs off inflated CA values. And there were few Starker exchanges on the way out...the gains were all too short term.

In general those people hit here rode it once once or twice and then went on to Phoenix where they did the same thing. Often they never took possession and really sold the contract or did a simultaneous buy/sell.

As the market went up in 2005 I think you saw a lot of locals buy in with the thought of getting in before it was too late and perhaps making a little money. It was driven by a builder push and lots of absurd financing. The financing particularly enabled bkuyers to get in way over their head.

I looked at the statistics on the initial foreclosures. They were two thirds owner occupied and 90% locally owned.

So I would think that they actually did oversell the market...using the fear that the locals would be unable to get in and would miss all the gains plus all the weird financing.

Our population has not dropped to any significant degree and yet we have lots of vacant houses and very low new build for the last two years. So I think it very likely that they heavily overbuilt at the end of the runup.

[ParkTwain]

I've never seen any data that support your assertions, but maybe you're scooping the R-J's Hubble Smith on a regular basis. Based on what you say here, which timeframe you don't state and I can't vouch for anyway, one-third of purchases that went into FC were not owner-occupied. That's certainly a high enough percentage of investors in the market to pump up the market unrealistically. What degree of investor activity would you have predicted would distort the local market?

For instance, I saw lots of homes in The Vistas in Summerlin that were never occupied after being bought from the builder.

[olecapt]

Originally Posted by ParkTwain

I've never seen any data that support your assertions, but maybe you're scooping the R-J's Hubble Smith on a regular basis. Based on what you say here, which timeframe you don't state and I can't vouch for anyway, one-third of purchases that went into FC were not owner-occupied. That's certainly a high enough percentage of investors in the market to pump up the market unrealistically. What degree of investor activity would you have predicted would distort the local market?

For instance, I saw lots of homes in The Vistas in Summerlin that were never occupied after being bought from the builder.

The 2004 runup had lots of CA money. It was virtually all new build. I think that money was active through 2005 and was mostly gone by 2006. Hell some of the homes in the Vistas changed hands four times and were never lived in. I ran the foreclosure numbers in early 2008. And I agree there is some speculative component...but it was pretty much local...and it was not deep pocketed investors because it went belly up early on. I would think it mostly locals who bought the home as owner occupied to get highly leveraged financing and then had the bottom fall out.

Take a look at the Case Shiller data for Las Vegas and Phoenix. Like peas in a pod simply moved a little temporally...see

Home Prices Through September ’08 - Interactive Graphic - NYTimes.com


I have a couple of clients who are deep pocketed investors who played and got burnt...but they are not likely to go to foreclosure even though each house is costing them a grand a month or so. Interesting they won't sell either because of having to stand the 100K plus loss.

I was there PT...and watched most of it from up close.

Hubble by the way reports but seldom does any analysis. He relies on Smith and Murphy. Smith gets it right once in a while...Murphy never.