The Las Vegas Valley
2nd Quarter and Mid-Year Edition
REAL ESTATE QUARTERLY Existing Home Sales - Substantial Climb...Again Home sales continue upward as June finished off the quarter with the highest sales ever recorded. This is clearly a reaction to prices being reset to those of nearly one decade ago. Single Family April
May
June
Listings Available Average price Median Price
12,391 $231,145 $169,000
10,720 $213,315 $170,000
9,956 $416,579 $189,000
3,202 $166,304 $141,950
3,258 $172,487 $140,000
3,785 $167,425 $140,000
Units Sold Units Sold Average Price Median Price Avg. Days on Market
67.0
66.7
67.3
Condo/TH April
May
June
Listings Available Average price Median Price
3,915 $159,409 $98,700
3,369 $129,834 $85,578
3,080 $279,224 $115,000
727 $84,235 $64,500
737 $84,072 $65,000
917 $85,931 $66,000
Units Sold Units Sold Average Price Median Price Avg. Days on Market
80.0
76.7
71.7
The story for the second quarter was one of declining for-sale inventories, multiple offers on high-quality or well priced fixable bank owned homes, especially those priced below $200,000 and banks slowing their releasing their inventory to the market. We presume that had more inventory been on the market, our sales numbers would be even higher. While banks, homeowners who purchased during the boom years and others have suffered from price declines, first-time buyers have been ecstatic. Some astute investors have also shifted into purchasing mode as they have recognized that many homes cash flow well as rentals.
1000 900
600
2000
500
1500
400
Residential Pricing
2
Sales Greater than List Price
3
Commercial Real Estate
4
Chicken Little
5
New Home Sales
6
Graphical Recap
7
Indicators
New Home Permits Apartment Rental Rate
300
1000
1
Median Price (soldexisting)
700
2500
The Mortgage Market
Closed (existing)
800
3000
1
Housing Total Available Housing Inventory (existing)
Condominium/TH Sales
Single Family Sales 3500
Key Resale Data
The charts below show the magnitude of the climb in sales both month-to-month and compared to 2008.
Source: GLVAR
4000
ALWAYS INFORMED
Q2' 09
Q2' 08
13,036
21,546
4,695
2,613
$124,673 1,616
$223,675 4,414
$856
$871
10.2
8.1
3-Month Libor
0.51
2.78
30-Year Fixed
5.41
6.14
Prime
3.25
5.00
6-Month CD
1.34
3.16
871,200
929,800
11.1
5.7
200
500
100
0
0
April
May 2008
2009
June
Apartment Vacancy Rate (%) April
May 2008
June
Rates (%)
2009
The Mortgage Market Update
Employment
Homebuyers are back in the Las Vegas market big time. June while often a strong month for sales, surpasses sales records as price declines are being responded to by investors and individuals seeking a place to call home. While we have often heard of well financed investors buying up homes, we know there are many kinds of buyers out there and with current prices, they don’t have to be ten figure folks. Our agents, as well as our friends at PHH Mortgage have recently dealt with many people who are finally able to realize their dream of owning a home, due to today’s prices and low interest rates. One couple of note made less than $10 per hour working for a major retailer and was able to purchase a home for just over $100,000. This is great news for these buyers and this demonstrates the possibility of how far money can go in the current real estate market.
Total Employment Unemployment Rate (%)
Source: UNLV CBER, Bloomberg, Mlxchange, Salestraq, Coldwell Banker Premier Realty. Note: Rental rates are lagged one quarter, employment is lagged by one month.
-Continued www.lasvegashomes.com
The Las Vegas Valley
2nd Quarter and Mid-Year Edition
REAL ESTATE QUARTERLY Continued from page 1.
In addition, FHA loans are still popular and while one has to compete to a certain extent with conventional and cash buyers for some homes, this still opens a door of possibilities for first-time buyers. In addition, the $8,000 tax credit is still available until December 1st. If you are considering filing for this credit, if you haven’t done so already, its time to do some homework, find out how much home you need, what you can afford and start the pre-approval process so you can begin looking at homes. Dave Reichert CMP & Ray Melton Mortgage Advisors PHH Mortgage
Back to the Future In the 1985 film Back to the Future, Marty McFly takes a ride in Doc Brown’s Delorean into the past. In terms of pricing, we have also gone back. While we did not need a flux capacitor to get back in time, we are back to levels of the earlier part of the decade. While this has hammered balance sheets, caused distress among owners who purchased during the high-flying years and has yielded further uncertainties through feedback effects, the bright spot has been with first-time buyers and investors looking for cash flow, rather than the speculation of appreciation that was abundant in the past. Many first time buyers are finally looking for a place to call home. What a wonderful concept we have returned to...the reason for the asset to exist in the first place. This is a healthy response to actual demographic demands. Further, cash flow investors tend to hold for the long-term and are not contributing to restricting supply as speculative activity did in the past. This is positive news. While homes under $200,000 have experienced dramatic sales, other segments are lagging in sales and price declines. The market cannot be considered fully functional until further buyer Single Family Home Prices by Square Footage Range segments return to the market, such as move-up buyers. Y-O-Y Change 1,000 to 1,500 Y-O-Y Change 2,500 to 3,000 1,000 to 1,500 2,500 to 3,000 80%
$550,000 $500,000
60% $450,000 $400,000
Back to the early 2000’s
20%
$300,000 $250,000
0%
$200,000 -20%
$150,000 The 1990’s
$100,000 -40% $50,000 -60% Ja n-
96 Ju l- 9 6 Ja n-9 7 Ju l- 9 7 Ja n-9 8 Ju l- 9 8 Ja n-9 9 Ju l- 9 9 Ja n-0 0 Ju l- 0 0 Ja n-0 1 Ju l- 0 1 Ja n-0 2 Ju l- 0 2 Ja n-0 3 Ju l- 0 3 Ja n-0 4 Ju l- 0 4 Ja n-0 5 Ju l- 0 5 Ja n-0 6 Ju l- 0 6 Ja n-0 7 Ju l- 0 7 Ja n-0 8 Ju l- 0 8 Ja n-0 9
$-
Source: GLVAR, Clark County, Coldwell Banker Premier Realty.
Year-Over-Year Change
40%
$350,000 Median Price
For individuals who have not owned a home, or those who have not had a mortgage in three years and can be considered a first time buyer (or cash buyers), it’s a great time as you can basically go back in time on the prices of your home and investment.
The Las Vegas Valley
2nd Quarter and Mid-Year Edition
REAL ESTATE QUARTERLY Multiple Offers and Bank Owned Homes
89 00 2 89 01 1 89 01 4 89 02 1 89 02 7 89 03 1 89 04 4 89 05 89 2 06 1 89 08 1 89 08 89 5 10 1 89 10 3 89 10 6 89 10 8 89 11 0 89 11 5 89 11 8 89 12 89 0 12 2 89 12 4 89 12 89 9 13 1 89 13 5 89 13 9 89 14 2 89 14 4 89 14 6 89 14 8 89 15 6 89 16 9 89 17 9 89 81 5
Single Family Sale Prices above List Prices, Bank Owned - June The current market is very dynamic with 100% trends and procedures shifting quickly. Not 90% too long ago an offer below list price on a 80% bank owned property might easily be considered. Our recent experience shows that many 70% of the quality bank owned (REO) properties 60% are receiving multiple offers, thus buyers have 50% often written their offers above the list price. Instead of lingering on the market above mar40% ket clearing prices, banks are listing below or 30% near the estimated market price and allowing offers to make a price discovery. So far this is 20% 10% more than common with 48 percent of the June sales exhibiting this behavior. The ex0% hibit to the right displays the proportion of homes sold for higher than list price in each zip code (note that some zip codes had only 1 Source: GLVAR.. Note: Some zip codes are not depicted as they recorded no sales. or 2 sales, although 44 of the 65 with sales had sales above list). Part of this is due to REO’s becoming more scarce and because the probability of closing on an REO is much higher than for short sales.
As a result of the intensified interest in bank owned homes and the aforementioned proportion of properties selling for greater than list, the average sales price as a percent of list price is 100%. While noting the scaling of the chart below, we see that sales price/ list price has increased 3% just since March. This is a noteworthy change in the market since a deterioration market is usually characterized by chasing prices on the downside with multiple adjustments to list price. The reverse is occurring now, with the list price acting as a trigger for what is basically an auction process. On a practical note, one has to be quick to react in this market. One has to make offers quickly since you are competing with many other buyers. If you don’t actually quickly, you could be wasting the time you had spent searching. While one needs to be quick, to decide, patience is also a virtue. If you don’t get an offer accepted, keep trying, the right home is out there!
Single Family Sales Price as a Percent of List Price, Bank Owned - January -June 103%
100% 99% 98%
98%
98%
97%
100%
98%
Sale % of List
95%
93%
90%
88%
85%
83%
80% Jan-09
Feb-09
Mar-09
Source: GLVAR, Coldwell Banker Premier Realty.
Apr-09
May-09
Jun-09
The Las Vegas Valley
2nd Quarter and Mid-Year Edition
REAL ESTATE QUARTERLY Commercial Market - Another Dynamic Sector of Our Market
Transactions are happening across the board in the commercial real estate market, however, downward pressure remains constant. “They are not even close to the pace of deals in 2008 yet deals are getting done”, explains Ron Opfer, CCIM. “There are many more incentives involved in these transactions, such as higher TI allowances, shorter leases, and lower rents.” A look at the overall commercial leasing market shows industrial deals as low as 25 cents per square foot (sq.ft). per month, retail deals as low as 60 cents per sq.ft per month, and office deals as low as 55 cents per sq ft/mo. Not all deals were done at these prices, but, “there are not many tenants looking to expand. Tenants are looking for the best deal possible and not moving fast to find one”, says Opfer. “Most tenants are experiencing downward pressure on their business from the economy. They simply cannot afford to pay the rents they used to pay.” Elle Gaensslen’s experience in the market is similar. Gaensslen notes, “Most businesses are downsizing to smaller square footages and lower rates to alleviate the financial pressures during these market conditions. As noted, deals are happening. “I have a retail client that is expanding into the Las Vegas market from California to take advantage of the lease opportunities and to secure prime space for less,” said Gaensslen. Most economic indicators reflect a lot of downward pressure on the economy. During the 2nd quarter of 2009 we saw vacancy rates across the board increase. With unemployment still rising we can expect to see even more vacant spaces in the coming months. “I don’t see signs of a turnaround coming soon. That means there are great deals out there for those looking to expand in Las Vegas,” stated Opfer. “Take U-Swirl Frozen Yogurt for example. They are a fast growing company. They will open 10 stores in Las Vegas in less than 1 year. Not to mention their franchise locations opening in other states. The change in market conditions has proven to be a big positive in their expansion plans,” explains Opfer. “The same goes for the medical profession” added Opfer. Another adjustment in the market is the terms of leases. Gaensslen notes, “landlords are agreeing to shorter term leases because they don't want to be stuck with discounted leases when the market stabilizes. Tenants want shorter term leases due to uncertainty with their respective businesses, anxious about Vegas as a market to stay in long term, and some feel the market will slide even further, giving them the opportunity to secure an even better deal in 2010.” Much of the recent leasing activity has been between one and three years. Further pressures are expected to come as banks are expecting more commercial defaults during the remainder of 2009. “This could be a great opportunity for those with cash,” said Opfer. “It may be that the deals of the not so distant future will resemble those of the RTC (Resolution Trust Corporation) days,” added Opfer. Property values have had downward pressure and are in need of a price re-set. “The LTV’s are no longer in balance and when the banks complete their re-appraisals, they will be in need of moving those underperforming assets”, explained Opfer. The properties on the market today are being sold to raise capital. Large real estate holding companies like Weingarten and General Growth are selling some very good properties. Some will pay down debt and others to expand. Sonic, the restaurant franchise, plans on doing sale-lease backs on several of their properties to fuel some of its western growth plans. Whether it is a bank, growth oriented company, or a debt heavy REIT, properties are on the market for sale and investors are underwriting the properties and making offers. “There is a bit of a disconnect between how investors and sellers value properties. I still see seller proformas valuing their property on last year’s lease rates assuming full occupancy, when the center is 20% vacant. Investors are looking at the rent rolls and assigning the tenants in risk categories. They are assuming re-tenanting the centers on what they think lease rates will be 6 months from now and are assuming a lot of incentives will be needed to attract tenants. That all has an effect on the price they will offer for the property”, said Opfer. “We are in the midst of some amazing real estate opportunities. The affordability factors of owning commercial real estate are very favorable for those with cash. This is going to be looked at as a highly opportunistic time to buy commercial real estate,” concluded Opfer.
The Las Vegas Valley
2nd Quarter and Mid-Year Edition
REAL ESTATE QUARTERLY Chicken Little
Whether relating to the lives of pop stars, the landscape of our political environment and the state of the national and local economy, there is absolutely no shortage to bad press…the bigger the headline, the more media and the better the sales. Throughout the last 18 months, positive press about our local market has been dripping as quickly as a leaky faucet. Turn on the tap! The surge in positive articles and reports surrounding many aspects of the greater Las Vegas Valley has started! Between CNNMoney.com ranking Clark County in their Top 25 places for jobs, Henderson honored for being one of the most Playful Cities in the country for kids by KABOOM, Las Vegas ranking in many Forbes.com reports and even being honored as The Best Adventure Town in the nation by National Geographic Magazine The doom and gloom must be drying up and Las Vegas is, once again, back on top!
New home sales...making a comeback? Advantages of buying a newly built home While the data still shows that single family new home permits in Las Vegas were below 500 for the 10th consecutive month, we did see an increase from May to June and sales activity at new home communities is also increasing. This trend is occurring across the country. With the substantial reduction in resale inventory since the first of the year and many homes receiving multiple offers, some buyers are opting to purchase a new home to avoid what they consider hassles of purchasing an REO property along with numerous other advantages. These are some of the top reasons today's buyers are considering and purchasing a newly built home including • • • • • • • • •
Conforms to today's building codes and often have more safety features and fewer health hazards than older homes. Offers warranties in case certain problems develop over time - - and the home's major appliances and systems are typically covered by manufacturer's warranties. Reflects the latest in modern architecture and layout. Great rooms, bigger closets and additional bathrooms often replace the formal dining and living rooms found in older homes. Is more energy efficient in design with better windows, more efficient heating and cooling equipment and a more extensive use of insulation. Is built with materials requiring less maintenance, such as aluminum siding, vinyl windows and pressure-treated wood decks that resist rot and insects. Has the ability to be customized more easily than a resale home, since you can often select many options and details ranging from floor plans and paint colors to faucets and light fixtures. Boasts wiring for today's technologies such as multiple phone lines, high-speed Internet connections and extra cable outlets. Provides additional opportunities to meet new friends as the neighborhood develops and new households move in. With energy costs near the top of consumer concerns, it's good for them to know that today, new homes are more energy and resource-efficient than ever before. Through the use of new materials and construction techniques, today's homes are built twice as energy efficient as new homes a generation ago, making them more affordable to own and operate.
New home construction has and always will be a key driver of GDP for the U.S. economy. Purchasing a new home supports local jobs and the local economy. While a large segment of the market will continue to be driven by foreclosures, the new home market, while having experienced its toughest test to date in its history, will survive and eventually stand tall again.
The Las Vegas Valley
2nd Quarter and Mid-Year EditionÂ
REAL ESTATE QUARTERLY Single Family Sales by Price Range - Q2, 2009
Single Family New Listings by Price Range - Q2, 2009
5M +
3
5M +
18
3M - 4,999,999
3
3M - 4,999,999
34
1M - 2,999,999
1M - 2,999,999
37
500,000 - 999,999 400,000 - 499,999 300,000 - 399,999
493
250,000 - 299,999
593
200,000 - 249,999 180,000 - 199,999
300,000 - 399,999
861
250,000 - 299,999
882
140,000 - 159,999
100,000 - 119,999
1,302
120,000 - 139,999
1,173
1,629
100,000 - 119,999
1,141
Under 99,999
1,437
Under 99,999
2,704
800
1,093
140,000 - 159,999
1,131
120,000 - 139,999
600
839
160,000 - 179,999
882
400
2,081
180,000 - 199,999
708
160,000 - 179,999
344
200,000 - 249,999
1,346
200
481
400,000 - 499,999
183
0
220
500,000 - 999,999
146
1000 1200 1400 1600 1800 2000 2200 2400 2600 2800
3,090
0
Single Family Prices by Home Type - Q2, 2009
400
800
1200
1600
2000
2400
2800
3200
3600
Single Family Sold by Time on Market - Q2, 2009
121 +
$365,259
1,889
4+ Bdrm $168,054
91 - 120
844
$132,737
61 - 90
3 Bdrm
1,237
$122,508
31 - 60
1,836
$123,279
2 Bdrm $104,341
$-
$50,000
$100,000
1 - 30
$150,000
Median Price
$200,000
4,439
-
$250,000
500
1,000
1,500
2,000
Average Price
Type of Financials by Units Sold - Q2, 2009 AUCTION
110
CNOFLSE
6
PRIVATE
17
OWC
16
LSEOPT
2
EXCH
1
CTL
6
AITD
5
VA
686
FHA
3,671 2,639
CONV CASH
3,092 -
Source: Mlxchange.
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2,500
3,000
3,500
4,000
4,500
5,000
The Las Vegas Valley
2nd Quarter and Mid-Year EditionÂ
REAL ESTATE QUARTERLY Condo/twh Sales by Price Range - Q2, 2009 5M +
0
3M - 4,999,999
0
1M - 2,999,999
2
500,000 - 999,999
10
400,000 - 499,999
6
300,000 - 399,999
Condo/twh New Listings by Price Range - Q2, 2009 5M +
4
3M - 4,999,999
4 29
1M - 2,999,999
66
500,000 - 999,999 30
250,000 - 299,999
21
200,000 - 249,999
38
180,000 - 199,999
37
160,000 - 179,999
42
400,000 - 499,999
69
300,000 - 399,999
98
250,000 - 299,999
51
140,000 - 159,999
160
77
180,000 - 199,999
181
100,000 - 119,999 90,000 - 99,999
93
200,000 - 249,999
62
120,000 - 139,999
112
160,000 - 179,999
109
80,000 - 89,999
130
140,000 - 159,999
152 224
70,000 - 79,999
220
120,000 - 139,999
60,000 - 69,999
300
50,000 - 59,999
305
258
100,000 - 119,999 Under 49,999
693
0
100
200
300
400
500
600
2,251
90,000 99,999 - 99,999 Under
700
800
0
Condo/twh Prices by Home Type - Q2, 2009
200
400
600
800
1000 1200 1400 1600 1800 2000 2200 2400
Condo/twh Sold by Time on Market - Q2, 2009 $94,184
121 +
519
3 Bdrm $79,454
91 - 120
222
$83,996
61 - 90
2 Bdrm
322
$64,350
31 - 60
435
$69,216
1 Bdrm $44,950
$-
$25,000
1 - 30
$50,000 Median Price
$75,000
$100,000
881
-
100
200
300
400
Average Price
Type of Financials by Units Sold - Q2, 2009 CNOFSLE
-
AUCTION
49
PRIVATE
2
OWC
3
LSEOPT
-
EXCH
-
CTL
-
AITD
-
VA
34
FHA
254
CONV
376
CASH
1,663
-
Source: Mlxchange.
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
500
600
700
800
900
1,000