Big Picture | Las Vegas Now

MarketWatch Reports and End of Year Analysis

January 19, 2011

Market Watch Report
End of Year 2010

Las Vegas, Nevada

Happy New Year! Well…..another year of living the Las Vegas real estate dream has come to a close. And, we’re all still here. At a minimum, let’s raise our glasses to that fact. That alone speaks volumes. So………..Cheers!

2010 was a year without a lot of surprises. Things stayed pretty constant throughout. Those who projected the beginning of a turnaround (was there anyone who took that side?) were left to grasp a few glimmers of hope that came to pass and those who warned of another year of further crashes throughout the market – the Gloom and Doomers – were also off the mark.

The home buyer tax credit, which many worried was artificially propping up an otherwise much worse market, came to an end. And while we agree that we did see a slowdown in closed units in the months that followed, certainly, those numbers did not dip to the lows that were being presented at that time.

Hopefully, the 2011 Las Vegas real estate market will begin to show signs of a turnaround. However, I believe that we will probably see another year very similar to 2010. Of course, massive job creation or a spike in interest rates could move the pendulum in either direction, and quickly.

Here’s what I noticed as I reviewed the end of year statistics as well as each month’s numbers throughout the year:

1. Inventory is climbing. December was the first time that available inventory had declined since April, but it is up 50% from the same time in 2009. REO and Short Sale inventory climbed 58% and 68% respectively over that same period. The available inventory is showing signs of stabilization. From August through December, the available inventory has remained between 14,119 on the low end to 15,353 at the upper end.

2. Contingent and Pending properties are down. Since April, this number has been trending downward, from 16,193 in April to 10,849 in December—a 33% decrease. For the year, the number of contingent and pending properties is down 17%.

3. They’re baaaaacck. The next wave of REOs may be upon us. In December, there were 1,880 REO closings—the highest number since March 2010. We shall see.

4. Final Short Sale numbers proved us wrong. Earlier in the year, I predicted that Short Sales would pass REOs as the largest portion of closed units in a given month. They got close, but did not quite make it. In June, REO closings were 38% of the closed units for the month and Short Sales were over 34%. However, the spread started moving back the other way in July, and at the end of the year, REOs were back to 50% of the closed units and Short Sales had declined to 26%.

5. There is one other thing to note about Short Sales in 2010. While the general perception is that Short Sale successes are on the rise, a closer look at the numbers shows this is just not the case. Overall, Short Sales are successful between 8 – 12 % of the time, or 1 out of every 8 – 12 Short Sales actually closes. This statistic has remained pretty consistent over more than just these past 12 months. Many theories abound. I will save that for another discussion.

6. Finally, distressed sales (REO and Short Sale) continue to dominate the market. They comprised 77% of the closed units in December 2010. This number has been as high or higher for some time. With the number of homeowners underwater at around 80% and Las Vegas having the highest percentage of distressed assets in the United States, look for things to remain the same for awhile. The turnaround everyone is looking for may still be a few years away.

Thanks for your continued support and readership. I really enjoy sharing every month. And again, Happy New Year!

David

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THE COSMOPOLITAN OF LAS VEGAS

December 21, 2010

The Cosmopolitan of Las Vegas delivers stylish design with an adventurous and welcoming spirit – delivering a decidedly different kind of Las Vegas experience. The new 2,995-room resort features oversized residential style living space with expansive one-of-a-kind private terraces and spectacular designs by acclaimed interior architects David Rockwell, Jeffrey Beers, Adam D.Tihany and the Friedmutter Group. Guests will enjoy diverse dining experiences from the country’s top chefs, unprecedented services and amenities, innovative new membership offerings, three distinct pool environments, a 100,000-square-foot casino, Sahra Spa & Hammam, Marquee Nightclub & Dayclub, nine unique retail boutiques and breathtaking views of the Las Vegas Strip at every turn.

“The Cosmopolitan is about creating a resort experience set apart from anything that exists right now in Las Vegas,” says John Unwin, CEO of The Cosmopolitan. “When you combine spacious suites, high design from talent like David Rockwell, a carefully curated award-winning dining collection, unparalleled service and gaming, we know guests will enjoy an experience that harkens back to an era when guests felt connected, inspired and engaged by their resort.”

Situated at a desirable center-Strip location, The Cosmopolitan’s uniquely vertical multi-tower design on just 8.7 acres of land boasts sweeping views of the Las Vegas skyline, allowing guests to feel that they are truly at the epicenter of the vibrant city while maintaining a boutique style footprint.

The 50-story East and West towers comprise oversized hotel and condominium-style rooms ranging in size from 730 square feet to over 5,400 square feet in addition to ten three-story bungalow-style suites adjacent to the west pool deck. Contemporary bespoke room décor by David Rockwell will feature spacious living areas, luxurious bathrooms, a hundred small but unique touches, and many with expansive terraces with dazzling views of the Strip. Each room features state-of-the-art technology control panels, plasma-screen televisions, entertainment system, wireless internet and a custom in-room bar. The oversized bathrooms offer moments of unexpected tranquility combined with breathtaking views —Japanese soaking tubs, rain showers and marble floors complete the guest bath experience.

The Cosmopolitan of Las Vegas offers culinary concepts from some of the country’s top chefs and a roster of dynamic, new-to-Las Vegas restaurants. To date, the prestigious lineup will include: Blue Ribbon Sushi Bar & Grill by restaurateurs Bruce and Eric Bromberg; China Poblano and Jaleo, both by Chef José Andrés; Comme Ça by acclaimed Los Angeles Chef David Myers; international restaurateur Costas Spiliadis’ Estiatorio Milos; Holsteins, an exciting new burger concept from Block 16 Hospitality; Scarpetta and D.O.C.G., both by award-winning chef Scott Conant; and popular steakhouse STK from The ONE Group.

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November FAST FACTS

December 21, 2010

Each month, we scrutinize the housing data in FAST FACTS looking for a number that has changed significantly. If we find one, our task is to figure out why it changed and what it means. This year, we have seen significant numerical changes on only three occasions:

1. In June 2010 we saw 983 new home closings – - about double the 515 in May and the 408 in July. The reason: The expiration of the $8,000 home buyers tax credit was June 30th.

2. This month we saw Short Sales listings in the local MLS break the 50% mark for the first time. The reason: Banks are showing a preference for the Short Sale over the Foreclosure Sale.

3. This month we see 951 Bank Foreclosures, less the half of the 2,195 we saw in October, in fact, less than half of the 1,900 we’ve averaged for the first ten months of this year. The reason: the much ballyhooed but short lived foreclosure moratorium highlighted by the “robo-signing” scandal which broke in September and October.

Does that mean that we can expect bank foreclosures to snap back to their normal level of about 1,900 next month? Probably not, because of three factors:

1. It’s the Christmas season, and apparently even the Scrooge Banks have some heart . . . December 2009’s 1,325 foreclosures were the fewest for any month that year.

2. Some lingering, left-over robo-signing effect from previous months.

3. But the main reason: banks are finally realizing that they are better off pursuing short sales than they are pursuing foreclosures.

According to Fitch Ratings, “Loss severities are expected to increase between 5% and 10% on residential mortgage-backed securities in 2011 as loss mitigation costs and foreclosure expenses go up.” This is a national trend, and we believe it is part of the solution to our current housing crisis.

Just look at November’s numbers regarding types of sales in the existing homes market:

SHORT SALES 824 $125,000

AUCTION SALES 308 $91,000

REO SALES 1,597 $111,000

NON-DISTRESS 1,187 $119,900

Notice this; not only did Short Sales fetch more money than REO sales, they also sold for more than the Non-Distress (Normal) sale! When we look at a YTD comparison, we see Short Sales at a median price of $123,000 and Normal Sales at $125,000.

Here’s what’s happening, in our opinion; The fact that the majority (70%) of all sales are in the Distress Sale category dictates the pricing for ALL categories. This is unfortunate for the non-distress homeowner who is trying to sell his home, but the “inconvenient truth” here is that there are many homes for sale today in Las Vegas (78% of them vacant) and the buyer doesn’t care who owns it, or why they are selling it. All the buyer knows is that he can buy the typical home in Las Vegas today for $115,000 (the median price of all types of resale homes last month.)

Because we see another year or two of distress properties coming on the market (Remember 16% of homeowners are more than 60 days delinquent on their mortgage payment and 75% are underwater) prices are likely to remain suppressed for the foreseeable future.

However, we predicted at last January’s Crystal Ball Seminar that we “Would NOT see a tsunami of foreclosures” in 2010, and that has proved to be the case. We noted that the banks at that time appeared RELUCTANT to foreclose on homes expeditiously, and that many people where still living in their homes many months even a year or more after they stopped making their payments. Why? Because banks sensed the very precarious nature of the housing crisis. They realized that aggressively proceeding with foreclosing as their first remedy would be self-defeating, driving prices down both lower and faster. That’s the reasoning underlying the short sale. Leave the homeowner in the home, let him maintain the home, and help him out of his underwater condition.

All of leads us to this question, “If the banks today are willing to adopt a Short Sale philosophy (as opposed to a Foreclosure mentality) so that a buyer can purchase the home for less money than is owed against it, why are the unwilling to do (in effect) the same thing for the homeowner himself via an outright principle reduction?”

For the answer to this and other mysteries of the Las Vegas housing market, come to the Jan 20, 2011 Crystal Ball Seminar for only $29. Coffee bar and registration from 7:30 – 8:15 am, presentations from 8:15 – 10:00 am at View 215.

We wish you and yours a happy holiday season and a better New Year!

Respectfully Submitted,

Larry Murphy and Steve Bottfeld

SalesTraq™ and Marketing Solutions