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A few key points to consider in February’s numbers—

1. Inventory dipped below 15,000 units for the first time since September 2010. And the decrease in total inventory by over 500 units is quite significant when compared to the past year……even longer.

2. Total pendings increased for the second straight month after 8 months of declines. This may be evidence of the seasonal adjustment that we experience every year during the March through July months or maybe it is a sign of something greater. We will monitor this in the coming months.

3. Closings are up 10% versus last year at this same time. Remember, last year had the benefit of the homebuyer tax credit to fuel sales. The fact that closed units are up versus this same time last year, and there is no tax credit inflating those numbers is a good sign.

4. Cash transactions are still increasing—53% of all closed units last month. Wow! Investors are running wild. Smart money is on the loose. The positive cash flow opportunities in the Las Vegas real estate market are being noticed worldwide. And, they are being acted upon.

5. 85% of all closed units in the month were priced under $200,000. And only 44 total closings were priced over $500,000. I just searched for the number of listings currently on the market in Las Vegas, priced over $500,000. There are 878….or 20 months of inventory. Ouch! This is a pretty good sign that the luxury home market may see further downward pressure on pricing.

Finally, and unrelated to the numbers, last month, two clients unexpectedly received letters from a major lender that was their first lien holder at the time of their approved (but deficiency not waived) and ultimately, closed short sale. The letter basically stated that the lender had good news for them. The lender was announcing in the letter that they were not going to pursue the deficiency—that they were releasing the client from all future claims. Why is this happening? Single action State? Lender receiving economic incentive for doing so? I don’t know. I am asking you. If you know (I know you do, Steve), or if you have ideas, please share. Very interested.

Until next month………….be well.

Regards,

David

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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• This month’s report continues a few developing trends—inventory is growing (up another 1,000 + units and up for the 3rd consecutive month), specifically, REO inventory is up for the 4th consecutive month, and pending sales are down (nearly 600 units) for the 3rd month.
• Short Sale closings declined versus the previous month for the first time in 6 months. The gap last month between REO and Short Sale closings was only 2.5%. Now it is back up to over 10%.
• Blended inventory (3.58 months) and REO inventory (1.79 months) are the highest they have been in over 12 months.
• Total closings are down 20% compared to July 2009. And REO closings are down over 50% compared to that same period.

As always, I am here for any comments, questions, or concerns you may have.

Warmly,

David Brownell

Las Vegas Real Estate May Numbers

A vital and thriving market has returned to Las Vegas. Prices have flattened and in many communities started back up. Foreclosures are fading into the background as banks find better and more cost-efficient ways to handle these liabilities. Short-Sales rise 2 and 3 times last year’s volumes and deals are getting done.

The numbers are encouraging. By many indicators Las Vegas real estate hit bottom late last year and now seems to be headed back up.

Here is the link for the Home Buyer Tax Credit 2010.

As the deadline approaches, we are getting more and more interest in this tax credit. Don’t miss out on this one! The link above leads to the IRS website so you can read what they have to say about it. If you have additional questions, feel free to contact us. There is a lot of misinformation out there so be careful. That is why I linked directly to the source; The IRS

If you would like another source of information, I suggest Brad Malkin of Prospect Mortgage. Brad is extremely knowledgeable on all the ins-and-outs of this credit.

Las Vegas Real Estate Market

With great pleasure I once again present Fast Facts courtesy of Larry Murphy and Steve Bottfeld of SalesTraq. Larry and Steve always do a fantastic job analyzing the Market and all of us have reaped great benefit from the insight they have provided. You can visit their Nevada website here; CrystalBallSeminars

So now I present;
December’s Fast Facts

The gradual stabilization of the Las Vegas real estate market was the theme of December’s Fast Facts data.

We look forward to seeing you there!

Las Vegas 2010

Today Time Magazine quoted David Brownell;
By T.R. Witcher / Las Vegas

Jim Murren waited five years to welcome the world to CityCenter, the 18 million–sq.-ft., $8.5 billion resort complex that opened this week in the heart of the Las Vegas Strip. When he took over as CEO of MGM Mirage a year ago, he was a youthful 47. “I’m now an old 48,” he says, and he’s got the gray hairs to prove it. That’s because CityCenter came within a whisker of not opening at all, even as it was billed the most expensive private construction project in American history and thought of among locals as a beacon of the city’s resurgence from the depths of recession.
Early this year, the company was in the grip of what Murren calls an “intense, very dire liquidity crisis.” MGM Mirage’s joint partner on CityCenter, the Dubai World subsidiary Infinity World, had sued MGM Mirage and stopped putting money into the project. Unable to find other sources of capital, the casino company was left with two choices: walk away from CityCenter or try to work out a deal with MGM Mirage’s bankers.
It fell to Murren to convince the bankers that the project was worth saving — but things had gotten so touchy that he had to ask Nevada’s congressional delegation, led by Senate majority leader Harry Reid, to call the CEOs of MGM’s banking partners to ask them to return Murren’s calls.
Even that almost wasn’t enough. The company owed a $200 million payment to CityCenter’s contractor, Perini Construction. It was due on a Friday in March. Murren spent that day on a conference call with the company’s banks, trying to persuade them to lend MGM the funds until it could resolve its problems with Dubai. Murren could promise them nothing. “We don’t know the outcome of CityCenter. We don’t know how we’re going to get there.”
MGM Mirage had already prepared its bankruptcy papers for the project and rented construction fencing to seal off the complex. As Murren waited for the decision in his office, TV crews circled overheard in helicopters, catching footage of a project widely rumored to be failing.
On March 27, the consortium of banks approved the loan by the narrowest of margins — 50.43%. It proved to be the first step in putting CityCenter back in business. Had it gone under, Murren says, it’s “very possible” MGM Mirage would have been brought down too. And the financially reeling state of Nevada, which received so much of its revenue from gaming, would be in “a tremendously damaged position, more so than even we had been this year.” Murren calls it the most challenging time of his life — “Had I known we would have survived, I might have enjoyed a bit of it.”
Now, of course, he looks like he’s enjoying this week as his playground of smart-suited corporate glass and steel glitters on the Las Vegas skyline. The mood this week in the city is upbeat as fireworks and a multitude of parties have marked the opening of Aria, CityCenter’s central casino-hotel. (A retail mall, Crystals, opened early this month, along with a Mandarin Oriental hotel and a condo-hotel called Vdara. Three more towers are still in mid-construction.)
But the question remains whether CityCenter will help spur a rebound in the city — the common wisdom in Las Vegas is that new supply creates demand — or the addition of more than 4,000 new hotel rooms will depress an already oversupplied market. Murren describes it as the “stimulus package of all time for this community,” pointing to the 12,000 jobs CityCenter has created. Expectedly, he’s bullish that CityCenter will lure new visitors to Vegas. “There’s no doubt in my mind that more people will come to Las Vegas next year than this year.”
In the short term, though, Grant Govertsen, a partner and analyst with Union Gaming Group, says the “pool grows bigger, but it won’t grow enough to maintain footing for all the properties. You’ll see a hit at some of the other properties.” Nevertheless, Govertsen also believes visitor growth will rise next year and expects a modest up-tick in the city’s revenue per available room, which could help the city absorb the new inventory.
But no one is expecting a fast turnaround. Indeed, as Aria is opening, the venerable Binion’s Gambling Hall downtown has shut down, and the Sahara just announced plans to temporarily close rooms in two of its three towers. One of the early selling points of CityCenter was that a slate of condos was planned to give the project some semblance of urbane flair. But the high-rise-condo market is in dire shape. Murren says MGM Mirage has 50% of its condos under contract, but it also recently announced a 30% price reduction to lure in new buyers as well a financing package to help buyers afford to close the deal.
Real estate broker David Brownell says a 30% discount might not be enough. Condos around the city that were selling for between $500,000 and $750,000 in 2004 are selling today for less than $300,000. Brownell says if he had marketing money to spend, “one of the last places I would think of trying to invest it is promoting [condos at] CityCenter. I don’t think there’s a great demand for it.”
Still, a cautious optimism has taken hold. In the airy, triumphant lobby of Aria, Murren notes, “Nothing gets close to the immense amount of gratitude and pride I have about this.”
Parts of the project have had bad luck. The Harmon boutique hotel, a victim of construction defects, won’t be finished until the end of 2010. But the opening of Aria is a significant achievement, signifying the end of an era in Vegas. The days of visionary auteurs bringing extravagant casino dreams to eager banks are over. Land is too expensive if you don’t already own it. Banks are reticent to lend to developers who lack land equity and plenty of cold hard cash. MGM Mirage owns a larger parcel than CityCenter a few miles north of it on the Strip. It’s unlikely the company will attempt a sequel. “I think people will quickly come to a conclusion that no one will ever top this,” Murren says. “We’ve delivered in excess of people’s expectations.”