There are two typical indexes that Adjustable rate mortgages are tied to. One is the London interbank offered rate (libor) and the other is U.S treasuries. When a lot of mortgages were unwritten in the last few years, these two indexes tracked each other closely. Following the financial turmoil which largely began in 2007, these two rates diverged. The libor began to reflect risk premiums and the lack of liquidity. U.S treasuries reflected a flight to quality in the face of great uncertainties.

Mark Schweitzer and Guhan Venkatu at the Federal Reserve Bank of Cleveland publish a nice short paper about how this changes mortgage payments when using these different indices. They use their region of Ohio for the data sample. They break it down for typical prime and subprime loans. In some cases, these differences barely matter and in other cases may translate into a monthly payment of $100 more for every $100,000 of remaining principal for subprime borrowers. Fore prime borrowers, it matters less at nearly $50. Mortgage holders with notes tied to treasuries are able to enjoy lower rates. Lowering the spread between Libor and Treasury rates will help homeowners with libor tied mortgages.

There are some nice exhibits in this paper so take a look at the online version if this has sparked your curiosity. Click here for the study.

The Las Vegas area has seen significant price declines. This is a well published fact. What is interesting is to see the "invisible hand" at work and we see that manifested in other statistics, such as increased sales and lower days on market. Days on market has slid greatly since the days of massive inventory build up in 2007 and early 2008. Now we see inventories stabilize due to increased sales nearly equaling bank owned inventory additions.

There is a multitude of people participating in the economy that have a wide variety of motives. Some folks are underwater with their mortgages, while others, we can call them savers, have stepped in to fill this void by purchasing primary or investment residences. Other people who did not jump on the home buying bandwagon during the frothy herd following days can now get into the right house at a better time, instead of any house at the wrong time. For those who rented during the boom times, they are sitting pretty. That is why the first time homebuyer market is a true bright spot. There are homes to choose from and search time is not wasted. Further, mortgage payments can be made at a far smaller fraction of gross earnings before.

People talk about risk, but things were risky when people were buying near the peak. In retrospect thats obvious but at the time it was follow the herd. For folks with a job and some cash as a buffer, when some home segments are selling below long run trends, I would say that is less risky than those go-go days of 2005 and 2006. There is a large mix of people with different personal finance scenerios and some have recognized opportunity and are able to act. As part of this result, we see that people are responding to prices and average days on market is on the low side of the metro comparison.

 Source: Altos Research LLC and Real IQ.

Its the first week of a new month, which for us means a new report cycle. Today we release or Residential Rental Report. While not as action packed as the latest movie feature, for those interested in purchasing investment homes or have homes they want to lease, this should grab your attention just the same.

A lot of this report is for reference purposes, with zip code lookups for lease rates in absolute prices as well as price per square foot. We also take a look at the high-rise rental market. Further, we look at larger aspects of the market including occupancies, vacancies, owner occupancy and lease rate trends. We also examine the relationship between home sizes and prices.

Given that price levels to purchase rental properties are the lowest in years, we are seeing some properties cash flow nicely. Without factoring any appreciation rates, many are getting high returns. This is good news, but naturally, caution is required. There is a lot of product out there in various conditions. Market research, due diligence and knowing any possible rehab costs are key. Due to competition, there is a lot of vacant product out there but some locations are really good and in high demand. This is especially true for people with solid jobs but went underwater on their home purchase. They may not be looking at apartments since they could have families and are not looking for a huge lifestyle change. They probably fall into the single family rental market. We look at both the single family and condominium markets.

The exhibit below shows average prices by different product types over the Valley.

Source: Mlxchange, Coldwell Banker Premier Realty.

We do sell these reports so if this info is useful to you, send us an email at info@cbprds.com.

As an enterprise big on educating buyers and sellers, in addition to other peridocals, we publish a quarterly that we thought our blog readers might also be interested in. It provides some key market statistics as well as some articles that we thought were important and interesting. Please click on the image and enjoy!

The M Resort, Spa and Casino opened this weekend. I have been in Las Vegas long enough not to try to go opening night due to the heavy traffic and people filling the casino arm to arm. I did make it out there last night however and found it pretty impressive. While considered to be a "locals" casino, this $1 Billion property fits in well with the upper echelon of Las Vegas casinos. While it may be a little stressful for the casino management to open during these economic times, it is great to see a new project pulsing with activity.

While the hotel is small by Las Vegas standards at 390 rooms and the gaming floor is nowhere near as large many other hotels, the property should serve its area residents well, as well as traffic from California. At one time the property was expected to hire about 2,000 people. While this is not a huge percentage of the labor force, and some of the employees are probably backfill from other properties, it is a positive for 2009. Several more properties are expected to come online this year as the chart below depicts (give or take a 1,000 due to delivery schedules moving around). This does mean significant hiring and while it may be meaker than some earlier estimates, it should help the employment picture. This does not mean a huge demand cycle for housing until there is a degree of stable growth in employment (it will help limit excess supply of homes). Further, credit restrictions will probably limit migration flows to some degree. Nevertheless, there is not a lot going on in terms of large scale projects around the country, but there is here, and like the M Resort, its going to be very cool.

Source: Las Vegas Convention and Visitors Authority.