Developer Services Blog

House Flipping Making a Comeback

2009-12-20T00:00:00-07:00

Check out this recent article in the Wall Street Journal. Las Vegas is seeing more sales activity at the trustee auctions and will most likely be a viable source for investors in the next few years, particularly in 2010. http://online.wsj.com/article/SB126022588878780861.html

What to expect when purchasing a home today

2009-10-23T15:06:10-07:00

What to expect when you’re expecting to purchase a home in the current “Buyers Market” when applying for a loan…

A play on a book title but an appropriate subject to discuss… the first word(s) that comes to mind is extra scrutiny if you are applying for a mortgage. Gone are the days of “I have good credit rating and I have a million dollars in the bank I want to state my income. All lenders are turning a critical eye to the haves as well as the have not’s and will continue to do so for the foreseeable future.

To shed a positive light on an otherwise gloomy statement is that mortgage applications ticked up in the 3rd quarter as rates dipped again. Rates have slowly risen and applications have trickled off somewhat but there is still a healthy application rate as the looming deadline for the First Time Homebuyer’s tax credit approaches.

Investors cannot be left out of the equation and are making up a lion share of purchases below the $100,000 mark as they are able to purchase with cash and close quickly. With lending guidelines and turn times for loans increasing due to new legislation such as: Home Valuation Code of Conduct – lengthening the time it takes for appraisals being performed, “3/7/3” rule regarding disclosures and effectively ruling out a quick close if financing is required and lastly on the State level legislation regarding the “Nevada Good Funds” rule that puts holds of up to 10 days on certified funds physically brought to title companies at the time of close, you can see why sellers are often opting for cash buyers who are only slightly impacted and can close quickly in this price range.

Historically low interest rates are also headed to higher ground as the Fed begins to wind down their purchases of Mortgage Backed Securities and it will be left to the open market again to dictate interest rates. What that equates to is that the insulation from the Stock Market fluctuations will also come to an end because in a typical market (one without the assistance of the Fed buying the MBS’) stocks and bonds fight for the same dollar. So as the stock market goes the inverse happens to the bond market – a run up in the stock market means a rush of money out of the bond market and a byproduct of that money flow is higher interest rates.

So now you ask- I am looking to buy what can I do to position myself as a strong buyer? -Get pre-approved not pre-qualified the difference between the two is your documentation has been reviewed and the other is that you have simply had a conversation discussing your situation.
-Meet your lender and provide them all of your income and asset information so that the lender can write a stronger approval.
-Expect to re-submit up-to-date pay stubs and bank statements more than once throughout the process to show that you are still qualified.
-DO NOT MAKE ANY NEW LARGE TICKET PURCHASES during the process on your way to closing. Wait to buy your furniture and any appliances you may be eyeing until AFTER your Real Estate Agent slides you your keys.

There is a lot to digest here but the take away of this article is to get in the game NOW. If you are considering buying now is a great time to go and get pre approved. PHH Mortgage charges nothing for you to get pre-approved and you’ll be surprised how easy it is to accomplish. Investors are not the only people buying homes there are plenty of people just like getting in the game and winning some great properties at great prices with great mortgage rates. With all of the changes that are coming this may be the best chance you have to realize the American Dream of home ownership!

Dave Reichert CMP

PHH Mortgage

America's 10 Best Undervalued Places to Live

2009-08-10T00:00:00-07:00

From a recent U.S. News and World Report article we find that Las Vegas is considered to be undervalued by 41%!

Las Vegas. After a dizzying run-up in prices, Sin City has become a cautionary tale for real estate investors everywhere. Since its 2006 peak, Las Vegas home values have plummeted by more than 50 percent. And today—at $77 a square foot—existing homes are actually priced below the cost of building materials, says Steve Bottfeld, the principal of Las Vegas-based Marketing Solutions, which specializes in real estate economics. "That's truly undervalued," he says. Although the market may be depressed today, several factors will support strong housing demand in Las Vegas over the long haul, Bottfeld says. The opening of MGM Mirage's CityCenter, which is expected later this year, will bring new jobs. The city's enviable climate—hot summers and mild winters—and its exciting downtown district will continue to attract residents. And the best-in-class architectural design of area properties will appeal to would-be buyers. "We are on the bottom of prices at this point," Bottfeld says. "There is no question that the residential market in Las Vegas is undervalued." The median single family home price in Las Vegas was $140,000, in the first quarter, which IHS Global Insight considers 41 percent undervalued.

We continue to see a frenzied pace of sales and buyers are realizing how attractive real estate values are in Las Vegas. One of our neighbors from SoCal purchased their second home in our community (one is for an investment and the other will eventually be a 2nd home). Even with the reduction in values in SoCal it shows that Las Vegas remains for affordable. Here's some fast stats as of today:

12,331 active listings with 40% short sales and only 21% REOs (more REOs are on the way)
13,599 pending and contingent sales with more than half (7,110) being short sales
Nearly 13,000 sold in the past 90 days.

For the complete article and the list of the top 10 most undervalued cities in America: http://www.usnews.com/articles/business/real-estate/2009/07/16/americas-10-best-undervalued-places-to-live.html

Renegotiation of Home Mortgages

2009-07-14T10:30:00-07:00

A lot of folks are asking why banks will not work with them in alleviating their mortgage burden. Statements like, "if they just knocked off a couple grand I would be happy to stay and pay the loan" or "please help me stay in my home" is nearly commonplace language for people who bought during the bubble. Some observers have blamed the banks for being incompetent or irrational or outright nefarious. If we understand that firms are profit maximizers then there must be other reasons for banks not working with struggling homeowners.

One of the popularized explanations is securitization. That you cannot modify a loan when it has been pooled with other loans. PSA's or pooling and service agreements dictate how modifications can be performed and sometimes a services can only perform modifications on a certain number of mortgages. While it sounds plausible that this would be an obstacle in working with borrowers, authors Adelino, Gerardi and Willen find evidence that this is not necessarily the culprit.

In a Boston Federal Reserve Paper, Adelino, Gerardi and Willen posit that the reason lenders do not work with deliquent buyers is that (direct quotes after the numbers):

1. lenders expect to recover more from a foreclosure than from a modified loan.

2. renegotiation exposes the lender to two types of risks that can dramatically increase its cost.

a. "Self-cure" Risk: 30% of seriously delinquent buyers make up the missed payments without a modification. This implies that money spent on the modification is simly wasted by the lender.

b. Borrowers redefault. In their sample, a large proportion of the modified loans went into default six months after the modification.

In a land of falling home prices, delaying a foreclosure actually costs more money. Further, as homeowners are aware that they may be walking from the home, they put less expense in maintaining the home or in some cases, they deliberately damage the property. This is a reason why banks would rather foreclose on a home and market it as soon as possible.

Currently, we are seeing banks use a short sale process more and more and this may be due to accounting requirements as well as Federal oversight or in some cases lenders may find that the servicing of short sale properties is more efficient than REO's. One thing is for sure, in a dynamic environment like this, we really have to be quick to educate ourselves.

The Adelino, Gerardi and Willen paper can be found at http://www.bos.frb.org/.

Rental Investment Properties in Las Vegas

2009-07-10T00:00:00-07:00

We recently presented our Premier Investment Series to our retail army of 330+ sales professionals. The following provides a summary of what was shared:

• Market IQ - From monthly market synopses, quarterly regional and economic housing summaries, consumer demand reports and more, we have the information that will satisfy the most discerning and analytical clients including builders, developers, investors and financial institutions.
• Key market indicators: With the resale median price in Las Vegas approximately $125,000 and the bulk of sales and listings under $100,000, there has never been a better time in the history of Las Vegas real estate to purchase rental investment properties.
• Gross Operating Income Report: This report conveys a strong value proposition to investors illustrating the cash flow opportunities available in purchasing single family homes and condominiums in Las Vegas. We have segmented this report by zip code to assist in targeting the location(s) of choice. While this report is based upon averages it provides a powerful tool to assist investors in acquiring the right assets for their portfolio.
• Advantages and areas of concern of investing in residential rental properties: It is important to know each of these, particularly if you are a first time investor. More wealth in our country has come with investing in real estate than any other investment and today presents a unique environment that we may never see again in our lifetime.
• Investment Strategies: Purchasing with the intent to hold and rent or lease-to-own will most likely be the primary strategies of today's investor. Some may desire to purchase with the long-term goal to convert to a 2nd home or primary residence at a later date. Regardless of an investors exit strategy, the primary objective is to make their liquid assets work for them today to generate positive cash flow while taking advantage of the numerous benefits associated with owning residential rental property.
• Rental Investment Analysis: CBPR has created an Investment Analysis worksheet to assist investors by understanding cash flow before taxes, cash flow after taxes, taxes due on sale and a performance summary that will highlight how utilizing cash and leveraging the asset will yield significant returns once the property is sold after a reasonable holding period.
• Partnerships to Success: Leveraging the professional relationships CBPR has with our Concierge partners will assist investors with any legal, tax, property management, insurance, inspection, financing, and property improvement questions they might have.

Email us at info@cbprds.com for any of the related market reports.

Median Days on Market

2009-03-11T10:01:00-07:00

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.

Home Financing

2009-02-13T11:58:00-07:00

We return to the subject of financing from our previous post about how mortage rates are established towards what type of financing are buyers actually using. After the turbulence of the last half of last year in the credit markets, with interest rate spreads leaping skywards, significant changes have occured in the mortgage markets. Mortgages are still available at some very low rates for creditworthy buyers. FHA has recently become a dominant mortgage type. FHA loans are not loans from the government but are made by private lenders with the government insuring against default. While FHA loans are not for everyone, one benefit for some folks is the small downpayment. These are not for people who require a large mortgage but at the current price points of a lot of the Valley's housing, this is a viable option for many (See chart) . For that same reason and because of the increase in professional investors entering the market, cash purchases have been stronger in the fourth quarter than the same period in 2007. It would not be surprising to see cash grow proportionately more as prices decline, especially on properties that have good tenant histories as rentals. On a further note, allegedly, the House and the Senate have finished the last pieces of the stimulus legislation and it should be on the Presidents desk next week. One of the housing related issues in the package was a change in the home buyer tax credit (supposedly $8,000 for new home buyers). There was also a discussion of extending Freddie Mac and Fannie Mae loan limits in high-cost markets. So we'll see what happens to that by next week. With affordability at the highest point in years and increasing, it looks like the price component of the market is solving a lot of the problems by returning to long-term fundamentals and people are responding, sales of single family homes in January were up 120% from January of 2008 and 154% for condominiums.

Source: Mlxchange, Coldwell Banker Premier Realty.

Las Vegas Valley Real Estate Report 2008

2009-02-09T00:00:00-07:00

Coldwell Banker Premier Realty has recently published the 2008 Las Vegas Valley Real Estate Report. This report is useful for investors, home buyers or sellers, developers or anyone curious about the Las Vegas Valley residential market.

The report details:

Existing Home Sales
Days on Market
New Home Sales
Pricing
Foreclosures
Short Sales
Vacancy Rates
Owning Vs. Renting
Luxury Home Sales
Luxury Home Features

The report also discusses taking your money further in the residential market as well as some notable sales. The report utilizes crisp graphics and photos within a thoughtful narrative. If you would like this emailed to you, just register and we would be happy send this to you. Enjoy!

Real Estate Investors

2009-02-05T00:00:00-07:00

We deal with a multitude of clients everyday and have noted that professional investors are back in the Las Vegas real estate market. These are real investors, not the speculators of days past. They do their homework and deeply investigate individual assets as well as the overall market. They are here to purchase real assets...most were on the fence in the past year plus however, with the average price and affordability we expect the professional investor to play a substantial role in the Las Vegas housing market in 2009 and 2010. We expect a return to this subject in further posts as we further discuss REO purchases, rental rates and vacancies, prices and other issues related to real estate investing. Stay tuned!

Welcome to the Developer Services Blog

2009-02-04T00:00:00-07:00

The real estate market in the Southwest U.S has frequently been in the news. We are a real estate sales, marketing, investment and consulting firm with a lot of experience in the Northwest, Southwest and particularly Las Vegas. We have found that there is a lot of interest in the Las Vegas housing market as well the regional economy so we have established this blog to discuss and elaborate on market conditions, current real estate topics and generally to feed the hunger for reliable, current information related to real estate.