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Sep. 21, 2008
Copyright © Las Vegas Review-Journal

Speculators come back

Declining home prices have some investors looking for bargains in LV, observers say

By HUBBLE SMITH
REVIEW-JOURNAL
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Joe Pierro poses in the yard of a North Las Vegas home he bought in April. Housing analyst Larry Murphy of Las Vegas-based SalesTraq said he thinks the investor mentality is surfacing again for home buyers. Real estate agents noted a growing sense of urgency among buyers to "buy while the price is low."
Photo by Samantha Clemens.



Realtor Robin Camacho, left, shows a house at 1298 Stokes St. to New Jersey investor Mark Feinberg. A report from Credit Suisse on the local housing market said buyers are back and looking for deals. Traffic levels improved during the summer, especially on lower-priced homes.
Photo by Ralph Fountain.

As a poker dealer at The Orleans, John Hill talks to players almost every day who have come to Las Vegas from faraway states and foreign countries.

They're not all here for the card game. That's just something to pass time when they're not out scouring Las Vegas for a good investment home.

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    • Median home prices have dropped 25 percent from last year to about $210,000, Las Vegas-based Home Builders Research reported. Foreclosures and short sales, or homes sold for less than the mortgage owed, account for roughly 65 percent of monthly sales.

    What really boils Hill's blood is that international and out-of-state buyers are snapping up housing deals while the backbone of Las Vegas' tourism industry -- people who earn most of their income from tips -- are being squeezed out of the market.

    "All the tip people can't afford a home in Las Vegas because of the mortgage crisis, while people from China and the Philippines and Canada come in and buy homes like crazy," Hill said.

    Speculators and investors were partly blamed for the run-up in Las Vegas home prices from 2004 to 2006 and the ensuing foreclosure mess. It seems they're back in town, circling like vultures.

    "I think the investor mentality is surfacing again," housing analyst Larry Murphy of Las Vegas-based SalesTraq said. "Some speculators, investors, buyers -- whatever you want to call them -- they got ... caught in the wringer. This could be a more sophisticated investor.

    "At least they survived. They're not broke," he added. "I've got to believe they're buying with cash or I understand the banks will provide financing with a decent down payment."

    Many of them are cash buyers, Realtor Robin Camacho of Top10Real EstateValues.com said. She had a client from Canada who wanted to buy multiple homes in Las Vegas when the U.S. dollar had weakened against foreign currencies.

    "I'm working with so many buyers, it's unbelievable," Camacho said. "It's been tough getting offers accepted lately, even offers for well over list price. Right now, I'm working with at least seven or eight serious, well-qualified buyers -- some strictly cash -- at the same time, which is incredible, even in a good market."

    A report from Credit Suisse on the Las Vegas housing market said buyers are back and looking for deals. Traffic levels improved during the summer, especially on lower-priced homes.

    Real estate agents noted a growing sense of urgency among buyers to "buy while the price is low" as inventory levels have been steady for several months and sales are starting to improve, the report said.

    Mark Feinberg, a truck driver from New Jersey, wants to use equity from properties he owns on the East Coast to possibly buy two lower-priced homes in Las Vegas, where he plans to retire someday.

    Feinberg made several offers on foreclosure homes during a visit in August, including a $73,500 bid on a fixer-upper in east Las Vegas that was listed for $64,900. He didn't get it.

    However, his $54,000 offer for a townhome in the same area was accepted.

    "I probably like it least as far as possibly living there someday, but I like it most for the cash flow," he said.

    Feinberg said he prefers to invest in Las Vegas over other depressed places like New Jersey and Florida because he believes this market will rebound sooner.

    "It's the greatest place in the world and with real estate prices right now, it's probably the best deal you're going to find," he said.

    International buyers have been an important source of business since the market downturn, said Wayne Lee, marketing manager for foreign currency exchange specialist HiFX. It's estimated that between 150,000 and 190,000 homes were sold to foreign nationals from May 2007 to May 2008.

    Canada replaced Mexico as the country with the largest share of buyers in the United States, more than doubling from 11 percent last year to 23.5 percent this year. However, the U.S. dollar continues to strengthen against the Canadian dollar, making it more expensive for Canadians looking to buy U.S. properties, Lee said.

    With the British pound remaining strong against the U.S. dollar and house prices softening, "many British buyers agree that now could be the perfect time to snap up a bargain in the States," Justin Figgins, director of Rightmore Overseas, said in the National Association of Home Builders' online newspaper.

    The British pound rose against the dollar Friday, going to $1.8355 from $1.8192.

    During this year's first half, searches by buyers in the United Kingdom for real estate in the United States rose by 50 percent to 190,000 a month on average, Figgins said.

    Most of the loans that Patrick McNaught sees as president of Greystone Financial Group in Las Vegas are primary residents who've been "sitting on the sidelines," priced out of the housing market and renting in the meantime. They're buying with Federal Housing Administration financing and 3 percent down, he said.

    Investors of properties financed through Freddie Mac and Fannie Mae are required to come up with substantially more, anywhere from 10 percent to 25 percent down, he said.

    "So FHA gives working borrowers in town the opportunity to enter the marketplace," McNaught said.

    Local resident Wendy Reese was able to snag a foreclosure home in northwest Las Vegas. It was listed for $299,000 and had three offers before the "For Sale" sign was put up. She got the five-bedroom, 3,100-square-foot home for $303,000.

    The 4-year-old house needed cleaning and was missing window coverings, light fixtures and ceiling fans, but Reese said she liked the countertops and floor plan.

    "I could look past the dirt and visualize it," she said. "I had been doing my research and every time I found a home and ran to it, it was like, 'We have 12 offers.' Some were cash deals. It's definitely a buyer's market."

    The window of opportunity is shrinking, Joe Stewart of Realty Executives said. Recent housing reform legislation passed by Congress does away with seller-assisted down payment programs, which will make it tougher for local residents to buy a home. Also, FHA is increasing down payments from 3 percent to 3.5 percent effective Oct. 1.

    "It is going to materially affect people in this town who truly deserve to have a home, who are well qualified but don't have that much cash saved up," Stewart said. "It's a big issue and one that the shadow Congress has to work with."

    Resale homes on the Multiple Listing Services continue to be distributed toward units not occupied by the owner. Vacant properties accounted for 54.1 percent of inventory, while tenant-occupied properties made up 9.9 percent, Las Vegas-based research firm Applied Analysis reported.

    The remaining owner-occupied units represented a more modest 36 percent of all listings.

    The 23.2 percent year-over-year decline in resale inventories is primarily due to a reduction in owner-occupied listings, suggesting investors and speculators continue to be impacted, Applied Analysis principal Brian Gordon said.

    Both investors and primary homeowners are benefiting from huge downward adjustments in Las Vegas home prices, Lindsay Watt of Gavish Real Estate said.

    "Although the housing market bubble has blown overvalued houses back to realistic prices, it's created a tremendous opportunity for people in this town to own a home based on a real-life wage," Watt said. "With Las Vegas being a service-based town, it was completely unrealistic that these values would maintain."

    Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.

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    Bill McBeth wrote on September 21, 2008 09:03 PM: Just ask Kool-Aid carrier and chief Las Vegas real estate cheerleader Paul Murad about foreign investors.


    Contrarian wrote on September 21, 2008 07:50 PM: There are values and bargains out in the market. There is smart money in the market. There are people trying to chase smart money in the market. Not every deal in the market is smart money (for example 3,100-square-foot home for $303,000 is marginal at best). Price compression is getting to a level where is has to bottom out because it is below the price of the materials therein.

    Bear Stearns effectively went to 0. Lehman Brothers is on its way to zero. None of these properties are going 0.


    Doom and Gloom wrote on September 21, 2008 06:45 PM: Patrick - Layoffs during the holidays? You mean the jobs we'll lose because Encore opens up at the end of the year? If that is what you consider layoffs, then I'm 100% with you. And Vegas will really be struggling when in the next 15 months we also open Aliante Station, Ceasars new tower, City Center, Cosmo, Fontainebleau, the Golden Nugget expansion, Hard Rock expansion, M Resort, and Planet Hollywood's new tower. We'll probably lose at least 30,000 jobs right there!

    I know, nobody is visiting Vegas anymore...I say bs on those stats too. Many of the flights that were lost were just connecting flights. If times were really that bad - I would expect to see a much more significant drop off than what we have.

    Regarding the double and triple counting of foreclosures - if Realtytrac had made a change in the way they counted, then we would have seen a drop off in the number of foreclosure filings. In other words, if they were double or triple counting and made a significant change, the numbers would have come down to the current 5-6000 from 15-20,000. They were never at 15-20,000/mo.

    You don't have to believe that 5000 people continue to move here each month - but I think the truth is in the actual numbers. Inventory is flat. Resale closings are up to around 3000/mo. Rental inventory is up just a little bit. We also have right around 1000 new home closings each month. If we had that many foreclosures coming on the market, and that many people leaving, inventory would be increasing...it's not!


    Patrick wrote on September 21, 2008 05:10 PM: Response to "Doom and Gloom"

    I understand that numbers can be misleading. And I read your article that you posted and find it slanted to paint a picture that also doesn't seem correct.

    Population Growth: I have no doubt that Las Vegas is growing in some way but the article fails to acknowledge how many people are also leaving Las Vegas at the same time. I by no means believe that 5000 people are coming here every month.

    Foreclosures: I understand things can be counted twice. Remember Realtytrac adjusted their numbers to try and prevent that. I have read how they track and they try to eliminate double counting. Now is everything perfect, no, but if they counted like before LV would probably be in the 20,000 a month for notices. If even half the monthly stated foreclosures are actually foreclosed on, there would 3500-5000 houses a month going on the market, which would keep inventories going up.

    Unemployment: I see the article fails to address a second jobs, which in my experience I am seeing a lot of people work second jobs to get buy. They're taking the less than 10/hour jobs that before they shunned. I know several dealers now that carry two jobs because of the tip situation. Also that article also was for July, which we now have moved a hole .5% higher. So let's run a basic number of 1M workers, which 5000 people lost jobs. and if 5000 people came here and we assume all are able to work they would have had to fill 5000 jobs that were created in August.

    Recommendation: Cash is king, LV Real Estate to go down more. Count on more layoffs on the strip through the holidays.


    Ex Realtor wrote on September 21, 2008 05:02 PM: Had to laugh at Realtor Bimbo, how true. Can add to that, once bimbo realtor finished the 3 month internet course, paid thousands of dollars to the GLVAR to be a "realtor". Broker ask Bimbo to join his brokerage because he offers training and assistance, instead bimbo gets NO assistance, and screws up buyers paperwork incurring more cost while broker takes 50% of what Bimbo does manage to sell. Bimbo takes cocktail waitress job to support GLVAR and her broker. Makes more as cocktail waitress than from real estate sales.


    Hi Angel- wrote on September 21, 2008 04:00 PM: I am a well-to-do investor with no rental properties at all. If you would like to show me what Las Vegas has to offer, I would be more than happy to get driven around town and look at the falling real estate. (Just don't ask me to buy anything, and if my wife asks,, I am just checking things out)

    Thanks

    Steve


    Lil Bimbette wrote on September 21, 2008 03:23 PM: As a newbee realtor, all I have seen is prices dropping and very few buyers. I did get a couple of `lookers' during my floor time but the `lookers' were really not interested in real estate, just my `Double Ds'

    Angel


    Propoganda wrote on September 21, 2008 02:18 PM: Garbage and Propoganda

    What planet you are living on?the price of properties has come waay down in just the last 3 months. That is not becuase they are selling so well. I low ball offered on 3 properties through the listing realtor and got all 3, but backed out as I found out that the Neamiah loans people could get are no longer available and the price will comedown further as that was 40 % of the loans being issued in las vegas for the working poor as stated.

    As for the rest of the propoganda about buyers from poor countries buying - PROPOGANDA again. They all said China would be such a geat stock market and grow. The worst performing stock market in the world in 2008 was China and they make on average less than 2 dollars a day - the Philippines is even worse.

    I smell a lot of rubish - and with no jobs being created, the highest unemployment in 25 years, highcost of gas , food , expenses, Utility bills higher than almost any state in the nation, and Nevada now being in the top 5 Taxed states - it will gto down quickly and continue for a while.

    People cant buy homes if they dont have the money - and the average consumer in the USA has less than $15,000 for a married couple in thier early 50's. This means no job - no loan - no house - and Canadians and Chineese immigrants dont have the money either or they wouldnt be sqalering to wrok as maids for $7 an hour at motel 6 part time.

    The immigrant workers that got fraudulent loand are responsible for about 70 % of the foreclosures as it is and could not pay the mortgages...


    creep wrote on September 21, 2008 02:12 PM: "Both investors and primary homeowners are benefiting from huge downward adjustments in Las Vegas home prices, Lindsay Watt of Gavish Real Estate said....Ok I need help on that one..I bought a house in 2006 for $530k that is now worth $350k, assuming I could sell it at all that is...how am I, as a homeowner benefiting?


    TOM T wrote on September 21, 2008 02:00 PM: I wish the RJ would give Bubble Smith his pink slip. Bubble would be a good replacement for Billy Mays (Oxy-Clean commercials).


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