Let’s take a look at where the Las Vegas real estate market stands today, and also, let’s think about where it might be headed during the second half of this year. So far, 2012 has been a crazy time for the market. Short sales are up, foreclosures are down, conventional sales are up, and activity is through the roof.
Short sales, as predicted, have continued to be a major component of the market, and now represent approximately one-third of sales. Real estate agents who have not mastered short sales have dropped out of the business in record numbers. Short sales have not gotten any easier, as you might think they would have because of AB284. But getting “full satisfaction” has gotten a bit easier. Lenders realize that if they don’t agree that the short sale payoff is enough to satisfy the borrower’s debt in full, many debtors will simple choose not do short sales at all. I have had to request (demand?) full satisfaction less and less, as it has been increasingly offered by the lenders voluntarily. In some cases, lenders have increased substantially the amount of “moving money” being offered to borrowers to cooperate with the short sale process and evacuate the property in good condition. Last year, HAFA incentives of $3,000 seemed miraculous. But this year, some lenders have paid up to $30,000 in their version of a short sale/cash for keys program. Short sales are just as tough to navigate as they were last year, and they take just as long, too. But for those highly trained and dedicated agents, the results are better than before. Short sales will continue to be ubiquitous, but in my opinion, the peak of short sales has passed.
Foreclosures have fallen off a cliff. I feel compelled once again to address the “wave of foreclosures” that I have been asked about going on four years now. Folks: there is no wave! In all this time, it has not materialized. Do you still think it’s imminent? Those who believed a wave was coming were tricked by the slowness (incompetence?) of the lenders when it came to turning around foreclosed homes and getting them back on the market as REOs. But if anyone had any thoughts that lenders were intentionally holding back foreclosure inventory by design, they must surely agree that they were mistaken by now. Foreclosure listings are off more than 80% in the Las Vegas area since their peak. REOs are attracting tens and tens of offers on the first day of coming on the market, and many of those offers are sight-unseen. That is because there is virtually no new inventory. If banks had anything up their sleeves, they would have acted by now. But AB 284 has stopped banks, if not slowed them, right in their tracks. Banks realize that in many cases, due to improper paperwork, they are not able to foreclose. Hence, significant cash offerings for homeowners to cooperate with short sales have appeared. Notices of Default, which are the first major step toward foreclosure, have plummeted. I don’t see any significant increase in foreclosure listings for the rest of this year, at least.
Conventional sales are on the rise. Look at it this way: when the Las Vegas real estate market took a turn for the worse roughly four years ago, many, many people became upside down on their mortgages. That, combined with resetting mortgages (ARMs) and massive layoffs, caused a new phenomenon known as short sales. But one by one, those homeowners have sold short, or already lost their homes to foreclosure. As those homes got resold to new buyers, the prices have been “reset”. That means that gradually, the wave of foreclosures and short sales must subside, and more conventional sales will be forthcoming. Most properties that were bought since 2010 that came back on the market are not short sales or REOs; they are conventional sales. Expect conventional sales to gradually uptick the rest of this year.
Sales activity is crazy. Most new listings are attracting multiple offers the first day. Guess what? We are in a strong seller’s market! That’s right: we have gone from an incredibly strong buyer’s market over the last few years to a super-tight seller’s market now. A seller’s market is defined as one with less than six-month’s worth of available inventory. And Las Vegas inventory (listings without an offer) is now standing at about a five-week supply. That is one of the tightest seller’s markets we have seen in recent history. Granted, the prices are very different than they were in the last seller’s market. But make no mistake: sellers are once again in control. Smart real estate professional know this, and are seeking new listings in record numbers. Appraisal waivers are back in vogue, and buyers can expect to pay list price and above in the vast majority of purchases.
New home builders have also been enjoying the fruits of a buying frenzy. Some builders have become outright cocky, even going so far as to cut real estate agents’ commissions. For buyers who do not have the intestinal fortitude or the time or the patience to outbid the competition for short sale and foreclosure listings, many have turned to new homes. As a result, some builders have been raising their prices at every turn. There is little new home inventory available now, and builders are once again snatching up lots for future construction. Wow, how things have changed.
And when it comes to our industry, as I predicted, the numbers continue to drop. Lack of training, not dedicating enough time to the business due to other jobs or other reasons, lack of investment and increased costs are all reasons that some of the weak members of our professional community have been squeezed out of real estate and into other professions. As I have been saying for years: this is a serious business, not a hobby. And as such, it requires incessant training and dedication, a strong stomach, guts, a willingness to fend off distractions, and a desire to strive higher than the competition. No longer can an agent do the minimum training required by NRED, stick a sign in the grass, and make a living. Now, only the strong will survive. And the strongest amongst us are doing better than ever before.
So as the year progresses, look for short sales to represent around 30% of the market, foreclosures to represent around 25%, and traditional sales to make up the balance. We should see continued strong activity, with a slight diminution in the fall (traditionally getting into a slower time of year), and prices slowly on the rise.
Keep your eye on the Las Vegas real estate market. Expect the unexpected. What a great time this is.