Cash buyers are stabilizing the Las Vegas housing market. Whether they are saving it or exploiting it depends on your point of view.
Home Address … 622 WOOD ROSE CT, HENDERSON, 89015
Resale Home Price …… $124,900
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if the illusion is real
let them give you a ride
if they got thunder appeal
let them be on your side
The Cars — Let the Good Times Roll
The bottom of the cycle is always dominated by cash buyers. Cash is king. Cash buyers stabilize a market when lenders are unwilling to loan. The cost of cash is higher than the cost of debt, so prices must fall to attract cash investors. As today's featured property shows, if you lower prices to the mid 90s levels, cash buyers are enticed to the strong cashflow and potential for appreciation when the market reverts back to the mean.
Cash Buyers Now Rule Vegas Housing Market
Foreclosures, Short Sales Account For Most Transactions
POSTED: 1:34 pm PST February 8, 2011
UPDATED: 12:04 am PST February 9, 2011
LAS VEGAS — Thanks to tighter lending standards, coupled with a massive inventory of foreclosures and short sales, the majority of homes sold in southern Nevada are being purchased with cash, according to the Greater Las Vegas Association of Realtors.
The agency reported that 51 percent of transactions involved cash buyers in January, as investors sought to take advantage of low prices.
“It's a combination of things,” corporate broker Forrest Barbee said. “We've got a lot of foreign investors. Foreign investors can't get loans. Canadian investors, Asian investors. A lot of cash coming in from there.”
Barbee contends that even though half of the homes being sold are to investors, it's a good thing.
“These are real investors putting good tenants in properties,” Barbee said. “They're also putting money in the property and spending money on appliances, drywall, paint or whatever.”
I know i am doing my part to employ construction workers and buy housing related products.
According to the GLVAR, the median price of a single-family house sold last month was $125,000, down 5.3 percent from $132,000 in December. The average listed price was $157,081. The median price of condominiums that sold last month was $64,900, up 4.7 percent from the month before.
The total number of homes sold dropped 19.7 percent in January. Last month 3,214 houses were sold, down from 4,007 in December.
Bank-owned homes continued to dominate sales, representing 48.8 percent of transactions, while 26.6 percent were short sales, the GLVAR said.
Lenders control 75% of the transactions in Las Vegas, and they indirectly control most of the other 25% as most of the equity sales are flippers like me who got their property at an auction called by a lender.
While both figures are proof that families still struggle to pay their mortgages, the agency claimed the increase in cash buyers is a positive sign.
“Cash buyers are still purchasing thousands of local homes that might otherwise sit vacant,” said GLVAR President Paul Bell.
A house with no occupant is a completely wasting asset. It produces no benefit and deteriorates with disuse.
But some homeowners disagree, saying that their neighborhoods are becoming more transient.
Dawn Lane, owner of the Professional Realty Group, said people who want to buy a home in Las Vegas to live in are getting priced out of the market.
“They have an opportunity to buy a home and when they go to put an offer in, you've got investors purchasing the home for cash,” Lane said. “What's a better deal for the bank? Let's take the cash and run.”
And although Lane said it's great homes are being sold, the investors could end up hurting Las Vegas in the end.
“If we're trying to build neighborhoods up again, don't we want solid families or people invested in our community who wants an opportunity to live in Las Vegas and grow?”
But Barbee, the broker, said homeowners can still buy a home through restricted government programs.
And for your amusement…
Poll: Do You Plan To Buy A Home In The Next Year?
A property purchased by a cash investor
Below is a property purchased by a cash investor in Henderson just southeast of Las Vegas. As you can see, it is selling for just over its 1996 purchase price. If houses double in price every 15-20 years, this property should be selling for $180,000 to $200,000. That's how far these properties have overshot to the downside.
Home Address … 622 WOOD ROSE CT, HENDERSON, 89015 
Resale Home Price … $124,900
Home Purchase Price … $110,000
Home Purchase Date …. 7/9/1996
Net Gain (Loss) ………. $7,406
Percent Change ………. 6.7%
Annual Appreciation … 0.9%
Cost of Ownership
————————————————-
$121,900 ………. Asking Price
$4,267 ………. 3.5% Down FHA Financing
5.00% …………… Mortgage Interest Rate
$117,634 ………. 30-Year Mortgage
$25,241 ………. Income Requirement
$631 ………. Monthly Mortgage Payment
$106 ………. Property Tax
$10 ………. Homeowners Insurance
$280 ………. Homeowners Association Fees
============================================
$1,027 ………. Monthly Cash Outlays
-$60 ………. Tax Savings (% of Interest and Property Tax)
-$141 ………. Equity Hidden in Payment
$8 ………. Lost Income to Down Payment (net of taxes)
$15 ………. Maintenance and Replacement Reserves
============================================
$850 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$1,219 ………. Furnishing and Move In @1%
$1,219 ………. Closing Costs @1%
$1,176 ………… Interest Points @1% of Loan
$4,267 ………. Down Payment
============================================
$7,881 ………. Total Cash Costs
$13,000 ………… Emergency Cash Reserves
============================================
$20,881 ………. Total Savings Needed
Property Details for 622 WOOD ROSE CT, HENDERSON, 89015
——————————————————————————
Beds: 3
Baths: 2 F
Home size: 1299
Lot Size: 00.13
Year Built: 1996
——————————————————————————
MOVE IN READY – NOT a Short Sale or REO! Seller responds quickly. Newly rehabbed 1-Story home with 3 bedrooms and 2 bathrooms. Kitchen has white cabinets with a breakfast nook. Back-yard is fully landscaped with desert landscaping. Home is not far from schools, shopping and freeway access.
This property was a complete cosmetic do over. We replaced or repainted everything in this house. Unfortunately, we don't have any of the before pictures. It was a mess.
Jacki has been working on her artistic architectural photography. This master bath shot turned out well.
Rental property investment performance
| Asking Price | $118,900 | |
| All Cash Purchase Financial Analysis | ||
| Net Income | $7,185 | |
| Capitalization Rate = Net Income / Total Cost | 6.0% | |
| Mortgage Purchase Financial Analysis | 15-Year | 30-Year |
| Mortgage Interest Rate | 4.3% | 5.0% |
| Actual Monthly Cashflow | $0 | $88 |
| Cashflow after Financing | $3,774 | $3,486 |
| Initial Capital Investment (down payment) | $39,577 | $23,780 |
| Cash-On-Cash Return = Cashflow / Investment | 9.5% | 14.7% |
| Rental Income | Terms | Calculations |
| Gross Rent | $1,150 | |
| Vacancy and Collection Loss | 5.0% | $58 |
| Monthly Rental Income | $1,093 | |
| Operating Expenses | Terms | Calculations |
| Property Tax | 2.67% | $264 |
| Homeowners Insurance | 0.50% | $50 |
| Maintenance and Replacement Reserves | 0.50% | $50 |
| Homeowners Association Fees | $15 | $15 |
| Property Management Fees (% of Gross Rent) | 10.0% | $115 |
| Monthly Cash Expenses | $494 | |
| Net Operating Income | $599 | |
| Monthly Payment (based on maximum loan) | $511 | |
| Actual Monthly Cashflow (assuming impounds) | $88 | |
| Interest Expense | $396 | |
| Total P&L After Expenses and Debt (loan amortization plus excess) | $202 | |
| Financing | Terms | Calculations |
| Comparable Value Full Asking Price (buy it now) | $118,900 | |
| Maximum Allowable Loan (with available terms) | 80.0% | $95,120 |
| Maximum Cashflow-Positive Loan (30-year amort.) | 93.8% | $111,534 |
| Maximum Loan (lesser of two limits) | $95,120 | |
| Investor Capital (remaining after cash-out loan) | $23,780 | |
| Comparable Resales | Resale Date | Amount |
| 910 DODEE CT — 3 bed 3 bath 1623 SF — 1996 List: $122000 | 8/9/10 | $126,000 |
| 628 HOLLY BUSH CT — 3 bed 2 bath 1540 SF — 1997 List: $119900 | 7/1/10 | $115,000 |
| 882 COZY VALLEY ST — 3 bed 2 bath 1389 SF — 1997 List: $105000 | 5/6/10 | $105,000 |
| 884 COZY VALLEY ST — 3 bed 2 bath 1299 SF — 1997 List: $124900 | 8/31/10 | $123,000 |
| 620 E WOOD ROSE CT — 3 bed 2 bath 1299 SF — 1996 List: $109000 | 4/27/10 | $109,000 |
| Lease Date | Amount | |
| 501 GARDENIA BLOSSOM ST — 2 bed 3 bath 1179 SF — 1997 List: $1050 | 10/21/10 | $1,050 |
| 500 FRAGRANT ORCHARD ST — 2 bed 3 bath 1179 SF — 1997 List: $1000 | 9/3/10 | $1,000 |
| 593 FOX CHASE ST — 3 bed 2 bath 1547 SF — 1998 List: $1250 | 10/6/10 | $1,250 |
| 969 MEDINA DE LEON AV — 3 bed 3 bath 1485 SF — 2005 List: $1150 | 10/21/10 | $1,150 |
| 643 BONSAI TREE LN — 3 bed 2 bath 1303 SF — 1998 List: $1195 | 10/5/10 | $1,195 |
| 1036 STEPPE EAGLE AV — 3 bed 3 bath 1370 SF — 2003 List: $1099 | 7/19/10 | $1,099 |
| 531 SCENIC TERRA DR — 3 bed 2 bath 1425 SF — 1997 List: $995 | 7/16/10 | $995 |
If you are interested in this property contact nancylicata@ppglasvegas.com or Jackie@ffglasvegas.com.
For Irvine you need to eliminate FHA analysis since its virtually non existent, less than 1.6% need it.
For Las Vegas you need to provide more FHA information. You need to say seller assisted down payment, 0% down, let the good times roll. I wonder how much fraudulent FHA purchasing is going on now in Las Vegas.
Yeah IR, you need to do it differently because you do not know how to run this blog or what to write about. Planet Reality has much experience and success with his blog so you should be listening to him and taking his advice.
IR…are those your typos? perperty,consmetic?
Sue, LOL, how about
ALL CAPS, “desert landscaping” with no pictures, “freeway access” ?!?!
Oh shush PR. Please point me to your daily blog so I can read your perfect spelling of thousands of words written weekly.
I like IR. He’s taking care of business and building a future.
Here’s to you IR
:exclaim:
PR – Your blog can provide daily updates of foot-traffic over at the Irvine Spectrum as well as congestion levels of the parking lot.
Why should house prices double every 15-20 years?
Doesn’t that depend on an increase in aggregate income (number of jobs x average wage) in a community?
In the short term, hasn’t LV lost jobs, thus lowering that result?
“Why should house prices double every 15-20 years?”
Because it’s THE LAW! You know…like gravity.
Sheesh.
>Canadian investors, Asian investors. A lot of cash coming in from there.
What is their objective?
Henderson is the city where it’s better (maybe, not cheaper) to rent than to own.
The reasons:
* All available jobs are in LV. If rents become comparable in Henderson and LV, it’s better to rent in LV in order to cut commute time.
It’s similar to the Inland Empire. People had to move to IE during the boom times, but are leaving now due to lack of jobs.
* The rent prices in LV will slowly decline. Now they are lagging compared to the house price declines.
For example, the Irvine Company can keep the rental prices steady. But there are numerous alternatives. Homeowners complain that it’s MUCH harder to rent now, and they have to negotiate.
* In Henderson, home prices are rapidly falling. 17% for the last year.
http://realestate.aol.com/Henderson-NV-real-estate
Vincenzo,
You hit the nail on the head on explaining why the IE and outer LV had a larger and quicker crash than OC and premium areas with higher paying jobs. Time is money but can be remade after it’s lost. LV economy is centered around the casino’s. LV lacks economic diversity, so it more prone to boon – bust cycles. IE when up in a large part due to too high cost on the costal area. The second raise for the IE will be for food if the water problem can be solved.
Those maintenance reserves at $50 a month are pretty low.
Why would I want to buy that house for 125k when I can go right around the corner and pick up a carbon copy house on a larger lot with a swimming pool for less than 99k?
http://www.redfin.com/NV/Henderson/912-High-Mountain-St-89015/home/29714091
I guess it’ll work until it doesn’t.
In 2010 the Irvine Company sold more than 1200 new homes:
http://lansner.ocregister.com/2011/02/17/irvine-co-reports-sales-of-1200-homes/99937/
“The incredible sales and rising prices at Woodbury in Irvine were the national new home story of the year,” Irvine-based housing consultant John Burns told the Register.”
“Although the housing market may not have turned nationally, it has unquestionably returned in Irvine”
It looks like the Irvine company is full speed ahead with even more new houses in Irvine, where else is this happening????
http://lansner.ocregister.com/2011/02/20/596-new-homes-coming-to-laguna-canyon-road/100021/
“The project will consist entirely of single-family homes, with prices ranging from the low $600,000s to more than $1 million. The development includes”
“Young said that all the homes in the Irvine Pacific Collection have new designs that incorporate innovations used in the 2010 models, such as replacing formal dining rooms with “great rooms,” and providing plenty of storage for items purchased from big-box stores like Costco or Wal-Mart.
Great quote, what recession in Irvine? Irvine company sold 100 homes per month in addition to the normal 200 per month resale transactions. Where else is this happening?
LOL, I suggest reading the comments of this story.
Planet Reality says:
February 17, 2011 at 6:27 pm
Can’t go wrong buying in Irvine.
Einstein says:
February 17, 2011 at 8:59 pm
“Can’t go wrong buying in Irvine.”
And you couldn’t be more wrong, Sparky.
For example, idiots as far as the eye could see bought houses in Woodbury 5-6 years ago on option ARM loans. Well, those ARM loans are now resetting and I’m getting a flood of Woodbury listings. Here’s yet another one I got earlier today:
Woodbury (WD) Zip 92620-2804 TGNO 861B1
Orange County (OR) XSTS Rhapsody/Lamplighter Aerial Map
P766454 Media: 10 Builder Tract Treo (WDTR)
Bed 2 Model (*)
Baths 3 Style Traditional Stories Two Levels Floor 1 of 2
View No View HOA Dues $ 105 + $170 Land Lse/Yr $
ASqFt 1,824 Estimated YrBlt 2005 Assessor Land Fee
List Date 1/19/2011 Date Added 1/19/2011 Tran Date 2/17/2011 DOM 29 LP/SqFt $269.68
Org Price $519,900 Prev Price $519,900 Cur List Prc $491,900
Peak pricing $519k, current $491k? LOL the Irvine “crash” was devastating. Thanks for proving my point. Where else are they selling new homes at half the normal resale pace?
The only point that has been proven is that other people who have no association with this blog also think that you are a buffoon. Shocker!
How are those 2% interest rate predictions working out for you? I am still anxiously awaiting these new record lows that mortgage rates are going to “continue” to break that you were pumping up a few months ago.
But some homeowners disagree, saying that their neighborhoods are becoming more transient.
Dawn Lane, owner of the Professional Realty Group, said people who want to buy a home in Las Vegas to live in are getting priced out of the market.
“They have an opportunity to buy a home and when they go to put an offer in, you’ve got investors purchasing the home for cash,” Lane said. “What’s a better deal for the bank? Let’s take the cash and run.”
And although Lane said it’s great homes are being sold, the investors could end up hurting Las Vegas in the end.
“If we’re trying to build neighborhoods up again, don’t we want solid families or people invested in our community who wants an opportunity to live in Las Vegas and grow?”
Agree 95%. I think the issue is more that the locals are being crowded out by the all-cash real-estate gamers ( not priced out ).
How is it helping Las Vegas to turn all these neighborhoods into these mini Feudalistic Kingdoms rather than let prices fall to where locals can buy them for what incomes support. IrvineRenter, don’t you think that you are overstating the “lenders will not loan” talk? It’s making it sound as though not a single person in Vegas can get a loan so they need a California landbaron to keep them warm at night.
These neighborhoods are going to turn into ghettos because no right-minded family is going to buy their family home in a neighborhood where 70% of the people living there are renter class. In terms of price appreciation, these neighborhoods are toast. Not to mention that Las Vegas is not exactly the first thing that comes to mind when it comes to a nice place to raise a family. What is this “revert to the mean” talk as though it is some kind of foregone conclusion?
There is a stated claim to an exit strategy: We will sell you back your house when you can get a loan. This claim sounds dubious. Suppose that prices drop for the next 7 years or stay completely flat and your tenant calls you up and wants to buy his house back. Are you planning on “helping” by selling the house for the lower price or would you “decline” and prefer to keeping renting it out for monthly cashflow until prices go up?
Irvine Renter is trying to make a living for his family. He’s not required to do charity work for anyone. He’s allowed to play the ruthless capitalist game like you or I. I don’t know how its going to turn out for him. I have my doubts I see LV with a bleak future. His vulture business model has created jobs in depressed Las Vegas.
He’s not required to do charity work for anyone.
Of course not. I am just evaluating the quality of the “help” that is being advertised. Who exactly is being “helped“?
I fail to see how a group of Californians forming a club to buy up houses in Las Vegas and rent them out is going to help those neighborhoods recover. I just don’t see it. I see the neighborhoods falling into disrepair and slum taking over as the land barons compete with each other for tenants. Some will get good renters, others will not. Some will keep the properties looking nice, some will not.
I sometimes wish that IrvineRenter would just come out and admit that it is all a game rather than promote it as community service. We all know that this is not about helping families so why not just tell it like it is and drop this veneer that it is about keeping families off the street because banks won’t “lend” to them?
The cash investors do it for the children. Whatever would the poor renters and poor new home buyers do without the cash investors? They would never be able to survive, if they were lucky they would be forced into a grapes of wrath nomadic life, only way they could keep on living… Most likely they would keel over and die without the cash investors.
If potential buyers in LV were actually being crowded out, then prices would be rising, not falling.
You also really need to think about what you’re saying. 5 years ago you had ‘absentee’ landlords from CA and everywhere else, including other LV residents, buying ‘investment’ properties in LV, with no money down. That provided a lot of air for the bubble. That was a real negative activity.
Either side of a rental transaction is not a sin. The idea that rental communities instantly become ghettos is false. What will become ghettos are areas with lots of vacant homes. That is the choice. IR is getting families into homes as renters, and that is an improvement over the home being vacant.
You also really need to think about what you’re saying.
I do think about what I say. You should too.
If potential buyers in LV were actually being crowded out, then prices would be rising, not falling.
Not true at all. Prices could reach an artificial plateau or just decline less rapidly with a sudden influx of outsider money. The market is trying to find a bottom that is supported by the local incomes. Outsiders swooping in and meddling with it are just causing distortion. Irvine Renter used the word “save” but I think that is a euphemism for “distort“. I do think “save” sounds better from a marketing perspective though.
The idea that rental communities instantly become ghettos is false. What will become ghettos are areas with lots of vacant homes.
These are not mutually exclusive statements at all. They can both be true. I do agree that the vacant houses are not a good thing. I do not agree that the only solution is for outsiders to buy and rent them out. The solution is to let the prices keep falling and let the local market find a balance rather than everyone from around the country swoop in and artificially push prices up to “save” the market.
IR is getting families into homes as renters, and that is an improvement over the home being vacant
Actually we don’t know who the renters are. Your choice of the word “families” has an underlying assumption involving “children” which is a Jedi Mind Trick. It certainly warms my heart to read about families. However, IrvineRenter could just as likely be renting to single people, childless couples, retirees, college kids, etc. I would be curious as to the Demographics that make up his tenants.
We also do not know if IrvineRenter has outbid any local Las Vegas residents at auction. Are the only people showing up to these auctions other real-estate gamers? Or are there some folks there who are trying to find shelter for their children? Can’t families bid for a house at auction and come up short against the “Superfund“? I hope this is not the case, but isn’t it possible? If it did happen, it sure would not be very “helpful” to all these “families“.
IR is not renting these homes he’s flipping them… nothing wrong with that. Just clarifying what he’s doing.
You might want to try reading the blog post. Take note of the part that talks about buying foreclosures and renting them back to you until you can get a loan.
i see the little blurb on the cartoon, but this house is vacant… therefore it’s a flip, if their were anyone living in it then why does he have it on the mls? dumbass…
How can you make profit by renting this property?
$15 ………. Maintenance and Replacement Reserves
$850 ………. Monthly Cost of Ownership
$15 will hardly cover carpet cleaning.
What about water leaks, repainting, etc.
If somebody moves in with a dog, he will trash the whole house.
One renter can be nice and clean, another one not so.
If you search for a 3-bedroom house below $1,000, there are numerous offers in LV:
http://lasvegas.craigslist.org/search/apa?query=&srchType=A&minAsk;=&maxAsk=1000&bedrooms=3
The low maintenance cost is due to the fact cash investors bought it. Without cash investors as middle men the monthly cost of maintenance would be $200-$300 per month easily. This would be the same as the cost of maintenance for a house in Irvine, amazing I know. Thank god for the cash investors.
ooh, ooh, updates on the Irvine Rectum. Sign me up!
I thought it was the Irvine Speculum.