Why are their homes for sale? It's a question that always gets asked, and it's more important now than ever.
There's about 30,000 properties for sale in Las Vegas. In our defined areas of Very Vintage Vegas, there's about 800. Why so many? Let's look at the basic categories and thinking behind the different groups of sellers.
Group One -- Distressed Sellers in the Las Vegas Real Estate MarketGroup one is currently the most abundant group. Financially, they HAVE to sell NOW. They're already in foreclosure, or at least in default. The banks who have already foreclosed on houses are also in this group. Generally speaking, the homes they're selling are in the worst repair. Many have sat empty for many many months, (especially the bank owned ones). They're the most desperate to salvage what little they can in the way of equity, or to keep the foreclosure off their credit reports. Many are just walking away, or are just waiting for the eviction letter.
Some of these sellers made a bad bet. Some didn't know what they were getting into or the downside of the teaser rates loans. Some just lost their job, or had a car wreck or fell on hard times. Many have simply gambled away the roof over their head.
They are also the first homes that are going to get sold, as there's a huge pool of buyers who we'll collectively call the "bargain hunters".
Vintage Vegas has it's fair share of distressed sellers, though typically the speculators who bought all those new homes 2 or 3 years ago from the builders (with a greedy desire to make a killing) weren't buying in Vintage Vegas. Most of our distressed sellers are distressed now, because they didn't fully understand what was going to happen when their starter rates adjusted.
That's why I didn't think the "foreclosure problem" was really a problem in Vintage Vegas as it was out in the suburbs. Vintage Vegas prices held up and even continued to accelerate while prices started sinking in the suburbs. But...the lending problem which was caused by the foreclosure problem steamrolled over Vintage Vegas also.
We fervently believe that the historical trends in the "vintage", close-in, hip, trendy, and convenient neighborhoods of almost every city in America will cause huge price escalation in the future in Vintage Vegas as well. Try googling "hilltop" or "gaslight" in San Diego. How about "short north" in Columbus, or "Oak Lawn" in Dallas or "Capital Hill in Denver, or ........
The "bargain hunters" are going to make a killing.
Group Two -- The "Normal" Sellers of Las Vegas Real EstateGroup two also need to sell, either because of a change in job, or retirement, empty nesting or changes in family size, or illness, or mom now needs to move in, or any number of valid and compelling reasons. Some of them took advantage of incentive packages and bought a new home before selling their old home. This group is not generally in financial trouble. This group typically bought more than 4 years ago. They have equity. They want to get as much of it as possible, of course, but cashing out their equity is not their motive for selling. Traditionally, this group has always been the largest group, but right now, they're lost among all the group one sellers. Truly, these are the sellers I feel sorry for right now, and they're the group that is being least served by the real estate community. They didn't buy their homes during the run up. They didn't use mortgages that were going to adjust. They didn't do anything except live the dream and own a home.
Generally, these homes are in very good condition. The sellers love their homes, but are moving for legitimate reasons that have to do with jobs or families or life in general.
As much as they hate it, they're going to have to give up something to get their home sold. Price is everything in this market. There's just as many regular buyers as there are regular sellers. They want to buy a nice house, not a fixer upper. They know it's a buyer's market. They're not in for the kill, and they DON'T want a fixer-upper. They won't pay the asking price, but the list price has to be reasonable enough for them to want to see the home, and to feel like they got the nicest home available that meets their needs, and for the best price. AND They have to be confident enough that now is the right time to buy.
Many of the buyer's for these homes are sitting on their hands. They want to buy, and until a month ago, were trying to "time the market" and jump in at the very bottom. They plan on living in the homes. They're not "investing" or "speculating". They fully believe that this is a market cycle and want to be part of the next market cycle. Things have backfired on them. Now they'll have trouble getting a loan till the mortgage problem sorts itself out. I'm hearing a lot of regret now that they didn't buy a few months ago, even at a higher price, because they can't buy now at all because they can't get financing.
Another whole huge group of the buyers who will buy the group 2 homes have to SELL FIRST. They bought condos or smaller homes that they could afford back then. Their equity will make the big down payment that will allow them to still have reasonable mortgages on the new home. But their buyers can't get loans either, and were waiting for prices to come down.
We're telling the group 2 sellers to drop their prices, and to make their homes as CLEAN and as PRETTY as they can afford to do. They've got the time, because when the buyers come back out, they're going to buy the nicest homes at the most reasonable price. The more anxious they are to sell NOW, the more they'll need to price their home competitively.
Group 3 -- The "Demanding A Miracle" Seller In the Las Vegas Real Estate MarketGroup 3 on the other hand, has been reading the same headlines and watching the same CNN reports that the buyers have. They want to get their equity out now, and are afraid that prices will come down and they'll lose all their gains if they wait. Unfortunately, this group has the most equity, has the ability to be the most flexible, but they steadfastly refuse to do so. They "don't need to sell" and they're "not giving their house away". We generally call them the "overpriced" listings. They're also mad at their agents because no one is looking at their home. They only remember the stories from 3 years ago about people who got MORE than their asking price when the market was hot. I'm reminded of my gambler friends who can recall every win, but conveniently forget about every loss.
Since the don't need to sell, they should not be on the market! The only good time to sell, and the only good reason to sell is because you HAVE TO. I think this group accounts for about 25% of the available homes right now. If ALL of these sellers were to pull their homes from the market, it would be a very good thing, and would help alleviate the bad headlines about "too much inventory".
Their homes aren't going to sell until the market improves dramatically, and it has to improve from the bottom up. The bargain homes will sell first, because the bargain hunters are buying NOW. The reasonably priced nice houses of group 2 will then have to sell. After that, the group three's will have a chance. Why be on the market for 6 or 8 months without a showing? Wait it out until the Group ones, and group twos have been absorbed.
There's TONS of would be buyers, but they are also the sellers of group 2. They won't be buyers until the Group one inventory comes down, and they have a chance at selling their group two home. The Group one sellers won't be buying since their credit is ruined, and the group three sellers aren't selling anytime soon. The best bargains are selling NOW. The best houses at the most reasonable prices are selling NOW. Everyone else is just sitting there, hoping and waiting.
In Part 2, we'll be discussing the different group of buyers, and what we're telling them to do.