Federal Reserve Interest Rate Cut Is Good News For Las Vegas Real Estate

From the Mortgage Matters Newsletter:

The long awaited Fed decision arrived with a bang! The Fed surprised many economists and traders with a half percent cut in both the Fed Funds and Discount Rates. Stocks soared higher and enjoyed their largest gain since 2003.
What does the Fed cut mean? Rates on consumer debt, car loans, and Home Equity lines will all benefit. But because Home Loan rates are tied more closely to inflation, it is not uncommon to see less of a reaction...or even an opposite reaction in mortgage rates.
The Fed cut also hurts rates of return on investments, which gives foreign investors less incentive to invest in US securities. This has sent the Dollar much lower against the currency of most major foreign countries. This makes foreign goods more expensive for us to buy, which adds to inflation pressures.Overall, the Fed cut is good news for the economy, but may nudge inflation a bit higher.
end


Uncle Jack's take on it:

We started getting some good news 3 weeks ago with the discount rate cut, and now, this 1/2 point drop in the fed rate is another shot in the arm. As Gary Keller, the founder of Keller Williams Realty always says "All Real Estate Is LOCAL". The fundamentals of Las Vegas haven't changed at all. Low unemployment, job growth, more people moving in than moving out. All unchanged.

The first buyers off the block (or the fence, in this case) will either score the best deals, or score the best home. Investors are out snagging the foreclosures. The vast majority of the homes in Vintage Vegas that are on the market are pretty crappy. The nice ones aren't nearly as discounted and aren't going to be either. The selection of the BEST homes in Vintage Vegas has never been better.

The big difference between Vintage Vegas and the Suburbs, is that EVERY home in Vintage Vegas has to be considered a "custom". There are no 2 alike. Out in Summerlin, or Green Valley or Alliante, or countless neighborhoods on the way to them, there's dozens, if not hundreds of absolutely similar properties for sale. Not so in Vintage Vegas. Each home is old enough to be unique.

There's some fantastic property that's ready for the smart buyer. And, there's some terrific bargains for the savvy investor or owner occupant, but they will need some or a lot of work. 3 or 6 months from now, I'll be hearing buyers lamenting that they didn't buy last summer or fall.

It's inevitable. All real estate is local. The dynamics of the gentrification of the urban core can't be stopped.

There's A Lot Of Real Estate Buyers Who Think We've Seen The Bottom Of The Market For Las Vegas Real Estate

Well, certainly a lot more in the last 10 day than in the last 6 months.

That's why you haven't seen as many daily posts as usual. That's why I've had to wash the car twice this last week. That's why Oxbow sold in 10 days.

That's why there's offers being negotiated as we speak on the 15th and Oakey Mid Mod, as well as the Newport Cove Condo. That's why Susan thinks she's getting an offer in Spokane, and is going to decide this weekend which Townhouse is the best blend of best property and best price.

That's why Lori is shopping for a home to surprise her husband with when he comes home from Iraq in November. That's why my phone has started ringing a lot!

There's signs of life in the Las Vegas Vintage Real Estate Market

Who's right? The buyers who have started to call? Or, the buyers who aren't calling yet. Will it continue to pick up? I'd certainly like to think so, and the signs are pointing to it. Rates are coming down. New loan programs are starting to get introduced (that make sense for the average buyer). Investors are bargain hunting the bank owned properties. Many more buyers are calling than they did last week or last month. We're opening escrows. There's signs of life, at least for me in Very Vintage Vegas.

Will it continue to look like the bottom of the Las Vegas real estate market tomorrow, or next week, or next month?

I'll let you know.

This Article Explains "Who's to Blame For The Sub Prime Mortgage Mess

"Who's to Blame For The Sub Prime Mortgage Mess?"

It pretty well sums it up. There's plenty of blame to go around.

I'm still working on the "who's buying, who's not buying and why" and plan to publish it by Sunday. Part one "who are the seller?" is HERE.

The Mortgage "Problem"

I get this weekly market update emails from a dozen different lenders. (It's a stock program they can buy into. It's usually pretty good information, but I really don't know who to really give accreditation to, since I get a dozen copies a week from a dozen different lenders.)

I'm using it as a prelude to 2 posts I'm currently writing. One is "who are the sellers, and why are they selling" and the other is "who are the buyers who are buying (or not buying) and why?"


MARKET COMMENT (from the Mortgage Matters e-newsletter)

So the world isn’t coming to an end. On the contrary, it’s thriving quite nicely, at least according to the most recent slate of economic data releases. Gross domestic product – the broadest measure of economic health – expanded at an annual rate of 4% in the second quarter, significantly higher than the 3.4% most economists had predicted. Leading the way was strong business investment, followed by robust consumer spending, which increased a better-than-expected 0.4%


The good news is that all this increased economic activity was non-inflationary. In fact, the personal consumption expenditure (PCE) index, the Federal Reserve's preferred measure of inflation, rose a mere 0.1% in July, half of June’s 0.2% increase.

The news wasn’t quite as encouraging on the housing front, but it wasn’t necessarily discouraging either. Sales of existing homes met consensus estimates, with purchases declining 0.2% to an annual rate of 5.75 million in July, the National Association of Realtors reported. Contractions aren’t welcomed, to be sure, but then again, the contraction was expected.
Meanwhile, the prime, conforming mortgage-rate scene continues to improve. The 30-year and 15-year fixed-rate mortgages dropped a few basis points to average 6.45% and 6.12%, respectively, while the five-year Treasury-indexed hybrid adjustable-rate mortgage inched up a basis point to average 6.35%. Rates are roughly where they were this time last year.


BUST TO BOOM
The year-long drop in housing prices has alarmed many housing commentators. But should it? Housing is often depicted as an exemplar of steady, linear growth market. However, price volatility happens more often than expected. Since 1979, residential real estate prices have had two 10-year cycles where prices have risen significantly, then retreated approximately 15% to 20% over the subsequent year or two. Similar booms and busts can be traced back to the early 1900s.

In the last bust, during the saving & loan crises of 1991, the federal government responded with the Resolution Trust. The feds are again responding. President Bush has introduced a plan to allow the FHA to accept more distressed borrowers, while Fannie Mae’s is already helping distressed borrowers refinance and retain their homes with its successful “Homestay” program.
More borrower relief could be forthcoming from the mortgage market. The Federal Reserve will likely lower its influential federal funds rate when it meets on September 18. But rates could dip lower this week, particularly if productivity and costs and the employment situation beat market expectations.

This Newsletter is for informational purposes only. The information contained herein may not be applicable to every situation or jurisdiction and we urge you to consult your professional advisor prior to acting on information contained herein. The content, accuracy and opinions expressed herein are not verified or endorsed by the sponsor hereof.
End.

Uncle Jack again:

Real Estate, like stocks, and fashion is cyclical. Things go up and come down and go up and come down. What was HOT once goes out of style. What no one wanted a while ago becomes popular again. That's why Vintage Vegas is blooming, while the thousands and thousands of 80's and 90's neighborhoods are wilting and looking shabby. The 2000's neighborhoods had become "too" expensive for the working people to buy, and traffic problems created the first "commuting from the suburbs" headache that has ever been experienced in Las Vegas.

The urban core of Las Vegas Real Estate was still doing well during the last year even as the suburbs started seeing the foreclosure crisis swell. But the "lending crisis" which has now been downgraded to a "lending problem" steamrolled right over the top of us.

I'm getting lots of buyer calls from 2 distinctly different groups. Group one has money, believes that real wealth comes from REAL ESTATE, and are looking for bargains. They believe that Vintage Vegas holds the best appreciation opportuny in the coming rebound. Group 2 wants to LIVE near work, wants a unique charming home in upwardly changing HIP neighborhoods. The question question for both groups is whether they can get a loan at the moment, not whether there's a great house out there for them.

2 and 3 years ago, getting the money was easy, and getting the home was hard. The pendulum has currently swung completely the other way and a lot of it has to do with OVER reaction both then and now.

As the newsletter I quoted above points out, things will soon change again. The Fed and the Government and the markets will sort things out, new loan programs will emerge, the inventory will shrink, rates will come down, confidence will increase. My mother always taught me that progress come 2 steps forward, and then a step back till the next 2 steps forward.

We're in the 1 step back phase at the moment, and the cycle will change once again. The next 2 steps forward in Vintage Vegas will be huge. I know that 3, 6, 9 months from now, the number one thing I'll be hearing is "Damn, we missed the bottom, we should have bought something last summer or fall, when the pickings were best".

That's the definition of "Cyclical".

Better news turns the "crisis" back into a "problem"

Of course if you're in foreclosure, or have a loan that's about to adjust, then it's still a crisis for you.



But yesterday, The President actually made a speech that I was able to listen to. Ben Bernacke, the Fed Chairman also spoke at an economic summit. Both speeches calmed a lot of nerves on wall street and in the credit markets. The fed is prepared to act if the housing problem starts to effect the overall economy. The President is urging leniency from the lenders, and actually proposed one of the things that I've touted, which is changing the tax code so that forgiven debt doesn't become current income.



We're seeing more FHA and VA loans. The buyers who were sitting on their hands waiting to try to "time the market" are suddenly worried about not being able to get a loan. I think that buyers coming back into the market, lowering of rates, frustrated sellers coming off the market, will start to reduce the inventory, and create the bottom.



Since I don't think we're going to have any "flip" buyers, (except for the extreme fixer uppers) there's opportunities to get into properties at prices that haven't been seen in several years. Out in the suburbs, we're back to 2005 prices for the bank owned and pre-foreclosure properties.



In Vintage Vegas, prices are holding up pretty well due to the growing demand for "location location location" and all the great reasons that exist to live in the Urban Core.



Vintage Vegas only represents about 5% of all the homes in all of Las Vegas. Many of the 80's and 90's suburban neighborhoods are starting to look beat up. Vintage Vegas is improving everyday. I don't know anyone who doesn't believe that the URBAN CORE is going to have the best price appreciation in the coming years.



So, the bottom line is....if you can get a loan now, NOW is the time to start the process, while the inventory is at it's best I've ever seen. There's terrific great vintage homes that deserve top dollar, and will always be the first to be snatched up, and there's ton's of bargains from distressed homeowners and banks. The undiscovered cool neighborhoods are full of opportunity to make money.



And Believe me on this, the markets are cyclical, Vegas is STILL Vegas, people are still moving here, jobs are being created and there's STILL a shortage of land to build on.

Speaking of Open Houses...

We launched the marketing of 1017 Hassett yesterday. I know what we're doing is right because a dozen people stopped by just to say hello, or to introduce themselves. 2 of them called someone they know and told them to get over there to take a look. They're both talking to lenders on Monday.

I met 3 "ready to buy in the next few weeks" buyers, and am starting an action plan for them that will soon have them living in VVV.

The slowdown in Vintage Vegas has ENDED, though not in the rest of the valley. There's now 22 homes under contract, and 12 in contract has been the running high for the last 5 months for the downtown area, and over all the geographic area that we cover, there 80 under contract with a 5 month prior average of about 45. And the inventory of available homes is still huge, and the selection is tremendous, but it's starting to warm up again in terms of the percentage under contract.

Help me tell the world. Your friends, family and co-workers ought to know.

NAR Says Existing Home Sales Have Hit Bottom

Great article by Blanche Evans published in Realty Times

MONEY QUOTE:
Despite wailing from banks that late or non-payments on sub-prime loans are sinking their profits, continuing fear from homebuyers that they're catching a falling knife, and predictions from housing analysts that the pain is far from over, the outlook looks sunny for housing, says the National Association of Realtors.

While 2006 ended as the third-best sales year on record, it was because the winter/spring months still had momentum going from a record-breaking 2005. The fourth quarter, on the other hand, was a rout. Existing home sales, including condos, dropped 2.7 percent in the fourth quarter compared to the same period a year earlier -- the biggest year-over-year drop on record.

Analysts say that a number of causes kept buyers away including affordability, the financial media, rising gas prices, rising mortgage interest rates, and buyers' fear of becoming "the greater fool."

Housing bulls suggest that the drop in housing sales is primarily due to fear -- that housing fundamentals are actually better now than they were during record housing conditions. Unemployment is down, wages are up, gas prices and mortgage interest rates have somewhat modified. Rising inventories have encouraged builders and sellers to offer incentives and negotiate, respectively. That results in better choices for homebuyers.

In fact, inventories are already being absorbed. Both the National Association of Realtors and the National Association of Homebuilders reported in February that inventories of homes are improving. In December, new home units hit a 10-month supply in November and were down to a 5.9-month supply in December 2006. Existing homes were at a 6.8-month supply in December, down from a 7.3-month supply in November.

That's why David Lereah, NAR's chief economist, said it appears the fourth quarter was the bottom for the current housing cycle. "This information confirms 2006 was the year of contraction, and hopefully the fourth quarter was the bottom of this current business cycle," he said. "Home sales are leveling at historically high levels, and examination of data within the quarter shows home prices stabilizing toward the end. When we get the figures for this spring, I expect to see a discernible improvement in both sales and prices."

BOTTOM LINE FOR LAS VEGAS?
we haven't seen anything yet. There's another million people headed here in the next 10 years, and many are baby boomers bringing their "previous home equity" with them. Rents are rising fast and investing in Las Vegas real estate may prove to be the best investment ever.

There is no housing "bubble" in Las Vegas

From the 3/3/07 Review Journal

MONEY QUOTE:
"These results fly in the face of the doomsday sayers who only a year ago were predicting that property values in Las Vegas would drop precipitously when the real estate bubble burst in Las Vegas," Murphy said. "It also flies in the face of local analysts who have been declaring all year long that property values are dropping. The fact is that following the boom of 2004 when we saw appreciation rates of 40 percent, the only thing that has dropped has been the appreciation rate itself."
click to read the entire RJ article