The Las Vegas real estate market has endured an amazing roller coaster ride in the last ten years. Homeowners in the Las Vegas valley saw very modest price appreciation throughout the 90’s and the early part of this decade. In 2003, sales began to pick up and by 2004 Las Vegas was the hottest market in the United States. Prices shot up to astronomical new heights only to come crashing down a few years later. The 2007 and 2008 season saw the Las Vegas real estate market become as cold as ice as both prices and closings plummeted and foreclosures soared. But all things come full circle and since the summer of 2008, the Vegas market has been picking up steam and has in fact enjoyed record sales going into the summer of 2009. In fact, there were more sales in June and July of this year than during any previous month on record…including the heyday back in 2004. The continued bad news, is that after 18 months of price drops the huge gains in appreciation that we saw from 2003 to 2006 have not only been erased, but we have receded to levels of a decade ago. The average median home price in Las Vegas has settled near $130,000. Virtually everyone that purchased in Las Vegas after 1998 is now upside down in their home. It does not make a lot of sense to most Las Vegans as homes are now selling well below builder’s replacement costs.
This drastic decrease in prices has brought droves of investors back into the Las Vegas real estate market. 80% of closings in the last several months have been on REO or post-foreclosure bank owned homes. Cash buyers have been dominating the market and getting great properties for around $40 to $70 per square foot. Unfortunately, the inventory of bank owned homes is now at an all time low of under 2000 units. This represents less than a two week supply of inventory based on the fact that the majority of the 4702 and 4602 closings in June and July were REOs. Even though Las Vegas is the “foreclosure capital of the world”, we are continuing to see foreclosure inventory shrink on a monthly basis. June and July saw nearly 3300 homes per month revert to the banks through foreclosure, but this pales in comparison to the over 3700 REO sales per month that we saw at the same time. This disparity means that we are loosing nearly 400 homes per month from the inventory of bank owned homes.
The low inventory is causing heavy competition for the homes that are available. REOs coming on to the market today are creating bidding wars as investors try to snatch up cash flowing properties at great, low prices. Both owner occupants and investors looking to take advantage of great buying conditions are finding that they are having serious difficulty getting homes under contract. This excess of demand is beginning to drive prices up on bank owned homes.
For months, I have touted the benefits of buying REOs directly from the banks. The process is simply and easy, and, until recently, investors could use this method to acquire great properties at great prices. But those days appear to be coming to a close, at least for the time being. There has been talk for over six months, since the moratorium on foreclosures ended in March of this year, that the banks have a surplus of inventory they are holding back. The problem seems to be that no one knows when or if this rumored inventory will be released. Until or unless that day comes, I am now advocating that investors change their strategy for acquiring properties in Las Vegas. Plan B is to buy homes at the trustee’s sale. After the notice of default (giving a late paying home owner 90 days to cure the late payment) and the notice of sale (giving them another 21 days) a home is sold at the trustees sale. At this sale, the property will either be bought by a third party (you or I) or it goes back to the bank and will eventually become a bank owned, MLS listed REO foreclosure property.
Previously, I have not advocated buying at the trustee sale because there are many restrictions and hassles involved in this method of purchase. Not the lease of which is that properties cannot be financed…cash must be paid at the time of sale. However, with the inventory of REO homes tightening so drastically, I am now finding that trustee sales are offering opportunities to purchase homes at 20-30% below the price that would be paid once the home becomes an REO. Buying at the trustee sale also eliminates the competition of multiple offers. This is where the true investor can now turn to get great wholesale deals. Investors must continue to adapt in order to profit in today’s real estate market. I believe trustee sales in Las Vegas are the next step in this evolution.
Anyone interested in getting involved and finding great homes at the best prices with the least amount of competition feel free to get in touch with me for more information.