I have gotten several inquiries recently mirroring this sentiment:
"As you know, the Las Vegas market will go further down approx 27% this year. That is why banks are not giving financing because it is a declining market. If the banks accept 30% below list cash offers, then it is worth buying now - otherwise, it is better to wait."
This is part of an email I received yesterday. This got me thinking. Those of you out there that are basing your investing decisions on what you are reading in the paper or hearing on the news need to know how our market is behaving.
This investor is looking at cash flowing investments here in Vegas. This generally means $150K or below. I am absolutely not seeing the banks accepting 30% under list cash offers (believe me, I am writing a lot of them). What I am seeing is up to 10% below list on cash offers. With this segment of the market cash flowing at list, anything less is purely a bonus.
What we seem to have here is a disconnect between the sub $300K market and the rest of the market. In this segment, we are commonly seeing multiple offer situations similar to last summer. Many properties are actually going for more than list at this time. Considering that we are just heading into the most active time of the year, I expect to see a continuation of the points made below.
I am copying my response to the above referenced email with the graphs referred to in my answer. I believe this will be helpful to many of you in understanding just what is going on here.
"I have attached some info that you may find helpful. Attached are the weekly resale trend reports. This info is gathered directly from the local MLS and breaks down the market trends in several ways. A lot of this is not important to what you are wanting to do, but there are a few graphs you should check out.
**Realtor.com readers, the graphs would not upload. Please email me at scottmeservey@702properties.com and I will be happy to email the graphs to you**
First is graph #1 (median price), look at the dark blue line that indicates active properties on the market. It shows a leveling of median price for the last seven weeks.
Second is graph #2 (days of supply by price range), look at the dark blue line ($0-299K) which shows a declining supply since Jan 7, 09. This indicates less homes available in the price range you are looking at, which means stable to increased pricing.
Third is graph #3 (combined days of supply), this graph shows combined price ranges for SFR (dark blue line). As you can see there is a significant trend toward the reduction of supply.
Fourth is graph #4 (light blue line), this graph shows absolute # of homes (supply) by price range. As you can see, the raw number of homes in the $0-299K has been in decline since mid December and has been accelerating to the downside for the last seven weeks.
Next is graph #6 which shows demand by price range ($0-299 is light blue line). This clearly shows a dramatic and increasing level of demand for this price range since the first of the year.
If you look at the other price ranges on these graphs, they tell a very different story than the $0-299K range. If you blend the higher end statistics with the lower end, I could see how a further decline would be projected. We are not looking at the higher end, however. Right now in this market, the $0-299K range is behaving very differently from the rest of the market. In this price range, we are currently in multiple offer situations. Make absolutely sure you know where the info you are basing your opinion on comes from and exactly what it represents.
In my personal opinion, I don't think that a home that sold for $260,000 three years ago that is currently listed for $90,000 will go down another 27% this year. The statistics currently show a strengthening market in this price range. If you want to wait, that is fine with me - I'll still be here and will be happy to help you. I would enjoy meeting with you later this month. Let me know when you are going to be here."
I hope the graphs are readable. The other colors represent higher price range segments of our resale market which show much different activity. These graphs are current as of 4/29/09. If you would like to discuss this further (or are looking for primary residence) please feel free to contact me at scottmeservey@702properties.com or give me a call at 702/496-4710.
