Nevada's new and nationally popular foreclosure law (AB284) has shut down virtually all non-judicial foreclosures in the state, creating a severe inventory shortage and skyrocketing property values.Â The inventory shortage is so bad Realtors are dropping out of the business because their buyers cannot win the bidding for the few properties on the market in the sweet zone for investors (see my previous two blogs for details
).Â The law at the core of our spiking prices was sold to us as a consumer protection response to bank misbehavior and robo-signing.Â That might be somewhat true, but as with all politics, there was an ulterior motive!Â A CONSiPRACY!!!
The big deal with AB 284 is a provision that makes the bank swaer they have the ORIGINAL (wet) documents from the loan.Â Of course they don't have them, because since the mid 1990's the loan package was scanned by the originators and forwarded onto the banks.Â Once in the system, the mortgage broker's shredded the originals in favor of their electronic copies.Â Realtor buzz is that our state legislators were stupid when they put in that provision, but I think differently.Â I think it was done very much on purpose.Â Very much with an ulterior motive.Â Very much for the benefit of the entire state, but with secrecy and deception needed to actually pass it and make it work.
I can imagine the closed door conversations of our state legislators and their researchers, "What can we do to bring property values up, get people out from underwater, increase property tax revenues and improve the Nevada economic situation without making another bubble that will eventually blow up and hurt us?"Â
The answer was this law that would simply force the banks to change gears to a system that would make it impossible to flood the market and spread out the absorption of the tens of thousands of defaulted loans over several years, but initially stop them altogether.Â In the meantime, they will be incentivised to make fair deals with homeowners byÂ giving many homeowners really good leverage to use against their creditors.
FOR ONCE, GOVERNMENT ACTUALLY DID SOMETHING THAT WORKED THEY WAY THEY WANTED IT TO!Â
What I believe they had in mind is now exactly what is happening!Â AB284 is bringing up property values quickly, and with no drop in sight.Â Once the banks are able to make the transition to judicial foreclosures, they will be working thru the inventory slowly which will level off the appreciation to normal levels, just when it reaches 2002-3 levels (or at about the cost of building a house).Â At that point, the construction industry will get back on its feet and our recovery will be complete. I know conventional wisdom is that government policies generally lack wisdom, but this just makes too much sense!Â This was a brilliant move by Nevada government!
THE OPPORTUNITY CREATED
Everyone else blogging here is complaining about the price spike and investors are hesitant to go all in for fear of a bust, but when you put all the pieces together, you can see the timeline for opportunity very clearly.Â First of all, any property value lower than the cost to build will be a good investment.Â This increase will not slow down until they hit that figure.Â Right now, we're about $20-30/SF away from it.Â Even though we've seen almost triple digit inflation in the past 6 months, we're still undervalued and still selling at prices where there is healthy cash flow.Â Yes, it was better to have bought 4 months ago, but...shoulda, woulda, coulda! It's not over yet.Â Yeah, the days of 20% cash flow and 80% appreciation are gone, but 9% cash flow and 40% appreciation is still pretty good and I believe that right now (and for the next 90 days), we can still get that.Â
THERE IS NO BARGAIN HUNTING, JUST A RACE TO THE TOP!
I live my life by a perverted axiom I learned from my father (I don't even know the real version), "A pig gets fat, and a hog gets slaughtered."
Â Don't call me, telling me you want to buy Las Vegas real estate at 30-40% below market value, you're wasting my time and yours.Â There are no discounts in Las Vegas, and won't be for some time now.Â At least not in the price range where investors should be going.Â DON'T EVEN ASK!!!Â Your value comes with the combination of market appreciation and positive cash flow.Â There is no bargain hunting in Las Vegas, it's a race to the top!Â Overbidding and aggressive terms are the only way you're gonna get into this market and make money.Â If you want to "wait for the good deal", you will wait yourself out of the market and I will find you crying in your oatmeal next year.Â
I KNOW IT'S A CLICHE....
I know it's a cliche, but if you've read the past two blogs and this one as well, you understand the market and why I say, "BUY NOW OR GO HOME!"
If you're an investor who's new to the investing world, or has been sitting on the sidelines, give me a call, shoot me an email, send me a letter, but make contact with me and let me help you put together the investment plan that works best for you in our unique market.
Jay Rosen,Â Broker
Since 1917 Realty & Property Management