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Rob Flitton's Blog

By Rob Flitton | Agent in Las Vegas, NV
  • What the Las Vegas Real Estate Market Crash Did to My Perspective

    Posted Under: General Area in Las Vegas, Home Buying in Las Vegas, Property Q&A in Las Vegas  |  May 22, 2013 9:02 PM  |  243 views  |  No comments

    Were You Affected by the Las Vegas real estate market crash?  What it did to my perspective … I learned:

    When everyone is planting wheat, grow corn.

    I have been involved in the real estate industry since the late 1970s – by involved I mean as either a keen observer or investor, or else employed in the industry directly (mostly at a senior level) as either a lender, builder or land developer.

    From about 1980 to 1983 unemployment was high, interest rates were high and home sales were extremely sluggish.  We believed the housing market was coming to an end.

    In the late 1980s and into about 1991, there was a major Savings and Loan crisis which dramatically affected the housing market and retail/commercial markets.  The housing market stayed sluggish until the mid-1990s, and we believed that “the good old days” were over.

    At around 2000 to 2001 there was the dot.com bubble which made a lot of equity and wealth disappear overnight and which accordingly hammered the housing markets.  We found it hard to believe we would ever see a robust housing market again.

    In late 2006 and early 2007, my colleagues and I were some of the first to realize there was a major collapse and correction coming.  This was a hugely devastating time in the industry – it ended major companies and numerous careers.

    But here’s the thing …

    Had people in general not been fretting during these times and feeling as though there would never be a market again, they would have been buying and they would have made tremendous and sustainable wealth.  It is all about perspective and timing – I wish I had been on buying sprees during those worst of times, and it cannot be said that this is Monday-morning-quarter-backing, as it has been consistently true again and again.

    I am absolutely convinced that if you want to buy a Las Vegas home, you still have an excellent window in which to do so.  However, given how tight the market is you cannot afford to have an inexperienced and unfocused REALTOR.  Call me – I am a top REALTOR in Las Vegas.  I am THE CLOSER.

  • The Foreclosure Cliff – Las Vegas

    Posted Under: Market Conditions in Las Vegas, Home Buying in Las Vegas, Home Selling in Las Vegas  |  December 10, 2012 8:38 AM  |  273 views  |  1 comment

    For 25 years I have been analyzing and predicting real estate markets with remarkable accuracy.  Yet, in order to analyze what lies ahead for the 2013 Las Vegas real estate market, I need to wait until I know for sure what is happening with the pending extension of the 2007 Mortgage Forgiveness Debt Relief Act and Debt Cancellation.

    The act expires on December 31 2012 and needs extension by Congress within the month of December or it will die – and if it dies, doing a short sale in theLas Vegas real estate market basically will no longer make sense for most people holding underwater homes and either foreclosures or loan modifications will dominate.

    It is quite clear that buyers have jumped back into the Las Vegas real estatemarket – so clearly that they have pushed values up by about 15% across the board in 2012.  Low foreclosure inventory caused buyers to aggressively bid on the available properties – the low inventory was directly caused by one thing: a slowdown by banks in foreclosures being released to the market.

    Despite there being way fewer foreclosures than in 2008 to 2011, there are still a ton of Las Vegas homes underwater and in need of a solution – the available solutions include:

    - wait it out until equity returns
    - do a short sale
    - modify the existing mortgages (the terms and the amounts)
    - allow foreclosure

    According to all sources there are still a massive number of foreclosures that can happen – meaning Notices of Default have been issued and it is ambiguous as to whether or not they will become foreclosures or be resolved in some other way.  Despite the low inventory, foreclosures remain 30% of the whole resale market, and this begs the question: if banks start following through on the pent-up numbers of foreclosures they have, will this re-flood the market with foreclosures and increase the inventory – i.e., slow down the flurry of buying and thus flatten prices in 2013?

    The extension of the aforementioned act has a huge impact because if short sales go away it is entirely unknown what will replace them in the Las Vegas real estate market.

  • Are Las Vegas Real Estate Banks Holding onto REO Inventory?

    Posted Under: Home Buying in Las Vegas, Home Selling in Las Vegas, Property Q&A in Las Vegas  |  November 19, 2012 10:03 AM  |  277 views  |  1 comment

    In the Las Vegas real estate market, a common question heard daily from prospective home buyers andREALTORS® is:

    “are banks holding onto REO inventory?”

    Hell, yes, they are.

    Why?  Leaving aside any possible governmental regulation that might interfere with foreclosing and bringing foreclosures to market, banks properly strive to make money.  How do you make money?

    “Buy low – sell high.”

    For 4+ years, Las Vegas Real estate banks have been buying high (foreclosing with major losses on each foreclosure) and selling low.  Now, with rising market values and shrinking inventory (which they primarily and purposefully induced) they have a chance to increase sales revenue by holding property off of the market for as long as possible.

    In Las Vegas, market prices are rising more than 1% per month – on a $100,000 home, this is about $12,00 per year, or an imputed 12% annualized return (and maybe higher) for the bank by merely waiting.

    The math is ruling the Las Vegas real estate market today.

  • Las Vegas Real Estate Inventory Issues

    Posted Under: Market Conditions in Las Vegas, Home Buying in Las Vegas, Property Q&A in Las Vegas  |  October 29, 2012 8:26 AM  |  290 views  |  1 comment

    Housing inventory in the Las Vegas real estate market isn’t essentially different than inventory in any other business. “Just-in-time” inventory improves a business’s return on investment and reduces loss risk.

    But the double-edge sword of just-in-time inventory is that it doesn’t enable curious buyers to touch and feel actual examples of the product, and it doesn’t enable the business to respond to demands for immediate purchase.

    A “spec-home” in the new home building market is the opposite of just-in time inventory – it is built-inventory paid for and sitting on the shelf. And there is nothing in the home building industry that signifies market health than builders aggressively building spec-homes and ignoring just-in-time strategies. It means that demand exceed supply.

    But since the supply is so low in the Las Vegas real estate right now, how is it that demand for new housing is not much more robust? The answers lie in the core of the dramatic and devastating housing crash that began taking hold in 2006/2007.

    First, there are less built spec-homes in place for buyers to look at and consider.

    Second, financing issues still plague many buyers and many smaller home-builders (spec loans are just not available).

    Third, the cost of building a new home (lot cost included) is still at least 150% higher on average of what a similar existing home costs to buy.

    Fourth, because of undue and unwelcome governmental interference, the market cannot clear itself of REO/foreclosure inventory and no one can speculate on how it will clear – and thus venture capital will stay idle. And venture capital generally in America is still scared pending the upcoming election.

    If you start to see a lot of spec home activity in the Las Vegas real estate market, be sure to buy before it’s too late.

  • To Analyze the Las Vegas Real Estate Market, Study Replacement Costs

    Posted Under: Market Conditions in Las Vegas, Home Buying in Las Vegas, Investment Properties in Las Vegas  |  October 25, 2012 8:31 AM  |  287 views  |  No comments

    In the Las Vegas real estate market, when developers and builders undertake the heady prospect of negotiating to buy land, getting it entitled or zoned, engineering and designing the neighborhood, retaining contractors to build the lots, and THEN proceed onto the equally arduous task of building and selling quality homes, it is very risky and very complicated.

    From the day they buy the land until the day the building lots are finished, that period of time is completely unpredictable – 2 years?  3 years?  And, accordingly, development costs can be a moving target.  Building a home in the Las Vegas real estate market is exactly predictable time-wise, but costs and sales prices are hard to predict.

    What am I driving at?  From now on when you look at Las Vegas homes for sale – resale homes – look at them differently.  At some time in the past, someone had to undertake the immense risk of building that subdivision and that new Las Vegas home.  People, we are buying homes right now that are often priced at about half of what they can be built for.

    This means that you can begin to feel reasonably secure about the Las Vegas Real Estate market when resale homes are about 85% or higher of the probable replacement costs – building lot, home and all.

    When interest rates were higher, new home builders could compete by offering to buy down financing rates, but right now they don’t have that edge – it makes no financial sense to buy a new home … yet.  Study the difference between new and resale homes and you will have an edge.

  • Las Vegas Real Estate Phantom Inventory and AB284

    Posted Under: Market Conditions in Las Vegas, Home Buying in Las Vegas, Foreclosure in Las Vegas  |  October 24, 2012 9:58 AM  |  344 views  |  1 comment

    In the Las Vegas real estate market, Assembly Bill 284 (AB284), Nevada’s robo-signing law from late 2011, makes it a felony for loan servicers to sign documents related to foreclosure without “personal knowledge” of who owns the note, and further requires lenders to provide an affidavit showing they have authority to foreclose.

    The goal of the law was to stop potentially illegal foreclosure activity – preserving the sanctity of Las Vegas real estate transactions is important, but not like this.

    But what has this legislation actually done?  Primarily it has dramatically dammed up the flow up foreclosures into the Las Vegas real estate market, thereby creating a false heat in the market – i.e., artificially lowering inventory and thus heightening competition between available buyers.

    Foreclosure notices were commonly around 5,000 per month and are now about 20% to 30% of that number.  The other foreclosures don’t simply disappear – rather they are there “somewhere” and this is known as “phantom inventory.”  In fact, it looks like the mythical dip inventory has caused a number of the major builders to begin pulling building permits (“starts”) and pouring footings/foundations to be ready to answer a possible dearth in supply.

    Those missing pending foreclosure borrowers are where?  Living in their homes.  One reliable source indicates that about 75,000 current Las Vegas real estate homeowners have not made a mortgage payment in 3+ months – and it is known that many of them haven’t made a payment for many months and, in some cases, up to 2 years.

    But, what is concerning is the volume of reports claiming that Las Vegas real estate is recovering based on the spurt of false market activity.  AB284 has only delayed the inevitable – no one is ever effectively able to fake reality, and the market must organically self-correct without regulatory influence.  As the old saying goes, capitalism without bankruptcy is like religion without hell.  The market needs to heal and it cannot begin to heal until it is left alone by do-gooders.

    There are many Las Vegas real estate voices clamoring for stimulus to “drive the economy”, but AB284 and any other measures are only attempts to “break some windows” a la the broken window fallacy in economics.

  • Demystifying the Claim that Las Vegas Housing “Is Back”

    Posted Under: Market Conditions in Las Vegas, Home Buying in Las Vegas, Home Selling in Las Vegas  |  October 22, 2012 9:30 AM  |  299 views  |  1 comment

    Analyzing the Las Vegas real estate market is all in how one examines the details. It is claimed on a Las Vegas real estate news website that:

    “New home sales and permits soared last month in Las Vegas while closing prices slipped.”

    and also this:

    “Last month, 440 new home permits were pulled in the valley, up 75 percent from September 2011.”

    But before one believes the market “is back”, it needs to be recognized that a burst of “starts” does not necessarily mean much.

    Builders “start” new homes for a variety of reasons – and then often leave them at the footings or foundation stage.  Primarily it creates the impression of spec inventory without the risk or exposure of building real spec inventory.

    First, it heightens sales excitement to see a flurry of activity.

    Second, it helps with cash-flow if that builder can draw down on his construction loan for that start.

    Third, it allows a builder to get to an Occupancy Certificate more quickly and thus be able to promise buyers a quicker delivery date for closing.

    As a real estate professional for more than 25 years analyzing housing inventory, I know first-hand that it is Occupancy Certificates that should be measured …not building starts.  The Las Vegas housing market still has a long way to go.

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