LAS VEGAS HOUSE PRICES MAY BE RISING BUT NOT BUBBLING
The previous decade’s burst of the real estate bubble, with its plummeting Las Vegas house prices and accompanying economic dislocations, made a lasting impression. For most homeowners, the damage was strictly psychological. The majority weren’t even tempted to sell while Las Vegas house prices were dropping (or hovering below what they darned well knew were way beneath reasonable values). That was a half-decade ago, and since then, prices have been in recovery mode—with gusto. In fact, last year the rises across the nation were so steep that we began to hear grumbling about a new real estate bubble starting to form. The numbers did suggest a rambunctious market: a 20+ month streak of double-digit year-over-year U.S. price appreciation (by August of this year, a 6.5%). For homeowners, any rise in Las Vegas house prices certainly comes as a relief from the emotional distress of seeing sale prices below common sense levels. But having so recently experienced the ‘bubble’ burst, it was easy to begin to worry about the same cycle already in progress…again…? Some good news and a convincing analysis has just been produced from one of our most reliable sources. The author, Mark Liu of CoreLogic, released “Another Look at U.S. Housing Market Conditions” late last month. He thought it time to examine “suggestions that a housing bubble is reemerging” following the release of the latest figures that continue to show improving house prices. Others have discounted the ‘bubble’ formation idea, but this time, Liu brought some unusually clear logic to the discussion. Simply put, he reasoned that since homeowners use their income to pay for home mortgages, in any local market, house prices over the long run can’t be sustained if they grow faster than income. If house prices rise faster than income for a long time, an unstainable ‘bubble’ will have formed (and, of course, will eventually pop). During the last bubble years—January 2005-November 2007— in the largest 50 markets, home prices were more than 10% above sustainable levels. During the bubble’s ‘pop’ (from late 2010 to mid-2013), home prices fell to “levels of less than 10% below the sustainable price.” And even by August of this year, house prices still remained 6% below the long range sustainable price. Not only is this not what anyone would call a bubble. Instead, it seems to lead to the conclusion that prices will have to rise faster. Las Vegas homeowners will be even more pleased with Liu’s forecast through the end of 2016: prices will still remain 3% under sustainable levels—in other words, nothing like a bubble! Whether you’re looking to buy or sell a Las Vegas home, rising prices at sustainable levels is a pretty encouraging action scenario…and a pretty good first action will be to give me a call!
LAS VEGAS INVESTMENT PROPERTIES GAIN ON PERENNIAL RIVALS
It’s the perpetual ebb and flow. Sometimes the popularity of investment properties in Las Vegas begins to rise, sending them toward the head of the pack against rival investment ideas. A Las Vegas investment property’s basic allure has always been its unique attribute as the most “real” of real goods (investment property is pretty close to the very definition of the word ‘substantial’). But as a haven for capital, its place in the pecking order of investment ideas depends a lot on the performance of the competition—especially stocks and bonds. When the predicted long term returns from the stock market begin to look lackluster, or if market factors begin to seem more volatile than usual, investment property gains in comparison. When the uncertainty gage starts twitching upward—and that seems to be happening lately—some of the underlying benefits Las Vegasinvestment properties offer get renewed attention. Items that register in the calculus— Item: Inflation hedge Because rental rates can rise with (and lately, ahead) of inflation rates in general, that constant worry is less of a factor. Investors factor in the real inflation rate (not always the official one) when they look at their portfolio’s performance. Item: Cash flow Properly managed, a Las Vegas investment property can produce ‘dividends’ that are substantial without diminishing the value of the principal investment. (There’s no board of directors to make sweetheart deals with management, either!). Item: Predictability Investors know that no one can guarantee what the future will bring—but it’s harder to picture a time when people won’t need shelter than one where they won’t be bidding up stocks or bonds. The rental performance of any one Las Vegas investment property may be more reliable than another (a mid-range apartment complex vs. a top-notch luxury residence, for instance); but in overall predictability, investment property rates highly. And then there’s one that’s counter-intuitive: Item: Flexibility Everyone is familiar with the most obvious inherent drawback to investment properties: namely, their relative lack of liquidity. You can sell stocks or bonds rapidly because their markets are comparatively transparent and active. Capital is ‘stuck’ in real estate until buyers appear. But what that analysis doesn’t take into account is that the equity manifested in Las Vegas investment properties can serve as a lower-risk springboard for financing other opportunities. Real estate can be relatively easy to borrow against since its value is less volatile than, for instance, that which buying stock on margin entails—especially when ‘iffy’ market conditions suddenly develop. Furthermore, the deductibility of mortgage interest makes this form of financing less expensive. If this fall finds you reevaluating your portfolio, I can show you some of Las Vegas’s investment properties that offer exciting possibilities. Call me! 0
LAS VEGAS REAL ESTATE AGENTS HELP NEW BUYERS TAKE THE PLUNGE
Sports divers know something that’s relevant to the first-time home buyer’s decision about whether to enlist the services of a Las Vegas real estate agent. A ‘free diver’ (one without SCUBA gear) who descends into dark, unknown waters and usually finds it’s possible to dive much deeper the second time down. The reason: on the first dive, not being sure what lies down there is a little spooky—the diver’s anxiety causes their heart to race faster, which uses up their lungful of air quickly. The next time down, it’s into newly familiar territory; they don’t run out of breath nearly as quickly. So what does this have to do with buying a house or deciding whether to call a Las Vegas real estate agent? The first time you go shopping for any new item—especially anything with complicated features—requires focus and often patience. If the choices are many, making an intelligent purchase can produce a certain amount of frustration and stress. If this sounds far-fetched, just remember the last time you set about comparing the features and plan options for a new model cell phone. But those demands are trivial compared with the stress level most newcomers experience when they buy their first home. It’s not just that the homes up for sale offer such a variety of characteristics that resist straight-up comparison (although in Las Vegas this fall, that’s certainly true)—it’s also that the whole process of looking, financing, negotiating and closing differs so much from other kinds of purchases. It’s the first time down into murky waters—who wouldn’t feel the stress? And then there’s that one other factor: it’s probably the most expensive purchase they’ve ever even thought about making! As a Las Vegas real estate agent who has helped many a buyer through their first home purchasing experience, I can report that an important part of what I do is to remove a huge chunk of the anxiety that would otherwise grow from the unknowns. Right from our first conversation, by asking the relevant questions that experience has shown will point the way to the most likely candidate properties, the fog of the unknowns begins to lift. Likewise, every part of buying that first home—from locating reliable inspection resources through securing the most advantageous financing alternative—becomes more like a walk in the park than a trek through the wilderness. A Las Vegas real estate agent doesn’t completely eradicate the newness of the experience for a first time buyer, but choosing to tap the resources of an experienced guide who knows the area well is not a hard call. And since real estate agent fees are traditionally paid from the seller’s proceeds, it’s also an economical one! If you’re a homeowner about to dive into your first home sale—or a first-timer on the lookout for a home of your own—I hope, you won’t hesitate to give me a call. I’d like to become your Number One Las Vegasreal estate agent resource. And next time out? It won’t be nearly as daunting…but you’ll know who to call then, too!
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