Cash buyers are stabilizing the Las Vegas housing market. Whether they are saving it or exploiting it depends on your point of view.
Home Address … 622 WOOD ROSE CT, HENDERSON, 89015
Resale Home Price …… $124,900
if the illusion is real
let them give you a ride
if they got thunder appeal
let them be on your side
The Cars — Let the Good Times Roll
The bottom of the cycle is always dominated by cash buyers. Cash is king. Cash buyers stabilize a market when lenders are unwilling to loan. The cost of cash is higher than the cost of debt, so prices must fall to attract cash investors. As today's featured property shows, if you lower prices to the mid 90s levels, cash buyers are enticed to the strong cashflow and potential for appreciation when the market reverts back to the mean.
Foreclosures, Short Sales Account For Most Transactions
POSTED: 1:34 pm PST February 8, 2011
UPDATED: 12:04 am PST February 9, 2011
LAS VEGAS — Thanks to tighter lending standards, coupled with a massive inventory of foreclosures and short sales, the majority of homes sold in southern Nevada are being purchased with cash, according to the Greater Las Vegas Association of Realtors.
The agency reported that 51 percent of transactions involved cash buyers in January, as investors sought to take advantage of low prices.
“It's a combination of things,” corporate broker Forrest Barbee said. “We've got a lot of foreign investors. Foreign investors can't get loans. Canadian investors, Asian investors. A lot of cash coming in from there.”
Barbee contends that even though half of the homes being sold are to investors, it's a good thing.
“These are real investors putting good tenants in properties,” Barbee said. “They're also putting money in the property and spending money on appliances, drywall, paint or whatever.”
I know i am doing my part to employ construction workers and buy housing related products.
According to the GLVAR, the median price of a single-family house sold last month was $125,000, down 5.3 percent from $132,000 in December. The average listed price was $157,081. The median price of condominiums that sold last month was $64,900, up 4.7 percent from the month before.
The total number of homes sold dropped 19.7 percent in January. Last month 3,214 houses were sold, down from 4,007 in December.
Bank-owned homes continued to dominate sales, representing 48.8 percent of transactions, while 26.6 percent were short sales, the GLVAR said.
Lenders control 75% of the transactions in Las Vegas, and they indirectly control most of the other 25% as most of the equity sales are flippers like me who got their property at an auction called by a lender.
While both figures are proof that families still struggle to pay their mortgages, the agency claimed the increase in cash buyers is a positive sign.
“Cash buyers are still purchasing thousands of local homes that might otherwise sit vacant,” said GLVAR President Paul Bell.
A house with no occupant is a completely wasting asset. It produces no benefit and deteriorates with disuse.
But some homeowners disagree, saying that their neighborhoods are becoming more transient.
Dawn Lane, owner of the Professional Realty Group, said people who want to buy a home in Las Vegas to live in are getting priced out of the market.
“They have an opportunity to buy a home and when they go to put an offer in, you've got investors purchasing the home for cash,” Lane said. “What's a better deal for the bank? Let's take the cash and run.”
And although Lane said it's great homes are being sold, the investors could end up hurting Las Vegas in the end.
“If we're trying to build neighborhoods up again, don't we want solid families or people invested in our community who wants an opportunity to live in Las Vegas and grow?”
But Barbee, the broker, said homeowners can still buy a home through restricted government programs.
And for your amusement…
A property purchased by a cash investor
Below is a property purchased by a cash investor in Henderson just southeast of Las Vegas. As you can see, it is selling for just over its 1996 purchase price. If houses double in price every 15-20 years, this property should be selling for $180,000 to $200,000. That's how far these properties have overshot to the downside.
Home Address … 622 WOOD ROSE CT, HENDERSON, 89015
Resale Home Price … $124,900
Home Purchase Price … $110,000
Home Purchase Date …. 7/9/1996
Net Gain (Loss) ………. $7,406
Percent Change ………. 6.7%
Annual Appreciation … 0.9%
Cost of Ownership
$121,900 ………. Asking Price
$4,267 ………. 3.5% Down FHA Financing
5.00% …………… Mortgage Interest Rate
$117,634 ………. 30-Year Mortgage
$25,241 ………. Income Requirement
$631 ………. Monthly Mortgage Payment
$106 ………. Property Tax
$10 ………. Homeowners Insurance
$280 ………. Homeowners Association Fees
$1,027 ………. Monthly Cash Outlays
-$60 ………. Tax Savings (% of Interest and Property Tax)
-$141 ………. Equity Hidden in Payment
$8 ………. Lost Income to Down Payment (net of taxes)
$15 ………. Maintenance and Replacement Reserves
$850 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$1,219 ………. Furnishing and Move In @1%
$1,219 ………. Closing Costs @1%
$1,176 ………… Interest Points @1% of Loan
$4,267 ………. Down Payment
$7,881 ………. Total Cash Costs
$13,000 ………… Emergency Cash Reserves
$20,881 ………. Total Savings Needed
Baths: 2 F
Home size: 1299
Lot Size: 00.13
Year Built: 1996
MOVE IN READY – NOT a Short Sale or REO! Seller responds quickly. Newly rehabbed 1-Story home with 3 bedrooms and 2 bathrooms. Kitchen has white cabinets with a breakfast nook. Back-yard is fully landscaped with desert landscaping. Home is not far from schools, shopping and freeway access.
This property was a complete cosmetic do over. We replaced or repainted everything in this house. Unfortunately, we don't have any of the before pictures. It was a mess.
Jacki has been working on her artistic architectural photography. This master bath shot turned out well.
Rental property investment performance
|All Cash Purchase Financial Analysis|
|Capitalization Rate = Net Income / Total Cost||6.0%|
|Mortgage Purchase Financial Analysis||15-Year||30-Year|
|Mortgage Interest Rate||4.3%||5.0%|
|Actual Monthly Cashflow||$0||$88|
|Cashflow after Financing||$3,774||$3,486|
|Initial Capital Investment (down payment)||$39,577||$23,780|
|Cash-On-Cash Return = Cashflow / Investment||9.5%||14.7%|
|Vacancy and Collection Loss||5.0%||$58|
|Monthly Rental Income||$1,093|
|Maintenance and Replacement Reserves||0.50%||$50|
|Homeowners Association Fees||$15||$15|
|Property Management Fees (% of Gross Rent)||10.0%||$115|
|Monthly Cash Expenses||$494|
|Net Operating Income||$599|
|Monthly Payment (based on maximum loan)||$511|
|Actual Monthly Cashflow (assuming impounds)||$88|
|Total P&L After Expenses and Debt (loan amortization plus excess)||$202|
|Comparable Value Full Asking Price (buy it now)||$118,900|
|Maximum Allowable Loan (with available terms)||80.0%||$95,120|
|Maximum Cashflow-Positive Loan (30-year amort.)||93.8%||$111,534|
|Maximum Loan (lesser of two limits)||$95,120|
|Investor Capital (remaining after cash-out loan)||$23,780|
|Comparable Resales||Resale Date||Amount|
|910 DODEE CT — 3 bed 3 bath 1623 SF — 1996 List: $122000||8/9/10||$126,000|
|628 HOLLY BUSH CT — 3 bed 2 bath 1540 SF — 1997 List: $119900||7/1/10||$115,000|
|882 COZY VALLEY ST — 3 bed 2 bath 1389 SF — 1997 List: $105000||5/6/10||$105,000|
|884 COZY VALLEY ST — 3 bed 2 bath 1299 SF — 1997 List: $124900||8/31/10||$123,000|
|620 E WOOD ROSE CT — 3 bed 2 bath 1299 SF — 1996 List: $109000||4/27/10||$109,000|
|501 GARDENIA BLOSSOM ST — 2 bed 3 bath 1179 SF — 1997 List: $1050||10/21/10||$1,050|
|500 FRAGRANT ORCHARD ST — 2 bed 3 bath 1179 SF — 1997 List: $1000||9/3/10||$1,000|
|593 FOX CHASE ST — 3 bed 2 bath 1547 SF — 1998 List: $1250||10/6/10||$1,250|
|969 MEDINA DE LEON AV — 3 bed 3 bath 1485 SF — 2005 List: $1150||10/21/10||$1,150|
|643 BONSAI TREE LN — 3 bed 2 bath 1303 SF — 1998 List: $1195||10/5/10||$1,195|
|1036 STEPPE EAGLE AV — 3 bed 3 bath 1370 SF — 2003 List: $1099||7/19/10||$1,099|
|531 SCENIC TERRA DR — 3 bed 2 bath 1425 SF — 1997 List: $995||7/16/10||$995|
If you are interested in this property contact firstname.lastname@example.org or Jackie@ffglasvegas.com.