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Has the Housing Recovery Begun?

By Mark Karten on October 27, 2009

With the release of September's statistics, we now have official confirmation of the brisk sales and price increases that we've been witnessing these last few months.

To summarize the major trends of the local selling cycle, our sales were broken down into two major categories - investors and first-time homebuyers.

Back in 2004-2005, investors were buying and reselling homes for a quick profit. The new formula is to buy a property and keep it as a long-term rental, hoping for appreciation in years to come. What isn't being reported in the news, is that with so many rental properties competing against one another, rental prices are being driven down as investors look to bring in any income stream, even if it's lower than they originally anticipated.

It's a smart strategy for investors to buy properties now, especially single-family homes. With the increasing number of displaced families who require more living space than a condo and have the need for storage, a garage and a backyard - you've got an instant, positive revenue source and the likelihood of appreciation in years to come.

Currently 44% of all Las Vegas transactions are cash buyers. This is one of the most frustrating parts of the buying process because it's so hard to compete against a cash buyer. The banks love a cash transaction and are willing to take less for a home than a buyer requiring a mortgage, due to a number of factors. First, there's no contingency about financing, which could cause the transaction to cancel. Second, there's no appraisal to worry about. Although home values have increased by 2%, sellers hold their breath every time an appraisal is required on a home.

The challenge is that now cash buyers are competing against one another for the same homes, which also drives the prices up. This frustrates many buyers who want to pay less than the current foreclosure prices. Is this a reasonable expectation? Not really. It's a market with little inventory, pent-up demand and low prices. Think of shopping for a home like going to the stores the day after Thanksgiving. You've got to be quick and decisive to come out a winner.

Back to cash buyers versus financing. When you're getting a mortgage, If the home doesn't appraise, then the seller must reduce the sales price or the buyer has to bring in the difference. In most cases, the sale will cancel if the price isn't lowered. That's the last thing a bank wants on a foreclosure, so a cash transaction is usually the winner.

Fannie Mae, which currently holds about 15% of the local inventory, will only take offers from owner occupants for the first 15 days a home is listed. This is an excellent way to level the playing field and Freddie Mac is considering implementing the same requirement.

The first-time homebuyer credit currently expires on November 30th, which means that if you're not under contract within the next week, you'll most likely miss the opportunity to take advantage of this government gift. The US Senate is trying to get the credit extended but its chances don't look good as of today.

In this week's Las Vegas Review-Journal article, Larry Murphy, who compiles much of the real estate sales data, stated, "I've always said that at some time we'd look back over our shoulder and see that the bottom hit in the second quarter." Click HERE for the full story.

Interestingly enough, CNNMoney.com released a story on Tuesday, which states that prices will continue to drop and that in Las Vegas specifically, we may see prices drop another 23.9%. Click HERE to read the full story.

Every day brings more and more buyers into the market and if you're persistent and can hang in through multiple offers, you can be a homeowner. It may not be the "fun" you thought it would be, but the outcome is always gratifying.

We'll guide you step by step and make sure you're making informed decisions and have the guidance you need on your way to homeownership.

Have a great week and a Happy and safe Halloween!

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