It’s nice to every once in a while hear some sane words coming out of Las Vegas, the playground for gambling Southern Californicators. If any remember, the festering puss-filled housing bubble that overcame Socal in 2004 finally spewed it’s nasty excretions all over the Las Vegas Housing market.
To recall all of the insanity of 2004, keep in mind that they had year-over-year appreciation rates in the 40 and 50% range for several quarters. It was insanity in a bottle. Even today, all it takes is a quick drive down the strip to see the massive malinvestment in residential properties that leaves the Vegas housing market reeling.
The Review Journal gives us some great advice about what to expect based on what the problem is:
We don’t have a mortgage crisis. We don’t have an interest rate crisis. We have an equity crisis,” Murphy said. “Why did people take money out of their home? Because they could. It’s 2008 now and you know why people aren’t taking money out of their home? Because they can’t. That’s why it’s going to be rough sledding for 2008 and when we sit here a year from now, it ain’t gonna be any prettier picture.
Right on time, the knife catchers are lining up to have their throats cut.
Declining home prices bring an upside. Francisco Jimenez was able to buy two condominiums for $105,000 and $111,000, well below the $185,000 median, at separate foreclosure auctions held in December at the Plaza and Lake Las Vegas.
He picked up a third condo at a Feb. 10 auction, paying $140,000 for a 1,200-square-foot unit with attached garage that previously sold for $243,000.
“This is like the stock market. Buy low and sell high,” Jimenez said. “There is opportunity for lower-income people to buy, if they can’t afford $250,000 for a home but they have a job and good credit. It’s a good opportunity for anyone who has the money. I would buy another 10 if I had the money.”
Jimenez has read about the 120,000 new jobs expected to be generated by Strip development over the next few years and believes home prices will be as high or higher by 2010 than they were in 2005 and 2006.
That’s not going to happen until the market burns through an inventory of homes for sale that peaked at about 24,000 last year, roughly half of which are vacant.
Thanks, Francisco. You’re helping out your fellow man by creating comps that others can use in future negotiations. With the credit markets set to worsen over the coming year, and with the bulk of rate resets still coming up in the next year, you’re sure to eat your words many times over. I have heard it’s not as tasty as ramen, but it’ll sure fill you up.
The article is a good read, because, as was expected, it is difficult to appraise properties in a dead, falling market. Good thing they’ve got deep pocketed investors willing to snap them up at near peak prices.
“californicators” makes me laugh. As for Jimenez and his $355k of purchases…I think he jumped the gun. I’ve noticed a purchase increase since the recent rate drop. I expect the realtors and talking heads to jump at the chance to report it when the stats roll in next quarter. Unfortunately for them it’ll be followed by even more declining quarters afterwards.
I dunno, $100K condos in a major city doesn’t sound like a “falling knife” to me. Then again, I live in north Los Angeles county where the median household gross income is well over $100K. I would kill even for a decent $300K condo in my town. Which still doesn’t exist.
What are we expecting… real estate dropping to the price of cars? Like $50,000 for a condo? $100K properties means you probably need a gross income of $25-35K to afford it. That’s about minimum wage. Median household income in Las Vegas is probably, what, $45-50K?
It depends where Mr. Jimenez bought them. He could to well selling them in ten years, but the problem is that many parts of Las Vegas have slums rivaling that of Los Angeles (although not anywhere near as violent, but a lot worse looking). If he can service all of the properties and can hang in there for five years, he should be able to make a decent profit again.