Las Vegas Builders Rush To Fill Housing Gap
the last several months, the Las Vegas housing market has taken a
dramatic turn. Seemingly overnight, Las Vegas has gone from a
nationwide foreclosure leader to an epicenter for new housing starts.
How? Why? The answer begins with the passage of Nevada Assembly Bill
284. AB-284 added significant and far reaching restrictions on banks
looking to foreclose on delinquent mortgages. As a result, many banks
have slowed foreclosures dramatically or even stopped foreclosing all
together. Last year, in the month of April 2011, over 3000 homes were
foreclosed upon in Las Vegas...this year, April 2012, only 410 homes
went back to the bank. This is a drop of 87%! Over the last three
years, over 50% of home sales in Las Vegas have been bank owned REOs.
The inventory of available REOs is now standing at only 510 properties.
Since monthly sales in Las Vegas are still averaging around 4000
transactions, this leaves a significant gap in supply vs. demand.
With home prices remaining at 20 year lows, and interest rates also at historic all time lows, the demand for property in Las Vegas is extremely strong and we are seeing multiple bidding and price increases as inventory continues to shrink. Some say the good old days are back again. Others fear this current trend is artificial because of government interference. Either way, one thing seems clear; the banks want to do anything but foreclose. Banks are putting more effort into negotiating short sales, we are seeing postponements and cancellations of scheduled foreclosures, and more loan modifications are finally making it through. Also, with government support, banks are trying, whenever possible, to sell their foreclosure inventory in bulk packages and avoid the individual real estate investor.
In order to address this gap in supply vs. demand, local home builders in the Las Vegas valley have been scrambling to ramp up again for new construction. National builders are being left behind for the time being as they lack the operational agility to mobilize quickly enough to meet this sudden need for housing. New construction starts doubled last month from around 300 permits (the lowest in the last 25 years for Las Vegas) to 600 permits pulled. Just yesterday, I personally sold a new construction home at one of the Harmony Homes neighborhoods and was quoted a 4-5 month build time (framers are two months behind). Las Vegas unemployment has dropped to 11.7% from highs of 14% just 2 years ago. We cannot get skilled construction workers back to Las Vegas quickly enough for what is about to take place. I have been predicting a housing shortage in Las Vegas for quite some time but this is much sooner than even I expected. I thought we would eat thru another 100,000 foreclosures prior to a construction boom, but the bank’s change of policy, initiated by government regulations, is about to change all of that.
With the presidential election coming up in about six months time, interest rates at historic lows, and inventory literally nonexistent, we see an opportunity to build homes for the next 9 -18 months and move them very quickly in this market. I have partnered with a local builder and will be buying lots, building homes, and selling them as fast as we can build them over the next 9-18 months. Lots that are developed and completely ready to build are on sale for $30,000 to $40,000 per lot. These same lots cost builders near $120,000 per lot just five years ago and are now selling for around 25 cents on the dollar. The price of land has not begun to bounce back at all, whereas home prices have begun to creep up.
Owner occupants are continually getting shut out of home purchases because they are up against cash buyers in almost every transaction. The same is true for financed investors. With these historically low interest rates it is cheaper to buy than to rent if you are an owner occupant and returns on investment of near 15% can be achieved by financed investor buyers. The perfect storm for building and selling homes in Las Vegas has arrived.
We have opportunities for investors looking to partner in the purchase of finished lots, building homes, and the purchase of turnkey investment properties. As the 7th busiest buyers’ agent in all of Las Vegas last year and one of the busiest investors, I have personally rehabbed and flipped over 100 homes in the last two years and sold over 500 homes in Las Vegas in the last five years. I have partnered with over 35 cash investor/partners in the last several years and have always maintained a minimum of 12% returns for my clients. References are available upon request.