Las Vegas real estate market, 2013 prediction part 2 | Las Vegas ...

Las Vegas real estate market is manipulated by outside factors to a degree that free market forces have very little influence on the current Las Vegas housing market as I have explained in the last article. Las Vegas homes for sale prices have been appreciating rapidly in the last 6 months and there is no end in sight unless one of 2 things happens.

1: We need a few thousand homes listed in the Las Vegas MLS that are priced right to stop the spiraling up prices let alone decrease prices and I see no sign that this will be done in the next 3 months and have no idea what will happen after March, 2013.

2: Las Vegas home buyers, especially investors resist higher prices and I see no sign of this in the next 3 months either. Homes that are priced at today?s market pricing go under contract within 2-3 days with many offers, usually above (sometimes way above) list price and more importantly direct sold comps.

There are 2 reasons for the feeding frenzy on Las Vegas residential real estate by investors who want to invest in Las Vegas real estate.

A: Quickly rising prices which have accelerated in the last few months. Investors who know nothing about cash flow or rent-ability factor buy Las Vegas homes, condos and town homes in hopes of further appreciation, some of these investors have paid abnormally high prices for their home and will be losers. For example in a sub-division all comparables are in $50-$60 per square foot range and then one was sold for $90 per square foot. Las Vegas MLS is full of such deals.

2: Even at current prices I am finding good homes, in great investment locations that provide the investor with estimated 7.5%-9% cash on cash return on investment after HOA fee and property tax based MLS rental comps. One can deduct 2%-3% from this number to arrive at an estimation of net cash on cash return after vacancy, repairs, insurance and other expenses. A Las Vegas real estate investor can buy a home; get 4%-6% estimated net cash on cash return on the money with the possibility of additional double digit gain in 3-5 years and many investors cannot do any better worldwide. This is the reason for the feeding frenzy and why we have had clients from 6 continents who have invested in Las Vegas real estate. At the moment I do not see this ending soon.

There is no such a thing as a median priced Las Vegas home that rents for the median rental price and has median vacancy before being rented and makes median cash on cash return on investment.

In any market condition there are good deals and bad deals. For example if good deals and bad deals had a median price, those investors who purchased a home in June and July, 2012 at 50%-60% or higher prices from 2011 prices lose, regardless of Las Vegas real estate market conditions and those who got a great deal in January-late April, 2012 or before are winners, that is that.

I had a long talk with a prospective Las Vegas real estate investor about the Las Vegas real estate market and he along with many others was trying to time the market. We are currently way past the bottom of the market but even though I was the first to tell you about our appreciating market, last year, I did not know the magnitude of price hikes for a couple months until after they happened.

However, I have written that we have thousands of severely under water homes that have to change hands unless lenders cut the principal by more than 50%. The big question is how these homes will affect the future Las Vegas real estate market.

I will discuss this in the next blog post.

Source: http://www.lasvegas4us.com/wordpress/2013/01/06/las-vegas-real-estate-market-2013-prediction-part-2/

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