Las Vegas real estate: I hear the buzz on the street is it's a buyers market?
Many curious consumers are listening to news and reading headlines about the mixed messages being sent about home ownership and loans. For a typical first time home buyer all of this can be very confusing and many people don’t want to ask questions for fear of looking ignorant. I will try to sort through the mixture of reviews being heard in the Las Vegas valley concerning mortgages and explain what these opinions mean.
Most common headline #1: Las Vegas is ranked in the top 10 for foreclosures
It’s very scary for a new homeowner to enter into a purchase seeing what’s happening to other homeowners right now. New home buyers should know that steps are being implemented by our federal and local governments, by mortgage companies as well as secondary market investors so that this problem doesn’t happen again. Right now in the state of Nevada, a person without stellar credit cannot obtain a stated loan and still they are hard to come by WITH hefty down payment/equity requirements. Having that said, anyone approving you for a mortgage must review all your financials and prove that you can financially afford the home. Additionally folks are required to put down some money so they have some skin in the game as opposed to before when 100% financing was running amuck. With some skin in the game it would be much harder for the new homeowner to walk away from the investment.
Most common headline #2: Home appreciation is falling and homeowners are upside down
This is absolutely, 100%, without a doubt true. And what this translates to the first time home buyer is THIS IS A BUYERS MARKET. No one said a buyers market is a warm and fuzzy upside for everyone. It is a market advantageous to a buyer! On the opposite side of the coin someone is losing. That doesn’t mean that you are losing for picking up a home for less than its previous value. And you shouldn’t feel bad for purchasing a home for thousands of dollars less due to someone else’s hardships. People purchasing right now are helping our homes future appreciation by eating up the large supply of homes on the market. Someone really smart stated a pretty clear fact that made a lot of sense, “buy on bad news and sell good news.” Buy when the market is down or low and sell when the market is high or overpriced. Think of keeping your home long term. Don’t believe you can flip a home in this market. Appreciation will make gains again as historically they have shown us an average of 5% a year.
Most common headline #3: Rates are at their lowest
Rates are at all time lows when you compare to rates in 90s and into the 80s! A 6.5% loan rate is a good rate no matter what anyone says. Look at history, look back to the 1980s when the common household was paying 12%, 13%, 16% and upwards in the 18% range and even higher. Compared to right now those rates are seen in credit cards. Try imagining having that rate on a $250,000 home loan and see what affordability looks like then. On top of that, the average home is earning more money as compare to back then. Anyone complaining about not getting a 4% interest rate is crazy and is focusing on the wrong factor to determine a home purchase. Realistically, if you want to buy down your rate, you could walk away with any rate you want.
Most common headline #4: Home prices are continuing to drop
Why would I buy now if the price is going to drop more? Very good question to ask… If you are renting, then my question for you is why wouldn’t you buy now? Throwing money away on rent is doing absolutely nothing for you. Even if the price on the exact home you’re looking at drops a few thousand more, you will be paying on the mortgage in the meantime and earning tax deductions while you do so. There is absolutely no way to know (in short of having a crystal ball) where the decreases in prices is going. One thing you can know for certain is homes are going for several thousand and in some instances several hundred thousand less than what they were just a year or two years ago. That alone is a tremendous opportunity and those that aren’t taking part of it are missing out. In the last 50 years the population of the US has doubled. The future population is also set to double and all those people are going to need places to live. Thus real estate appreciation will come back and prices will rise again.
My professional opinion is that the Vegas valley will turn around faster than most other down markets because of our strong job growth and population growth. People are moving to places with less tax burdens like Las Vegas where there is no state tax. Businesses are moving to places like Las Vegas because it is easier to become incorporated and less overall costs to run a business.
Jobs are being created with all the high rise condominium and casino projects going up and a future housing shortage is predicted as I wrote about here.
And don’t miss my article on 8 Tips to Purchasing a Home in Las Vegas.
