Home Values Have Gone Up... So What's My Home Worth?

 The Most common Question we get is,

"How's the Market?"

Depends, Are you thinking about Buying or Selling

If you're Buying, I would say the Market is Good.

If you're Selling, I would say Great!

Home Prices have continued to Rise over the past 12 months.

Peeking in August and still holding strong.

Market Activity continues to Rise as well,

even with Investors "Backing Off".

Concerns of a second Housing Bubble and Rising Interest Rates 

have many people sitting on the fence to see how it all plays out.

In my opinion, other than the normal ebbs and flows,

Home Prices won't ever be as low as they were at the beginning of this year.

The Next most common Question we get is,

"What's My Home Worth?"

If you're Curious, 

We have Invested in an Over-the-Internet Home Evaluation Tool.

As Seen Below.

www.GoHansen.com/HomeValue

Data and Graphs courtesy of:

Inventory is on the Rise... Is that Good or Bad?

You have probably heard on TV or Radio have our Inventory has been Rising.

But Exactly How Much and Why?

In the Graph directly below, the Orange dotted Line represents that Months Inventory.

The Blue Bars below represent the Number of Months of Inventory, at the current Rate of Absorption.

The Rate of Absorption is the number of Sales that month.

For example... We have close to 7,000 Homes on the Market and we Sell about 3,500 a Month,

meaning we have 2 Months worth of Inventory.

According to the Experts ( people who's opinion is supposed to mean something ),

A Healthy Real Estate Market should have around 3 months of Inventory.

Less than 3 is considered a Sellers Market.

More than 3 is considered a Buyers Market.

We have also heard about all the Shadow Inventory of Foreclosures 

that are supposed to be being dumped on our Market.

There are 637 REO's of the 8,728 Listings or 7.2% Bank Owned

FYI... Short Sales make 14.6 % of the Active Listings.

In my opinion...

The reason Inventory is Rising is that Prices have gone up. (see Graph 2)

(1) Investors are backing out of Las Vegas because their Margins are shrinking.

(2) People finally have Equity in their Homes and want to Cash-In.

(3) The Timing.  Real Estate is cyclical. The Summer Price Surge has Sellers trying to Cash-In.

The Fall Drop Off means that people are not buying as Fast as they were just a couple of months ago.

People are concerned that there will be another a Housing Bubble / Burst.

We all still have a Bad Taste in our mouths from the last one,

and the Media loves to grab our attention with bad news.

Looking at 2 graphs below, I don't see anything to give me cause for concern.

A Knee Jerk Reaction... But Wait, Let's Think About it!

As Realtors, we get sent all kinds of emails from 

Lenders, Title Companies and others in the business sharing information they have access to

 to help educate us about what is happening in the Las Vegas Real Estate Market.

 Below is a graph we received this week with a note saying,

"When I look at this I’m thinking that we will be seeing short sales and REO’s in our future."

 

At first look, I see that Notice of Defaults (NOD's) are way up for September.

But why were they so low in June and July?

Well, on June 3, Nevada passed the Home Owner's Bill of Rights.

It's my opinion that this is why NOD's dropped when they did.

The Banks wanted to have their Lawyer's pick apart the New Law.

Second, is that 3,677 number really that high?

From Jan - May we averaged about 1,500 a month.

If you add June - Sept numbers, and divide by 4.

99 + 487 + 1,114 + 3,677 = 5,377 / 4 = 1,344

Which is below average for this year.

But this graph got people talking.  It grabbed a few headlines.

The Local News and Radio warned we could see more foreclosures.

Really?   Based on a Knee Jerk Reaction!

Front Page News... Did it get your attention? Should it?

On Tuesday, the Las Vegas Review Journal had this on their front page.

After 19 consecutive months of increases, we had 1 month with a 1% drop in the Median price.

 Should we prepare ourselves for the next Crash?

Should Home Owners Sell Now?

What does it Really mean? 

First of all, the Median Price means the middle.

Not the Average.

This is not a trend.

If you look close at the graph on the right, you can see the trends.

And within the trend you can see little up and down movements.

So unless we see this same graph in three months and it continues downward,

 I don't think we have much to worry about.

The next question I would ask is why did it go down?

If you think back we posted a previous blog about how Interest Rates had gone up a full 1 %

and how that would affect Buyers and how much they qualified for.

Maybe it's something as easy as people were focusing on getting the kids ready for school. 

Property Values have been on the rise for over a year and a half.

And more recently they have been rising rapidly.

I think Buyers are taking a step back and saying, "Whoa, Not So Fast!"

Investors are slowly backing off of Las Vegas because as Prices go up, 

and if rents stay the same, then their profit margins go down.

This is all to be expected in a normal Real Estate Market.

The market, when not being manipulated, self adjust.

Before we all get in a panic, let's just wait and see what happens.

Market Numbers, Statistics and Trends

As of Today Thursday September 26

There are 7,879 Available Listings

of them 1,032 are Short Sales (13%)
504 are Bank Owned REO (7%)
leaving 6,343 Traditional Sales (80%)
3,584 of All Active Listings are Vacant (45%)
(Traditional Sales Include Investors Selling Rentals, Investor Flips and Regular Sales)

There are 10,004 Listings Under Contract 

of them 6,491 are Short Sales (65%)
358 are Bank Owned REO (3.5%)
leaving 3,155 Traditional Sales (31.5%)
3,755 of these Listings are Vacant (37%)
Also, 5,711 of these are expected to be CASH transactions (57%)
(keep in mind that Short Sales take an average of 6 months to Close)

Over the past 12 months there have been 40,429 Sold Homes

of them 14,315 were Short Sales (35.5%)
3,941 were Bank Owned REO (10%)
leaving 22,173 Traditional Sales (54.5%)
20,374 of the Sold Listings were Vacant (50%)
Also, 22,259 of those Sales were CASH transactions (55%)

The Previous Years had a total of 45,161 Sold Homes

of them 14,374 were Short Sales (31.8%)
16,321 were Bank Owned REO (36%)
leaving 14,466 Traditional Sales (32%)
31,547 of the Sold Listings were Vacant (70%)

 Also, 23,682 of those Sales were CASH transactions (52%)

In the past 30 Days, there have been 3,256 Sales, 1,559 were CASH (47%)
(CASH Buyers tend to be Investors)

So what does it all mean?
We can see some Trends.

The market has had fewer Bank Owned Foreclosures (REO)

Fewer Short Sales are being Listed.
Probably because Home Owners have Equity again 
and are Selling as Traditional Sellers.

Fewer Cash Buyers (Investors) are Buying Homes.
Prices have gone up, Rents have stayed the same,
making it harder for investors to get the return they need.

People are very skeptical about what is going to happen 
with the Las Vegas Real Estate market.

Are we at the beginning of another Bubble and potential Burst?

Or will the market . . . 

AB 300 vs NV Homeowner's Bill of Rights...

 

Back in June we talked about what affect Assembly Bill 300 would have on our local Real Estate Market.

We have all heard about the increasing number of homes out there just sitting vacant.

Would the banks flood the Market with these listings or would they trickle on the market.

Last week the LVRJ had an article,

Foreclosures surge in August; Nevada again No. 1 in U.S.

 Notice of Defaults went up from 340 in June to 1,125 in July a 226% jump.

In the big scheme of things, really not that big of a deal. 

We knew they were coming. 

But what is next?

Well, in the meantime, NV has passed the NV Homeowner's Bill of Rights.

What's that?  Good Question.

In my opinion, a couple of years too late. 

Purpose of the Nevada Homeowner’s Bill of Rights

The purpose of the Homeowner’s Bill of Rights is to provide homeowners in the state of Nevada with better consumer protections, as well as fair and honest treatment in the servicing of mortgage loans in default, especially when it comes to the loss mitigation process.

Many are speculating that the Intentions of AB300 was to allow the banks to Foreclose on the Shadow Inventory, but now the NV B of R's is going to draw that process out even longer.

NV Homeowner's Bill of Rights takes affect Oct 1st.

In the meantime, we will probably see the banks rush to Foreclose on as many properties as they can 

before the new Law takes affect and slows the whole process down again.

Interest Rates are on the Rise... What affect does that have?

When Calculating your Monthly Mortgage Payment, 

there are two primary numbers to look at.

The Cost of the Home, and the Mortgage Interest Rate.

Using an Example of a 30 year loan, Calculating only Payment and Interest.

(but do not forget about Taxes, Insurance, Association Fees and MIP)

If you Financed a $250,000 Home Loan in May 2013,

when Interest Rates were at 3.5

Your monthly Payment would have been $1,122.61

Purchase the same home today at the same price,

with Interest Rates at 4.5

Your monthly Payment will be $1,266.71

That's a difference of $144.10 per month

Reproduced with the permission of Mortgage-X.com

 So in a Market when Prices and Interest Rates are going up.
People want to Buy Now before Rate or Prices get any Higher.