[LIS123]

If this economist is predicting an additional 10-20% decrease in the LV market, that's probably in line with many others. There will be a good number who would expect the LV market to decline even more than 10-20% before a bottom is reached. Regardless of the exact number, things are much more likely to get worse than better at least in the near term. This is good news for you if you're looking to get in. If you continue to be patient, you should find some even better deals in the next 6-18 months!

[Eric Young]

Originally Posted by gulfer

I finally found the article written by moody economist.

Could you post a link, Gulfer?

[hasagos1]

I have stayed away from real estate over the past several years. During the bubble hey day, going against the advice of many “financial advisors” and “Realtors”, I stayed on the sidelines and rented. And I am glad I did.

At this point, looking at the scope of the price decreases, I am ready to step into the market. It is true that prices could very well fall more over the next 6 – 12 months. Bottoms are always very hard to determine. However, the following is why I feel comfortable buying a house now (and if I were an investor, I would start buying in incremental phases now):

1. Sentiment is extremely negative right now. The negativity we currently see in the market seems to mirror the exact opposite of what existed a couple years ago. I think when purchasing any asset for the long haul, if it’s a quality asset with good fundamentals, it’s hard to lose money when buying into extreme negative sentiment. The only positive people seem to be Realtors, who have a vested financial interest in being positive.

2. It is true that real estate cycles can take many years to play out. However, in many places I have looked at in Las Vegas, prices have fallen as much as 30 – 35% off their peaks (excluding the situations where owners have unrealistic expecations or trying to sell places that look like garbage). It is difficult for me to believe that the scope of this type of decline for decent quality homes in relatively good locations can go on for much longer. Maybe at very worst another 10 – 15%, for the following reasons:

a.At current prices, theoretically if credit was available for anyone to borrow at a 30-year fixed rate for the full value of the property, in many cases the buyer would be immediately saving money than from renting. This is especially the case once tax considerations are taken into account. This is due to the fact that interest rates remain very low.

Once the people who borrowed on adjustable and those who overextended themselves are flushed from the system, and once banks adapt more responsible lending practices and restore credibility to their balance sheets (which will have to happen if they want to survive and compete), even at current prices it would financially make sense for a lot of people to buy houses, if they took a long-term view, both in terms of immediately yearly cashflow benefits as well as fixing their payments over a long period of time, whereas if they rented, overtime inflation would push their payments up, maybe significantly. At some point down the ladder of fear, fundamentals will kick back in.

b. There is still massive construction going on in the strip area. This type of development creates a very good inertia. It increases jobs, increasing tourist appeal, and also increases the appeal of Las Vegas among retirees, who have plenty of entertainment options, etc. It also looks like its trying to target the high-end of the market. Also, by the way, in any situation where you have massive job creation, even if its on the lower end, it inevitably also creates demand for services, whether it be legal, healthcare, accounting, etc.

c. The California factor. I was reading that California is considering increasing their state tax rates again. For wealthy retirees, I think Las Vegas is going to look very appealing over time. Their cost of living goes down significantly, they won’t have to deal with ever-increasing state taxes, and over the next 3 – 5 years the levels of facilities for entertainment and recreation should continue to grow. Las Vegas is the most likely city in Nevada to exploit the California retiree factor. And its not too far from family and friends in SoCal.

d. If prices completely capitulate, in spite of the massive construction projects and facilities going up, I think at some point foreign investors would come into play. Compared to many places in Europe, Japan, etc. RE here is quite cheap. Also lots of Asians come to Las Vegas regularly, and many of these people have a lot of money. So if the level of facilities coming up is top-notch and prices were reasonable, its not unreasonable to think they would invest here, which should have a trickle-down effect to the rest of the local economy.

Personally, I really don’t know when the current down cycle will end. But my instincts tell me it will be a quicker cycle then in the past – barring any extraordinary events (i.e.., major terrorist attack, etc.). With a long term outlook, I think if you buy closer to the bottom than the top, the risk of losing money goes down substantially, and the probability of making money goes up. Right now I think we are closer to the bottom than the top. I could very well be wrong, however. Given that, its also a choice based on personal factors.

For real estate agents out there, one criticism I have of many agents, is that they always talk in all positives. Personally, I think if they want to establish greater credibility, respect, as well as engage in more believable salesmanship, they will refrain some saying things such as “the market can’t fall anymore”, “this is the bottom”, etc. It makes them sound like disingenuous shysters. The reality is, if Realtors were so good at market timing, they would not be working as Realtors for a living. Besides, there has never been a person alive who could accurately predict precise market bottoms and tops with consistency. Also the reality is that many people have lost everything as a result of the so-called “advice” their Realtors gave them. Personally I hate working with “advisors” but only do so as a necessary evil when absolutely necessary.

[Eric Young]

If you're a young and beautiful woman, Hasagos1, I'll give up my corrupt profession if you'll marry me.

Assuming you're an ugly old man like me, then I just want to say that I'm in nearly complete agreement. Very nice post for a first-timer and welcome to the board.

[AA702]

Yeah, nice post!

[gulfer]

Sure Eric. The title of the report is Aftershock: Housing in the Wake of the Mortgage Meltdown and you can see the information here http://www.economy.com/home/products...p?src=homepage

It's hot off the press (well within last couple of weeks). The report has 361 cities in it. Here is the one I used to find Las Vegas:

http://blogs.tampabay.com/realestate/files/homereport.pdf (broken link)

It's an executive summary of 11 pages that is in .pdf format.

Enjoy the read.

[Eric Young]

Thanks...the exec summary will surely get me to sleep tonight.

I'll scan the full report in the daytime.

[Eric Young]

By the way, Gulfer, if you have an interest in the Bank of America survey of realtors, feel free to send me a DM with an email address.

It's done monthly, covers about 50 metros and I find it a quick and informative read.

[gulfer]

Great read on that as well Eric. Thank You.

[noaguainvegas]

What people fail to realize is, Lake Mead will run dry by 2015. What will your SSB (stucco sh$t box) be worth then?