Las Vegas Home Sales Indicate Cash is King

Yes, Las Vegas is definitely having a half price sale! Prices have dropped on average of 59.2% from their all time highs in early 2006. But despite reports of doom and gloom in the local and national press about the Las Vegas real estate market, the actual sales volume stats for the year 2009 say something different. The total number of closings for single family homes in 2009 finished at 38,127, a 53% increase over closings in 2008. Condos and town home sales volume finished the year at 8752 closings, a 137% increase over 2008.

In fact, total closings in 2009 actually EXCEEDED the number of closings in 2005, the former sales volume annual record holder. Inventory for single family homes is down to 9,119 as of today’s date compared to a peak inventory of 26,000. Of the available homes currently on the market, almost half are short sales and the rest are divided pretty evenly between Las Vegas bank foreclosures and “real” sellers.

And why is the inventory of Las Vegas homes for sale so far down and why was the 2009 sales volume so high? Investors, attracted by the low sales prices which yield a good rate of return for rental income, are flocking back to the city. They are coming with cash and competing with first time homebuyers and move up buyers for the limited number of available listings.

December closings sold according to the following terms:

Cash 41% with an average sales price of $117,522
Conv 23% with an average sales price of $192,915
FHA 30% with an average sales price of $143,515
VA 5% with an average sales price of $188,113

Prices in some of the most popular areas of the Las Vegas Valley actually appreciated a small percentage in December, most notably in Summerlin, Anthem and the Southwest. The big banks are still sitting on a large number of foreclosures that have never been put on the market, but sources indicate that they will only be releasing these in controlled numbers over the next year or two so that prices remain stabilized.

MGM City Center Provides Financing for Las Vegas Condos

The following excerpts were taken from this week's MGM City Center press release announcing that City Center will be providing mortgages for condos and condo hotel units in its 67 acre mega development on the Las Vegas Strip. This is great news for Las Vegas condo purchasers who wrote checks for 20 to 30% down payments five years ago but have been unable to secure outside financing since the Las Vegas real estate crash. Along with City Center's recent price reductions to meet current market conditions, MGM Mirage seems to be doing everything possible to ensure that the MGM City Center development is a huge success.

LAS VEGAS (December 8, 2009) – CityCenter Holdings, LLC today announced that it has selected Private National Mortgage Acceptance Company, LLC (“PennyMac”) to serve as a lending resource for buyers of condominiums and condo-hotel units at CityCenter. PennyMac will assist buyers in arranging financing for their residential purchases. CityCenter, a joint venture of MGM MIRAGE (NYSE: MGM) and Infinity World Development Corp, a subsidiary of Dubai World, also announced that it intends to provide a seller financing program to well-qualified buyers, which will also be administered by PennyMac.

“PennyMac will be a resource to help our customers to assess their financing options and assist them with the closing of their purchase,” said Bobby Baldwin, President and Chief Executive Officer of CityCenter. “We are pleased to provide qualified buyers an additional option through a competitive seller financing program.”

PennyMac, through its subsidiaries, will coordinate loan origination, servicing, and secondary market activities. PennyMac has partnered with EvoFi One, a leading lender headquartered in Nevada, as an origination provider for this development.The seller financing program will include both a fixed rate and a variable rate option. With the assistance of PennyMac, CityCenter has developed a comprehensive program which takes both the buyer’s financial standing and their purchase into consideration when determining loan terms.

CityCenter also recently announced a 30 percent price reduction to buyers who consummate existing purchase contracts and who execute an addendum to their existing purchase and sale agreement. “We have spoken to the majority of our buyers since the price adjustment announcement, and it is clear that our efforts has been well received,” said Tony Dennis, Executive Vice President, CityCenter Residential Division. “By adding PennyMac as a lending resource, we now provide our buyers with a Las Vegas mortgage option to assist with their closing needs.”

CityCenter closings are scheduled to begin in January 2010 with buyers of The Residences at Mandarin Oriental, Las Vegas. Veer Towers closings are projected to begin in February 2010 and Vdara Condo Hotel closings in March 2010.

It is hoped by local residents that the more than 12,000 jobs created by the massive City Center project will boost the economy and spur Las Vegas homes sales this spring. Banks have been holding their inventories of Las Vegas foreclosure homes off the market in hopes that prices would rise in the first part of next year allowing them to recoup some of their losses.

New FHA Guidelines for Las Vegas Home Buyers

Buyers of Las Vegas homes need to be aware of several proposed changes to FHA guidelines that may soon be implemented buy the Federal Department of Housing and Urban Development which will impact their purchasing power. It is estimated that more than 71% of FHA’s losses over the next five years will come from existing loans, prompting HUD to re-evaluate criteria for new loans in an effort to minimize further losses.

Proposed changes to the current guidelines could include:

* Reduce the maximum seller contribution towards buyer closing costs from 6% of the purchase price to 3%. The current level exposes the FHA to excess risk by creating incentives to inflate the appraised value to cover costs paid by the seller.

* Raise the minimum FICO score for new FHA borrowers.

* Increase the down payment that a borrower has to bring to the table for an FHA-backed loan to make sure that FHA buyers have more “skin in the game” and a stronger equity position in their loans. Currently FHA minimum down payment is only 3.5% of the purchase price.

* Increase the mortgage insurance premiums currently charged. This could be in the form of an up front payment or an increase to the annual premiums paid as part of the monthly mortgage payment.

* Require lenders to indemnify the FHA fund for their own failures to meet FHA requirements, and holding lenders accountable for any improper activities. This would ensure that lenders assume all responsibility for any losses associated with loans not underwritten to FHA standards.

Greater down payment requirements and higher FICO scores will certainly impact the Las Vegas real estate market, especially for first time homebuyers trying to take advantage of the extended first time homebuyer tax credit and all time low prices. Even under current guidelines they are already in competition with all cash investors for the limited supply of affordably priced Las Vegas foreclosures, and stricter lending requirements could nix the dream of American home ownership for many. Buyers that have even been thinking about purchasing a property with an FHA loan should be aware of these impending changes and act quickly before they are put in place.