On my most recent blog I wrote about loans that home buyers can get even if they don't have a social security number. 

In the comments, Janet Guilbault, California Mortgage Expert, a fellow Active Rain member, whose opinions I respect, asked if I would write a blog about what is going on in the Las Vegas market and incredible amount of bank-owned property we have.

Janet asked, "Have you done an article about lender-owned properties around Las Vegas and the challenges getting investors financing? I, for one, would love you to write this blog. I hear rumblings from my California investors that there are lender-owned properties being deeply discounted.  They seem to be ready to pounce on them. What is the market like there? Is this true? Also, does the lender selling the house want to carry the loan themselves? Again? Or do they just want to make sure the buyer is solid?

We all saw yesterday's news that inventory in relation to sales is at its highest peak in 16 years, according to the National Association of Realtors.  And that was before the dramatic lending changes of this past month.   We can all expect that number to swell in the coming months.

Las Vegas is no different.   In fact, we are one of the leaders of swelled inventory with around 27,000 homes for sale. 

As I always write, to understand where we are we have to understand how we got here.

I am a lifelong Las Vegan.  Its hard to find many of us.  My folks moved here when there was 70,000 people.   I bought my first house, a 2200 sq. ft place to start a family, in 1990 for $136,000.  All the money in the world for me at that time.

Hundreds of thousands of people moved to this amazing city over these years.  One of the biggest reasons was affordable housing.    I sold that house in 2000 for $170,000.   It had appreciated by 25% over the 10 years I owned it.   And thats how the Vegas market was.

Then in 2001 or so it all changed.   Creative mortgages created more home buyers.  The lowest interest rates in 40 years fueled a national buying explosion.  

Las Vegas became one of the places to be for investors.  Investors came from all over the world.  There was far too much demand for the limited supply.  

I believe, at one point, there were less than 2000 houses for sale in our whole valley. 

You see Las Vegas is in a valley.  At the edges of our valley all of the land is owned by the federal government.  We cannot grow outwards without the release of land from the government.   And they release that very slowly.

The appetite for homes in Las Vegas was incredible.  Land prices skyrocketed.  Combine this with the high cost to build and high demand but low supply, and we saw 50% appreciation in one year. 

Some neighborhoods saw 100% appreciation. The average sales price went over $300,000.

The government held auctions to sell land to developers.  These auctions would yield hundreds of millions of dollars to the federal government.  

The auctions were so profitable that the Bush Administration, at one point, threatened to change the way the monies were split with the local municipalities because they saw Las Vegas land sales as a financial budgetary windfall of cash to help pay for the war and other deficit concerns.

To meet demand, developers built large master-planned communities and huge subdivisions all over town.  They even built high-rise skyscrapers to combat the land situation.  If you can't go out, you have to go up.

Investors snapped up every product offered.    

I attended a lottery for a new home tract.  10,000+ people showed up over three nights in a convention room of a major hotel to get a lottery number for the right to buy one of 200 homes. 

We will likely never see anything like that again.

Then the market crashed.  Prices got too high to make sense.  Interest rates went up.  The investors bailed.   And it turns out, the builders built way too many homes.  They never saw the end coming.

The homes the investors had bought and planned to flip were now theirs to maintain and they couldn't maintain the payment.  That was the first wave of foreclosures.  Then came the interest-only 100% loans.  Then came the subprime loans.

People will tell you that Las Vegas, as a whole, hasn't depreciated much in the past few years, which is true.  However, there are neighborhoods that are down 25-50%.   

These are the neighborhoods that were built during the boom and some of them look like ghost towns today because half of the homes in the neighborhood are bank-owned or owned by an out of town investor.   They are vacant.  

Ask any local agent to show you homes in developments like Aliante, Silverstone Ranch, and Mountain's Edge.    You will find homes that are $100,000's below what they originally sold for.

I recently read a story that said one of every three homes listed for sale in Las Vegas is vacant.   That is an amazing statistic.   There are around 27,000 homes for sale right now.  That means 9,000 or so are vacant.   

Thousands of these are bank-owned or "REO" for real-estate owned. 

As the credit markets tighten like we have all heard recently, these banks want to turn these homes to cash to sustain their banking business.

But what does that mean to you and your investors?  Opportunity!

Vegas is still growing like crazy.   This is projected to be the hottest job market in the country over the next five years as mega resorts are popping up all over the Las Vegas Strip.

Check this out.   According to a report by Deutsche Bank Securities, "the casino industry will need 113,500 more workers to fill the spots created by the new resorts that are now under construction.   Unless the city's population growth begins to accelerate, 25,000 of these jobs will go unfilled."

Now, that's what I call positive job news for potential investors.  

If you are interested in buying an REO property you should read my blog "What to Really Expect When Buying A Bank Owned Property" first as it has some helpful tips.  

I also wrote about buying a home when everyone else is afraid in Buying a Home in Today's Market: Contrary to Popular Opinion.

But to answer Janet's questions and I would love some of the talented Las Vegas Active Rain agents to chime in here....  Yes, some of the banks are offering deep discounts on a lot of properties but not in all areas.  Banks are smart.  They know what the true value of the home is and in what neighborhoods.   You will likely have to do your research and be prepared to make some repairs to really "steal" something.

And, no, according to most of the REO listing agents I deal with you don't have to adhere to that part in the listing that says the buyer "must be approved by our bank."  

That "requirement" usually comes from the sales department at the bank looking for a commission check.  The REO Department, and most banks have them today, couldn't care less so long as the buyer is qualified.  They want to turn the asset to cash.

By the way, you know that neighborhood where 10,000 people entered a lottery for the right to buy a home?  Last I checked that neighborhood still wasn't sold out and they were discounting prices $100,000's as well.

I remember sitting in that convention room with thousands of others thinking that it was insane for the builder to hold a lottery and not to sell all 200 homes for cash over those three nights to the highest bidders.    I am sure they could have sold it out and cleaned up.

When opportunity knocks, we have all been taught, you have to take advantage.   Today's Las Vegas market may just be a similar opportunity for those who have the courage to take the chance.  

If you are really looking to steal a home and you have patience and the finances to fix it up a bit and wait, I can think of no better place in the world to take a chance as an investor.

UPDATE:  After I posted this, a Las Vegas agent who specializes in REO sent me the following email privately...

"Actually 44 percent of the homes for sale on the MLS (in Las Vegas) are vacant, not a third. Also, about 10 percent are short sales and another 10 percent are bank/corporate owned.  We work with several banks and we are seeing lots of foreclosures coming."

Even more incredible than before.  This means that nearly 12,000 houses are vacant.