I have had great hope for the Las Vegas Valley Real Estate Market over the last 6 months. Looking at facts, figures, stats. I personally predicted hitting the low in January/February provided all economic conditions remain stable.

I watched with glee as our pendings rose dramatically last week, perhaps needing a seasonal adjustment, but nonetheless an upward tick. I started a spreadsheet to analyze monthly inventory just this week and was glorified to watch our inventory go from 13.3 months to 12.3 months overnight one night.

Then the realization of the subprime lending market doom (read Lewis Poretz) hit me midweek. Underwriting guidelines are tightening and we are watching decent rates for the 100% stated-income loan disappear. With foreclosures and shortsales increasing it is easy to admit this should have been seen coming from a mile away.

I am slightly concerned about the effect this will have on the Las Vegas market as I played escrow 911 most of the week because of underwriting guideline changes.

Our job market consists of many, many tipped income jobs. I seriously don't know how high the figure is but it could be as low as 20% and as high as 35%. The restaurant industry alone employs about 14.3% of Nevada's economy. It would be safe to assume that a good portion of those jobs are tipped jobs. When you combine those type of tipped income jobs along with other non food & beverage tipped income jobs (valet, floor person, card dealers, etc) that number rises exponentially. Consider that the IRS/Unions/Casinos make deals called "tip compliance" that allows these people to make so much more than money than they show on paper. While they have the income to support their stated income purchase, they do not have enough income for to document a purchse. What will happen to real estate sales here?

I can honestly say I don't know how this will play out. Perhaps people will have to look towards more traditional means of financing such as: saving their money for a Conventional down, VA and FHA (with a cosigner.)

As this collapses and the winds of change blow by, it will be interesting to watch the changes and the effects this has on our (what I thought was rebounding) market.

As Realtors, it is more important than ever to make sure we team up with a lender who understands this market and has seen this played out in the past (not to drop names but whispering Brian Brady.) It is important to make sure that our clients don't fall for low teaser rates only to be rate jacked when the loan goes to underwriting. Simply because their lender didn't understand or keep on top of new guidelines. We are going to have to do extra work to make sure our buyers for listings are qualified and their Realtors & lenders realize the impact of the changes. Every listing offer with a 100% loan contingency should be looked at with raised eyebrows and scrutinized before consideration by the sellers!

I hate to sound pessimistic or like an alarmist but this could have a serious impact and I really would rather err on the side of caution.