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Natural Market Forces are Not Even Allowing DPA in Some Parts of Vegas!

I think we need to hold the phone in regards to property values falling because of lack of Down Payment Assistance (will be referred to as DPA from now on) for FHA Loans.

Average sold prices declined June 2007-June 2008: -37.4% for SFR and -32.8 for Condo/Townhomes.

With ever changing underwriting guidelines and a huge avalanche of foreclosures happening and in the future, I cannot predict that we are at the bottom. If there isn't money to be lent, then there are no houses to be sold, right?

Let me get back to the story at hand.

Let me present to you:

Exhibit A Valley Wide: November 2007, 22.5 months inventory, SFR median at $273,500. June 2008, 8 month's inventory, SFR median $225,000. Inventory is a little over 1/3 of what it was. This is still a buyer's market, barely.

Exhibit B 2008 REO (Foreclosure) Listings: November 2007, 9.5 months inventory. June 2008, 2.8 months inventory. Inventory is down to 1/3 of what it was. This is a seller's market.

Let's go even more local!

Exhibit C Rhodes Ranch Area: November 2007, 28.3 months inventory with a median price of $285000. July 2008, 5.1 month's inventory with a median price of $220,000. Inventory is down to 1/5 of what it was. This is a neutral (almost seller's) market.

RE 101 with submitting and negotiating offers is all about knowing what your market will and will not bear. Back in November do you think incentives were being thrown to buyers left and right to reduce inventory? Heck yea!! You could ask for a lower price, DPA, Closing Costs (will be referred to as cc's from now on.) What do you think has happened in June? We have a seller's market in some areas which is resulting in bidding wars (drawing the price 10-20% higher in some cases,) seller's not willing to pay cc's (or dpa for that matter,) etc.

Here is what I am getting at: the loss of DPA in the LV area will NOT be what hinders values because DPA doesn't EXIST in some of the hotter sub-markets.

Let's take one Rhodes Ranch Area Subdivision. Nine sales since January 1, 2008:

Sale 1: REO; List Price at Sale: 244,900; Sale Price: 220000; Conventional Loan, $8840 Closing Costs; Close Date 1/22/2008
Sale 2: REO; List Price at Sale: 249,900; Sale Price: 225000; Conventional Loan, $0 Closing Costs; Close Date: 2/26/2008
Sale 3: REO, List Price at Sale: 175,000; Sale Price: 180,000; Conventional Loan; $0 Closing Costs; Close Date 4/4/2008
Sale 4: REO; List Price at Sale: 170,000; Sale Price: 176,000; Conventional Loan; $0 Closing Costs; Close Date 6/11/2008
Sale 5: REO; List Price at Sale: 209,500; Sale Price: 205000, Conventional Loan; $7000 Closing Costs; Close Date 6/12/2008
Sale 6: Non Distressed Seller Sale; List Price at Sale: 265,000; Sale Price: 262,500, Conventional Loan, $0 Closing Costs, Close Date: 6/16/2008
Sale 7: REO, List Price at Sale: 186,900; Sale Price: 190000, Conventional Loan; $0 Closing Costs, Close Date 6/30/2008
Sale 8: REO; List Price at Sale: 206,900; Sale Price: 221,900; All Cash, $0 Closing Costs, Close Date 6/30/2008
Sale 9: Non Distressed Seller Sale; List Price at Sale: 289,000; Sale Price: 255,000, Cash, $0 Closing Costs, Close Date: 7/16/2008

Now I picked this subdivision because it there were a ton of REO (seller's market) in the Rhodes Ranch area (neutral market). I categorized it by date. Notice how only ONE loan out of 7 received closing costs and it was conventional? Notice how the later the dates we have more all cash transactions? Notice how REO prices are being bid up? Notice how non distressed sales have increased and they were pressured into lowering their prices to reasonable prices?

Now areas where there is more inventory, yes, buyers are getting some DPA and closing costs. In areas that are pressured, not so much.

I don't think we need to worry about lack of non-profit DPA killing our market. If our market moves backwards it will be from careless speculators letting their so called "investments" go back to the bank producing more inventory pressure. It will be from economic conditions where people cannot afford homes due to energy prices or tourism drops.

That's what we need to get all worked up about. DPA is just a small factor.

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Posted by Renee Burrows - Las Vegas NV Valley - Homes For Sale - SRES - SRS - AHWD - ABR on 07/25/2008 07:04 PM

Comments (18)

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Originally posted at: Nevada Real Estate >> Las Vegas Real Estate Specialist: Natural Market Forces are Not Even Allowing DPA in Some Parts of Vegas!

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18 Comments on Natural Market Forces are Not Even Allowing DPA in Some Parts of Vegas!

JUL

2008

Renee

Good for you for escaping the emotional arguments that so many people get tied up in, and simply assessing the facts for what they are. I agree that the down payment assistance programs are nothing more than a crutch in propping up certain marketplaces.

As always, great writing.

booya! tell it like it is rene!

The reality is that the lending market has really tightened it's strings, especially in the last week. DPA was voted out yesterday by the legislature so it's no longer a reality. . so it is what it is for better for worse.

Great analysis, Renee, and makes the point yet again how local the various markets are.

Renee - I think you have the bull by the horns. Lets see where it goes from here. I suspect that the market is just going to get better as the year goes by. I don't claim to see the future, just watch the financial news.

Hmm, Renee, seems to me you are right on target. DPA would certainly help some folks but I can't see how it will really impact the market as you are describing it. We;llsee where tings go. Lots of signs of improvement in some market, but certainly still some concerns about the big mortgage companies, the rate of foreclosures, etc. I remain cautiously optimistic.

Jeff

JUL

2008

Renee..... I agree and disagree. DPA's not allowed will affect the market.... but each area, or "your local market" is different from one or the other. My business and my office's business has been up 35% because of the DPA's. I think the hype or misleading info on DPA's has hurt the name and again, congress stepping in and it will hurt overall numbers.

On the other hand, I don't agree with Larry's assessment. I believe it will still get worse, before it get's better. Yes, people are still buying. My business has been better this year than the past 2 years. But have made more contacts and I am doing loans in about 6 different states right now. And blogging has helped my business by about 60% or more.....

More on this later....

jeff belonger

I think this will have a big impact on the TAMPA Bay Market. There are many buyers that are cash-crunched with PERFECT credit.

The BIGGEST part of this bill that makes a LARGE inpact is that some folks may NOT have 30% equity therefore they will not be able to buy a move-up home unless they can qualify with BOTH mortgage payments.

Hi Renee - I'm seeing closing costs on two loans, Sale 1 and Sale 5, which represents 29% of your sample. And with only seven loans in six months, the results can really be skewed. Try looking at all sales of 200-250K in Area 504 for the first six months of 2008 and see if you reach the same conclusion.

Bill: Thank you! I write a lot of offers and negotiate with a lot of builders. I also do a ton of BPOs (50-100 a month) all over the city. I would like to think that I have a grasp with what my market is giving and what it isn't giving :)

Steve: :smooch:

Tracy: Homes will sell if they are priced accordingly to market conditions. Luckily we had new construction and REO price adjustments which jump started our market BIG TIME. We are one of the fortunate few.

Patricia: Exactly. I don't want to hear that my market will depreciate another 30% because DPA is gone. It just isn't the truth.

Larry: Me too. THat's why I don't want to see a knee jerk reaction that the sky is falling.

Jeff: See my response to Larry :) I remain cautiously optimistic too.

Jeff: THe next two months are going to be crazy. Hmmm DPA plus a nice tax break for first time buyers. Work hard and sleep when it's dead :)

Katrina: Gifting is still allowed. Price adjustments may be necessary to give the market boost that is needed. We have an abundance of pent up demand in the area. The chips are falling with the foreclosures and that worries me most about my market presently. I would also like to comment that maybe a bunch of bad apples ruined it for the rest as far as the primary to investment. If you can see the amounts of people buying a home similar to theirs at half of their mortgage and letting it go back to the bank, you would not be surprised by this guideline change at all.

John: How about I pull from the same grid I use my Rhodes area stats? If you want me to print and scan my grid I will be happy to.

January: 36 sold, 19 cc's paid (52% of sales, 1 apparent DPA (2% of sales)
April: 47 sold, 24 cc's paid (51% of sales), 7 apparent DPA(14% of sales),
June/July(last stats pulled) 82 sold, 35 cc's paid (42% of sales) and 6 apparent DPA (7% of sales.)

As the months go on, even though a large percentage still may get closing costs, they are dwindling, not even close to 3%. As I said earlier, if anyone would like me to post the grids, more than happy to.

FYI, January is right before prices, DPA and FHA started getting sexy around here.

Hi Renee, That was an in depth look at a segment of your market and it certainly must feel good to see the changes. I am believing that many us will be observing these more balanced markets soon. Prices- well they seem to be stable and in some areas maybe even seeing a tiny bit of appreciation. That will most likely pick up more as we get close to the late spring market next year. Good detailed post and fun to see how other markets are faring in this still unsettled market.

I'm really pissed off at a friend of mine. He went to Vegas and bought two properties for investment with one already with a tenant. I told him I wanted to refer him to you. He told me he bought them directly from the bank...yeah right.

Renee.... sky is not falling, but it will be bad for a while. Those are the facts. I said 1 1/2 years ago that it wasn't going to get better until mid to late 2009. Yes, business has been better for me this year than in recent years. But the overall aspect of things, more people are doing worse.

I will be writing about this over the weekend or on Monday..... it's will be titled, "Buckle Up"..... I am getting sick of the politicians, the realtors, and some loan officers that have no idea. The figures they keep touting are misleading in regards to the DPA's.... and people don't think common sense. The bottom line, the average person just can't save, period. But if their rent is on time, what makes them a bad risk when buying with no money. We will see that the housing market will slow down even more once this is pulled.... mark my words... in markets that have homes priced from $80,000 to $300,000... depdning on the market.

Overall, the misleading facts that DPA's were bad recently, they aren't dissecting these figures... there is more behind the numbers. Gee, I have been doing DPA's since 1996.... all of a sudeen, these are bad? Did anyone look at all loans and how they are performing?? Coupled by the enconomy? It's just sad... the gov't needs to let the market correct itself.... period....

jeff belonger

Nice article Renee. Great info!

JUL

2008

Renee,

I appreciate the analysis! Love the comments too, especially Jeff B.

Mike in Tucson

This is a great piece Renee. I love stats, numbers and analysis. Data doesn't lie, puff or cheat.

JUL

2008

Renee - Great write up! Although DPA's are what they are, they do help to support markets. In anticipation of the impact the lack of DPA's will have on our market, I've started to advise those that need it to extend their leases another 6 months and save up money. Chances are, property values will dip and my clients will get the best of both worlds.

JUL

2008

William: Interesting times for sure!

Neal: What are you going to do other than smile :) Thanks for thinking of me anyways!!

Jeff: Agreed to an extent. Unfortunately FHA is a government program so I guess they can change all the guidelines they want.

Aaron: Thanks :blush:

Mike: I love the insight from Jeff B the resident FHA specialist too!

Craig: It can if not presented properly

Mark: I hope it all strategically works out well in your market :)

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