1st Quarter 2011 Market Update

Todd Miller: Hello, welcome to Todd Miller Tv. I wanted to give you an update to the Las Vegas real estate market for the first quarter of 2011. I just got a report that’s very interesting; it’s got some really good data. It’s from the Center for Business and Economic Research.

What I’ll probably do is PDF this and stick it on the website so you can take a look at it. I read through the whole report and its 14 pages, it was a lot of data and most of it was pretty boring, but I got some really interesting stuff out of here I thought that I would share with you. So you all know that there is a lot of inventory there’s some vacant properties and a lot of those are foreclosures and we have a high mix of short sales. Well what I want to do is go through some of the specific numbers because there’s some interesting things in here.

The question I get most of the time by you all is ‘what are prices doing?’, ‘where are they going?’ ‘Are there going to be more foreclosures?’ So starting with the first one I’ve got which is the median sale price. So whether there’s a lot of homes on the market, or not a lot, biggest concern is-are they going to go down? So from the fourth quarter of 2009 to the fourth quarter of 2010, so over those five quarters, home prices didn’t change. The median home price was within 5,000 of $140,000, which is pretty stable. So that was number 1. Number 2 is-how long are they staying on the market? Well this is very interesting. 40% of all homes sell in the first 30 days. That is not normal for a market. A normal market is-you have a 6 month inventory and it takes 6 months to sell all your houses, which means in general you’re selling 15-20% each month for 6 months. Well this is 40%, and it’s a little skewed because what that 40% is, believe it or not, are the foreclosures; the REO properties. They come on the market and people are jumping on the, Home owners are jumping on them, investors are jumping on them, people are grabbing those up mainly because of this number here, the $140,000 median price. The houses that are coming out below that are just disappearing super fast. So that was one I thought was interesting. What the correlates to is how houses sell for about $75 for a square foot. It’s an average so what that means is on average its a thousand square foot house, its probably 75,000. It’s a 2,000 square foot house it’s probably about 150,000 and it depends by neighborhood and other factors like that. Where were we a few years ago was over 200, obviously we’re at a 3rd of the values that we were at before, and that’s something else that was super, super interesting.

Another question is, well I’m an investor, I want to buy-can I rent? Here’s the number-of all investment property0this is all types of investment properties, houses, apartment, everything-there is only a 10% vacancy rent. So that means 90% of all units available for rent are all rented, which is pretty good. The great about that is, that is not going to create downward pressure on rents. Although property values have fallen by three times, rents are off between 5 and 10% total and that actually correlates to when the prices shot up, rents didn’t skyrocket, they just went up 5-10% which is a pretty good number. Then the last thing is really super interesting and it’s kind of hard to see, I don’t know if you can see it on here or not, but there’s a line here which represents what home values should’ve been long term.

If you just take normal economic progress and we were on that. Las Vegas was on that until about 2002 when prices started going up and that’s when you see this big rise here in prices. Well what’s happened is back here in 2009 they shot below this line. This is a long term, economic line. What this is, this difference here is economic forces will tend to push back towards that line. So what happened was, the prices went up, they came streaming down, and now because of supply and demand, remember they were up here and supply and demand caused them to go this direction so now they’re down here, supply and demand is going to force them to go in this direction. So, this is my recommendation and this is why I think personally now is a good opportunity to invest to but because you’re going to get rental money, you’re going to get 10-15% easy return, almost no brainer return on an investment.

But I think prices are going up, I don’t know if it’s going to be in a few years, five years, ten years, this is why. Because these numbers are publically available, some hedge funds, somebody’s going to figure this out and big money is going to roll into this town and start buying real estate. I personally, am buying properties. Buying 3 bedrooms, under 100,000, stuff you can rent out for $900, get a return. I think there’s a huge opportunity there. Anyway, I just wanted to share all of these numbers with you, sort of give you a feel for what’s going on. I can’t predict the market, I can read the numbers and sort of interpret them , I know what actions I am taking and I know that are investors that come in here are seeing this opportunity saying ‘hey this is great’. That’s the update for today and I hope you stay tuned and watch other episodes. Thanks a lot.