http://stephaniebullock.cbvegas.com/blog/archive_201004/sort_entrydatetime-desc/ Here are the latest happenings in the Las Vegas real estate market! Check out our April newsletter.http://cbprds.com/newsletterfiles/n3.html http://stephaniebullock.cbvegas.com/blog/801/coldwell-banker-premier-realty-developer-&-investment-services-newsletter/ Wed, 28 Apr 2010 02:07:43 -0800 We put a lot of focus on the Las Vegas real estate market. After all, we sell large amounts of real estate here. Our view cannot be too myopic however, so observations of global trends are necessary. For the past couple of years I've been looking at China real estate. Its difficult to grasp the magnitude of China's deals because a lot goes un-reported. But I recall seeing cranes everywhere in Beijing and Shanghai. Sure, demographics push a lot of this and a growing consumer base is the genesis of demand for these housing units. Nevertheless, rapidly increasing prices does generate a type of euphoria and prices de-link from what we believe are fundamentals.This bubble appears to be occurring in China and has for some time. Two years ago I was talking to real estate investors in China who noted that their interest in U.S assets was weak because our market was deflating and "theirs just keeps going up." But a lot of Americans have been down this road with two bubbles in close proximity, the tech bubble and the housing bubble. From my empirics, I see many of the U.S real estate markets as an anti-bubble, where we have offloaded all the gains of the bubble...and then some. The notion that I derive from these factors is that it is more reasonable to buy assets in these depressed markets rather than the euphoric ones. As the possible China bubble is becoming more newsworthy, perhaps greater monies will find themselves in these beaten down markets that have long-term positive possibilities.More on what is happening in China.While "flipping" of homes in China does occur, Patrick Chovanec, writing in Seeking Alpha, notes that there are also long-term holds or stockpiling happening (not even renting the homes). The perception is that it is similar to a "store of value" like gold. Why not just buy precious metals then? I think it may be that leverage is available for real estate deals. We've been down that road before.In the U.SSome individuals in the U.S are worried about inflation. The numbers really don't show it however and components of CPI, like housing, have been falling in price. Lower airline fares, lower new car prices and declines in some household furnishings also contributed to weak inflation results in the CPI. Listening to an interview on Bloomberg the other day, and I cannot recall the individual, stated that he did not believe the government numbers. He stated the famous phrase from the Jacobellis v. Ohio case but with a twist. "Inflation is like pornography, you know it when you see it." Eat at any restaurant or buy commonly used services and ask yourself if you thought prices declined. Not to mention trash pickup, auto registration and other municipal or state services and other things you are compelled to buy per the law.Inflation is a difficult concept to grasp though. In and of themselves these items increasing in price doesn’t necessarily mean inflation but are the result of supply and demand. In Milton Friedman’s view, excess money creation generates inflation. The Fed's quantitatively easing hasn’t yet yielded measurable inflation. There just isn’t enough velocity of money. Even congress, who manage money worse than wino’s, haven’t pushed out aggregate demand. But doesn’t it feel like your purchasing power has weakened? I am convinced that Reese’s peanut butter cups are smaller than they used to be. Fun size Snickers used to be at least two inches, now they are smaller. Stuff that used to be in a twelve ounce bag is now 11.5 oz but at the same price. I don’t think we are as deflationary as the CPI shows and there appears to be creeping price increases.The point is, inflation can come out of nowhere and fast. Real estate may end up proving to be a nice store of value in the downtrodden but upside laden U.S markets but looks a little scary in China. We do see some hedging occurring as well. In the near-term, its unlikely that Bernanke, a student of the great depression, along with the Fed, will increase rates very soon as one of the reasons for the great depression has been noted as the Fed tightening too much. Nevertheless, If the velocity of money ever does pick up, than we are likely to see inflation again. When this time comes, who knows, but I have a feeling general people will know it and start hedging before the indicators show it.Sources:Seeking AlphaFederal Reserve Bank of Atlanta http://stephaniebullock.cbvegas.com/blog/782/housing-component-of-cpi-examination-of-china-re/ Sat, 17 Apr 2010 12:41:17 -0800 This post dovetails off of a Wall Street Journal article printed today called "New Ways to Read Economy." I've seen the diesel fuel sales and the counting of train passengers but I think one of the neatest indicators (or at least a gauge of interest) is Google Trends, which shows trends in visitor traffic by search term.Here are some examples.You can see that the housing tax credit is still on an upward trend, though spikes occur around news releases. The search for Las Vegas hotels has jumped substantially from the latter months of 2009 and then leveled off. The vertical jump in December was most likely a result of CityCenter's debut, although it looks like there is some sustained interest. Short sales are the new big concept following a couple years of "REO" dominating housing headlines. A lot of people want to know how to short sell a home.Luckily, for all of those short sellers out there (of homes, not stock), there are homebuyers too. I used the term, "how to buy a house" because I thought that's what a first-time buyer would type in. It's a clear upward trend with some seasonality evident. Searches jump in the beginning of the year and taper off towards the end. 2009 was a little different, with a peak in the middle of the year. That's about the time we experienced really good sales in Las Vegas and an end to the big price declines. http://stephaniebullock.cbvegas.com/blog/874/economic-indicators/ Thu, 08 Apr 2010 09:39:56 -0800 blog.­coldwellbanker.­com http://stephaniebullock.cbvegas.com/blog/866/coldwell-banker-blog/ Tue, 06 Apr 2010 12:48:30 -0800 Of all the fancy indicators demonstrating a bubble in home prices, nothing was as telling as shows like "Flip This House" or "Flip That House.” During the time this programming was first presented, I was a consultant thinking that this programming was the equivalent of an "end is near" sign for residential prices. When you have a cab driver or your hairstylist (I’ve never actually had a hairstylist but you may) or the kid across the street that mows your lawn tells you to buy another house, maybe things are oversaturated. Same for the daytraders which sprung up everywhere during the tech bubble with documentaries about Mountain Dew slugging twenty somethings so glued to the computer screen they barely had time to load a pop tart in the toaster. I could hardly consider any of these folks “investors.” It’s different today. While “flippers” have been back in the news, it’s not the same breed of overleveraged individual participating in this market. The people who buy at trustee sales or attempt to purchase homes in bulk are usually well capitalized firms that perform deep due diligence. They are the heroes in today’s market, taking the risk of buying a home that may have less than obvious issues and making them move-in ready. That’s a real value added proposition as many people, especially first-time buyers, cannot raise the cash to buy one of these homes, much less pay thousands to fix it up. It’s much easier just to roll it into the mortgage loan. Without the investor, it would merely be another vacant home withering away.In addition to making homes available for sale, investors are purchasing homes for cash flow. Often these homes are purchased from a bank, are fixed up and then rented. You can buy them with a lease in place and we’re seeing some respectable cap rates, even above 10%. br />  In the exhibit below, we note that there are a few hundred more listed single family homes in March of this year versus March of last year with tenants in place. While homeownership for owner-occupied families is great, it’s also important to understand that a well functioning rental market is good too. This is real organic use of resources, unlike the bubble years where investors couldn’t care less if it was occupied as long as it appreciated. The key is to have occupied homes.Source: Mlxchange. http://stephaniebullock.cbvegas.com/blog/863/residential-investors/ Mon, 05 Apr 2010 03:45:26 -0800