Greater Availablity of Mortgage Loans

Bloomberg news reported today that according to a Federal Reserve survey of 98 banks there has been a “continued easing of lending standards and terms for many types of loan categories amid a broad-based pickup in loan demand.” Many potential home buyers have complained that it has been difficult to obtain mortgage financing even in cases where they clearly have the income to repay the loan and have generally good credit. This easing tread should make it possible for objectively qualified buyers to obtain financing.

Fed Says U.S. Banks Eased Loans Amid Broad Pickup in Demand

The article notes that the easing has been predominately with regard to prime residential real estate loans. This is a definite positive, since we don’t want to go back to the times when anyone whose breath could fog a mirror could get a mortgage. In any event, the real estate market clearly will benefit from the greater availability of financing for quality borrowers.


July 2014 Las Vegas Real Estate Market Trend Report

Here is a video that my assistant prepared illustrating how the market for single family homes in Las Vegas has performed since it hit bottom in January 2012. The report cover all of the properties sold through the Greater Las Vegas Association of REALTORS® MLS system, however, most neighborhoods have exhibited similar trends. If you would like information on any particular community, send me a text or email or give me a call.

Housing Affordability

In an article today (October 9, 2013) in the National Association of REALTORS® (NAR) web site for its members, Lawrence Yun, the association’s chief economist, noted that “increases in home prices and mortgage rates have made sharp cuts in the housing affordability index.” Most recently it was at 156, the lowest mark in affordability in 5 years. Housing affordability, however, remains at historically high levels. Even with the recent cuts, the index is still at it fifth most favorable level in the last 40 years. Dr. Yun advises that even with the affordability index hovering around 120, as it did during the 1990s and early 2000s, the housing market was still fine with no major changes in home prices. For the affordability index to fall to 120, mortgage interest rates would have to rise to 7 percent. According to Dr. Yun, the housing market will only face significant problems if the affordability index drops to 100 or lower. For that to occur, mortgage interest rates would have to rise to 9 percent.

In recent months, mortgage interest rates have been in the 4.3 percent to 4.7 percent range. Dr. Yun suggests that rates may rise to 5 percent by the middle of next year and move up to 6 percent by sometime in 2015. To give you some idea of how these suggested increases could affect your personal financial situation, let me give you an example. Assume, you are planning on purchasing a home for $500,000 and putting 20% down, leaving you with a mortgage of $400,000. If you were able to get a 30 year fixed rate loan at 4.5%, your principle and interest payments would be $2,026.74. At the 5 percent rate Dr. Yun says you may face next year, your payment would be $2,147.29. At 6 percent, your payment would be $2,398.20, an amount that at the current 4.5% rate would enable you to borrow $473,311.95! If mortgage rates climb to that 6 percent rate and you want or need to maintain your payment at the $2,026.74 that you would pay on a $400,000 loan at today’s rates, you could borrow no more than $338,043.44. In the disaster situation of 9 percent mortgage rates, you would have to pay $2,026.74 on a mortgage of $251,887.18.
Since inevitable interest rate increases will affect housing affordability to a greater extent than short term home price fluctuations, now is a favorable time to buy the home you want.

Will the 3.8% Medicare Tax Apply to the Sale of Your Home?

You may have heard rumors that the Patient Protection and Affordable Care Act (often referred to as Obamacare) imposes a 3.8% transfer tax on all real estate sales and may be concerned that you will incur the 3.8% tax if you sell your home.

The origin of this rumor is the 3.8% tax on some investment income that was added to the legislation at the last minute to help shore up Medicare. Beginning on January 1, 2013, the new tax will apply to certain investment income, e.g. capital gains, dividends, interest payments, and net rental income, received by individuals with adjusted gross income of more than $200,000 and married couples with adjusted gross income of more than $250,000. All of the revenue derived from this new tax will be paid into the Medicare Trust Fund.

In examining the application of this tax to real estate sales, it is important to note that $250,000, in the case of individuals, and $500,000, in the case of married couples, of gain from the sale of a principle residence remains excluded from taxation under the federal income tax law and is excluded from the new 3.8% Medicare tax as well.

If you file your federal income tax return single, the tax will only apply with respect to the sale of your principal residence if both (a) you sell your home for at least $250,000 more than you paid for it (i.e., you have more than $250,000 of gain on the sale of your home), and (b) your adjusted gross income is more than $200,000. If you and your spouse file a joint federal income tax return, the tax will only affect you if (a) you have more than $500,000 of gain on the sale of your home, and (b) your combined adjusted gross income is more than $250,000. (If you are able to sell your house in this market for $500,000 or more than you paid for it, please call me and let me know your secret.) Even then, only that portion of your gain that exceeds the excluded amount of gain will be subject to the tax.

For example, let’s say you and your spouse bought your home for $1,000,000 and sell it for $1,525,000 (after the expenses of the sale) for a $525,000 gain. The maximum amount of gain that could be subject to the 3.8% Medicare tax would be $25,000, the amount by which the total gain exceeds the $500,000 exclusion. In this case the maximum amount of the Medicare tax would be $950. The final determination of the amount of the tax would also take into account the amount and type of additional income that is includable in your adjusted gross income.

Of course, you need to consult your accountant or tax advisor concerning the tax consequences of your real estate dealing. It is clear, however, that the 3.8% tax is not a general transfer tax on real estate. Although the tax may apply to gain on some real estate investment transactions, in today’s real estate market it will apply only to a small portion of the gain on a limited number of sales of principal residences.

The NATIONAL ASSOCIATION OF REALTORS has prepared a brochure that explains how the 3.8% Medicare tax applies to a variety of situations, both those involving gains from real estate sales and those involving gains from other types of investments. If you call or email me I will be happy to email that brochure to you.

Fabulous Home With Spectacular Las Vegas Strip View

The last couple of days I have showed a home that has one of the most spectacular views of the Strip that I have ever seen. This home is unquestionably unique. It dominates the end of plateau looking down on the Strip and over the top of homes far below that have merely fabulous strip views. There may be no more than a dozen homes on the ridges above the Las Vegas Valley situated like this one to completely own the end of a plateau looking down on over the Valley. I have never been so entranced and have never viewed a home in the Las Vegas area that I have felt so compelled to write about. Moreover, it sits in a neighborhood with homes costing many millions yet it is priced under a million! Call me if you have the desire and resources to possess such a home.

Chart of Las Vegas Real Estate Prices Over the Last Year

Here is an interesting chart of the average prices of Las Vegas single family homes over the last year.

Do you think it might be time to buy while properties are still relatively inexpensive? If the trend continues they won’t be cheap for long.

The Las Vegas Real Estate Market is Changing

Because of the rapid changes in the Las Vegas real estate market, I have done a detailed analysis of what the market looks like TODAY. The changes are occurring so rapidly that by tomorrow this might be old news, but the trend is clearly in the direction of improvement. If you want to buy or sell a home in the Las Vegas Valley, particularly the area of Henderson around Seven Hills and Green Valley Ranch where I specialize, call me today and if you can’t call me today, call me tomorrow. I keep generally apprised of the Las Vegas real estate market and update my knowledge of the market in my area of specialization almost every day.

Today there are 4,300 single family residences (2,939 equity sales, 383 bank-owned, and 978 short sales) listed on the Greater Las Vegas Association of Realtors MLS as actively on the market.  In the last 30 days, 2,893 single family residences sold.
Over that 30 days there has been a slight increase in inventory (a few less than 200 properties). The number of bank-owned and short sale properties has remained relatively stable, so most of that increase has been attributable to additional equity sale properties entering the market replacing properties that sold.
Recently, I have been seeing properties moving through the market more and more quickly. Many properties are now receiving multiple offers within a few days of listing.  This is apparent not only in the lower priced properties where the buyers are often investors but also in properties over $200,000 which are more likely being purchased as personal residences.  To statistically examine just how fast properties are moving, I looked through the MLS for properties currently in escrow that had been actively on the market for 2 days or less before getting into escrow.  There are 1,478 of those!  Of those, 214 are properties that were listed for more than $200,000.
In the last 60 days 351 single family residence listings closed within 30 days of the listing. Fifty-eight of those closed for more than $200,000.  One of those properties was a property that sold for $2,500,000, received the offer that was accepted 2 days after being listed, and closed 3 days later!
Sales are occurring so fast that while I was writing this note 43 more houses showed up as closed! So right this second, the data show that 2,936 sold in the last 30 days.
It appears that the Las Vegas real estate market is healing.  I have not done statistical analysis of prices across the entire market, but I have in regions of my focus area and they are beginning to move up. Of the entire number of homes listed on the Las Vegas MLS that sold within the last 30 days, 59% sold for list price or more, 7% sold for 10% or more above list, and 2.5% went for 20% or more above list!
Given the supply and demand characteristics of the market that I have outlined above, now might be a good time to move if you have been considering buying a home in the Las Vegas area.  For sellers, it might be a good time to sell because it is clearly a sellers market.  This is particularly true if you have an equity position in your home and plan on moving up to a larger home.  Although you might be able to get a little bit more for your home down the road, by that time there will also be a corresponding increase in the price of the home you want to buy.  For example, say you have a home that you can now sell for $200,000 and you want to buy a home that is now selling for $500,000.  Next year you are able to sell your current home for $220,000. Of course during that time, the $500,000 home likely will have risen by at least the same percentage so you are now looking at buying that $500,000 home for $550,000.  You got $20,000 more for your home, but had to pay $50,000 more for the new one so you lost $30,000 by waiting.  Another thing that you might take into consideration is that more expensive homes have been increasing in price more rapidly than other homes.
So now is the time to sell and now is the time to buy.  If you want to sell a current home or investment property or by a new home or investment property or know anyone who does, send me an email at or give me a call on my cell at 702-235-2869. Calling the cell is better for me, and I am available now. I can make it happen.