July 2021 | Jeff Howard's Las Vegas Area Real Estate blog

My Thoughts on The Current Housing Market (or “is the Bubble About to Burst?”)

If you aren’t aware, most of the U.S. is seeing a sharp rise in the cost to buy a home, and in many cities, buyer’s find themselves in one bidding war after another until they finally win (or give up). Some have commented to me that it is reminiscent of 2006… so is a housing crash around the corner? Now I don’t have a crystal ball, but…

I say unlikely.

Now let me explain my answer.

I’ll speak specifically about the Las Vegas housing market, because I know it intimately, however from what I have gleaned from professionals I know around the country, what is happening in Las Vegas seems to be true in most cities in the U.S.

In 2006, home builders were building as fast as they could in Las Vegas, with a sort of “Field of Dreams” mentality that “if you build it, they will come”, and the buyers bought… (until they didn’t anymore). When the Las Vegas market screeched to a halt, there were roughly 50,000 completed vacant residential units (single family homes and condos) with no buyer, and thousands more in some state of incomplete. To put that in perspective for you, (not counting 2005, when the most units were sold in Las Vegas) approximately 3,000-5,000 units sell in our valley each month on average – literally 3,708 in the past 30 days. In economics we learn that when the supply goes way up – even if the demand does not change, then more sellers are competing for the same number of buyers, so most of them begin to lower their prices… and they lowered them and lowered them.

Additionally, in 2006, you also had money that was super easy to borrow, so very few buyers had any “skin in the game” when they bought a property. In 2006, you could buy a $300,000 house with zero down payment and zero proof of income… in fact, just before the crash, there were loans that let you buy a house and actually walk away with cash in your pocket!

So, when the number for sale properties went up sharply, and sellers were dropping their prices to attract the buyers, the owners that had recently purchased with no down payment, saw the prices of their properties begin to go down. Those people had no down payment to lose… so they just walked away from their new homes, leaving them to be foreclosed on, and add more units for sale to an already over-supplied market. Then prices dropped more and more units went up for sale and priced dropped more and (well, you get the idea).

Builders stopped building almost completely (a few were built here and there) until around 2012, when the inventory finally dried up and houses started to go up in value again. Between 2006 and 2012 a lot of people also consolidated households out of need. The economy was bad so people shared homes with parents, friends or whoever they could to keep expenses down… causing there to be very little need for new homes anyway.

Around 2011, a ton of cash began flowing into the Las Vegas real estate market and in 2012, close to half of the houses purchased in our valley were paid for all in cash by investors scooping up bargains. Many of them had seen the writing on the wall in 2005 and sold their assets and putting their cash “on the sidelines” to wait for this. Wall Street got involved too and hedge funds like Blackstone started buying properties to rent out. Since 2012, close to 1/3 of the houses in the valley have been purchased with all cash, and now, (unless you are a veteran of the armed forces), you pretty much have to have at least a small down payment to buy a house… plus, builders, who learned their lessons, are only building if you give them a down payment, and even if they wanted to build them faster than they could sell them, according to a Wall Street Journal article this past April, we also have too few home builders in the US.

So, with the economy recovered (pre-Covid), combined households, began to realize they wanted their own space, so builders began to build again. But remember, for 6 years, our population grew at a normal rate, but the number of new houses built, stagnated significantly. So now we have a lot of people wanting to own a home, but not enough homes to own.

Then came Covid… along with a moratorium on evictions and foreclosures. Sure there were plenty of people out of work, but believe it or not, there were a fair number of essential workers who had good income and wanted to own their own place, but there were very few for sale because many people who may have thought about selling, just didn’t want a stranger in their house, so they waited… and you did not have people “forced out”, so those did not come on the market.

[January, 2020, just before Covid hit in the Las Vegas valley, saw 23% more homes sold than January 2019 with 23% less homes on the market, and this has actually got worse since then. January 2021 saw 28% more homes sold than the year before and 40% less homes on the market.]

According to a Wall Street Journal article this past June, the U.S has 5.5 million too few homes, currently, and I read another that says if we double the number of homes built from last year, and kept that pace, it would take until 2050 to catch up based on current demand and estimated population growth.

Wow that’s a lot of information and if you didn’t follow it too well, I’m not surprised, so I will sum it up. We need a lot more houses in this country than we currently have (make that a lot more than a lot… actually a lot more than that), so it is highly unlikely based on the laws of supply and demand that the Las Vegas or U.S. housing market is going to crash anytime soon. Individual small markets could certainly be an exception here and there, however that is the overall outlook.

Do you have a need for commercial / industrial / retail buildings or land? Are you ready to buy or sell a home? Do you want 3 cash offers? We can help you with all of that… just call us at 702 SELL NOW or click on this link to my website http://www.702SellNow.com

Choose to have an amazing day… Jeff

My Thoughts on Reverse Mortgages

I recently read an article in Investopedia entitled “5 Signs a Reverse Mortgage Is a Bad Idea” and I thought I might learn something new about reverse mortgages. All I saw was a “glass half full” explanation of them. Let’s be honest, every financial tool is not perfect for every situation, and if you are over 62, you may be considering a reverse mortgage, so let me tell you what I think about them. Then, read other opinions and decide for yourself.

What is a reverse mortgage? Let’s start with what is a mortgage? (just in case). If you are clear what a mortgage is, skip to the next paragraph. A Mortgage (called a Deed of Trust in some states) is a loan, secured by real estate, and they were really made popular after the Great Depression when the time to repay was stretched from 5 years to 30 years. That’s right, many years ago, if you could not pay off your house in 5 years you couldn’t buy one, and the Federal Government stepped in to create the 30 year mortgage in order to increase homeownership. When you buy a home, most people borrow most of the money and the repayment is usually spread out over 30 years. We won’t get too deep into amortized interest here, so suffice it to say that for the first several years, most of your payment goes to pay interest, and a small portion goes to pay down the amount you need to repay (principal). Usually, your real estate taxes and homeowner’s insurance are also bundled into that payment. You also might pay a fee called Mortgage Insurance, which is essentially an insurance policy in case you can’t pay your mortgage and they need to begin collection proceedings. Yes, they can take your home away if you do not pay your mortgage (that’s fair, right?).

So, what is a reverse mortgage? Well, it’s a mortgage that works in reverse… With a mortgage, you start with a high balance, and pay it down. If you stay in mortgage for the full 30 year term and never make extra payments, at the end of the term, you no longer owe a mortgage payment (you still owe real estate taxes and homeowner’s insurance). In a reverse mortgage, you start with a low loan balance (as low as zero if you have paid your house off already) and your balance increases as you receive money. You must start with at least 50% equity, so if your home is worth $400,000 and you owe less than $200,000, you have enough equity. You could also use a reverse mortgage to buy a $400,000 home with a $200,000 down payment and, because the house is going to pay you, you do not need to have good credit or income.

What? Why would I receive money from my house? That sounds like a scam to me!

Based on my conversations with people, there are 4 primary reasons people don’t get a reverse mortgage when they should, and the above reason is

#1. People think it must be a scam, so let me explain why a bank would send you money. Remember, the loan is secured by real estate, and banks are just investors who are in business to make money by loaning it out. And if you remember that you must be 62 or older to obtain a reverse mortgage, then you’ll realize that you are closer to the end of your life than the beginning, and reverse mortgage is only valid while you are alive and living in the home. When you die, the bank loan must be paid off. The 2 most common ways this happens is that your heirs pay off the loan by getting a new mortgage, or they sell the property. If there is any money left over after selling it, the heirs get to keep it. However (and this is pretty cool) if there is not enough money from the sale to pay off the loan, your heirs do not owe the difference. Now you can see, it makes business sense for a bank to offer a reverse mortgage.

#2 (THIS IS FALSE) People think the bank will eventually foreclose on me and kick me out! As long as you are alive and living in the home, the bank cannot take it away from you. The worst thing they can do is stop sending you money if they have sent you the maximum they originally agreed upon, and very often, by the time they have sent you that amount of money, the home has gone up substantially in value, however it is possible that you stop receiving money. In fact, if you really beat the odds and live to a healthy 150 years old, the bank will just have to wait until you die (or voluntarily move), in order to get the mortgage paid back. Of course, interest will continue to accrue, but remember, your heirs do not owe the difference if the sale does not bring in enough to pay what is owed.

What if you are still alive and want to move? Just like any home you own with a mortgage, sell the home, pay off the mortgage, and move. No problem. Which brings me to reason

#3. There are high upfront fees to get a reverse mortgage. Now these high fees, spread out over many years, seem reasonable to me. And let’s be honest, when I die, I can’t take the rest of the money with me, so personally, I am ok with spending that money today to not have a house payment in my later years and create some additional income. Which brings me to reason

#4 If you get reverse mortgage, you are spending your children’s inheritance (or at least some of it). This is a true statement! The more you spend while you’re alive, the less your heirs will receive when you are gone. So here is how I view this; when you’re gone, (depending on what you believe) you will not get to watch them spend it anyway, so if you want them to enjoy your money, why not have them enjoy it with you? Get the reverse mortgage and use the money to spend your last years creating wonderful memories with the ones you love! Also, as a parent, I believe it is my job to teach my children the life skills they need to surpass my accomplishments, not to just leave them a pile of money when I am gone.

Closing thoughts:

I am not 62 yet, and at some point, after I turn 62, I fully intend to get a reverse mortgage. I have paid into my home for years and I will feel good when it pays me back.

To be clear, there are legitimate reverse mortgages and there are certainly reverse mortgage scams out there too, so if you want to talk to a reputable reverse mortgage lender, just let me know and I will be happy to recommend someone, after all I’m Jeff Howard – you’re Realtor for life.

Choose to have an amazing day….Jeff

Matching Cabinet Hardware

Whether you have knobs, pulls, handles, or some other hardware, you need to have some way to access your cabinets. If your cabinets are relatively new, that hardware is probably fairly modern. However, if you have older cabinets, and you have new cabinets in the same area of your home you may want to match the hardware of the new and old cabinets.

However if your old hardware needs replacing since they have been broken or dinged up over time, this situation can be stressful, especially if you’re not sure where to start. While your success will depend on the specific pieces that you’re looking for and how recently they were manufactured, here’s some info that will hopefully point you in the right direction if you find yourself on a hardware hunt.

The Need to Match Hardware – Why do you need to match old cabinet hardware, anyway? There are a few reasons. The most common is that handles and knobs sometimes become damaged or break over time, especially if the cabinets see frequent use. You may also find yourself adding new cabinets or other fixtures that you want to match as closely to the older cabinets as possible, including similar finishes and hardware. In some cases it may even be a matter of hardware being removed to repair or replace cabinet doors and then getting lost or accidentally tossed out. Whatever the reason, you want matching hardware, and it doesn’t seem to be available in stores anymore.

Sources for Older Hardware – When trying to match old hardware, it’s important to start by checking if it’s actually available. Visit cabinet or woodworking shops in your area with pictures of the hardware you need (or the actual hardware itself) to see if anyone can recognize it and know where to order it. If that doesn’t pan out, check the internet; there are a lot of stores online that specialize in older items, and this can include out-of-production hardware and other materials. Even if you can’t find the specific hardware from its original manufacturing run, you may be able to locate visually similar reproductions that will at least match the look of your existing hardware.

If that doesn’t work, spend some time searching online auction sites to see if you can find the hardware that you’re looking for there. While online auctions can be a mixed bag, there are a lot of people who post used or out-of-production items that they have a surplus of to make some money off things that they no longer need. It may be worth checking a few times on different days, as new items are listed all the time, and you never know when someone is going to list that handle or knob that you need for a few dollars.

Unable to Find a Match? – Unfortunately, there may be some cases where you simply can’t find a match for your old cabinet hardware no matter how hard you try. If this happens, you typically have two options: You can upgrade all your hardware to a new style, or you can find something that complements your existing hardware to create a mix-and-match arrangement. It basically comes down to whether you want to upgrade some of your existing hardware or all of it with something a bit newer. You can choose pieces that complement your cabinets, hardware that goes well with sinks and other fixtures in the room, or even something significantly more modern than the cabinets to create a visual contrast between the cabinets and the hardware. Regardless of what you choose, be sure to pick something that you enjoy.

Of course, if you decide that the cabinets themselves could use an upgrade too- remember Jeff Howard , your realtor for life, is here to help you. I can help you find contractors and other pros who can give your rooms the new cabinets or other solutions that you need.

Choose to have an amazing day….Jeff

Nevada Enacts Ban On ‘Non-Functional’ Grass

One thing that will soon become unforgivable in Las Vegas is useless grass.

There is a new Nevada law that will outlaw about 31 percent of the grass in the Las Vegas area. This effort is to conserve water amid a drought that’s drying up the region’s primary water source: the Colorado River.

Other cities and states around the country have enacted temporary bans on lawns that must be watered, however legislation signed a couple of weeks ago by Governor Steve Sisolak makes Nevada the first in the nation to enact a permanent ban on certain categories of grass.

Sisolak said last week that anyone flying into Las Vegas viewing the “bathtub rings” that delineate how high Lake Mead’s water levels used to be can see that conservation is needed. Sisolak stated “It’s incumbent upon us for the next generation to be more conscious of conservation and our natural resources — water being particularly important,”

The ban targets “non-functional turf” according to the Southern Nevada Water Authority. It applies to grass that virtually no one uses at office parks, in street medians and at entrances to housing developments. It excludes homes, parks and golf courses.

The measure will require the replacement of about 6 square miles of grass in the metro Las Vegas area. By ripping it out, water officials estimate the region can conserve 10 percent of its total available Colorado River water supply and save about 11 gallons per person per day in a region with a population of about 2.3 million.

John Entsminge, General Manager of Southern Nevada Water Authority, stated “Replacing non-functional turf from Southern Nevada will allow for more sustainable and efficient use of resources, build resiliency to climate change, and help ensure the community’s current and future water needs continue to be met.

The ban was passed by state lawmakers with bipartisan support and backing from groups like Great Basin Water Network conservation group and the Southern Nevada Homebuilders’ Association, which wants to free up water to allow for projected growth and future construction.

When the ban takes effect in 2027, it will apply only to Southern Nevada Water Authority jurisdiction, which encompasses Las Vegas and its surrounding areas and relies on the Colorado River for 90 percent of its water supply.

The ban came as the seven states that rely on the over-tapped Colorado River for water — Arizona, California, Colorado, Nevada, New Mexico, Utah and Wyoming — consider the prospect of a drier future.

Lake Mead and Lake Powell, the two reservoirs where Colorado River water is stored, are projected to shrink this year to levels that would trigger the region’s first-ever official shortage declaration and cut the amount allocated to Nevada and Arizona.

In Arizona, farmers in Pinal County south of Phoenix have had to stop irrigating their fields because of the cuts. Nevada stands to lose about 4 percent of its allocation, although the state has historically not used its entire share.

I think we should all pray to the water gods and do a rain dance. It might not help, but it won’t hurt, since we need a lot of rain and snow in the southwest over the next few years to feed our rivers and lakes.

Choose to have an amazing day….Jeff