Las Vegas housing market checkup
After spending almost a week in one of the most remote places in the US - The hot springs of saline valley in Death Valley national park, I drove back to Las Vegas for my spring housing market checkup. The change from the beauty of Death Valley, to the fast paced, no road rules of Vegas is not for the timid.
My first stop was North Las Vegas near the 215 beltway and I-15. I visited several subdivisions of public home-builders SPF, KBH, and LEN. I must digress just a bit. What is it with these subdivision names? Mountain shadows, Eagle canyon, Canyon springs, Coldwater ranch, etc...Let me make it clear - In Las Vegas, there are no freaking mountains, eagles, shadows, shade, canyons, or coldwater! Vegas is hotter than hell in the summer, and windier then the top of Everest in the winter! The subdivision names should be:
Deadpan desert view estates
Tumbleweed factory condos
Dust-bowl dirt boxes
Desolate windy ditch ranch
At least your not renting homestead
Sorry, I'm back with the north Las Vegas subdivisions. I drove around and talked to potential buyers and agents. Overall traffic and interest is up considerably since Dec - but this is the seasonal norm. The big difference is that very few are buying. The prices here in Vegas are still too high, and the homes are just too big. Most floor-plans are at least 3500 - 4,000 sq. ft. The builders need to be downsizing these homes to 2500 sq ft IMHO. The current price per sq. ft is low, but the total price is just too high.
Beside price, the reasons for the lack of buying seem to be lack of mortgages, and fear of further price drops. In Las Vegas, the location is still key. In North LV and west LV near red rocks, activity is much stronger. South LV and Henderson are a completely different market - and in trouble. I don't know why Henderson is consider Las Vegas? Henderson in particular is horrific. Two developments projects, Inspirada and Kyle Canyon will cause major problems for KBH, BZH, and LEN.
Overall, I would avoid any HB with large Las Vegas and especially Henderson exposure. The most exposed to LV and Henderson are: LEN, KBH, BZH, and TOL. The home-builder with the least LV exposure is SPF with only 3 active communities(LEN has 34 active and 6 in Henderson).
On a positive note, I visited some large subdivisions in Northwest LV near the BLM boundary. A year ago these had thousands of empty boxes as far as the eye could see. As I drove in these new subdivisions, I noticed all the boxes are now occupied. Obviously I have no idea if these were all sold, or rented, but no slum-like deserted subdivisions that some of the media fear-mongers are spewing about.
I have been predicting the US government to start various bailout packages as this housing depression continues. This is happening with the GSE's now with 200-300B more $$ to lend, and the FED floating billions to brokers now. I am still predicting the final bailout - 300-500B buyout of CDO's and CMO's by the federal government.
Here is an excerpt from an earlier blog from over a month ago:
"The US housing bailout needs to work as follows. 300-500B of lower level tranches of CMO debt needs to be purchased and held by the US government. Also the GSE's/FHA need to loan cheap money 5.5% 30 yr, to refi the weak/poor loans with 2006-2007 vintages. and slow down the foreclosure process. The third leg of the bailout would be the GVMT helping states and cities raise bond funds to purchase distressed homes in hard hit communities and take them off the market - maybe affordable rentals, for lower level workers, etc...."
More US housing bailouts:
This weekend, central banks from the US and England are considering mass purchases of mortgage-backed securities in a bid to solve the global credit crisis. The fed has since denied this rumor, but it does not matter - this WILL happen IMHO.
I am still looking to move to a fully invested position by mid-April/May. I think we will retest the lows, and I will be buying from my top 50 cash flow yielding list. I am not buying or shorting HB's here. To many variables that can not be predicted. If you have a large short position in a HB, when the Fed announces the HUGE CDO, CMO purchases - you will get crushed! As of now LEN and BZH would be my favorite short or red thumb candidates.
Good Luck to the foolish investor!