Las Vegas is a City built on taking risks. Those who take educated risks such as Investment Real Estate can do very well (or very poorly). I firmly recommend taking calculated risks in your professional and personal life. A calculated risk is one where you have educated yourself on the historical performances, agree the reward is worth the risk, and never risk more than you can afford to lose.

We can assist you in each class of Investment Real Estate. Because the majority of our clients are investors in Residential Real Estate and because of the turmoil in that market right now I will give some insights into the Las Vegas Real Estate Market that will be of use to most readers. If you are interested in Commercial Real Estate or Business Brokerage please contact me for specific documentation and advice.

The Las Vegas Residential Real Estate Market

February 2008

Everybody (Real Estate Agents included) ask when we will see the bottom. My opinion is that Real Estate Values will continue to fall through 2008, generally. Remember the adage about the (3) most important things in Real Estate is Location, Location, Location. Each location in Las Vegas will act to a different degree, but not independently. Therefore I will talk about the Las Vegas Market in general and try to add some specific locations.

We are in a recession we just do not want to admit it yet, for the economy to be defined as a recession we need two successive quarters of declining indicators. The current crash of our economy was led by the decline in housing Values, lower volume of spending and the tightening of credit. I believe we will see 'Echos" of the initial economy crash in other industries which are impacted by the fragile economy and lastly a rise in unemployment.

The specific impact to investors is "Where do we put the money to work?". The Stock Market is bearish, Treasuries and Bonds are not paying well, Private Equity investments such as Leverage Buy Outs are extremely risky at this point. Real Estate investments were the first to be wounded and will be the first to return. I believe the worst in Real Estate is right here and right now. J.D. Rockefeller stated the time to buy is when blood is running in the streets, now through the end of 2008 the blood will continue to flow.

I believe the overvaluation of Las Vegas Housing Prices has ended and prices are returning to prices the economy of Las Vegas can afford, pre-2004 investor speculation boom and actual average (not median) prices that average Las Vegans can afford.

Where are the Deals?

My 4th Quarter 2007 Newsletter advised that the purchases to focus on were with the New Home Builders. I suggested that these were businesses with business goals that were not the same as homeowner goals. Specifically, the New Home Builders are Corporations that needed to take advantage of their opportunity for the public market to allow write-offs of standing inventory before their fiscal year ended. New Home Builders in October and November cut prices on standing inventory between 10% and 30%. I assisted clients purchasing New Homes models that had sold during that summer in the mid-$700s, we bought for the mid $500s. Hopefully, they will sit on these homes for the two years required by the IRS for occupancy, the market will return and they will have created $200k in equity. We also negotiated the New Home Builders to pay closing costs and buy down the points of the loans to 5.5%.

The New Home Builders do not have the same deals available for 1st and 2nd Quarter 2008. They have eliminated the majority of standing inventory, and are not building any more homes in the upper price range until a new home project is purchased upfront by the buyer. The asking prices for new homes in  all ranges are now reasonably priced as compared to 2003 prices. The New Home Builders are aggressive with lending incentives such as no money down, 4.5% fixed rate, closing costs, upgrade allowances, etc.

I also stated in the 4th quarter Newsletter to stay away from Distressed Properties, i.e. - Short Sales, Foreclosures, Auctions, and REO (Bank Owned). I made this statement because the banks had not swallowed the reality that they would need to accept realistic current market prices for their loan assets tied to distressed assets. During the end of 2007 the amount of Foreclosures and unapproved Short Sales soared while the volume of these transactions remained flat.

2008 is a different year for Distressed Assets. The deals right now are with Bank Owned properties. I still am not suggesting Auctions and Short Sales. Short Sale and Auction success is too unreliable. The banks still seem to have adopted a rigid stance of pricing for Short Sale and Auction marketing. However, once the property becomes an asset on the banks books (REO) they are selling at prices that are based upon the market and even willing to be persuaded as to the actual market price. The banks have retained large teams/groups of  Realtors to market their REO's. They are paid on commission so of course they will price the properties at prices near current market value and will attempt to negotiate if presented properly.

The situation for resales is bad and getting worse. Now that the bank is cutting prices on homes on their books they have flooded the market with homes that are much lower than the typical homeowner who bought in Las Vegas in the last 5 years can afford to sell. It is rare to find a resale home that is priced based upon 2003 prices. There are a few.

Locations to focus on purchases that will appreciate beyond the general Las Vegas market are;

1.) Summerlin near the soon-to-be developed Summerlin Centre Retail complex. Other areas of Summerlin should be looked at based upon individual properties.

2.) South, Near 1-15 and I-215 exchange - If the casino projects that are planned do come to fruition, there will be a drastic need for homes in the $200k-$300k range in that area for some 45k+ projected employees.

3.) Northwest, Near I-215 beltway and main roads of (Aliante Parkway, Decatur, Jones, Durango) - This area is under heavy commercial development including casinos, indoor mall, stip malls, hospital, etc. By 2010 these projecs and the completion of the I-215 exits will create a demand for existing homes.

We welcome any questions you may have, including specific properties.

Regards,

Christopher Smith

(702)376-2510 direct