Las Vegas Bank Foreclosures Bought as Rental Investments

by on cities

A large portion of Las Vegas bank foreclosures were purchased as rental investments in August, based on home sales data collected by two real estate research firms.

Absentee buyers purchased 40.2 percent of total homes for sale in Las Vegas in August, the highest percentage reached in ten years including the 39-percent rate reached during the boom years.

Based on public real estate records for August, 45 percent of all buyers used cash, indicating purchases by investors.

According to Larry Murphy, head of research firm SalesTraq, the high level of cash purchases reflected a high number of investors snapping up properties in Las Vegas. The high number also indicated that there are still bargain-priced homes in the city, including cheap foreclosures.

Murphy also said that Las Vegas residential property is undervalued. In August, the home price index showed that the annual home price growth rate nationwide since January 2000 was more than 4 percent, but Las Vegas only had a 0.22-percent growth rate. Since 1991, the yearly growth rate nationwide was 3.8 percent, but Las Vegas had a growth rate of only 1.31 percent.

Based on reports from the research firms, Las Vegas bank foreclosures contributed substantially to home sales and home price declines in August. The firms reported that 69 percent of all houses and condo units sold in August were foreclosed properties. The percentage was lower than the July share of almost 70 percent, but was still higher than the 63-percent level in August 2008.

The August foreclosure percentage was still close to the 74-percent share in April when foreclosure sales reached their highest level.

Murphy said that investors have calculated their investment money and cash flow projections and decided that Las Vegas homes are profitable. If the resale price is less than the construction cost, investors see value.

Las Vegas housing analysts also observed that the new investors are different from the flippers during the boom years. Whereas before, many investors were using home loans, now they are paying in cash. The change is good for the Las Vegas housing market because the cash investments mean commitment to their properties and to the city.

Additionally, the analysts also said that more investors are looking for lower-priced properties, which are now fast declining in number. Sales of resale homes and newly-built homes and condo units in August dropped by more than 11 percent because of the decline in inventory.