Mark Baker at Cardinal Financial Company L.P. Shares Insights on Las Vegas Home Values
Mark Baker, a 22-year Mortgage Loan Originator in Las Vegas Nevada, shares his thoughts on interest rates, Las Vegas home values, and if Investors are contributing to another upcoming crash.
Las Vegas, NV, April 13, 2018 --(PR.com)-- Every day, Mark Baker gets phone calls from Real Estate Agents and Clients asking the same three questions. The calls happen so frequently The Mark A Baker Team wanted to post Mark’s answers as "food for thought." The questions are:
Q: How do rising interest rates effect a Home Buyer?
A: The Mark A Baker Team recently did a piece that shows for every 1% the rate goes up on a mortgage loan, the buying power goes down 10%. That said, Mark believes there are a lot of Buyers saying (or have said): "I’ll wait for the rates to get better because 4.5% is too high." The illustration showed Principal & Interest payments only (no taxes/insurance) since that is the true amortized payment for a 30-year loan. The demonstration was a $275k loan amount at a 4.50 rate got a $1,400 P&I payment. The same $1,400 payment at a 5.5% rate gets a $245,314 loan amount. This means that same $1400 payment gets you $27k less house if the rate change is 1%. This is very significant for a Buyer as a $27k difference in house price is significant on amenities.
Q: How much have Las Vegas home values actually increased?
A: Just this last year, according to the most recent report from Las Vegas publication, SalesTraq, the median sales price for an existing home in Las Vegas for Feb. 2018 was $240,000. Twelve months prior in February 2017, the median price was $207,000. That $33,000 difference divided by 365 days means the median price of a home increased more than $90.00 per day. Mark's team has had Buyers that did not buy because their payment was $50 or $100 higher than they wanted, and this shows they missed a $90.00 per day increase in value.
Q: Are we in for a crash soon?
A: When the Real Estate bubble "popped" 10 years ago, everyone was buying Investment homes. Mortgage Lenders had loan products allowing someone to buy a home with little to no money down if their credit was good, so it was very easy for almost anyone to buy an Investment home, and everyone wanted at least one it seemed like. Today those liberal loan products no longer exist. While there are Investors buying homes today, there are more "real Investors" as the loans require them to put money down and they have to qualify for financing. The other option for buying an Investment home is obviously to pay cash (cash transactions are still currently 25% of the market in Las Vegas). The difference is "skin in the game." All things being equal, having your own money out there will keep you in the game longer, preventing what happened before to happen again anytime soon. Mark thinks this alone will prevent a "crash" anytime soon.
But the main reason Mark doesn't think there is a bubble brewing right now is simply Supply vs. Demand. The value for any item increases if there is not enough of that item to support the demand. The consumer will either pay more for for the item if they want it bad enough. When it come to homes, the Las Vegas community has not had a lot of building for the past 10 years. The number of homes the banks took back and re-sold from Foreclosures and Short Sales were more than enough to satisfy the demand, which caused values to go down. Now, those homes are mostly sold and with the economic recovery, Las Vegas is seeing many new home buyers that are 1) "Rebound Buyers" (Buyers that had a Foreclosure, Bankruptcy, Short Sale before and can now get back into home ownership) 2) "2nd home Buyers" (Affluent people that vacation in Las Vegas a lot, Snowbirds, Hockey fans, Raider fans, etc.) 3) "Transplant Buyers" (moved to Las Vegas because of new jobs, retirement, tax purposes, etc.). These people are used to owning, looking to buy, and are willing to pay what it takes to own, hence tightening the supply and making the home prices increase.
Mark Baker can be found at www.MarkABaker.com | Cardinal Financial Company L.P. is a full-service mortgage banking firm in operation since 1987. The company is an approved Seller/Servicer for Fannie Mae, Freddie Mac and Ginnie Mae and is an approved lending institution for the Department of Housing and Urban Development/Federal Housing Administration and the Department of Veteran Affairs/Veterans Administration with FHA's Direct Endorsement and VA Automatic Lender Authority. Cardinal Financial Company L.P. is licensed by the Departments of Banking in 49 states.
Q: How do rising interest rates effect a Home Buyer?
A: The Mark A Baker Team recently did a piece that shows for every 1% the rate goes up on a mortgage loan, the buying power goes down 10%. That said, Mark believes there are a lot of Buyers saying (or have said): "I’ll wait for the rates to get better because 4.5% is too high." The illustration showed Principal & Interest payments only (no taxes/insurance) since that is the true amortized payment for a 30-year loan. The demonstration was a $275k loan amount at a 4.50 rate got a $1,400 P&I payment. The same $1,400 payment at a 5.5% rate gets a $245,314 loan amount. This means that same $1400 payment gets you $27k less house if the rate change is 1%. This is very significant for a Buyer as a $27k difference in house price is significant on amenities.
Q: How much have Las Vegas home values actually increased?
A: Just this last year, according to the most recent report from Las Vegas publication, SalesTraq, the median sales price for an existing home in Las Vegas for Feb. 2018 was $240,000. Twelve months prior in February 2017, the median price was $207,000. That $33,000 difference divided by 365 days means the median price of a home increased more than $90.00 per day. Mark's team has had Buyers that did not buy because their payment was $50 or $100 higher than they wanted, and this shows they missed a $90.00 per day increase in value.
Q: Are we in for a crash soon?
A: When the Real Estate bubble "popped" 10 years ago, everyone was buying Investment homes. Mortgage Lenders had loan products allowing someone to buy a home with little to no money down if their credit was good, so it was very easy for almost anyone to buy an Investment home, and everyone wanted at least one it seemed like. Today those liberal loan products no longer exist. While there are Investors buying homes today, there are more "real Investors" as the loans require them to put money down and they have to qualify for financing. The other option for buying an Investment home is obviously to pay cash (cash transactions are still currently 25% of the market in Las Vegas). The difference is "skin in the game." All things being equal, having your own money out there will keep you in the game longer, preventing what happened before to happen again anytime soon. Mark thinks this alone will prevent a "crash" anytime soon.
But the main reason Mark doesn't think there is a bubble brewing right now is simply Supply vs. Demand. The value for any item increases if there is not enough of that item to support the demand. The consumer will either pay more for for the item if they want it bad enough. When it come to homes, the Las Vegas community has not had a lot of building for the past 10 years. The number of homes the banks took back and re-sold from Foreclosures and Short Sales were more than enough to satisfy the demand, which caused values to go down. Now, those homes are mostly sold and with the economic recovery, Las Vegas is seeing many new home buyers that are 1) "Rebound Buyers" (Buyers that had a Foreclosure, Bankruptcy, Short Sale before and can now get back into home ownership) 2) "2nd home Buyers" (Affluent people that vacation in Las Vegas a lot, Snowbirds, Hockey fans, Raider fans, etc.) 3) "Transplant Buyers" (moved to Las Vegas because of new jobs, retirement, tax purposes, etc.). These people are used to owning, looking to buy, and are willing to pay what it takes to own, hence tightening the supply and making the home prices increase.
Mark Baker can be found at www.MarkABaker.com | Cardinal Financial Company L.P. is a full-service mortgage banking firm in operation since 1987. The company is an approved Seller/Servicer for Fannie Mae, Freddie Mac and Ginnie Mae and is an approved lending institution for the Department of Housing and Urban Development/Federal Housing Administration and the Department of Veteran Affairs/Veterans Administration with FHA's Direct Endorsement and VA Automatic Lender Authority. Cardinal Financial Company L.P. is licensed by the Departments of Banking in 49 states.
Contact
Cardinal Financial Company L.P. / The Mark A Baker Team
Mark Baker
(702) 451-1040
www.MarkABaker.com
Mark Baker
(702) 451-1040
www.MarkABaker.com
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