Esko Kiuru - Las Vegas NV Mortgage Consultant

In multiple areas nationwide the residential real estate market remains soft and offers home buyers splendid opportunities. Prices are coming down and many sellers are at last realizing that the marketplace determines the listing price and not them. They are now more willing to negotiate rather than just turn down unappealing offers. And mortgage interest rates in recent weeks have reached new lows, hovering right around 5.5%. These developments should be boosting transaction activity, but are they making as big a difference as expected?

The word affordability plays a large role in that. The Center for Housing Policy conducted a study on the very issue and according to its findings things are getting a bit better. Some noteworthy advances have been made in the expensive areas like California, Arizona and Florida, which also happen to be the states where prices rose really fast during the boom years. They are also three of the four leading mortgage foreclosures states, with Nevada being the fourth. So it makes market sense that prices are now receding in them and helping out with the affordability assessment.

Despite the marginal improvement, the working families are the ones who still face a shortage of homes they can manage to get a mortgage for. Workers like registered nurses, retail sales persons and customer service representatives - all deemed high-growth occupations - are simply priced out in many regions. In the Center for Housing Policy's report registered nurses, for instance, can't afford a median-priced house in 108 out of the 201 markets the study looked at. And customer service reps were left out in 185 markets.

Las Vegas mirrors pretty much the national trend. Prices soared a few years ago to unprecedented highs and are now retreating, narrowing the affordability gap that grew way out of control. Stagnant home sales in the valley will improve as soon as median household incomes and home prices come closer together, reaching a comfortable and workable balance. Bulk of the adjustment has to come from the price sector because wages predictably increase at a slow pace. There already are small single-family houses on the market for under $200,000, indicating that the affordability issue is getting corrected here.

2007 was one of those years in Las Vegas residential real estate that many will remember for a long time. The glut of homes on the market, new and resales alike, from single-family houses and townhomes to condominiums, put tremendous pressure on prices. On top of that the mortgage industry ran into homeowner and investor payment problems and as a result foreclosures began to rise steeply. In summary, it was an ugly year.

Let's look at some specific statistics. New home sales totaled 19,670 for all of 2007, a serious 45.6% decline from 2006. On the resale side last year's final number was 24,838 which amounted to a 40.7% drop from 2006, as was recorded by Home Builders Research. Combined sales haven't been this low since 1997 when they were 39,187 units. This last comparison alone is enough to indicate how far the market has up to now dropped. To read the entire article, please click on the link in the first paragraph.

This week has really been up and down in the Las Vegas condominium market. Earlier Sinifox Financial reported how well the MGM Mirage's CityCenter condos were accepted by the luxury home buyer. A few days later the news turned sour as an item surfaced about a downtown condominium project called Newport Lofts being taken over by its lead bank. And now there is another case of premature lender involvement.

Cosmopolitan, a $3 billion condo and hotel project wedged between the Bellagio and CityCenter, was served a notice of default by Deutsche Bank when payments on a $760 million construction loan were missed. The developer, 3700 Associates LLC, has already sent out a management team to scout the financial landscape for a potential equity partner that would ultimately lead to another loan. However, in today's soft residential real estate market and tough mortgage environment it can become a major challenge.

But then Deutsche Bank obviously had a change of heart and worked out a temporary arrangement with Perini Building Co. to continue construction on the project toward its estimated December 2009 opening. In the meantime 3700 Associates and the banks are discussing new financing options and availabilities.

This may be the best alternative for Deutsche Bank. If it pulled out of the project altogether, it would likely lose all of its to-this-point investment in it. Should a new lender emerge in the coming weeks, so much the better. Or it could let Perini finish everything as scheduled and then seek a buyer for the project. The real estate market in Las Vegas and the national mortgage conditions in late 2009 and beyond could be much improved and actually allow the bank to break even or even make a decent profit.

The frustrating mortgage lending environment and soft residential real estate market in Las Vegas is testing the resolve of many condo developers. Several projects in the past few years have been cancelled or put on hold. Some that are presently under construction are struggling to attract buyers offering their usual amenities, so they have done the next best thing and lowered prices, sometimes substantially. But even that hasn't always been enough, though.

Newport Lofts is a downtown condo project being built by West Seegmiller that had recently advertised an auction of 60 of its units, priced from $229,000 on up. Evidently sales had been lagging, so an auction became a viable option. Soon after the announcement one of the lenders, Pyramis Global Advisors which is the institutional asset management arm of Fidelity Investments, decided to intervene and assumed control of the 23-story development. That effectively cancelled the planned auction.

By July Newport Lofts had in its books 32 sales with an average price of $536,315, according to Home Builders Research, which is far removed from the much lower auction offering and that must have raised serious concerns with the lenders. In addition, since July only one unit has been contracted for and that will put any project on notice to seek different answers.

The banks involved and West Seegmiller have scheduled a meeting in the near future to hash out possible solutions to the issue. But it's going to be tough to find the right recipe. Unless the developer bears a name and an organization like Turnberry Associates or Trump, the successful marketing of a condo project in this market becomes a true task.

MGM Mirage's CityCenter is a massive entertainment and residential enterprise located right on the Las Vegas Strip south of Bellagio. Construction is moving forward on schedule and the project is estimated to open its doors in November of 2009.

The development will have a total of 2,650 luxury condominiums in four separate buildings, namely in Veer Towers, Mandarin Oriental, Vdara Condo Hotel and Harmon Hotel. About half of the available units have been sold to date which has produced $1.63 billion in revenue, nearly 60% of the total projection at sell-out. Please click on the link in this paragraph to read the entire article.