Waiting for the right time to buy a home? That time is NOW. According to a study done by Deutsche Bank cited by CNN Money, the right time to buy a home is now based on affordability and the cost of owning a property versus renting it. Here are the top cities with the most affordable real estate:
Top 10 Cities
- Atlanta, GA
- Orlando, FL
- Rochester, NY
- Cleveland, OH
- Tampa-St. Petersburg, FL
- Las Vegas, NV
- Jacksonville, FL
- St. Louis, MO
- Buffalo, NY
- Memphis, TN
Las Vegas Real Estate
Las Vegas homes are coming in at number six on the list. The metrics the study used were two fold. First it looks at the percentage of their income the average homeowner pays in after tax costs: home mortgage payment, real estate taxes and home owner's insurance. The study found the current percentage is 9.8%, down from 17.2% at the height of the bubble in 2007. Second the study looks at the cost of ownership versus renting. One of my clients is currently looking to move to Las Vegas from Boulder City and rent a home. We found a suitable home for $1,150 a month. The identical floor plan was for sale across the street and would cost him $864 a month to own it. Las Vegas is not alone in this phenomenon. The study found that in 28 out of 54 major housing markets it is now cheaper to own a home than it is to rent the same house. Here are the Las Vegas housing statistics according to the study:
Rent as % of after tax mortgage payment: 125.1%
Median home price change, 2006-2010: -56.5%
Investors Making a Move
Shawn Tully of Fortune Finance interviewed Dotan Y. Melech, who owns UnitedAMS. UnitedAMS manages apartments and other properties and has raised more than 20 million from outside investors to specifically buy distressed properties. According to the article, Mr. Melech has bought around 300 Las Vegas homes and is planning on buying another 200 before the end of the year. His justification is simple. Occupancy rates are high, around 95% and the cap rate is between 8% and 10%. Melech also targets a specific demographic when choosing his renters---people who lost their own property but are reliable renters. The Las Vegas rental market is booming due to the high number of foreclosures. Many renters having lost their home to foreclosure are unable to buy an affordable home due to bad credit.
More than half of the sales in Las Vegas are cash (if you are buying a Las Vegas condo, cash may be your only option).
National Real Estate Market
Other hard hit foreclosure areas like Phoenix, Miami and parts of Northern California are starting to see improvements as well. One of the biggest factors is the dwindling supply of new homes into the market. The Phoenix real estate market has a total of 8,100 new home, down from 53,000 in mid 2006. Another factor is the absorption rate of foreclosures. Foreclosures can radically effect pricing because of the randomness of their markdown pricing. MIT economist William Wheaton was quoted saying "We had levels of inventory even higher than this in 1990 and 1991. But they were traditional listings, not foreclosures so they didn't create the big discounts you get with foreclosures." Mr. Wheaton is right on the money. Foreclosures have pushed prices down past historic values creating an artificial market price. As less and less homes go into foreclosures, prices will soar back up to historic levels.
Thanks for reading our Las Vegas real estate blog.
Sources: CNN Money