Mesquite Market

“Will I Have Enough Money in Retirement?”

Very few baby boomers have not given this question considerable thought.

Mesquite can continue down the path set some years back as a high end, wealthy, golf, and gaming lifestyle community with great weather. Mesquite did a good job of this, but times are changing. The market has changed. For those claiming credit for Mesquite’s booming past, the truth is it had a great deal to do with market timing, funny money, and the Palm Springs hype.

The high-end housing market is a very competitive and a shrinking market. New homes being built today continue to get smaller nationally. While Mesquite has focused on expensive HOA’s, gated neighborhoods, streetscapes, and image our competition is focusing on future cost saving efficiency and sustainable living.

Even a free and clear home is not free to live in, homeowner association costs, taxes, insurance, maintenance, and utilities all go on forever.

The boomers are just starting to retire this year and will be retiring at a pace of 8000 to 10,000 per day for the next nineteen years. These retirees are Mesquite’s future target market.

Besides their recent asset value losses and reduced personal net worth, they are concerned about future health care costs, pension stability, social security, debt, inflation, and their future cost of living. There is 2.5 Trillion in pension funding owed today, who will pay this, Bankrupt States, Municipalities, Unions, the Federal Government? Are you willing to gamble your future on the stability of this debt? Or is your future already depending on it? Will our legacy for our children and generations beyond be that they will live with a lower standard of living, and we were a generation of extravagant, wasteful, fools?

For most, they grew up thinking real estate had little or no risk. The reality that there is downside risk in real estate has hit them, as a generation, hard.

We all know a huge percentage of the Boomer generation has not saved enough money.

Looking forward, some of the most relevant results of the recent past will be the way they view their money. Their attitude about debt. Their attitude about investing in residential real estate has fundamentally changed. It is no longer viewed as a quick way to wealth; rather it is where they live. They have also realized that leverage or debt has plenty in common with a margin account used for trading stocks. Gambling with borrowed money. They have become far more cautious and conservative. Finances in most cases will dictate their lifestyle choices, including where they will live.

Objections, obstacles, and adversities create opportunities. They are nothing more than problems to be solved. Remember IBM thought the Personal Computer was a Stupid Idea! They ignored the future at their own peril. 

Yet not a single home builder in Mesquite offers a solar application of any kind in a standard package. They do not talk much about orientation to the sun or solar applications. Mesquite homebuilders took out 201 new home building permits in 2010. How many do you think are properly solar oriented?

Innovation and technology like shared geothermal systems for heating and cooling entire neighborhoods and solar energy are the future. Do you think electricity costs are going down? Have you heard about cap and trade? 

The level of consumer awareness about home energy consumption costs will continue to rise. It will become a higher priority for many future home buyers. Solar orientation has as much to do with cooling in the summer as it does with warming in winter months. Your home’s energy efficiency will eventually affect your homes value.

Undeveloped subdivisions platted and being re-platted and approved by The City of Mesquite meet many requirements, but no consideration is given to home site solar orientation. This will not happen without The City of Mesquite’s support. The City of Mesquite will need to take the lead and be committed. The home builders will not just do this, land use density or maximizing the number of homes they can build on a parcel of land will prevent them from laying out lots for maximum solar exposure.

Overton Power offers a Power Purchase Agreement to individuals. While this is becoming more common, it is not available in all markets.

This is not about “Green Thinking” rather smart financial planning for the future and marketing.

Solar applications such as home orientation, glass exposure, and overhang design do not necessarily increase cost to build. Yet they save money each month forever.

The systems to generate electricity and heat water add to initial cost, but right now, there may be numerous incentive and rebate programs, stimulus money!

Today for the most part, Mesquite looks like an example of how to best not utilize the sun’s power at all! 

Are there any new solar oriented homes in Mesquite’s future? 

Would people visit Mesquite just to see a solar home neighborhood?

Could Mesquite become a shinning example, attracting national attention?

Would affordable solar homes in Mesquite stimulate economic development? 

Are there solar oriented subdivisions in Mesquite’s future?

Ignoring the concepts of affordable self-sustaining housing as Mesquite grows is like ignoring the fact that the Baby Boom Generation are really retiring. Proper solar orientation keeps homes cooler during the hot summer, permanently reducing the need for expensive air conditioning.

As I see this, we can either lead or follow. It is a conscious choice that the people of Mesquite should discuss and provide feedback to The City of Mesquite. To be “solar certified” would require changes to existing building codes, and powerful tract home builders and developers will likely oppose any changes. Is Mesquite economic development moving in the direction you would like it to be?

The truth is home building technology has not changed much in fifty years. If not properly oriented an energy star rated home can still cost plenty to heat and cool. The sun can help change this.

Vacant land cost basis, five subdivisions sold, all up in the newer Mesquite Heights/ Canyon Crest area. They were a total of 223 acres and sold combined for $2,650,000 or $12,000 per acre. If the builder puts six homes per acre, that is an average cost basis of $2,000 per lot. This is deleveraging in action, lowering cost basis. Infrastructure and grading costs could bring this cost basis up to $30,000 per lot. This could be why only three single-family resale lots sold in 2010 with a median price of $71,000, per Mesquite MLS.

Real estate building and development can become the economic engine for Mesquite again. The target market may have changed, dictating innovation and product change. We must look forward and adjust to the new realities.

Old style conventional home builders in Mesquite have been too slow to embrace this land use and building concept. In my opinion, Mesquite’s future is far too important to leave it to builders and land developers to lead Mesquite into the future.

Is the type of Mesquite’s future land development, home building and growth an election issue? 

Let’s start with the easy pieces, the edge pieces, the positive aspects of the current housing market.

Home sales are up in Mesquite, Nevada from 15 closings in January 2009 to 39 in January 2010, huge increase in closings. Price per square foot dropped from an average of $120 in January 2009 to $100 per square foot in January 2010. This was stimulated by Federal tax dollars in the form of tax buyer credits that would be your money!

Single family new home building permits are up in Mesquite from 1 in January 2009 to 22 in January 2010. That adds to the competitiveness of the market, the supply side.

Trying to keep it positive here, mortgage interest rates are still near historic lows.

The Home Builders Index of confidence rose 2 points to 17. A score of 50 or more on the index indicates that more builders view conditions as favorable rather than unfavorable.

Access Research & Consulting Inc. estimates that the number of mortgage brokerage firms is down from a peak of 53,000 in 2004 to less than 15,000; this may be a good thing.

Now we can start into the middle of the picture, the harder pieces of the puzzle.

Realty Trac reported January 2010 foreclosures were above 300,000 for the eleventh straight month, and up 15% from January last year. US Home ownership is back down to levels not seen since 2000.

Private mortgage insurance companies are dropping like moths flying into the flames of a blazing fire. Short sales and foreclosures are literally wiping them out.

Mortgage underwriting standards are getting tighter everyday, shrinking the pool of eligible qualified potential home buyers. Even FHA has made it tougher to qualify for a mortgage. This piece is part of the demand side.

By most industry estimates, there are eight million delinquent mortgages in the US today and only a very small percent of the mortgage modifications are actually working. The re-default rate continues to climb. Only 66,000 are considered permanent of 900,000 of those who are enrolled in trial modification programs.

3.4 million Homes in the Treasury Department’s Making Home Ownership Affordable (HAMP) are currently 60 days or more delinquent.

There are a half trillion dollars of mortgages still out there that will reset or adjust over the next twenty four months. Many of these homeowners are not prepared for the higher cost of housing headed their way.

The picture is coming together, but there are still some pieces missing.

The shadow inventory is out there in various forms, and the number of homes sitting vacant is at a historic high. Many are owned by institutions, others are owned by individuals, all are waiting for the market to improve. Then there are the sellers who would like to sell but can not or will not sell at current prices. At some point they will have to liquidate this inventory.

We should all hope Fannie Mae, Freddie Mac, and the others will slowly ease this inventory into the market. Some industry experts believe it could take as long as three years for the market to absorb this shadow inventory of homes.

If they dump a wave or waves of distressed property into the market, it will drive down prices further and create a huge opportunity for those in a position to capitalize on the low prices.

The Federal Reserve’s 1.25 trillion dollar fund set up to buy mortgage backed securities is nearly spent. Without the support of this emergency fund, the secondary mortgage money market is bound to drive rates higher for consumers.

The effect of higher interest rates is to make housing less affordable and reduce the buyer pool, again reducing the demand side.

What the real estate market needs is jobs and time. Jobs will help people stay in the homes they currently own. Jobs will slow foreclosures, help mortgage modifications work, and create new demand.

Time will heal credit, time will clear inventory, and in time the market will find balance again.

Now step back and look close, with all the pieces of the puzzle in place. Where do you think the market will go over the next six months, twelve months, and twenty four months?

Remember Mesquite, Nevada is a prime retirement community with a very bright future offering a low tax structure, excellent weather with nearly constant sunshine, premiere golf courses, excellent outdoor opportunities, gaming and all located within an hour’s drive of Las Vegas.

Chris W. Miller

ERA Brokers Consolidated

Mesquite NV 89027

702- 346-7200

435-862-5951

Mesquite Market

chris@mesquitemarket.com

Lincoln County Land Market

Nevada Ranch Properties

New home building permits issued by the City of Mesquite went up; 114 issued in 2007 Q4 compared to 42 in 2006 Q4. For the year permits increased from 262 in 06 to 463 in 07 or 76% more. This increase is compounding the market slow down and pushing prices down across the board. Listed “for sale” inventory grew faster than 4 to 1 compared to “sold and closed” units.  Based on December closings as an absorption rate there is a 30 month supply sitting out there, many are vacant. 

Today the average asking price for a listed home stands at $197 per square foot. October sales prices were at $169 with 15 sales, November was at $159 with 22 sales, and December was at $150 per square foot with 11 sales. There were only 17 resale homes closed during the Q4 of 2007 with an average sold price of  $170 per foot. There were 33 new home closings with an average price of $157 per foot, including 17 at Sun City which averaged $147 per foot! 

Town home/condo market did not fare any better, with only 18 closings for the last quarter 2007. The average sold price dropped to $146 per foot from the low 160’s earlier in the year. For the year builders pulled less multi family building permits, 55 in 2006 vs. 16 in 2007. 

The Mesquite MLS Market Comparison of Residential Properties Statistical Report, December to December shows depreciation in prices from 19.81% to 30.01%. 

No commercial land or building sales transactions took place during Q4 2007. Yet commercial building permits issued tripled for 2007 over 2006, from 11 in 2006 to 35 for 2007.  Commercial vacancy rates were high starting out 2007, they will go higher. 

No single family residential land sales closed during Q4 2007. Lots “for sale” increased 10 fold during 2007, from very few to over 50 active today. Add this fact to the new developments around town which include as many as 14,000 vacant home sites and you get some very nervous land speculators. 

The number of bank owned foreclosure properties and short sale properties being offered is climbing. Most, just like existing home sellers, are not quickly embracing the falling prices and these homes are sitting out there vacant. 

While rates have come down during this past quarter, qualifying has become much more challenging if not impossible for many buyers. This fact eliminates some buyers and reduces the demand side of the equation. 

Rental rates on residential properties have come down some and vacancy rates remain high. Commercial space asking prices have not come down much yet, but that looks likely to change. 

Mesquite, Nevada remains a wonderful place to live. Sun City/ Pulte Del Webb continues to shine a huge spot light on Mesquite, and many new visitors arrive daily. Sun City sales representatives tell me they wrote over 300 new home purchase contracts since the grand opening in June 2007. Mesquite will continue to be one of the top choice areas for the graying baby boomers to consider. From the looks of the current market it will be less expensive and more affordable than it was, at least for some time to come. The market is creating some great buying opportunities for 2008. 

Weekly Mesquite market reports available on pod cast at www.radiomesquite.com

Chris W. Miller

ERA Brokers Consolidated

Mesquite NV  89027

702- 346-7200

435-862-5951

Mesquite Market

Nevada Farm and Ranch Land

Nevada Water Rights

Lincoln County Land Market

chris@mesquitemarket.com