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? 

I will give you all the market numbers here, but the real Million Dollar question is who will be Mesquite’s future housing target market and how much are they going to be willing and able to spend on their housing needs? If the numbers from 2010 are any indication, then $200,000 is the magic number for single-family home sales. Sound low? Consider this, Mesquite Nevada, may be at a crossroad.

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 developing this image, but times are changing and the market has changed. The higher end home market in Mesquite has not yet seen the worst of this market.

For those claiming the credit for Mesquite’s booming past, the truth is, Mesquite’s growth had a great deal to do with market timing, funny money, and the Palm Springs hype. At the same time, many builders took advantage and cut corners, in many cases, they were just too busy to pay attention to the details, in other cases just greedy or both, but the consumers and the market allowed this.

The high-end housing market is a very competitive and 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. The City of Mesquite talks about economic development, but talk is cheap, and in my opinion, their efforts at economic development are stagnant at best and maybe taking the city backwards. More baseball fields will not restart the real estate engine that has driven Mesquite’s economy for many years.

“Will I Have Enough Money in Retirement?”  Very few baby boomers have not given this question considerable thought.

Even a free and clear home is not free to live in, homeowner association costs, taxes, insurance, maintenance, and utility costs all go on forever and will keep going up.

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 cost conscious retirees are Mesquite’s future target market.

Besides recent asset value losses and reduced personal net worth, they are concerned, if not living in fear about future health care costs, pension stability, social security, debt, inflation, and their future cost of living. If they are smart, they are deleveraging for retirement, not taking on more debt.

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 baby 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 is fundamentally changing. 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. Basically, gambling with borrowed money. The days of flipping homes are gone, and affordability is now and will be in the future their focus. They have become far more cautious and conservative.

Finances in most cases will dictate their lifestyle choices, including where they will live.

Mesquite MLS showed 285 single family homes sold and closed with a median price of $184,900 for 1732 square feet or about $106 per square foot of heated space in 2010. Mesquite MLS as of mid January 2011 shows 355 active listed residential properties plus the unlisted new home supply, and Las Vegas MLS listed foreclosures, short sales, etc. There are likely well over 500 properties for sale today in Mesquite. 

Clark County records show 73 total sales at Sun City for 2010; this includes resales and new home Pulte Sun City sales. The most recent 2011-email marketing from Sun City shows 24 Spec homes in their current standing inventory, these have come down in price to an average of around $150 per square foot asking price. There are also currently per Mesquite MLS 29 listed resale homes at Sun City, with a median asking price of $254,900 or $147 per square foot. Pulte Del Webb expected to sell 50 homes per month when they opened the project 43 months ago; it looks like that projection is off by about 70%.

On the residential vacant land side, five distressed subdivisions sold, all up in the newer Mesquite Heights/ Canyon Crest area. They consisted of 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. Infrastructure and grading costs could bring this cost basis up to $30,000 per lot. The lower cost basis in the land should allow for very affordable homes to be built, that is a Heads Up! This could also be why only three single-family resale lots sold with a median price of $71,000, in 2010 per Mesquite MLS. As if 10,000 to 12,000 vacant lots are not enough, the vacant land market just got much larger as the Mesquite City Council approved annexing around 5000 acres in Lincoln County into Mesquite’s City limits for future development.

The condominium market closed 142 units at a median price of $79,900 for 1130 square feet or $73 per square foot, per Mesquite MLS.

The town home market closed 126 units at a median price of $115,000 for 1360 square feet or $92 per square foot, per Mesquite MLS.

The City of Mesquite issued 201 new home building permits in 2010, which is nearly double the 105 issued in 2009.

The Clark County records full transfer and bank sold residential properties for 89027 and 89034, Mesquite and Sun City respectively showed combined 514 transactions in 2009 and 721 transactions in 2010. November 2010 there were 13 pages of Notice of Defaults filed in Mesquite or 37 housing units in one month. Also in November 2010, there were 39 residential units on the Notice of Sale report. The NOD and NOS numbers are tomorrow’s foreclosures and then future inventory. Based on this one month, there are well over twelve months supply in distress and likely headed to the market. This is shadow inventory!

Only 8 residential units were foreclosed on in November, these show up as sales in these full transfer and bank numbers and everyone was purchased by Fannie, Freddie, a holding company, or a bank. On these sales, they generally pay the amount of the outstanding loan, which is not current market value, and these sales can be used to manipulate the price numbers. Buyer beware of numbers, you had better understand what you are looking at.

These numbers also prove the continued reluctance on the part of the Banks, Holding companies, Fannie, Freddie, and FDIC to actually confront and deal with reality and this can only prolong the mess. I believe in fact, it is prolonging it and making it worse. Expect more short sales, strategic defaults, and foreclosures. This continued high level of market distress and the upcoming inventory/supply combined with the new home building supply will continue to put downward pressure on residential prices in 2011. I would guess for some years to come.

The current Obama administrations efforts at saving homeowners and preserving values, is a total failure and huge waste of tax dollars. They do appear to be making the Big Banks wealthy again.

No commercial buildings or land closed through Mesquite MLS in 2010. Yet 13 commercial building permits were issued in 2009 and another 9 in 2010. There is a huge amount of empty commercial space, office, retail, light industrial, and a huge amount of vacant commercial land in nearly all zoning categories. This market segment is still in for a serious reality check.

The Mesquite Market appears to be getting worse from a supply and demand point of view.

If you are considering shopping the Mesquite real estate market without the benefit of a buyer’s agent representing you and your best interests, you could be placing yourself at risk of making a serious financial mistake.

For more on agency and representation read     www.MesquiteMarket.com 

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

Home Buyers sitting on the Fence Should Know This

Currently FHA has been playing a large role in home mortgage lending. The relatively easy to qualify for and low down payment requirements have made FHA loans attractive to many of today’s home buyers, FHA Does not actually Loan money to home buyers, but insures lenders against default on loans that meet FHA criteria.

Some rules changes are on the way to FHA guidelines. They will include higher upfront insurance premium, current buyers pay 1.75% of the loan amount that will go to 2.25%, that will be the second increase in two years.

The current value of the FHA’s reserves to cover losses has fallen to $3.6 billion, less than.05% of the roughly $680 billion in loans outstanding, down from 3% a year earlier.

In addition the agency may ask for buyers to pay annual premiums. FHA runs a risk of coming up short and may be forced to go to congress to ask for a bail out of its own for the first time in history.

Today only a 3.5% down payment is required on FHA loans. There has been much criticism, that FHA is only prolonging the current crisis, and even creating a new bubble of buyers unable to afford the home they are buying.

There is speculation FHA will increase the required down payment to ten percent, this idea is supported by many housing analysts. As well reducing the amount sellers can contribute to the costs of sale for the buyer from 6% to 3%.

That seller’s contribution has undoubtedly lead to inflated pricing to give the seller the funds to pay the buyers costs. This artificial inflating of prices to allow people to buy homes by paying their down payments and closing costs sounds the reverse of what the market needs right now.

For now Mesquite Nevada real estate home buyers still have USDA financing available, a low down payment program. It could be gone with the 2010 census if we have grown above the 20,000 population mark.

Chris W. Miller has 33 years in the real estate industry, was trained and worked as a financial advisor for Morgan Stanley Dean Witter and currently specializes in Irrigated Nevada land with water rights with ERA Brokers Consolidated in Mesquite Nevada. He can be reached at 702-346-7200 or chris@mesquitemarket.com
Chris W. Miller

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

Affordable housing is about living life with financial options.

For some the home they live in is everything, it defines who they are and it is their primary investment. For others their home is a place to live. People have a diverse view on what the house they live in means to them, and people have different priorities.

We all have limited resources, from the federal government, to state budgets to Bill Gates and Warren Buffet. Typical retirees have fixed incomes and limited ability to increase net worth. Broad spectrums with one thing in common, limited resources.

It has been said “Money is good for the good it can do”. Money has time value, at 6% you pay $6000 per year to borrow it or get $6000 per year to lend it, time value.

Based on the fundamental principles of limited resources and time value of money, affordable housing is about personal priorities and the option of discretionary spending.

As an example using 6%, a good historical average $300,000 has a time value of $18,000 per year, while $100,000 has an annual time value of $6000 per year. Whether owned out right or mortgaged, you are either losing interest income or paying to borrow.

Sustainably Affordable housing offers the opportunity to those who chose to live in the $100,000 home to take the $12,000 per year difference and do as they wish in retirement. They may want the extra money to travel, spend on the grandchildren, or contribute to charities. The list is as diverse as people are.

There are those who would like to paint sustainably affordable housing into a “those people” class war. They like to use terms like workforce, subsidized, and low income, emotional charged stigmatized words.

Future retirees will come to view sustainably affordable housing as smart, prudent, comfortable, conservative, and emotionally satisfying. They will view their home as a place that meets their needs to live comfortably.

They will take the money they save and use it to enjoy life. As people grow to appreciate “house is a home” as a concept, rather than as an investment or measure of personal worth. Excess will be viewed as insecure arrogance, wasteful, and just plain stupid.

Government spending, industry bailouts, cap and trade, crumbling infrastructure, an aging population, escalating health and energy costs, and taxes, all point to one thing, we will contribute more and receive less, each and everyone of us, its guaranteed. 

Eventually proper solar exposure and appropriate overhangs will define modern homes like indoor plumbing and electricity once did. I know you laugh now, but when you go outside in July in Mesquite, do you seek the shade, or in winter a warm sunny wall, it is intuitive and it is the future of housing. Sustainable affordable housing is basically energy efficiency combined with proper solar orientation.

Sadly many Mesquite retirees did not have affordable housing as an option. They have bought large expensive homes and in the process given up many of those discretionary spending options. This of course is really what affordable housing is all about, personal financial options. The City of Mesquite has avoided any earnest discussion about affordable housing for years now.

Given a clear picture of retirement goals and options, many well healed retirees will chose sustainably affordable housing. Not because they can not afford to spend more but because they have other things in their lives that are far more important. Life is short and priorities are important. Status and image are fleeting and hollow at best.

Sustainably affordable housing has been given a bum rap, a bad image, although this has come mostly from those concerned with status and image.

Mesquite has an opportunity to shape the future; sustainably affordable housing is achievable here. It will require bold leadership with commitment and action today. The future will be here before we know it.

Many future retirees who can spend $300,000 will come to Mesquite to buy those $100,000 green sustainably affordable homes. The reason is simple, they want to spend that extra $12,000 a year having fun, rather than an extra 1000 square feet to heat and cool.

$1000 a month extra spending money for the average future retiree will change their lives dramatically. It would be very good for local businesses as well.

Interest rates have been historically and artificially low, this will not last forever. The average conservative retiree will not take out a mortgage more than about 2 to 2.5 times their annual gross income. This points to a greater urgency today to address tomorrow’s sustainably affordable retirement housing.

Mesquite’s future depends on decisions made today by the current leadership and administration. They need to hear your thoughts on affordable housing in Mesquite.

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

Mesquite NV real estate experienced the speculative frenzy and price run ups at close to its worst. High rates of false appreciation and flippers cashing big checks even before new homes were complete, causing market havoc. That market is gone. 

Today reality has set in and prices are falling, supply is at all time highs along with vacancy rates. Builders have walked away from whole neighborhoods and some look like gold rush ghost towns.

Land values, based on the supply of build-able residential and commercial sites available are headed south at unprecedented rates. The current supply will last for years.

Mesquite NV real estate fundamentals have not changed as far as desirability, weather, location, recreational amenities, taxes, etc. Retirees will continue to migrate to Mesquite, NV.

The Mesquite NV market does not hinge on the employment picture like many markets because most moving to Mesquite are not arriving looking for work. They arrive looking for the golf course and a nice place to go to dinner.

As 2009 unfolds Mesquite NV will continue the current trend to find balance between the extremes of the recent past and the budgets of tomorrows retirees. Land now owned by banks will come back into the market at a new more affordable cost basis.

Competition will continue to grow, Mesquite’s new home builders will continue to build and in some areas at even more affordable prices.

Smart buyers will find even better values as the market moves forward. The aging baby boomers are going to retire, guaranteeing Mesquite Nevada’s bright future.

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

In recent years there has been a fundamental change on the supply side of vacant land in the Mesquite NV real estate market including whole subdivisions, commercial sites, and single family home building lots. Prior to the north side take downs, Mesquite had a very limited supply. Today with those take downs completed and the land now open to and owned by many speculators, the free market, supply and demand will dictate prices.

This week the City of Mesquite announced another proposed public land swap, which will eventually add to the existing supply side. Another 4900 acres. Combine this to the roughly 4000 acres, encompassing Pulte Del Webb/Sun City/Canyon Crest properties, and the Lincoln County land, 13,300 acres (Toquop Township) we will have some where in the neighborhood of 22,000 acres of develop-able land in the market. Clearing this market will require time and competitive prices. Mesquite NV builders took out 209 permits during the first six months of 2008 to build new homes.

Mesquite Nevada real estate is very unique in that we are surrounded by public land, which can and is sold off to meet future needs. The Toquop auction which involved 21 sections or approximately 13,300 acres of land was sold at public auction back about four years ago. They paid around 47 million and plan to develop as many as 40,000 housing units as well as much more commercially zoned competition. This property has a six mile border with the City of Mesquite to the North. The current city maps show at least six streets running into the property.

The past run up in prices was a combination of funny money being thrown at consumers, speculators, and mindless frenzy. It was also partially based on the very limited supply side of the land in the market. That has changed. Today we have a number of whole subdivisions going into foreclosure. Today, at least from my point of view, it is almost impossible to know how many years it will take absorb this supply. 

The absorption rate will depend on cost basis as it comes out of foreclosure and the prices of the final product offered to the consumers. In other words, lower new home prices, at the very least, a highly competitive new home sales market for years to come. This supply of new home sites at lower prices will likely translate into future challenges to existing home price appreciation.

The difference here is the unlimited supply of public lands, and the city government dealing in real estate.

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