las vegas residential real estate investment
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Features
Vacancy and me on market trends
Rental rates
Capitalizaon rates
Factors that inuence investments
- Lender owned homes
- Loan default acvity
- Geographic variables
- Age of inventory
-Seasonal paerns
Real estate investment terms and concepts
Where the funds are buying
SUMMER 2013 INVESTOR IQ- LAS VEGAS RESIDENTIAL REAL ESTATE INVESTMENT
Coldwell Banker Premier Realty
Produced by
John McClelland - Vice President, Research Market IQContact
Coldwell Banker Premier Realty-Market IQ
Strategic Services
Phone: 702-938-1375
Email: info@cbprds.com
Web. www.lasvegashomes.com
8290 W. Sahara Ave, Suite 200
Las Vegas, NV 89117
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Real estate investors demand up-to-date market intelligence in order to make informed decisions. Coldwell Banker Premier Realty Market IQ, along with our
Strategic Services division is specially equipped to assist investors in navigang and prong in this dynamic investment environment.
Market IQ provides custom market studies for the residenal, land and commercial asset classes as well as geographic informaon system (GIS) and related spa-
al research.
As a client of a Coldwell Banker Premier Realty agent, resources available to you include:
Monthly Residenal
Summarizing the Las Vegas
residenal real estate market.
Notes market trends for
condominiums and single
family homes.
Separate breakouts for bank
owned, short sales and
tradional sales.
Examines factors inuencing
the market in a short synopsis.
Luxury Single Family
Summarizing the Las Vegas
luxury residenal market.
Illustrates trends in the luxuryreal estate market.
Notes key areas of concern or
interest.
Las Vegas High-Rise
Summarizing the Las Vegas
residenal high-rise market.
Illustrates trends in the high-
rise market at both the
aggregate and building levels.
Notes key areas of concern or
interest.
Contains street level
knowledge from those working
close to the market.
Includes charts on sales
velocies and pricing, as well as
current inventory.
Year-End Review
Reects on the prior years
residenal market and examines
legislave and economic factors
that may inuence the market in
the coming year.
Illustrates trends in the new
home, resale and luxury
sectors.
Notes key areas of concern or
interest.
Provides an in-depth view of
how homes are sold and
purchased in todays market.
Commercial Trends
Examines the commercial
property market.
Illustrates trends in oce,
retail and industrial
Discusses key inuencers such
as employment, gaming
revenue and visitor volume as
well as retail sales
Notes selected deals that took
place during the study period.
Class A Mulfamily
Examines the Class A apartment
market in Las Vegas.
Illustrates trends in sale prices,occupancy rates and
capitalizaon rates.
Invesgates points of interest
in the market and the likely
causes of shis in the market.
Emphasizes ground level
intelligence and depicts recent
transacons in a simple to read
format that details sale price,
unit count and capitalizaon
rates when obtainable.
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Las Vegas connues to be a target area for both the single family rental model in the burgeoning SFR REIT space and remains a popular area
for private and individual investors. Most investors we interact with remain yield driven, however capitalizaon rates have compressed sub-
stanally since we rst added coverage to this segment of the property market back in 2009. A majority of this cap rate compression has
come from asset price increases. In observing these price increases, as well as zooming out and nocing that prices remain below trend val-
ues, investors have given more thought to the potenal for appreciaon.
Movang factors for entering the space are manifold; some investors characterize their purchase as a buy below trend play and expect to
use the exit from the trough as a way to capture returns. Others look at the dierence between current prices and replacement costs as a
key signal that homes remain undervalued. We believe that a major component of buyer interest is the low interest rate environment in
which there is a broad search for yield. Rental homes become more like bonds, albeit with more maintenance. Comparable nancial instru-
ments connue to be low yielding. 5 year CD rates are about 1.2%. 10 Year U.S treasuries are about 2.12%. These low yielding instruments
have likely pushed investors into either higher risk products or towards alternave investments. A key queson for the housing market is;
will the Fed begin the so-called tapering or will other factors lead to an increase in interest rates?
The story of Las Vegas is compelling. The region experienced one of the largest bub-
bles in its housing market and one of the largest declines when that bubble deated.
In the trough, Las Vegas home prices fell far below long-run, pre-bubble trends. In
nominal terms, the typical home value fell to early 1990s levels. Prices rose substan-
ally since 2012, much of which is related to severe supply restricons, combined
with investor demand, second home use and an owner-occupant class that is
reemerging. This has moved pricing to the levels of the early 2000s in nominal terms.
Since cap rates have compressed so much, the challenge for investors is in determin-ing if potenal appreciaon merits both the operaonal and the economic risks.
The adjacent exhibit reveals the magnitude of the housing bubble, the depth of the
trough and the recent trend of increasing prices. In addion, the Case-Shiller futures
contracts are ploed. While nong the thin trading of these contracts, the forward
curve does provide some picture of investor expectaons, which is posive but not
nearly as vibrant as the increases as we have observed since mid-2012. While this
appears to be a plausible trajectory, state level legislaon may alter this path sub-
stanally, possibly even magnifying the supply problems we have had. Further, it is
unclear as to how investors will perceive risks going forward and how adequately
those risks have been priced recently.
0
50
100
150
200
250
J
an-93
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Jul-94
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indexValue(year2000=100)
Las Vegas S&P/Case-Shiller Home Price Index and Futures Contracts
Index Value Jan 1993 to Mar 2013
Futures contracts as of 5-31-2013
Source: Standard & Poors.
Note: LAV Case-Shiller futures contracts are thinly traded.
SINGLE FAMILY KEY METRICS
Year-over-Year
change in Single Family $/Sq.
31.7%
Available Lisngs
-26.9%
Median Days on Market
16
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CHARACTERISTICS OF THE HOUSING STOCK
Copyright 2013 Coldwell Banker Premier Realty.
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VACANCY AND HOMEOWNERSHIP
HOMEOWNERSHIP AND VACANCY RATES
Source: U.S Census.
Note: There are some noteworthy denional issues when looking at t hese me series. Las Vegas is well known as a second ho me/vacaon home market and hence, some units may a ppear to be vacant when they should be classied sepa-
rately. Time-share and fraconal deliveries in the recent ve years may also be biasing measurement.
Copyright 2013 Coldwell Banker Premier Realty.
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THE RENTAL MARKET
11.8
8.3
7.8
8.4
10.3
8.3
9
10.8
9.59.9
11.912.1
15.2
12.9
15.2
16
16.7
15
12.912.8
13
15.1
13.613.5
11.511.2
13.2
12.3
11
10.8
13.7
11.0
14.9
0
2
4
6
8
10
12
14
16
18
1Q
2005
2Q
2005
3Q
2005
4Q
2005
1Q
2006
2Q
2006
3Q
2006
4Q
2006
1Q
2007
2Q
2007
3Q
2007
4Q
2007
1Q
2008
2Q
2008
3Q
2008
4Q
2008
1Q
2009
2Q
2009
3Q
2009
4Q
2009
1Q
2010
2Q
2010
3Q
2010
4Q
2010
1Q
2011
2Q
2011
3Q
2011
4Q
2011
1Q
2012
2Q
2012
3Q
2012
4Q
2012
1Q
2013
Vacancy%
LAS VEGAS RENTAL VACANCY RATE
Source: U.S Census.Note: Includes aached and detached homes.
Copyright 2013 Coldwell Banker Premier Realty.
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THE RENTAL MARKET
Source: Mlxchange, Coldwell Banker Premier Realty.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
#ofHomes
New Listings Leased
MULTIPLE LISTING SERVICE NEW FOR LEASE LISTINGS AND LEASED HOMES
Note: Includes aached and detached homes.
Copyright 2013 Coldwell Banker Premier Realty.
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Copyright 2013 Coldwell Banker Premier Realty.
SINGLE FAMILY DAYS ON MARKET - Monthly Series
0
10
20
30
40
50
60
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
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Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
DaysonMarket
Median DOM Average DOMSource: Mlxchange, Coldwell Banker Premier Realty
0
10
20
30
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50
60
70
80
Aug-08
O
ct-08
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Ju
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ct-12
Dec-12
Feb-13
Apr-13
DaysonMarket
Median DOM Average DOM
ATTACHED HOME DAYS ON MARKET - Monthly Series
Source: Mlxchange, Coldwell Banker Premier Realty
Note that strong seasonality is present in
single family rental property markeng mes.
We suggest investors should factor this into
their pro-forma analysis.
Seasonality in condominiums does appear tobe present, however it is not exhibited as
strongly as we observe in single family rentals.
Condos do have a higher overall average
markeng me.
THE RENTAL MARKET
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TREND IN SINGLE FAMILY LEASE RATES - $/Sq. - Las Vegas Valley
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
%ChangeYear-Ov
er-Year
$/Sq.ft
Y-O-Y Change in Average PPSF Median $/Sq.ft Avg. $/Sqft
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
%ChangeYear-Ov
er-Year
$/Sq.ft
Y-O-Y Change in Average PPSF Median $/Sq.ft Avg. $/SqftSource: Mlxchange, Coldwell Banker Premier Realty
TREND IN CONDOMINIUM/TOWNHOME LEASE RATES - $/Sq. - Las Vegas Valley
THE RENTAL MARKET
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$0.69
$0.76
$1.57
$0.73
$0.00 $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 $1.75 $2.00 $2.25
SFR
Condo
High-Rise
Average All Types
$/Sq.Ft
Average Rental Rates Per Square-foot - Q1 2013
THE RENTAL MARKET
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89002
89103 89134
89011 89107 89135
89012 89108 89139
89014 89109 89141
89015 89113 89144
89030 89115 89145
89031 89117 89147
89032 89118 89148
89044 89119 89149
89052 89121 89178
89074 89122 89183
89081 89123 89166
89084 89128
89102 89129
ZIP CODE LEVEL RENTAL $/Sq. Trends - Selected Zip Codes - Aug 2008 to Apr 2013 Las Vegas Valley Zip Codes
NOTE: WE OBSERVE THAT MANY ZIP CODES HAVE
EXPERIENCED FLAT RENTAL PRICE PER SQUAREE-FOOT
TRENDS. SEVERAL MORE EXHIBIT A MILD DOWNWARD
BIAS. FEW HAVE RISING TRENDS.
Source: Mlxchange, Coldwell Banker Premier Realty.
THE RENTAL MARKET
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CAPITALIZATION RATE AND SALE PRICE RELATIONSHIP
THE RENTAL MARKET
Source: GLVAR,Coldwell Banker Premier Realty.
Rehab is esmated and is based on our own observaons.
Copyright 2013 Coldwell Banker Premier Realty.
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THE RENTAL MARKET
CAPITALIZATION RATES (Esmated), RENTS AND SALE PRICES (indexed)
0.00
0.50
1.00
1.50
2.00
2.50
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Oct-01
Feb-02
Jun-02
Oct-02
Feb-03
Jun-03
Oct-03
Feb-04
Jun-04
Oct-04
Feb-05
Jun-05
Oct-05
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Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Rent&SalePriceIndex
CapRate
Cap Rate Re nt I ndex Sale IndexSource: GLVAR, U.S Census, Coldwell Banker Premier Realty.
Note: Not seasonally adjusted.
CAP RATE SPREAD OVER 10-YEAR TREASURIES (Bp)
Source: GLVAR, U.S Census, FRED II, Coldwell Banker Premier Realty. Copyright 2013 Coldwell Banker Premier Realty.
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THE RENTAL MARKET
Source: GLVAR, U.S Census, Coldwell Banker Premier Realty.
RENTAL PRICE PER-SQUARE FOOT
Source: Mlxchange, Coldwell Banker Premier Realty.
Copyright 2013 Coldwell Banker Premier Realty.
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THE RENTAL MARKET
ESTIMATED GROSS RENTAL YIELD
Source: Mlxchange, Coldwell Banker Premier Realty.
Copyright 2013 Coldwell Banker Premier Realty.
15
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THE RENTAL MARKET
ESTIMATED CAPITALIZATION RATES
Source: Mlxchange, Coldwell Banker Premier Realty.
Copyright 2013 Coldwell Banker Premier Realty.
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MEASURES OF FUNDAMENTAL VALUE
0
25
50
75
100
125
150
175
200
225
250
Jan-02
Apr-02
Jul-02
Oct-02
Jan-03
Apr-03
Jul-03
Oct-03
Jan-04
Apr-04
Jul-04
Oct-04
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Jan-11
Apr-11
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Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
HousingAffordabilityIndex(Jan-02=100)
HOUSING AFFORDABILITY INDEXFINANCED BUYERS
Source: GLVAR, Bankrate.com, Clark County, Coldwell Banker Premier Realty.
The Aordability Index is formulated as the monthly income required to purchase the median home with a convenonal mort-
gage, by a median income family. Monthly Payment=(median home price, mortgage payment, insurance, taxes, household income)
Aer a level of what we would consider extreme aordability by households employing nancing, recent home price increas-
es has diminished aordability. Despite diminished aordability, the typical monthly cost burden is sll in a moderate range.
Mortgage rates remain extremely low, however there are a great number of households that cannot eecvely access the
mortgage market and some nanceable buyers must compete with cash buyers. So, while aordability remains, many buyers
may face challenges in purchasing a home.
PRICE/INCOME RATIO
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Jan-0
2
Apr-0
2
Jul-0
2
Oct-0
2
Jan-0
3
Apr-0
3
Jul-0
3
Oct-0
3
Jan-0
4
Apr-0
4
Jul-0
4
Oct-0
4
Jan-0
5
Apr-0
5
Jul-0
5
Oct-0
5
Jan-0
6
Apr-0
6
Jul-0
6
Oct-0
6
Jan-0
7
Apr-0
7
Jul-0
7
Oct-0
7
Jan-0
8
Apr-0
8
Jul-0
8
Oct-0
8
Jan-0
9
Apr-0
9
Jul-0
9
Oct-0
9
Jan-1
0
Apr-1
0
Jul-1
0
Oct-1
0
Jan-1
1
Apr-1
1
Jul-1
1
Oct-1
1
Jan-1
2
Apr-1
2
Jul-1
2
Oct-1
2
Jan-1
3
Apr-1
3
Ratio
Source: GLVAR, Census.gov, Coldwell Banker Premier Realty.
CASE-SHILLER HOME PRICE INDEX - LAS VEGAS
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
0
50
100
150
200
250
Feb-1987
Oct-1987
Jun-1988
Feb-1989
Oct-1989
Jun-1990
Feb-1991
Oct-1991
Jun-1992
Feb-1993
Oct-1993
Jun-1994
Feb-1995
Oct-1995
Jun-1996
Feb-1997
Oct-1997
Jun-1998
Feb-1999
Oct-1999
Jun-2000
Feb-2001
Oct-2001
Jun-2002
Feb-2003
Oct-2003
Jun-2004
Feb-2005
Oct-2005
Jun-2006
Feb-2007
Oct-2007
Jun-2008
Feb-2009
Oct-2009
Jun-2010
Feb-2011
Oct-2011
Jun-2012
Feb-2013
Year-over-YearChange
IndexValue(Jan2000=100)
While fundamental values of property are unobservable, we can get a sense of values based on price -to-
rent and price to income raos. Further, cap rates also provide us with informaon about values. Price-to-
rent and price-to-income raos can shi over me as expectaons of fut ure returns from the asset changes
(Krainer and Wei, 2004)1. That makes it dicult to assess the meaning of the volality in the series. Howev-
er, examinaon of the series relave to the pre -bubble period does add some color regarding fundamental
values. While the rao has increased markedly in t he past year, it hasnt reached the level of the early
2000s
1. John Krainer & Chishen Wei, 2004. House prices and fundamental value. FRBSF Economic Leer
Federal Reserve Bank of San Francisco, issue Oct 1.
The Case-Shiller home price index provides us with a longer-term view of prices for the Las Vegas MSA. The t rajectory of prices in the
past year have been alarming and to a large extent reects supply problems as well a s demand from investors and owner -occupants.
Prior to the bubble, prices rose quite consistently with an average increase of about 3% per year, essenally matching the ina on rate
and therefore, eecvely at in real terms. Interest by investors has not been surprising since values fell substanally below long -run,
pre-bubble trends. Even with recent price increases, prices have not intercepted the trend line (shown as the nave trend li ne in or-
ange). Certainly, following a long period of weak employment and diminished household formaon, below -trend growth in home prices
has some intuive appeal. The challenge for investors is i n determining if the rental market can support greater inventories and if the
labor market and household formaon can ulmately catch up to the strength of home price increases.
Source: S & P Dow Jones.
Median Home PriceMedian Household Income
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LOAN DEFAULT ACTIVITY
0
5,000
10,000
15,000
20,000
25,000
1972Q4
1973Q4
1974Q4
1975Q4
1976Q4
1977Q4
1978Q4
1979Q4
1980Q4
1981Q4
1982Q4
1983Q4
1984Q4
1985Q4
1986Q4
1987Q4
1988Q4
1989Q4
1990Q4
1991Q4
1992Q4
1993Q4
1994Q4
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2001Q4
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2003Q4
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2005Q4
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2007Q4
2008Q4
2009Q4
2010Q4
2011Q4
2012Q4
#ofServicedLoansinForeclosure
NEVADA NUMBER OF SERVICED LOANS IN FORECLOSURE - STARTED
Source: Mortgage Bankers Associaon, Economy.com.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Jan-11
Feb-11
Mar-11
Apr-11
May-11
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Sep-11
Oct-11
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Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
#ofHomes
Notice of Sale Notice of Default
CLARK COUNTY NVNOTICES OF DEFAULT AND NOTICES OF SALE
Source: Foreclosureradar.com,Ticor Title,Clark County NV.
The level of foreclosure acvity in Nevada and Clark County has declined signi-
cantly from its highs. Following AB 284 in 2011, a law that added stricter require-
ments to the foreclosure process, as well as the Naonal Foreclosure Selement,
which appeared to slow foreclosure acvity naonwide, noces of default fell
signicantly.
Recently, noce of default issuance has been on an uptrend, however it is far
from what was registered in prior me periods. In the recent legislave session,
AB 3001
was adopted and this session and it is intended to clarify language re-
garding personal knowledge. Personal knowledge refers to the knowledge the
signatory on an adavit of authority has regarding the proper documents to
foreclose.
SB 321 is also now Nevada law. Referred to as a Homeowner Bill of Rights, the bill
is intended to eliminate dual tracking (pursuance of a loan modicaon while
simultaneously processing a foreclosure). The bill also has previsions for dissemi-
naon of foreclosure prevenon alternaves by servicers as well as requiring a
single-point of contact in servicing, mediaon and other measures. While the
new laws inuence on foreclosure acvity is uncertain, similar laws in California
and other States points towards connued slow foreclosure acvity.
1.hp://openstates.org/nv/bills/77/AB300/documents/NVD00011139/
2. hp://www.housingwire.com/fastnews/2013/05/29/nevada-homeowner-bill-rights-inches-closer-
becoming-law
hp://www.leg.state.nv.us/Session/77th2013/Bills/SB/SB321.pdf
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TRENDS IN BANK OWNED HOMES
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
#ofHomes
Acquisitions Disposit ions REO inventory Notices of Default
BANK OWNED ACQUISITIONS, DISPOSITIONS, NOTICE OF DEFAULT ACTIVITY AND INVENTORY HELD BY FINANCIAL INSTITUTIONS
Source: Clark County,foreclosureradar.com,salestraq, Coldwell Banker Premier Realty.
Copyright 2013 Coldwell Banker Premier Realty.
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MIGRATION AND HOUSEHOLD GROWTH
In surveys of household moves, United Van Lines found that in-
bound moves to Nevada exceeded outbound moves.
Atlas found that Nevada was a balanced state where inbound
trac nearly matched outbound trac.
-2%
0%
2%
4%
6%
8%
10%
12%
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Jan-87
Dec-87
Nov-88
Oct-89
Sep-90
Aug-91
Jul-92
Jun-93
May-94
Apr-95
Mar-96
Feb-97
Jan-98
Dec-98
Nov-99
Oct-00
Sep-01
Aug-02
Jul-03
Jun-04
May-05
Apr-06
Mar-07
Feb-08
Jan-09
Dec-09
Nov-10
Oct-11
Sep-12
Year-over-YearChange
#ofElectricMeterHookups
CLARK COUNTY NVRESIDENTIAL ELECTRIC METER HOOKUPSCLARK COUNTY NVSURRENDERED DRIVERS LICENSES
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Jan-87
Dec-87
Nov-88
Oct-89
Sep-90
Aug-91
Jul-92
Jun-93
May-94
Apr-95
Mar-96
Feb-97
Jan-98
Dec-98
Nov-99
Oct-00
Sep-01
Aug-02
Jul-03
Jun-04
May-05
Apr-06
Mar-07
Feb-08
Jan-09
Dec-09
Nov-10
Oct-11
Sep-12
Year-over-YearChange
#ofSurrenderedDriversLicenses
Year-over-Year Change Surrendered Drivers Licenses 12 per. Mov. Avg. (Surrendered Drivers Licenses)
Source: Mlxchange, Coldwell Banker Premier Realty. Source: Mlxchange, Coldwell Banker Premier Realty.
Moderate uptrends in surrendered drivers licenses (although
we cant measure how many individuals are leaving) and the
level of electric meter hookups, point towards a return to
household growth in the region.
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INVENTORY
SINGLE FAMILY INVENTORY BY TYPE (NOT UNDER CONTRACT)
Source: GLVAR.
Copyright 2013 Coldwell Banker Premier Realty.
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ECONOMIC DRIVERS
TOTAL NONFARM EMPLOYMENT AND LEISURE AND HOSPITALITY EMPLOYMENT
TAXABLE SALES GROSS GAMING REVENUE VISITOR VOLUME
YEAR-OVER-YEAR CHANGE IN TOTAL EMPLOYMENT
YEAR-OVER-YEAR CHANGE IN LEISURE AND HOSPITALITY
Source: Nevada Department of Taxaon,Las Vegas Convenon and Visitors Authority.
Source: Nevadaworkforce.com.
Copyright 2013 Coldwell Banker Premier Realty.
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NOTES ON THE SFR-RENTAL MODEL
Copyright 2013 Coldwell Banker Premier Realty.
The trough established following the collapse of residenal real estate values opened the door
to many opportunies. One of these opportunies centered around purchasing single family
homes and renng them out on a very large scale.
Common to mom and pop investors, the recent poron of the real estate cycle is the only
one that has seen instuonal investors entering the space. I n prior periods, the model did not
make economic sense since managing disparate assets of dierent qualies, locaons and
tenants is not simple. Yields generally did not jusfy the eorts and there were dicules in
achieving the scale necessary from an operaonal standpoint. However, with low interest rates
and hence, a low cost of capital for qualied investors, combined with home values adjusted a
decade or more back in real (inaon adjusted) terms, and a global search for yield, the model
has become aracve. Coastal markets like Los Angeles and San Francisco had seen early ins-
tuonal buying. Florida cies like Miami and Tampa Bay and sunbelt cies like Phoenix and Las
Vegas have also been extremely sought aer. Several of the Georgia markets are popular as
well.
Several large rms are in the single family rental business including early entrants, now publi-
cally traded, Silver Bay Realty Trust and American Residenal Properes. Addionally, ColonyCapital entered the business with its Colony American Homes and Blackstone Group has a
large posion with its Invitaon Homes. American Homes 4 Rent, Waypoint Homes, Beazer
Pre-owned, Haven Realty Partners and many others have entered the business and each have a
sizeable book.
The lenders have also responded to the increased depth of the business with the creaon of
several lending facilies to buy-to-rent strategy rms. Deutsche Bank has extended signicant
credit of $2.1 Billion to Blackstone in 2012 and arranged another credit line of $1.5 billion for
Blackstone this year. Deutcsche Bank has also provided loans to Apollo Global Management
LLC and Tricon Capital Group Inc. Wells Fargo and bank of America have also been large lend-
ers with customers employing this business model.1
Inially, players in the space were very yield centric, however, given the posion of home pric-
es relave to trend values, many buyers have been encouraged to add appreciaon in their
pro-formas. See page 13 for an examinaon of cap rates and the recent direcons of asset
prices.
The exhibits to the right reveal the stock prices for the two publically trade SFR-Rental rms,
Silver Bay Realty Trust and American Residenal Properes. These share prices will be closely
monitored by other rms seeking an IPO.
1.hp://www.bloomberg.com/news/2013-06-17/deutsche-bank-leading-wall-street-rental-loans-
0
5
10
15
20
25
ClosingPrice
SILVER BAY REALTY TRUST CLOSING PRICES
0
5
10
15
20
25
ClosingPrice
AMERICAN RESIDENTIAL PROPERTIES CLOSING PRICES
Source: Yahoo Finance.
Source: Yahoo Finance.
$18.4/Share
Dec-17-2012
$16.53/Share
Jun-21-2013
$21/Share
May-9-2013
$17.66/Share
Jun-21-2013
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PURCHASES BY LARGE INVESTORS
AMERICAN HOMES 4 RENT AMERICAN RESIDENTIAL PROPERTIES APPLETON PROPERTIES
BEAZER PRE-OWNED BLACKSTONE COLONY AMERICAN HOMES
GTIS PARTNERS HAVEN REALTY CAPITAL SILVER BAY
January through April 2013 Closings
Source: Clark County Assessor, Coldwell Banker Premier Realty. Includes arms-length transacons and aucon purchases.
Copyright 2013 Coldwell Banker Premier Realty.
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Glossary of Terms
Adjusted cost basis: The investors cost of the property for tax purposes.
Depreciaon: An expense deducted from income for tax purposes which allows the owner to recapture the investment inan asset over its economic life by a periodic deducon from the income generated by the asset on a before tax basis.
Feasibility study: An analysis based upon esmates to determine if the investment makes sense and whether or not to
proceed with it.
Net operang income: Gross scheduled income less vacancy allowance and annual operang expenses.
Capitalizaon rate: An indicator of value and the rate at which investors are willing to invest their capital. Dividing net
operang income by the desired rate equals the purchase price the investor is willing to pay. This is a measure of real
estate yield.
Rate of return on equity: The rate which equates the present value of the net cash ow inows to the inial equity
investment.
Cap rate spread: In the case we referenced, this is the dierence between the capitalizaon rate and the 10-year U.S
treasury. In some cases, cap rate spreads have been referenced as the dierence between the cap rates on either dierent
asset classes or geographies.
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AUTHOR
John McClelland, Vice President, Research
CONTACT
Coldwell Banker Premier Realty
Strategic Services-Market IQ
Phone: 702-938-1375
Email: info@cbprds.com
Web. www.lasvegashomes.com
8290 W. Sahara Ave, Suite 200
Las Vegas, NV 89117
Coldwell Banker Premier has facilitated a multude of residenal investment transacons in Las Vegas. We draw on this experience andinformaon obtained from local government, U.S Census, third party data purveyors and the Greater Las Vegas mulple lisng service. The
informaon is deemed reliable but is not guaranteed. This material does not constute investment advise.
COLDWELL BANKER PREMIER REALTY
The informaon and opinions in this report are believed to be reliable and has been obtained from sources believed to be reliable. Coldwell Banker Premier Realty makes no representaon as
to the accuracy or completeness of such informaon.
The opinions expressed in the report constute the judgment of the authors only and may not reect the opinion of Coldwell Banker Premier Realty. This report is provided for informaonal
purposes only and does not constute investment advice.
This report may not be circulated or copied without our prior wrien consent.
Copyright 2013 Coldwell Banker Premier Realty.
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