Warren Buffet is famous for saying that the “herd mentality” controls the markets and that the markets can be controlled as much by emotion as anything else and the belief that we are heading into a recession could quite easily be yet another example.  If people think the Las Vegas market is ailing, it will likely fall in the short term.  Fortunately, this mentality can be quickly overturned by the fundamental factors that influence the local economy and markets.  So, will the Las Vegas local economy really tank due to a US recession?  Read on…

The price of goods and services are only applicable as long as people believe that whatever they are buying is worth what they are paying.  The laws of supply and demand certainly apply and when people perceive money to be on sale, as when the Fed cut rates from 2001 until 2004, they began the herd euphoria of “Mr. Market” as Buffet so aptly describes it.  This in turn drove up the price of real estate and just about everything else as people suddenly came upon piles of equity that were created from thin air.  By the time the Fed realized that they may have gone too far (as Alan Greenspan stated in his recent book “The Age of Turbulence”) they immediately increased the Federal Funds Rate.  The Fed then increased the Federal Funds Rate 17 times in row and in affect has helped push the country into recession. 

This is where fear comes in. 

The central bankers at the Fed understand the market mentality and the corresponding euphoria and panic that can go along with it; which may be the reason they stated in the New York Times this past November that we are NOT heading into a recession.  The markets tend to place more credence in the words of the Fed and the analysis of the delivery of those words than just about any other market indicator out there.  The Fed understands that emotion and perception have as much to do with the markets as anything. The current Fed chairman, Ben Bernanke, and his predecessor, Alan Greenspan, both like to use the term “resiliency of the market” to describe their strong belief in our economy.  This term is used whenever people express fears that our country is in a financial tailspin.  Greenspan made the point that the markets were hardly affected after 9/11 and recovered brilliantly after the tech fiasco in the early part of the decade.  Some of this can be directly attributed to Greenspan’s actions and the other can be attributed to the way the business world reacted to his statements as though he were a fortune teller. 

For the markets, perception is reality.  The Fed not only controls the flow of cash but is magnanimously capable of pushing the mentality of the markets.  Baron Rothschild famously stated “Give me control over a nation’s money supply, and I care not who makes its laws.”  Woodrow Wilson apparently understood all this after he signed the law creating the Fed in 1913 when he stated in his autobiography that his biggest regret was allowing the creation of the Fed.

Most people are unaware that the Federal Reserve is not a government body.  The President appoints the President of the Fed, who is usually (although not necessarily) also the President of the FOMC or Federal Open Market Committee (the body that determines monetary policy in this country).  Technically, the U.S. President’s only job or responsibility under the law is to appoint the President of the Fed.  However, there is to be a separation of the Fed and our government, and be that as it may, the close relationship between the Fed and our government is obvious.

I say all this to make the point that those who control the money supply in our country have a great degree of control over the mentality of the markets and the economic mind of the population.  If people perceive that money can not be borrowed or obtained as easily, or that the price of real estate or stocks are dropping they are less likely to jump into the market.  This of course puts a cap on inflation.  Those who are smart like Warren Buffet love times like this because they consider everything to be on sale.  The United States is a country that is not going to dwindle away to nothing.  More specifically, Las Vegas is a city that is growing at a fevering pace.  We have over $40 billion dollars worth of construction currently in process on the Las Vegas Strip.  This is equal to the total amount of construction that has been spent on the Las Vegas Strip thus far!  Opportunity is abound for those savvy enough to see it.  Rental rates are already on the rise in the valley and renters are increasing due to foreclosures and home buying slowdowns.  All of this provides an opportunity of epic proportions for the affluent few to buy real estate and businesses at historic discounts.

There is a window of time associated with these opportunities that is winding down.  Even with a United State recession likely, Las Vegas will continue to grow in terms of jobs and a housing shortage in 2009 based on our current migratory influx of new residents.  Recession or not, the local economy is poised to boom in 2009 and on.

Many green investors fall into the trap of personally feeling the emotional cycles of the market which often resemble an unstable person in which the cycle flips from exuberant to despair.  Savvy investors instead, logically analyze the market factors, cash flows and profitability of their investments instead of concerning themselves with the feelings of joy or pain the markets bring.  The facts are that real estate values in many parts of the city are offered at 2001 price levels, foreclosed properties are currently experiencing multiple investor offers and rents are appreciating.  These are all exceptional signals for Las Vegas investors to take a look at the market and determine if the time to act is now.

Call or e-mail me with your questions and comments on the real estate market.  As an avid investor myself, I love discussing the opportunities at hand.  You may also leave comments below.

Timothy Hartman / Luxury Financier
Luxury Mortgage Group
Direct: 702-370-0105
Timothy@LuxuryMortgageGroup.com

Or complete our full online mortgage application

Luxury Mortgage Group, a direct lender based in Las Vegas, Nevada has been selected as the exclusive preferred lender for Allure Las Vegas. The high rise project is a 41-story luxury condominium tower offering exceptional views of the Las Vegas Strip and the surrounding mountains, superb amenities and lavish finishes.

“All throughout this project we have carefully selected the highest caliber of vendors and service providers so that we can provide our buyers with a residence of the highest quality possible.  Selecting Luxury Mortgage Group as our preferred lender was the next step in bringing the tower and our future resident’s dreams to life.  We feel that Luxury Mortgage Group’s financing options fit well with our luxury buyers.  The mortgage options available to our US buyers as well as our foreign national buyers is unlike any other lender can offer,” says, Bea Goodwin, VP of Sales and Marketing at International Sales Group. “We feel that Luxury Mortgage Group can assist a much larger spectrum of our people and at terms superior to traditional sources,” Goodwin said.

Allure Las Vegas is located within easy access to the I-15 freeway, the Las Vegas Strip and the North downtown Strip area.  The project features approximately 428 units and 15 unique floor-plans with studios, one, two and three bedroom residences, as well as tower suites and extraordinary two-story penthouses.

“Allure Las Vegas has long term upside potential that we believe will make the current price per square foot a considerable value going forward.  Land prices on the Las Vegas Strip have skyrocketed and the actual construction costs to build a high rise building have outpaced their current price per square foot. If inflation continues to rise, today’s market price will be unavailable in the near future.  Allure Las Vegas owners will greatly benefit from the redevelopment activity and property acquisitions in the area. Allure Las Vegas will soon be surrounded by some of the largest high rise projects in Las Vegas. The project is already a success now and we believe it will be even greater success in the future,” says Jason Fox, President of Luxury Mortgage Group. “We are committed to the buyers in Allure Las Vegas and offer superior terms and unique mortgage programs to suit their new homes in this iconic tower,” Fox said.

“This is an amazing opportunity for the buyers of Allure Las Vegas,” says Linda Wilson, VP and Director of Operations of Luxury Mortgage Group. “The partnership with Allure Las Vegas makes a wonderful addition to our commitment to the finest level of super jumbo mortgage options that our clientele has come to expect. We have opened up an unprecedented number of additional opportunities for Allure Las Vegas’ foreign national and US resident buyers at loan terms superior to other lenders.  As the only direct lender to specifically focus on the financing of high rise condos, condotels and luxury homes, we are proud to be a part of this offering.  Even though traditional lenders have implemented constrictions in their residential finance offerings, Luxury Mortgage Group continues to offer generous 100% financing options for our luxury clients,” Wilson said.

Luxury Mortgage Group, founded by Luxury Financier, Jason Fox, is the only direct lender with a core niche focus of financing high rise condos, condo hotels and the most noble of luxury homes in the nation.  Recognized by national press, media and peers alike as the leader in luxury finance, Luxury Mortgage Group continues to serve as the most exclusive financier in the world. While others diversify, Luxury Mortgage Group remains committed to what’s best.

Contact Information:

Sarah Hartman / Director of Developer Relations
Luxury Mortgage Group, LLC.
http://www.HighRiseLoan.com
http://www.LuxuryMortgageGroup.com
(702) 444-0400

As the mortgage market continues to tighten the availability of residential mortgage money, many former qualified investment home borrowers are turning to hard money lenders to facilitate their needs.  In the first half of February of 2008, we’ve witnessed a massive resurgence of borrowers requesting this type of financing.

A hard money loan is typically defined as a loan that mortgage banks won’t do.  They range from borrowers with low FICO scores all the way up to complex commercial deals invoking blanket or bridge financing.  The lenders offering these funds are typically lesser known pools of funds put together by former mortgage brokers now turned hard money lenders. 

With the recent tightening of institutional financing and the folding up of 200+ lending institutions, these types of hard money pools are gaining popularity with former mortgage brokers faster the any new FHA reform you may hear about. 

These new hard money lenders bring on wealthy investors and pay them a sizeable return of approximately 10-12% for the use of their money.  They then loan the money out and keep the origination fees that they collect from the borrower.  Additionally, they typically charge their pool of investors a 1% fee for servicing all of the borrower’s monthly payments and collections.

In the past, and to some degree still today, hard money loans carry a stigma of ill repute.  This comes from the high fees (points) and exorbitant interest rates that nearly all of these lenders charge.  Interest rates of twelve percent are a normal starting point for these costly loans.  Origination fees are also high, typically ranging from 3-8 points (3-8 percent of the total loan amount borrowed.)

Interestingly enough, for some borrowers, this type of loan is a wonderful thing.  Residential investment mortgage loans have nearly dried up while the number of pennies-on-the-dollar foreclosure homes has gone through the roof.  In many cases, residential home investors are now forced to utilize hard money financing to purchase homes.  Traditional lenders used to allow investors to finance as many homes as they could reasonably afford.  With lenders feeling the pinch from sub-prime losses, they have nearly all restricted the max number of financed properties to four.  With the advent of the hard money lender comes relaxed guidelines and a more common sense approach to lending.

Hard money lenders typically loan at a maximum of 65% of the purchase price of a home or its appraised value on a refinance.  For a hard money lender, this gives a tremendous cushion and a firm reassurance that a borrower will pay their monthly hard money mortgage payment.  After all, if they don’t pay, the hard money lender will foreclose and own the home at a roughly 35% discount. 

There are few other qualifications to a hard money loan besides having “skin in the game” (having the 35% to put down on a purchase or at least 35% remaining equity in a home when refinancing.)  A few newcomers require the borrower to have a FICO score of 620+ but most old timers in the business still loan to anyone with a 65% LTV or lower.

If you are looking for a hard money loan on an investment property, a residential refinance or a commercial transaction your first stop should be to visit our friends at Las Vegas Hard Money.  They provide hard money loans strictly based on LTV (Loan-to-Value Ratio.)  They are the only technologically savvy source of hard money with a website that instantly gives you a lending decision.  Their website automatically pulls down the property valuation and divides it by the mortgages requested, thus providing a fully-automated immediate hard money decision.

Luxury Mortgage Group assists in the placement of funds for this pool as well as consults investors with diverse yield requirements from all over the US and abroad.  If you are interested in investing in hard money mortgage backed securities, continue on to our corporate website where you can read about investing in hard money.

If you have additional questions regarding hard money investing or obtaining a hard money loan contact:

Call Jason Fox / President
at (702) 444-0400 x1
Continue on to our 2 minute mortgage pre-approval form.
Or complete our full online mortgage application.

        There is not much debate at this time about whether or not certain segments of the housing market are in fact in a crisis, but rather the real issue is how we deal with our current situation.  Some advocate letting the free markets play themselves out with little government intervention.  Ron Paul, the conservative Republican, is perhaps the strongest proponent of this. Ron Paul predicted the subprime mess before it happened laying blame on the Fed for causing the “marginal buyers to get off the sidelines when they may not have known what they got themselves into.”  Paul does not support the increase in relaxation of guidelines in such programs such as the FHA programs and Fannie Mae guidelines.  As you may be aware, President Bush has been pushing for increases in FHA and Fannie Mae loan limits as well as proposing a freeze on current ARM rates for buyers who have been making their payments on time at the introductory rate, but may have difficulties once their rates reset.  His economically sound central argument places the ultimate blame on the Federal Reserve, saying that their unprecedented rate cuts to 1% was the creation of unhealthy exuberance for borrowers, thereby creating this mess we are in.
        On the democratic side, Hillary Clinton supports a freeze on interest rates for current homeowners and also a freeze on foreclosures for 90 days.  While some may argue that this might inject additional liquidity into the economy by allowing these homeowners to spend more free cash, others such as those in publications like Fortune magazine have argued that Hillary’s buzzsaw plan could cause a massive increase in long-term rates for future home buyers. With Hillaries plan, bond investors, already uncertain about reinvesting in mortgage-backed securities would scatter to find other financial instruments to park their money.  This would cause a huge long term hike in rates and be highly detrimental to affluent borrowers.
        Barrack Obama sees a much different root problem and solution to it.  His answer is for more accountability in the real estate industry itself.  Obama plans to go after the lenders, banks, loan officers and realtors who may have misled buyers as far as the programs that they were getting themselves into.  He proposes increased penalties and tightening of guidelines for predatory lending, and does not necessarily believe that direct government intervention other than tax breaks for middle-class homeowners is necessary.  While this is a great idea in and of itself, I do not believe that Obama has gotten to the root of the problem in his solution.
        Those who believe in free-market economics obviously are in support of letting the markets work themselves out.  I would consider myself to lean more in this direction, although I do believe that some government protection of the industry must happen as there is plenty of room for fraud and manipulation of fees and buyers as the current guidelines now stand.  We are seeing some of this happen already, specifically in Nevada and other states as loan officers are becoming directly responsible for making sure that stated income or non-verified income loans are reasonable and justified.  This shifts the responsibility more on to the lending institutions and less on the borrowers.
        I would, however, strongly encourage fully-verified income buyers to take advantage of the continued low level of long-term interest rates and strength of the mortgage bond market.  This situation may not last long as we are likely heading for a recession.  Mortgage bonds as well as the entire financial industry has the chance of pushing bond prices lower and then in turn, mortgage rates higher, so your timing is critical. ?
        The other current good news is that Fannie Mae is looking at increasing conventional loan amounts to somewhere in the range of $600,000-$700,000, where the previous limit was $417,000.  This means that jumbo loan limits are pushed higher and will allow the lower conventional rates to be applied up to these new higher loan limits.  This will help savvy borrowers looking to finance new properties at deeply discounted interest rates.  However, you must act quickly, as this situation is precarious and has the potential to evaporate quickly.  Contact me if you have any questions on luxury financing or the current status of the housing market nationally or specifically in Nevada.  I look forward to serving you and providing you with your best options available.

If have questions or are ready to become a client, please contact:

Timothy Hartman / Luxury Financier
Luxury Mortgage Group
Direct: 702-370-0105
Timothy@LuxuryMortgageGroup.com

Or complete our full online mortgage application